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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Genedrive Plc | LSE:GDR | London | Ordinary Share | GB00B1VKB244 | ORD 1.5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.375 | -9.68% | 3.50 | 3.25 | 3.75 | 3.875 | 3.375 | 3.875 | 5,099,462 | 16:28:07 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Coml Physical, Biologcl Resh | 55k | -5.15M | -0.0447 | -0.78 | 4.03M |
From May 2019 to May 2024
TIDMGDR
RNS Number : 5006F
Genedrive PLC
17 November 2020
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.
genedrive plc
("genedrive" or the "Company")
Audited Final Results
genedrive plc (AIM: GDR), the near patient molecular diagnostics company, announces its audited Final Results for the year ended 30 June 2020.
Financial Highlights
-- Revenue for the year to 30 June 2020 in line with expectations at GBP1.1m (2019: GBP2.4m), with H2 revenues significantly impacted by COVID-19 disruption
-- Year-end cash of GBP8.2m (Dec 2019: GBP3.5m) following a successful equity fundraise in May 2020
-- Balance sheet further strengthened through conversion of the US$8.0m Global Health Investment Fund bond
-- At year end over GBP1.0m of initial orders for Genedrive(R) 96 SARS-CoV-2 kit, pending regulatory approvals
-- Post year end, no material sales for 96 SARS-CoV-2 test as we await further registrations, but further orders are anticipated through a widened network of partners. Pipeline includes an advanced opportunity for supply to a Ministry of Health of a European country, which if converted to a sale, could be for low double digit millions of pounds and delivered in the first quarter of 2021
-- Unaudited cash of GBP5.1m at 31 October 2020 after securing long lead time supplies and building initial stocks
Operational Highlights
-- HCV test obtained WHO pre-qualification status -- AIHL test CE-marked and distributor contracted for UK product launch -- Framework contract with the DoD increased by $2.0m -- Genedrive(R) 96 SARS-CoV-2 test CE marked and modest first commercial sales achieved
-- Genedrive(R) SARS-CoV-2 Kit for Point of Care demonstrates positive results from saliva in approximately 15 minutes. Development remains on track with launch anticipated in March 2021
-- Post CE mark for 96 SARS-CoV-2 Kit - expanded extraction claims achieved and migrated Kit across wider range of RT-PCR instrument platforms
-- First overseas regulatory approval in September 2020 with South Africa Health Products Regulatory Authority validating the test
-- Initial feedback from FDA EUA submission received in November 2020 but no visibility on EUA timescales
-- Expecting additional regulatory approvals, but timing remains undefined
-- Post year end significant progress made with collaboration agreement with Beckman Coulter to bring a fully automated testing solution to the market
-- Recent vaccine news is very welcome but the Board remains confident that high throughput and point of care Covid-19 testing opportunities will be a critical part of controlling the pandemic for a considerable period of time
David Budd, Chief Executive Officer of Genedrive plc, said: "With a growing pipeline and opportunities across a range of healthcare markets I believe genedrive is very well placed for the future. We remain confident in our SAR CoV-2 products and through our network of commercial and other partners we see significant commercial opportunities ahead although additional regulatory clearances are still awaited in certain key territories. We will enter 2021 with a stronger product portfolio and a stronger balance sheet and ready to enter a new growth phase for the Company and its assays."
For further details please contact:
Hot Features
Premium
genedrive plc www.genedriveplc.com
David Budd: CEO / Matthew Fowler: CFO +44 (0)161 989 0245
Peel Hunt LLP (Nominated Adviser and
Joint Broker) +44 (0)20 7418 8900
James Steel / Oliver Jackson
finnCap (Joint Broker) +44 (0)20 7220 0500
Geoff Nash / Kate Bannatyne / Alice
Lane
Walbrook PR Ltd (Media Relations +44 (0)20 7933 8780 or genedrive@walbrookpr.com
& Investor Relations)
+44 (0)7980 541 893 / +44 (0)7876
Paul McManus / Anna Dunphy 741 001
The person responsible for the release of this announcement on behalf of genedrive plc is Matthew Fowler, Chief Financial Officer.
