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Fusion Antibodies Plc LSE:FAB London Ordinary Share GB00BDQZGK16 ORD 4P
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Pharmaceuticals & Biotechnology 3.9 -1.1 -3.2 - 29

Fusion Antibodies PLC Half-year Report

20/11/2020 7:00am

UK Regulatory (RNS & others)


Fusion Antibodies (LSE:FAB)
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TIDMFAB

RNS Number : 9370F

Fusion Antibodies PLC

20 November 2020

Prior to publication, the information contained within this announcement was deemed by the Company to constitute inside information for the purposes of Article 7 under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). With the publication of this announcement, this information is now considered to be in the public domain.

20 November 2020

Fusion Antibodies plc

("Fusion" or the "Company")

Half year Report

Fusion Antibodies plc (AIM: FAB), specialists in pre-clinical antibody discovery, engineering and supply for both therapeutic drug and diagnostic applications, announces its unaudited interim results for the six months ended 30 September 2020 ("H1 FY2021").

Highlights

Operational

   --    9% growth in revenues in H1 FY2021 over H1 FY2020 
   --    COVID-19 programme introduced as part of the Mammalian Antibody Library development project 

-- Recruitment of a Director of Research & Development, and additional research scientist appointments

Financial

   --    Trading for the period has been in line with the Directors' expectations 

-- Continued improvement in revenues: H1 FY2021 revenues of GBP1.90 million (H1 FY2020: GBP1.75 million)

   --    R&D expenditure of GBP271,000, an increase of 50% on H1 FY2020 

-- Losses held at same level as same period last year: H1 FY2021 loss of GBP0.47 million (H1 FY2020: GBP0.47 million loss)

   --    GBP3.0 million (gross proceeds) raised via placing of new ordinary shares 
   --    Cash position at 30 September 2020 was GBP3.24 million (31 March 2020: GBP1.54 million) 

Commenting on the interim results, Paul Kerr, CEO of Fusion Antibodies plc, said: "I'm pleased to report that our revenues have grown despite the fact that the period has been dominated by the COVID-19 pandemic. We have expanded our R&D programme to include a COVID-19 target along with our oncology targets, with the goal of using our Mammalian Antibody Library, which will be branded as "OptiMAL(TM)", to produce neutralising antibodies against the virus, and have raised capital for that purpose. We have remained operational throughout changing levels of government restrictions and have taken the steps to sustain the business in the coming months. I would like to thank our shareholders and staff for all their valued support to enable us to continue to grow in these challenging times."

Enquiries:

 
 Fusion Antibodies plc                                  www.fusionantibodies.com 
 Dr Paul Kerr, Chief Executive Officer                           Via Walbrook PR 
 James Fair, Chief Financial Officer 
 
 Allenby Capital Limited                                Tel: +44 (0)20 3328 5656 
 James Reeve / Asha Chotai (Corporate 
  Finance) 
 Tony Quirke (Sales) 
 
 Walbrook PR                   Tel: +44 (0)20 7933 8780 or fusion@walbrookpr.com 
 Anna Dunphy                                            Mob: +44 (0)7876 741 001 
 Paul McManus                                           Mob: +44 (0)7980 541 893 
 
 

About Fusion Antibodies plc

Fusion is a Belfast based biotechnology company providing a range of antibody engineering services for the development of antibodies for both therapeutic drug and diagnostic applications.

The Company's ordinary shares were admitted to trading on AIM on 18 December 2017. Fusion provides a broad range of services in antibody generation, development, production, characterisation and optimisation. These services include antigen expression, antibody production, purification and sequencing, antibody humanisation using Fusion's proprietary CDRx(TM) platform and the production of antibody generating stable cell lines to provide material for use in clinical trials. Since 2012, the Company has successfully sequenced and expressed over 250 antibodies and successfully completed over 200 humanisation projects for its international, blue-chip client base, which has included eight of the top 10 global pharmaceutical companies by revenue.

Fusion is a Collaborative Research Organisation (CRO) which provides antibody discovery, engineering and supply, through to cell line development. At every stage, our client's vision is central to how we work, ensuring the best molecule goes to the clinic. Our world-class humanization and antibody optimization platforms harness the power of the natural diversity of antibodies. To address remaining market needs in antibody discovery, Fusion is creating a fully human antibody library to capture the entire human antibody repertoire.

Fusion Antibodies growth strategy is based on combining the latest technological advances with cutting edge science to deliver new platforms that will enable Pharma and Biotech companies get to the clinic faster and ultimately speed up the drug development process.

The global monoclonal antibody therapeutics market was valued at $95.5 billion in 2017 and is forecast to surpass $174.2 billion in 2026, an increase at a CAGR of 6.9 per cent. for the period 2018 to 2026. In 2018, seven of the world's ten top selling drugs were antibody-based therapeutics with the combined annual sales of these drugs exceeding $62 billion.

Operational Review

The period began early in the United Kingdom's COVID-19 lockdown which was a time of high uncertainty as we and our customers adjusted to new working arrangements. The Company continued to operate throughout the initial lockdown and varying levels of restrictions and has delivered a 9% increase in revenues compared to the same period of the previous year.

The pandemic has created unusual patterns in customer needs as businesses have adapted their working practices and their research priorities. This has established opportunities for the Company to provide additional services to some customers, which has balanced out certain projects that have been delayed or paused by other customers. In particular, our core Antibody Engineering service continues to deliver and our Antibody Supply offering has performed well during the period, together underpinning the revenue growth achieved. As companies globally have adjusted to new circumstances, we have begun to see improved customer confidence.

The next service in the Company's development pipeline is the Mammalian Antibody Library Discovery Platform ("the Library"). The Library will add an important new offering for antibody discovery and the Directors believe it will represent a technologically superior solution when compared to traditional discovery methods and to other library offerings already available in the market. The Company had originally planned to use three therapeutic targets in the proof-of-concept R&D programme but early in the period added a new COVID-19 project. We successfully completed a GBP3.0m equity raise in April to support this and to provide additional working capital.

We are pleased to report that development work to date has progressed well throughout the period and potential antibodies from the Library are currently being screened prior to being evaluated against the COVID-19 target. This project is supported by an Invest Northern Ireland grant with Queen's University Belfast to test the resultant antibodies against the live virus in the University's virology facility.

To further demonstrate the potential of the Library, the next two development projects against oncology targets are underway. The fourth planned project is against a challenging target, and we are currently in discussions with a potential development partner to collaborate on this project. The Library will complement the Company's existing discovery services and will be offered alongside these, thus providing a broader range of services to our customers. Commercial collaborations are planned to commence in in FY2022, with meaningful revenues anticipated in FY2023. To aid marketing and promotion, the Company has registered the trademark OptiMAL(TM) for the Library and will use this name in future reports and marketing material.

Senior R&D scientists have been recruited to accelerate the research programmes and a newly created post of Director of Research and Development has recently been filled.

Financial Review

Revenues for the six-month period to 30 September 2020 were GBP1.90 million (H1 FY2020: GBP1.75 million).

Operating loss for the first half was GBP0.56 million (H1 FY2020: GBP0.62 million). This result reflects R&D expenditure of GBP271,000, an increase of 50% compared with H1 FY2020 and the continued programme of expansion of capacity and development of sales and marketing.

In April 2020, the Company raised GBP3.0 million of equity (gross proceeds) by issuing 3,333,333 new ordinary shares in an oversubscribed placing. The primary purpose of this raise was to finance the additional COVID-19 project of the Library development.

As a result of the increased number of shares in issue, basic loss per share has further reduced to GBP0.019 per share versus GBP0.021 loss per share in H1 FY2020.

Gross profit margin of 46% has improved on H1 FY 2020 (42%) and is similar to that achieved for the full year FY2020. In addition to the continued recruitment and training of scientists to enable the Company to deliver future growth, there were added costs arising from adjustments to working practices and higher consumable costs as a result of COVID-19 restrictions. Revenue grants relating to employment are included in other income.

Administrative expenses include expenditure on overheads, Board costs, sales and marketing, research & development as well as depreciation. Administrative expenses of GBP1.48 million have increased compared with H1 FY2020 of GBP1.41 million as a result of further investment in research and development.