Notes to Editors
About genedrive plc
genedrive plc is a molecular diagnostics company developing and commercialising a low cost, rapid, versatile, simple to use and robust point of need molecular diagnostics platform for the diagnosis of infectious diseases and for use in patient stratification (genotyping), pathogen detection and other indications. The Genedrive(R) HCV-ID kit has received CE-IVD Certification and has been launched in Africa and Asia Pacific. genedrive has distribution agreements with subsidiaries of Sysmex Corporation for the distribution of the Genedrive(R) platform in the EMEA and SE Asia (ex-India), and with ARKRAY Healthcare pvt Ltd for the distribution of the Genedrive(R) HCV-ID Kit and Genedrive(R) platform in India. The Company has assays on market for the detection of certain biological targets and has tests in development for tuberculosis (mTB) and Antibiotic Induced Hearing Loss (AIHL).
Further details can be found at: www.genedriveplc.com and www.genedrive.com .
Chairman's Statement
"Our adaptability and people drive the Company's ability to bring innovation and rapid product development to customers."
The past 12 months have brought some immense challenges and indeed some significant opportunities as key industry players found their place to contribute to the global Covid-19 crisis. genedrive has adapted well and emerged in a stronger position with an expanded product portfolio, a stronger balance sheet and a growing pipeline of sales opportunities.
With the challenge of Covid-19 came the opportunity for genedrive to innovate and respond - which we did with the development and launch of the Genedrive(R) 96 SARS CoV-2 Kit. Combining our deep technical capabilities in PCR with our manufacturing partner's abilities in freeze drying, we developed a unique and innovative Covid-19 test that we launched in and began selling in June. In parallel with the high volume test we began to develop a point of care Covid-19 test to run directly on the Genedrive(R) platform - a product that will be launched in the coming months.
In order to develop and launch a range of Covid-19 products the Group raised GBP8.0m (gross) through an equity funding announced in May 2020. Part of these funds were used in June 2020 to pay the interest due to Global Health Investment Fund (GHIF) when they elected to convert their $8.0m convertible bond. Conversion of this bond significantly strengthened the Group's balance sheet, reducing cash debt to GBP2.7m, (2019: GBP8.5m).
The focus of healthcare systems around the world on Covid-19 clearly impacted our assay strategies in the second half of the year with little commercial traction owing to low activity in hospitals on non-Covid related products. Our AIHL hospital trial programme was slowed, but still continued throughout the period through the energy and commitment of our clinical partners in the NHS, and is now due to complete imminently. Our HCV product saw limited sales but with WHO pre-qualification status achieved during the initial lockdown period, we are hopeful to see a positive pick-up in sales as and when the world returns to the new normal. Our US DoD contract was not directly impacted with sales being approximately as expected, but availability of funding may affect the timing of the next phase of the customer's purchase plans.
Performance
Revenue for the first half of the year was GBP0.6m and was on plan with our targets for the full year. However when Covid-19 began to impact in early 2020 it impacted our ability to commercialise the HCV product and full year revenues were GBP1.1m (2019: GBP2.4m).
Operational performance in the first half of the year was centred around the development of our AIHL product that was CE marked in November 2019 and launched into NHS Hospital trials in January 2020. We remain enthusiastic about the product's opportunities and very pleased with the partnership entered into with Inspiration Healthcare plc, experts in neonatal care and able to exploit the potential of this neonatal test.
Despite good progress on the AIHL test, the second half of the year was defined by our innovation and rapid development of two Covid-19 tests. We made a decision in March 2020 to develop a high throughput test, CE marked it at the end of May and began commercial sales in June. Our historical distribution partners do not cover Europe, so we have been working to establish new relationships in Europe while focusing on opportunities in India, Africa and the United States. The subsequent roll out and sales of the test have been impacted by delays in obtaining regulatory approvals from third party agencies as well as expanding claims to new platforms and both automated and manual extraction processes, to further improve product performance and positioning. Post year end we received South African approval for the test and also entered into a collaborative relationship with Beckman Coulter to deliver a high volume testing solution on their automated equipment. We have ongoing dialogue with the Indian regulators but progress has been slow. In November the FDA provided initial feedback of our EUA application, and requested additional information primarily related to new requirements and methodologies they introduced after our initial submission earlier in the year. We also provided additional data to the World Health Authority (WHO) in November. At this time we do not have visibility from the FDA, WHO or the Indian regulatory agency on approval timelines
but we believe the opportunities in these countries remain very significant. The focus of our development on Covid-19 products will continue into early calendar year 2021. Once the development is complete the team will revert to our Tuberculosis product development activities. Tuberculosis is still a significant unmet need and an attractive opportunity for the Company and one which we are targeting to launch a new product in 2022.