Cash used in operations was GBP0.73 million compared with GBP0.55 million used in H1 FY2020. This includes planned investment of funds in research & development as well as increased working capital requirements in H1 FY2021. The Company expects to increase consumable stocks further to mitigate against supply chain risks from COVID-19 and from Brexit which is an added risk for H2 FY2021. EBITDA losses are reducing as shown in the Key Performance Indicators below and are mainly attributable to investment in research and development.

The Board is not recommending the payment of a dividend in relation to the first half of the current financial year (H1 FY2020: nil).

Key Performance Indicators

The key performance indicators (KPIs) regularly reviewed by the board are:

 
 KPI                                                H1 2021       H1 2020 
---------------------------------------------  ------------  ------------ 
 Revenue growth against same period in prior 
  year                                                   9%          166% 
 EBITDA*                                        (GBP0.218m)   (GBP0.315m) 
 Cash used in operations                        (GBP0.727m)   (GBP0.551m) 
---------------------------------------------  ------------  ------------ 
 

* Earnings before interest, tax, depreciation and amortisation

Outlook

The Board is pleased to report that the Company has maintained and slightly grown revenues in the first six months of the year, in what were unprecedented times.

The Directors believe that the antibody therapeutic market continues to grow, and that Fusion remains in a strong position to grow and return to profitability in future years. The Company's core services are reliant on multiple orders which the Company can execute within two to three months, which limits the visibility of orders and revenues beyond that timeframe. However, the current pipeline is in line with the Board's expectations and the Directors are confident that progress will be made.

There are two major factors of uncertainly facing the Company and its customers in the second half of this financial year. COVID-19 restrictions continue to play a major part in many of our key markets with unplanned workforce and supply chain interruptions having a global impact. However, we will continue to operate the business and make our services available to our customers to the extent possible which, to date, has been with limited disruption. In addition, the United Kingdom will leave the European Union on 31 December 2020 ("Brexit"). The Company will maintain unrestricted access to EU markets due to its location in Northern Ireland which the Directors believe will reduce the impact of Brexit. The Board continues to believe that the Company has the expertise and financial resources to meet these challenges and capitalise on opportunities in the remainder of this period and beyond.

Statement of Directors' Responsibilities

The Directors confirm, to the best of their knowledge:

-- The condensed set of financial statements has been prepared in accordance with IAS34 'Interim Financial Reporting', as adopted by the European Union;

-- The interim management report includes a fair review of the information required by DTR 4.2.7R of the Disclosure and Transparency Rules of the of the United Kingdom's Financial Conduct Authority, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year, and gives a true and fair view of the assets, liabilities, financial positions and profit for the period of the company; and

-- The interim management report includes a fair review of the information required by DTR 4.2.8R of the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority, being a disclosure of related party transactions and changes therein since the previous annual report.

By order of the Board

Dr Simon Douglas

Non-executive Chairman

20 November 2020

Condensed Statement of Comprehensive Income

For the six months ended 30 September 2020

 
                                                6 months       6 months     Year to 
                                             to 30.09.20    to 30.09.19    31.03.20 
                                    Notes      Unaudited      Unaudited     Audited 
                                                 GBP'000        GBP'000     GBP'000 
 Revenue                                           1,905          1,753       3,895 
 Cost of sales                                   (1,032)        (1,014)     (2,123) 
-------------------------------  --------  -------------  -------------  ---------- 
 
   Gross profit                                      873            739       1,772 
 
   Other operating income              10             43             53          56 
 Administrative expenses                         (1,479)        (1,408)     (2,887) 
-------------------------------  --------  -------------  -------------  ---------- 
 Operating loss                                    (563)          (616)     (1,059) 
-------------------------------  --------  -------------  -------------  ---------- 
 
 Finance income                         3              1              4           6 
 Finance costs                          3           (10)            (9)        (20) 
-------------------------------  --------  -------------  -------------  ---------- 
 Loss before tax                                   (572)          (621)     (1,073) 
 
   Income tax credit                    4            101            148         376 
-------------------------------  --------  -------------  -------------  ---------- 
 
   Loss for the period                             (471)          (473)       (697) 
 
   Total comprehensive expense 
   for the period                                  (471)          (473)       (697) 
-------------------------------  --------  -------------  -------------  ---------- 
 