Governance and People
The Board has continued to focus on a strong governance framework, ensuring that internal controls, values and culture align with our strategy. We aim to have a governance structure that meets the medium term requirements of the Company.
The Board remains focused on ensuring its own effectiveness and that of the governance processes throughout the Group. We believe we have a board that reflects our strategy and ambition and will continue to review its effectiveness.
Outlook
In the short term the Covid-19 global crisis significantly impacts our ability to be definitive in our outlook. With a focused portfolio of products and our reliance on healthcare markets, demand will be impacted by the priorities of countries Covid-19 responses. But conversely our Covid-19 products, the on-market high volume lab assay and the soon to be launched point of care saliva based test, provide great opportunities. Although initial commercialisation of the high volume assay has experienced some delay we continue to focus on building sales through collaborations such as the one with Beckman Coulter and our other existing relationships. Our pipeline of sales opportunities for the 96 SARS-CoV-2 test is growing and includes a potential supply contract to a Ministry of Health of a European country. If converted to a sale this would be for low double digit millions of pounds of revenue and delivered in the first quarter of the new calendar year without the need for prolonged regulatory approvals. For our point of care test we are expecting to CE mark and launch the product in March 2021. We expect it will contribute significantly to the on-going management of Covid-19 and will also be an important contributor to sales for genedrive. Until such opportunities with our Covid-19 tests are crystalised we will continue to manage the cost base appropriately.
Despite these challenges our strategy is to position ourselves to react decisively and quickly to adapt to the changes and take advantage of opportunities that will emerge. In terms of AIHL and DoD Pathogen detection we expect to see a step up in demand through the coming year as these products enter new phases in their lifecycles. Whilst the past year presented many challenges it has also offered many opportunities which have the potential to deliver significant revenues and cash flows for the Group. The level of demand for Covid-19 testing remains high and even with vaccines on the horizon we believe this demand will continue for a considerable period of time and we will continue to maintain focus on our two product strategy with both lab based and point of care solutions. I remain confident of genedrive's ability to deliver and grow significantly over the coming years.
Dr Ian Gilham
Chairman
16 November 2020
Chief Executive's Review
"The previous year brought some immense challenges and fantastic opportunities."
Overview
During the first half of the year we continued to execute on our product and commercial strategy. However with the emergence of Covid-19 in the second half of the year we saw revenues on our core assays stall, just as many companies found as global markets went into quarantine. Despite the impact on revenues, Covid-19 brought real opportunity to genedrive as a commercial stage molecular diagnostics company. We were quick to develop solutions and brought a genuinely unique product to market in rapid time.
Reacting to the COVID-19 global crisis
As announced on 25 March 2020, following the rapid global shift of healthcare emphasis towards testing and treatment of Covid-19, the Company refocused a significant part of its core resources towards development of two SARS-CoV-2 tests to detect active Covid-19 infections.
The first test is a high throughput laboratory test and the second test, expected to be launched in March 2021, is a point-of-care test that will run on the Genedrive(R) instrument. The high throughput test was CE marked in May 2020 and we commenced commercial sales in June 2020. Despite having CE marking, our historical distribution partners focus on Africa, Asia and India and so we have been working to establish new relationships in Europe. In the UK, we have not focused on opportunities in the NHS due to their existing supply contracts, and their migration to 384-well format platforms in the new 'Lighthouse' labs. We do however believe our point of care device should have considerable relevance to the NHS.
After CE marking and initial launch, we continued to extend the product's claims, including the introduction of automated extraction processes and with the development of the Genedrive(R) Exporter tool to simplify analysis for the user. The registration and regulatory approval processes of the test has had to take account of the various formats of our product - we effectively have three distinct product variants for different lab machines. As indicated in May we obtained the CE mark on the Roche Lightcycler and have extended the validation to include the ABI 7500 FAST and BioRad CFX96 systems to the range of instruments on which the assay is CE Marked.
We have focused in specific target markets and obtained South African approval in September 2020 which was a clear validation of the product. We are currently pending on regulatory approvals in the US (EUA approval), with WHO and in India but have limited information on timescales which we believe is owing to the huge burden of activity on their regulatory bodies.
While there has been excellent sales funnel progression since the summer, there have been no material deliverable contracts to date as further key registrations have not yet been achieved. We have also focused commercially on the larger, more strategic opportunities that by their nature take longer to come to fruition. These are higher risk, but higher reward. We remain optimistic about the full potential of the test, and our pipeline of sales opportunities for 96 SARS-CoV-2 test includes a supply opportunity to a Ministry of Health of European country which the company is engaged with directly. This opportunity is at an advanced stage but may of course not conclude successfully. If we are successful the total revenue expectation is for low double digit millions of pounds in the first quarter of the new calendar year and we do not expect additional approval processes. We expect that our high throughput test will make a significant contribution to revenue over the coming periods. Finally, new relationships in new markets, such as with Beckman Coulter are presenting new and unique revenue opportunities for the Company.
The second test, the point of care assay on the Genedrive(R) device is due for preliminary release (Research Use Only) around December 2020 with a full CE marked product targeted for March 2021. While first to market opportunities are significant, the underlying qualities and reliability of a test are also of significant importance. I therefore believe that customers are looking for accurate validated products and that the advantages of being deployable and rapid, mean we can address a global market flexibly with the Genedrive(R) device. Post year end we announced that our test would be a saliva based assay with a design goal of achieving results within 15-20 minutes and with a limit of detection within the accepted product profile targets of the UK Government. While recent vaccine news is very welcome, we have a high degree of confidence that high throughput and point of care Covid-19 testing opportunities will be a critical part of controlling the pandemic for a considerable period of time. We remain fully focused on exploiting the commercial opportunities arising on testing for both assays.
Our performance
HCV
The CE marked Genedrive(R) HCV ID Kit was brought to market in March 2018. It is the first low cost, qualitative molecular decentralised testing product on the market. We achieved World Health Organisation pre-qualification status in May 2020. Prequalification means the Genedrive(R) HCV ID kit will be included in the WHO list of prequalified in vitro diagnostics (IVDs) and becomes eligible to participate in the procurement processes of UN agencies. WHO Member States are encouraged to use the WHO list of prequalified IVDs for their respective procurement decisions. To date, it has been a challenging opportunity due to low funding in market for HCV drugs and consequently diagnostics. The redirection of healthcare's focus to Covid-19 saw sales activity reduce significantly in the second half of the year.
Despite the Covid-19 market issues, the market opportunity remains, and as healthcare priorities move back away from Covid-19 with our WHO pre-qualification status and our experienced distribution partners we are positioned to quickly and efficiently exploit opportunities.
Pathogen detection tests for US DoD
Revenue in the year was GBP0.4m down GBP0.5m on the prior year, but this was expected as 2019/20 was a transition year for the DoD contract. The initial DoD development contract that had been worth approximately $10.0m over its life came to an end during 2019, and was extended by $2.0m in November 2019. This extension allows the DoD to continue ordering into their new financial year when it is expected they will enter a long-term supply contract. While final unit numbers and assays will be subject to confirmation and allocation of funding, the expectation is that the DoD will procure up to 500 Genedrive(R) 's and associated assays over a three year period and we now expect to begin contract discussions in early 2021.