 
                                                   Pence          Pence       Pence 
 Basic loss per share                   5          (1.9)          (2.1)       (3.2) 
 
 

Condensed Statement of Financial Position

As at 30 September 2020

 
                                                    As at   As at 30.09.19       As at 
                                                 30.09.20        Unaudited    31.03.20 
                                       Notes    Unaudited          GBP'000     Audited 
                                                  GBP'000                      GBP'000 
----------------------------------  --------  -----------  ---------------  ---------- 
 Assets 
 Non-current assets 
 Intangible assets                                      3                5           4 
 Property, plant and equipment             6        1,401            1,558       1,470 
 Deferred tax assets                       7        2,045            1,488       1,764 
----------------------------------  --------  -----------  ---------------  ---------- 
                                                    3,449            3,051       3,238 
----------------------------------  --------  -----------  ---------------  ---------- 
 Current assets 
 Inventories                                          373              231         340 
 Trade and other receivables                        1,171            1,200         887 
 Current tax receivable                                69               39          38 
 Cash and cash equivalents                          3,243            1,313       1,537 
----------------------------------  --------  -----------  ---------------  ---------- 
                                                    4,856            2,783       2,802 
----------------------------------  --------  -----------  ---------------  ---------- 
 Total assets                                       8,305            5,834       6,040 
----------------------------------  --------  -----------  ---------------  ---------- 
 
 
 Liabilities 
 Current liabilities 
 Trade and other payables                             607              580         828 
 Borrowings                                8          161              124         161 
----------------------------------  --------  -----------  ---------------  ---------- 
                                                      768              704         989 
----------------------------------  --------  -----------  ---------------  ---------- 
 
 Net current assets                                 4,088            2,079       1,813 
 
 Non-current liabilities 
 Borrowings                                8          148              170         219 
 Provisions for other liabilities 
  and charges                                          20               20          20 
----------------------------------  --------  -----------  ---------------  ---------- 
 Total liabilities                                    936              894       1,228 
----------------------------------  --------  -----------  ---------------  ---------- 
 
 Net assets                                         7,369            4,940       4,812 
----------------------------------  --------  -----------  ---------------  ---------- 
 
 Equity 
 Called up share capital                  13        1,017              884         884 
 Share premium reserve                              7,535            4,872       4,872 
 (Accumulated losses)/retained 
  earnings                                        (1,183)            (816)       (944) 
----------------------------------  --------  -----------  ---------------  ---------- 
 Equity                                             7,369            4,940       4,812 
----------------------------------  --------  -----------  ---------------  ---------- 
 

Condensed Statement of Changes in Equity

For the six months ended 30 September 2020

 
 6 months ended 30 September          Called     Share premium 
  2020                              up share           reserve     Accumulated 
  Unaudited                          capital           GBP'000          losses      Equity 
                                     GBP'000                           GBP'000     GBP'000 
-------------------------------  -----------  ----------------  --------------  ---------- 
 At 1 April 2020                         884             4,872           (944)       4,812 
 Loss for the period                       -                 -           (471)       (471) 
-------------------------------  -----------  ----------------  --------------  ---------- 
 Issue of share capital                  133             2,867               -       3,000 
 Cost of issuing share capital             -             (204)               -       (204) 
 Share options - value of 
  employee services                        -                 -              21          21 
 Tax credit relating to 
  share option scheme                      -                 -             211         211 
-------------------------------  -----------  ----------------  --------------  ---------- 
 Total transactions with 
  owners, recognised directly 
  in equity                              133             2,663             232       3,028 
-------------------------------  -----------  ----------------  --------------  ---------- 
 At 30 September 2020                  1,017             7,535         (1,183)       7,369 
-------------------------------  -----------  ----------------  --------------  ---------- 
 
 6 months ended 30 September          Called     Share premium 
  2019                              up share           reserve        Retained 
  Unaudited                          capital           GBP'000        earnings      Equity 
                                     GBP'000                           GBP'000     GBP'000 
-------------------------------  -----------  ----------------  --------------  ---------- 
 At 1 April 2019                         884             4,872           (402)       5,354 
 Loss for the period                       -                 -           (473)       (473) 
-------------------------------  -----------  ----------------  --------------  ---------- 
 Share options - value of 
  employee services                        -                 -              46          46 
 Tax credit relating to 
  share option scheme                      -                 -              13          13 
-------------------------------  -----------  ----------------  --------------  ---------- 
 Total transactions with 
  owners, recognised directly 
  in equity                                -                 -              59          59 
-------------------------------  -----------  ----------------  --------------  ---------- 
 At 30 September 2019                    884             4,872           (816)       4,940 
-------------------------------  -----------  ----------------  --------------  ---------- 
 
 Year ended 30 March 2020                                         (Accumulated 
  Audited                             Called     Share premium        losses)/ 
                                    up share           reserve        Retained 
                                     capital           GBP'000        earnings      Equity 
                                     GBP'000                           GBP'000     GBP'000 
-------------------------------  -----------  ----------------  --------------  ---------- 
 At 1 April 2019                         884             4,872           (402)       5,354 
 Loss for the year                         -                 -           (697)       (697) 
-------------------------------  -----------  ----------------  --------------  ---------- 
 Share options - value of 
  employee services                        -                 -              72          72 
 Tax credit relating to 
  share option scheme                      -                 -              83          83 
-------------------------------  -----------  ----------------  --------------  ---------- 
 Total transactions with 
  owners, recognised directly 
  in equity                                -                 -             155         155 
-------------------------------  -----------  ----------------  --------------  ---------- 
 At 31 March 2020                        884             4,872           (944)       4,812 
-------------------------------  -----------  ----------------  --------------  ---------- 
 

Statement of Cash Flows

For the six months ended 30 September 2020

 
                                            6 months       6 months     Year to 
                                                  to    to 30.09.19    31.03.20 
                                            30.09.20      Unaudited     Audited 
                                           Unaudited        GBP'000     GBP'000 
                                             GBP'000 
---------------------------------------  -----------  -------------  ---------- 
 Cash flows from operating activities 
 Loss for the period                           (471)          (473)       (697) 
 Adjustments for: 
 Share based payment expense                      21             46          83 
 Depreciation                                    344            300         620 
 Amortisation of intangible assets                 1              1           2 
 Finance income                                  (1)            (4)         (6) 
 Finance costs                                    10              9          20 
 Income tax credit                             (101)          (148)       (376) 
 Decrease/(increase) in inventories             (33)             11        (97) 
 (Increase)/decrease in trade and 
  other receivables                            (276)          (144)         169 
 (Decrease)/increase in trade and 
  other payables                               (221)          (149)          99 
---------------------------------------  -----------  -------------  ---------- 
 Cash used in operations                       (727)          (551)       (183) 
 Income tax received                               -              -          23 
---------------------------------------  -----------  -------------  ---------- 
 Net cash used in operating activities         (727)          (551)       (160) 
 
 Cash flows from investing activities 
 Purchase of intangible assets                     -              -           - 
 Purchase of property, plant and 
  equipment                                    (275)           (44)       (109) 
 Finance income - interest received                1              4           6 
---------------------------------------  -----------  -------------  ---------- 
 Net cash used in investing activities         (274)           (40)       (103) 
 
 Cash flows from financing activities 
 Proceeds from issue of share capital          2,796              -           - 
 Repayments of borrowings                       (85)           (71)       (172) 
 Finance costs - interest paid                   (4)            (9)        (12) 
---------------------------------------  -----------  -------------  ---------- 
 Net cash generated from/(used in) 
  financing activities                         2,707           (80)       (184) 
 
 Net increase/(decrease) in cash 
  and cash equivalents                         1,706          (671)       (447) 
 
   Cash and cash equivalents at the 
   beginning of the period                     1,537          1,984       1,984 
---------------------------------------  -----------  -------------  ---------- 
 
   Cash and cash equivalents at the 
   end of the period                           3,243          1,313       1,537 
---------------------------------------  -----------  -------------  ---------- 
 

Notes to the Interim Results

For the six months ended 30 September 2020

   1              Basis of Preparation 

The condensed financial statements comprise the unaudited results for the six months to 30 September 2020 and 30 September 2019 and the audited results for the year ended 31 March 2020. The financial information for the year ended 31 March 2020 does not constitute the full statutory accounts for that period. The Annual Report and Financial Statements for the year ended 31 March 2020 have been filed with the Registrar of Companies. The Independent Auditor's Report on the Annual Report and Financial Statements for 2020 was unmodified and did not contain a statement under s498(2) or s498(3) of the Companies Act 2006.