The DoD development contract has been a success for genedrive over the years supporting development of the Genedrive(R) capabilities, providing funding to the Group, delivering a complex product to the customer specification, and providing ongoing revenue. We had significant headwinds in being able to supply the DoD for part of the year owing to supplier quality issues. The Company ultimately transferred production of DoD product to Cytiva. We have every belief that the product and the customer will form a significant part of the business in the coming years.
Antibiotic Induced Hearing Loss
In June 2018 the Group was part of an award from UK NHS National Health Research for the development and implementation of a point of care test for the prevention of hearing loss in new-born children when exposed to certain antibiotics. The genedrive allocation of the award has been used to fund the product through development, and is now supporting our in-hospital validation processes during clinical trials at 2 NHS sites. The Genedrive(R) MT-RNR1 assay has been designed and manufactured to run a highly accurate test in 27 minutes - within the National Institute of Clinical Excellence "golden hour" needed for clinicians to assess and prescribe alternative antibiotics. I am thoroughly excited about the global commercial and clinical prospects as well as the healthcare benefits of this first use of a molecular test in a neonatal emergency setting.
The product is due to be launched on a targeted basis in UK and Ireland at the end of 2020 with full commercial roll out planned for June 2021. We signed a distribution agreement with Inspiration Healthcare plc in April 2020. With the neonatal sales knowledge of Inspiration Healthcare we expect commercial traction from early adopters at launch, then 12-18 months later waves of large demand following write-up and inclusion in paediatric guidelines; if successful there should be adoption in the NHS and further afield.
The market is potentially very attractive as being both large and at a higher margin compared to global health-related tests. This opportunity is well suited to the Genedrive(R) , needing multiple, low-cost units to deliver fast testing at a point of need.
mTB
Tuberculosis remains one of the largest molecular testing markets in the world and in terms of routes to market and process it is well defined. It is an important market for the Group and a vital component of our strategy. We have therefore not changed our stance on the importance of accessing this market, but owing to the focus on Covid-19 have pushed out our time horizon for product launch to 2022.
Outlook
At the end of a challenging year, we are now in a fundamentally stronger position, aided by the GBP8m (gross) fund raise in May 2020 and the conversion of loan notes in June 2020 and post year end in September 2020. We were nimble in reacting to Covid-19 and we now have four assays on market: HCV, DoD Biohazard, AIHL, and COVID 96 rapid test, and while there have been delays and there remain some uncertainties around regulatory approvals for the Covid tests, we remain confident in the product's potential and our pipeline. We also have two products in development: mTB and a COVID point-of-care test. These products are expected to produce meaningful revenues in the future.
It has been a challenging year, but genedrive was in the fortunate position to have invested in the capabilities and people needed to exploit its position in PCR, and emerge a better and stronger company. Our products and pipeline provide us with confidence that we will deliver strong growth and much increased shareholder value.
David Budd
Chief Executive Officer
16 November 2020
Financial Review
"The fundraise in May 2020 provided a net capital injection of GBP7.5m to help fund the development and launch of the Genedrive(R) COVID-19 products."
Revenue and other income for the year was GBP1.1m (2019: GBP2.4m). COVID-19 had an impact on sales in the second half of the year and the expected sales traction on our HCV and DoD assays did not take place as expected with customers prioritising their activities elsewhere.
Research and development costs were GBP4.7m (2019: GBP4.9m) and reflected an increased spend in the second half of the year related to the COVID-19 assay. Overall spend was slightly down on the year to June 2019 owing to reduced activity and tight cost control in the first half of the year.
Administration costs were GBP2.0m, up slightly from the prior year GBP1.9m. The majority of this cost increase was related to the second half of the financial year where certain share price linked costs increased as the share price increased.
The trading loss for the year was GBP5.6m (2019: GBP4.4m) and the increase was owing to the reduced revenue in the year. There were no exceptional costs in the year (2019: GBP0.4m gain), giving an operating loss of GBP5.6m (2019: GBP4.0m).