The condensed financial statements for the period ended 30 September 2020 have been prepared in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority and with IAS 34 'Interim Financial Reporting' as adopted by the European Union. The information in these condensed financial statements does not include all the information and disclosures made in the annual financial statements.

Going concern

At 30 September 2020 the Company had a cash balance of GBP3.24 million. The Directors have reviewed detailed projections for the Company. These projections are based on estimates of future performance and have been adjusted to reflect various scenarios and outcomes that could potentially impact the forecast outturn. Based on these estimates, the Directors have a reasonable expectation that the company has adequate resources to continue in operational existence for 12 months from the reporting date. Accordingly, they have prepared these condensed financial statements on the going concern basis.

Accounting policies

The condensed financial statements have been prepared in a manner consistent with the accounting policies set out in the financial statements for the year ended 31 March 2020 and on the basis of the International Financial Reporting Standards (IFRS) as adopted for use in the EU that the company expects to be applicable at 31 March 2021. IFRS are subject to amendment and interpretation by the International Accounting Standards Board (IASB) and there is an ongoing process of review and endorsement by the European Commission.

   2              Segmental information 

For all the financial periods included in these condensed financial statements, all the revenues and costs relate to the single operating segment of research, development and manufacture of recombinant proteins and antibodies.

   3              Finance income and costs 
 
                              6 months to       6 months     Year to 
                                 30.09.20    to 30.09.19    31.03.20 
                                Unaudited      Unaudited     Audited 
   Income                         GBP'000        GBP'000     GBP'000 
---------------------------  ------------  -------------  ---------- 
 Bank interest receivable               1              4           6 
---------------------------  ------------  -------------  ---------- 
 
 
                              6 months to       6 months     Year to 
                                 30.09.20    to 30.09.19    31.03.19 
                                Unaudited      Unaudited     Audited 
   Cost                           GBP'000        GBP'000     GBP'000 
---------------------------  ------------  -------------  ---------- 
 Interest expense on other 
  borrowings                           10              9          20 
---------------------------  ------------  -------------  ---------- 
 
   4              Income tax credit 
 
                         6 months       6 months     Year to 
                      to 30.09.20    to 30.09.19    31.03.20 
                        Unaudited      Unaudited     Audited 
                          GBP'000        GBP'000     GBP'000 
------------------  -------------  -------------  ---------- 
 Current tax                 (31)           (16)        (38) 
 Deferred tax                (70)          (132)       (338) 
------------------  -------------  -------------  ---------- 
 Total tax credit           (101)          (148)       (376) 
------------------  -------------  -------------  ---------- 
 
   5              Earnings per share 

The calculation of earnings per share is based on loss after tax from continuing operations for six months to 30 September 2020 of GBP471,000 (6 months to 30 September 2019: GBP473,000 loss, year to 31 March 2019: GBP697,000 loss).

The weighted average number of shares used in the calculation of the basic earnings per share are as follows:

 
                                   6 months       6 months        Year to 
                                to 30.09.20    to 30.09.19       31.03.20 
                                  Unaudited      Unaudited        Audited 
                                     Number         Number         Number 
----------------------------  -------------  -------------  ------------- 
 Issued ordinary shares at 
  the end of the period          25,437,025     22,091,192     22,091,192 
 
 Weighted average number 
  of shares in issue during 
  the period                     24,875,220     22,091,192     22,091,192 
----------------------------  -------------  -------------  ------------- 
 

Basic earnings per share is calculated by dividing the basic earnings for the period by the weighted average number of shares in issue during the period.