Financing costs
Financing costs were GBP14.7m (2019: GBP0.5m). The finance costs are associated with the convertible bonds outstanding during the year. The finance cost on the convertibles has several elements: an interest charge that unwinds the discount on these long term liabilities, a foreign exchange impact from the US dollar denominated GHIF bond and finally a derivative charge for the 'option' of the bond holders to convert the bond to shares in the Group. The interest on unwinding the discount and foreign exchange movements were GBP1.0m and were broadly in line with the prior year GBP1.1m. Owing to the increase in the Group share price from 20.5p at 30 June 2019 to 102p at 30 June 2020, the cost of the conversion rights on the two bonds increased by GBP13.8m and this is treated as an expense through the finance costs. In the prior year a falling share price since 30 June 2018 created a GBP0.3m gain. These movements are non-cash and merely reflect the changing value of the options to convert. As GHIF converted their bond on the 16 June 2020 and BGF partially converted their bond in September 2020, the only financing costs remaining will relate to the residue GBP1.5m BGF bond and as the share price rises or falls against the 30 June 2020 price of 102p a further charge or release to financing costs will be recognised.
Taxation
The tax credit for the year was GBP1.0m (2019: GBP0.9m). The Group investment in R&D falls under the UK Government's R&D tax relief scheme for small and medium companies where it meets the qualifying criteria. The tax credit was larger than originally forecasted owing to the increase in qualifying criteria as the Group invested and developed the COVID-19 assay that was not expected at the start of the year. As the Group did not make a profit in the year it collects the tax credit in cash following submission of tax returns. The expected receivable on the balance sheet is GBP1.0m (2019: GBP1.0m).
The loss for the financial year after tax was GBP19.4m (2019: GBP3.6m), with GBP14.7m of this loss being non-cash financing costs relating to convertibles bonds.
Cash resources
Net cash outflow from operations was GBP4.8m (2019: GBP4.6m). The operating losses were GBP5.6m (2019: GBP4.4m) with working capital contributing GBP0.8m (2019: GBP0.2m consumption) mainly from an increase in trade and other payables.
The tax credit received was GBP1.0m (2019: GBP1.0m) and relates to cash received under the UK Government's R&D tax relief scheme. The current year tax debtor is GBP1.0m (2019: GBP1.0m) and we would expect receipt in the months following release of these statutory accounts.
The net proceeds from financing activities were GBP6.9m (2019: GBP5.3m). The net proceeds from equity were GBP7.5m. Cash paid to GHIF as part of the conversion of their loan note was GBP0.7m.
The increase in cash was GBP3.0m (2019: GBP1.7m) meaning a closing cash position of GBP8.2m (2019: GBP5.2m).
Balance sheet
Balance sheet net liabilities at 30 June 2019 totalled GBP2.5m and this increased slightly to GBP3.3m at 30 June 2020. The deficit is mainly owing to the non-cash accounting adjustment on the BGF derivative and without this item the balance sheet would be in net assets as a result of the equity raise in May 2020. As the balance sheet position has remained in net liabilities throughout the year, there was no requirement under section 656 of the Companies Act to call a meeting of shareholders and discuss the net liabilities position.
Current assets of GBP10.3m (2019: GBP6.9m) included cash of GBP8.2m (2019: GBP5.2m) following the successful May 2020 fund raise. The tax receivable was GBP1.0m (2019: GBP1.0m) for the current year Corporation Tax Research and Development tax claim and this should be paid by the end of the calendar year. The remaining working capital-related items make up GBP1.0m (2019: GBP0.8m) with the largest increase in inventory being high average balances of COVID-related materials which are being held to mitigate long lead time supply.
Current liabilities were GBP2.2m (2019: GBP1.2m) with the large increase related to the purchase commitment on COVID-19 materials as well as property rent that was deferred during lockdown but that was paid post year end.
Capital and reserves were affected by two notable items in the second half of the financial year. The fund raise in May 2020 provided a net capital injection of GBP7.5m to help fund the development and launch of the Genedrive(R) COVID-19 products. Secondly in June 2020, GHIF, the holders of an $8.0m convertible bond, exercised their right to convert their bond into shares in genedrive plc. As part of the settlement with GHIF, the Group paid GHIF GBP0.7m and issued 7.1m shares. The net equity impact of the GHIF conversion was a GBP10.9m credit to reserves. In addition to these two large movements, there were share-based payment movements of GBP46k and a loss for the year of GBP19.4m, meaning an increase in net liabilities of GBP0.8m.