   6              Property, plant and equipment 
 
                                Right                                  Fixtures, 
                               of use     Leasehold         Plant       fittings 
                               assets      property             &    & equipment       Total 
                              GBP'000       GBP'000     machinery        GBP'000     GBP'000 
                                                          GBP'000 
--------------------------  ---------  ------------  ------------  -------------  ---------- 
 Cost 
 At 1 April 2020                  226           725         1,916            220       3,087 
 Additions                         14             -           253              8         275 
 Disposals                          -             -             -              -           - 
--------------------------  ---------  ------------  ------------  -------------  ---------- 
 At 30 September 2020             240           725         2,169            228       3,362 
--------------------------  ---------  ------------  ------------  -------------  ---------- 
 
 Accumulated depreciation 
 At 1 April 2020                   68           425         1,015            109       1,617 
 Disposals                          -             -             -              -           - 
 Depreciation charged 
  in the period                    34            72           214             24         344 
--------------------------  ---------  ------------  ------------  -------------  ---------- 
 At 30 September 2020             102           497         1,229            133       1,961 
--------------------------  ---------  ------------  ------------  -------------  ---------- 
 
 Net book value 
 At 30 September 2020             138           228           940             95       1,401 
--------------------------  ---------  ------------  ------------  -------------  ---------- 
 At 31 March 2020                 158           300           901            111       1,470 
--------------------------  ---------  ------------  ------------  -------------  ---------- 
 
   7              Deferred tax assets 

Deferred tax assets are recognised for the carry forward of corporation tax losses to the extent that the realisation of a future benefit is probable. The deferred tax arising from future utilisation of taxable losses of GBP8.8 million (30 September 2019: GBP8.7 million) is dependent on future taxable profits arising in the UK. During the period the Company raised GBP2.8m (net proceeds) of capital to invest in research and development and to finance growth and as a consequence this will increase taxable losses in the next two to three years. The Directors have prepared forecasts indicating a return to profitability in the future and they have an expectation that the Company will make sufficient future taxable profits against which the tax losses can be deducted and accordingly, a deferred tax asset has been recognised in the financial statements.

   8              Borrowings 
 
                                  At 30   At 30 September      At 31 
                              September              2019      March 
                                   2020           GBP'000       2020 
                                GBP'000                      GBP'000 
--------------------------  -----------  ----------------  --------- 
 At 1 April                         380               140        140 
 Adoption of IFRS 16 (see 
  note 12)                            -               226        226 
 Additions in period                 14                 -        166 
 Interest                            10                 9         20 
 Repayments                        (95)              (81)      (172) 
--------------------------  -----------  ----------------  --------- 
 At period end                      309               294        380 
--------------------------  -----------  ----------------  --------- 
 
 Amounts due in less than 
  1 year                            161               124        161 
 Amounts due after more 
  than 1 year                       148               170        219 
--------------------------  -----------  ----------------  --------- 
                                    309               294        380 
--------------------------  -----------  ----------------  --------- 
 

Borrowings are secured by a fixed and floating charge over the whole undertaking of the company, its property, assets and rights in favour of Northern Bank Ltd trading as Danske Bank.

   9              Retirement benefits obligations 

The company operates a defined contribution scheme, the assets of which are managed separately from the company.

   10           Transactions with related parties 

The Company had the following transactions with related parties during the year:

Invest Northern Ireland ("Invest NI") is a shareholder in the Company. The Company leases its premises from Invest Northern Ireland and received invoices for rent and estate services amounting to GBP40,000 (6 months ended 30 September 2019: GBP46,000, year ended 31 March 2020: GBP78,000). A balance of GBPnil (30 September 2019: GBPnil, 31 March 2020: GBPnil) was due and payable to Invest NI at the reporting date. The Company received various grants during the period from Invest NI amounting to GBP43,000 (6 months ended 30 September 2019: GBP53,000, year ended 31 March 2020 GBP56,000).

   11           Events after the reporting date 

There have been no events from the reporting date to the date of approval which need to be reported.

   12           Changes in accounting policies in the prior period 

This note explains the impact of the adoption of IFRS 16 'Leases' on the Company's financial statements and discloses the new accounting policies applied from 1 April 2019, where they are different to those applied before that date.

(a) Impact on financial statements

The adoption of IFRS 16 'Leases' from 1 April 2019 resulted in changes in accounting policies and adjustments to the amounts recognised in the financial statements. The new accounting policies are set out in note 12(c) below.