Going concern
We have experienced delays commercialising the Genedrive(R) 96 SARS CoV-2 test and the lack of revenue has impacted our cash position. However we continue to focus on obtaining product approvals and securing sales and we are managing the cost base until revenues are assured. We are confident in our sales forecasts but securing cash generative revenue in the forthcoming months is necessary otherwise the Group will have
to reduce costs and raise additional funds. We continue to adopt a going concern basis for the preparation of the accounts, but the combination of the above factors represents a material uncertainty that may cast significant doubt on the Group and Company's ability to continue as a going concern.
Risk management and the year ahead
Risk is managed closely and is spread across our businesses and managed to individual materiality. The Board has reviewed and considered the impact of the UK's departure from the EU and has considered the issues relating to a no-deal departure. The Board has considered all of the above factors in its review of going concern and has been able to conclude the review satisfactorily.
Matthew Fowler
Chief Financial Officer
16 November 2020
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2020
Year ended Year ended
30 June 30 June
2020 2019
Note GBP'000 GBP'000
-------------------------------------------- ---- ---------- ----------
Continuing operations
-------------------------------------------- ---- ---------- ----------
Revenue 2 1,059 2,362
-------------------------------------------- ---- ---------- ----------
Research and development costs (4,673) (4,877)
-------------------------------------------- ---- ---------- ----------
Administrative costs (2,026) (1,934)
-------------------------------------------- ---- ---------- ----------
Trading loss (5,640) (4,449)
-------------------------------------------- ---- ---------- ----------
Exceptional items 3 - 439
-------------------------------------------- ---- ---------- ----------
Operating loss (5,640) (4,010)
-------------------------------------------- ---- ---------- ----------
Finance costs 4 (14,744) (508)
-------------------------------------------- ---- ---------- ----------
Loss on ordinary activities before taxation (20,384) (4,518)
-------------------------------------------- ---- ---------- ----------
Taxation on ordinary activities 5 965 882
-------------------------------------------- ---- ---------- ----------
Loss for the financial year (19,419) (3,636)
-------------------------------------------- ---- ---------- ----------
Loss/total comprehensive expense for the
financial year (19,419) (3,636)
-------------------------------------------- ---- ---------- ----------
Loss per share (pence)
-------------------------------------------- ---- ---------- ----------
- Basic and diluted 6 (55p) (14p)
-------------------------------------------- ---- ---------- ----------
Consolidated Balance Sheet
as at 30 June 2020
30 June 30 June
2020 2019
Note GBP'000 GBP'000
-------------------------------------- ---- -------- --------
Assets
-------------------------------------- ---- -------- --------
Non-current assets
-------------------------------------- ---- -------- --------
Plant and equipment 147 164
-------------------------------------- ---- -------- --------
Contingent consideration receivable 7 47 153
-------------------------------------- ---- -------- --------
194 317
-------------------------------------- ---- -------- --------
Current assets
-------------------------------------- ---- -------- --------
Inventories 413 123
-------------------------------------- ---- -------- --------
Trade and other receivables 398 556
-------------------------------------- ---- -------- --------
Contingent consideration receivable 212 106
-------------------------------------- ---- -------- --------
Current tax asset 1,018 971
-------------------------------------- ---- -------- --------
Cash and cash equivalents 8,218 5,184
-------------------------------------- ---- -------- --------
10,259 6,940
-------------------------------------- ---- -------- --------
Liabilities
-------------------------------------- ---- -------- --------
Current liabilities
-------------------------------------- ---- -------- --------
Deferred revenue (67) (88)
-------------------------------------- ---- -------- --------
Trade and other payables (2,129) (1,129)
-------------------------------------- ---- -------- --------
(2,196) (1,217)
-------------------------------------- ---- -------- --------
Net current assets 8,063 5,723
-------------------------------------- ---- -------- --------
Total assets less current liabilities 8,257 6,040
-------------------------------------- ---- -------- --------
Convertible bonds 8 (11,599) (8,518)
-------------------------------------- ---- -------- --------