In adopting IFRS 16 the modified retrospective approach has been used such that the right of use assets arising is equal in value to the lease liabilities recognised as borrowings. In accordance with the transitional provisions of IFRS 16, a restatement of prior year financial statements was not required. The reclassifications and the adjustments arising from adoption of this standard are therefore not reflected in Statement of Financial Position as at 31 March 2019, but are recognised in the opening Statement of Financial Position on 1 April 2019.

 
                                       GBP'000 
------------------------------------  -------- 
 Lease liabilities at 31 March 2019        250 
 Effect of discounting                    (24) 
 Right of use asset at 1 April 2019        226 
------------------------------------  -------- 
 

The following table shows the adjustments recognised for each individual line item. Line items that were not affected by the changes have not been included. As a result, the sub-totals and totals disclosed cannot be recalculated from the numbers provided. The adjustments are explained in more detail below.

Impact on the opening balance on the statement of financial as at 1 April 2019:

 
 Balance sheet extract 
-------------------------  ---------  ----------------------------- 
                            31 March   Adoption of   1 April 2019 
                                2019       IFRS 16        GBP'000 
                             GBP'000       GBP'000 
-------------------------  ---------  ------------  ------------- 
 Non-current assets 
 Property, plant and 
  equipment                    1,588           226          1,814 
 Current liabilities 
 Borrowings                     (67)          (64)          (131) 
 Non-current liabilities 
 Borrowings                     (73)         (162)          (235) 
 Equity 
 Accumulated losses            (402)             -          (402) 
-------------------------  ---------  ------------  ------------- 
 

(b) Impact of adoption

IFRS 16 'Leases' replaces IAS17 'Leases' and related interpretations. It introduces a single lessee accounting model, eliminating the previous classification of leases as either operating or finance. This has resulted on operating leases previously treated solely through profit or loss being recorded in the statement of financial position in the form of a right-of-use asset and a lease liability, subject to certain exemptions.

The adoption of IFRS 16 'Leases' from 1 April 2019 resulted in changes in accounting policies and adjustments to the amounts recognised in the financial statements. The new accounting policies are set out in note 12 (c). In accordance with the transitional provisions in IFRS 16, comparative figures have not been restated.

The total impact on the Company's retained earnings was GBPnil as shown in 12(a) above.

Leases

The directors considered all leases in place at 31 March 2019 and the only lease identified for adjustment under IFRS 16 is for the Company's premises in Belfast. At 31 March 2019 this lease had 40 months remaining and annual lease payments of GBP75,000. The Company was required to recognise a right-of-use asset at 1 April 2019 for this asset of GBP226,000 and a corresponding liability in borrowings.

Rental payments will no longer be charged to profit or loss, however, a depreciation charge for the asset and an interest charge on the borrowings will be charged to profit or loss.

The following judgements have been made by the directors:

   --    The agreement for the use of the premises constitutes a lease under IFRS 16; 
   --    The lease term was assessed as ending on the expiry of the agreement as set out in the lease; 

-- The discount rate used of 4.7% was judged by the directors to be the rate at which the Company would be able to borrow a similar amount for the purposes of acquiring premises.

The impact on earnings per share for the year ended 31 March 2020 is a reduction of approximately GBP3,000 in reported earnings or an additional GBP0.0001 per share.

(c) IFRS 16 Leases - Accounting policies applied from 1 April 2019

Leases

Leases in which a significant portion of the risks and rewards of ownership remain with the lessor are deemed to give the Company the right-of-use and accordingly are recognised as property, plant and equipment in the statement of financial position. Depreciation is calculated on the same basis as a similar asset purchased outright and is charged to profit or loss over the term of the lease. A corresponding liability is recognised as borrowings in the statement of financial position and lease payments deducted from the liability. The difference between remaining lease payments and the liability is treated as a finance cost and taken to profit or loss in the appropriate accounting period.

   13           Share capital 

During the period the Company issued 3,345,833 Ordinary Shares of 4 pence each for gross proceeds of GBP3,000,000 before related expenses. Costs of the share issue totalled GBP204,000 and have been deducted from the Share Premium Reserve.

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END

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November 20, 2020 02:00 ET (07:00 GMT)

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