Net liability (3,342) (2,478)
-------------------------------------- ---- -------- --------
Capital and reserves
-------------------------------------- ---- -------- --------
Share capital
-------------------------------------- ---- -------- --------
Called-up equity share capital 9 780 510
-------------------------------------- ---- -------- --------
Other reserves 42,620 28,112
-------------------------------------- ---- -------- --------
Accumulated losses (46,742) (31,100)
-------------------------------------- ---- -------- --------
Total deficit (3,342) (2,478)
-------------------------------------- ---- -------- --------
Consolidated Statement of Changes in Equity
for the year ended 30 June 2020
Share Other Accumulated Total
capital reserves losses equity
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- -------- --------- ----------- --------
Balance at 30 June 2018 282 24,745 (27,464) (2,437)
---------------------------------------- -------- --------- ----------- --------
Share issue 228 3,015 - 3,243
Deferred consideration equity component - 315 - 315
Equity-settled share-based payments - 49 - 49
---------------------------------------- -------- --------- ----------- --------
FX on translation of overseas assets - (12) - (12)
---------------------------------------- -------- --------- ----------- --------
Transactions settled directly in equity 228 3,367 - 3,595
---------------------------------------- -------- --------- ----------- --------
Total comprehensive loss for the year - - (3,636) (3,636)
---------------------------------------- -------- --------- ----------- --------
Balance at 30 June 2019 510 28,112 (31,100) (2,478)
---------------------------------------- -------- --------- ----------- --------
Share issue - deferred consideration 13 (13) - -
Share issue 150 7,383 - 7,533
---------------------------------------- -------- --------- ----------- --------
Share issue - conversion of GHIF bond
(note 9) 107 7,092 3,777 10,976
---------------------------------------- -------- --------- ----------- --------
Equity-settled share-based payments - 46 - 46
---------------------------------------- -------- --------- ----------- --------
Transactions settled directly in equity 270 14,508 3,777 18,555
---------------------------------------- -------- --------- ----------- --------
Total comprehensive loss for the year - - (19,419) (19,419)
---------------------------------------- -------- --------- ----------- --------
Balance at 30 June 2020 780 42,620 (46,742) (3,342)
---------------------------------------- -------- --------- ----------- --------
Consolidated Cash Flow Statement
for the year ended 30 June 2020
Year ended Year ended
30 June 30 June
2020 2019
Note GBP'000 GBP'000
-------------------------------------------------- ---- ---------- ----------
Cash flows from operating activities
-------------------------------------------------- ---- ---------- ----------
Operating loss for the year (5,640) (4,010)
-------------------------------------------------- ---- ---------- ----------
Depreciation, amortisation and impairment 57 98
-------------------------------------------------- ---- ---------- ----------
Exceptional items (all non-cash) - (439)
-------------------------------------------------- ---- ---------- ----------
ATL Research credits (53) (89)
-------------------------------------------------- ---- ---------- ----------
Share-based payment 32 49
-------------------------------------------------- ---- ---------- ----------
Operating loss before changes in working
capital and provision (5,604) (4,391)
-------------------------------------------------- ---- ---------- ----------
Increase in inventories (290) (12)
-------------------------------------------------- ---- ---------- ----------
Decrease in trade and other receivables 158 60
-------------------------------------------------- ---- ---------- ----------
Decrease in deferred revenue (21) 88
-------------------------------------------------- ---- ---------- ----------
Increase/(Decrease) in trade and other payables 1,000 (346)
-------------------------------------------------- ---- ---------- ----------
Net cash outflow from operations (4,757) (4,601)
-------------------------------------------------- ---- ---------- ----------
Tax received 971 980
-------------------------------------------------- ---- ---------- ----------
Net cash outflow from operating activities (3,786) (3,621)
-------------------------------------------------- ---- ---------- ----------
Cash flows from investing activities
-------------------------------------------------- ---- ---------- ----------
Finance income 13 18
-------------------------------------------------- ---- ---------- ----------
Finance costs (15) -
-------------------------------------------------- ---- ---------- ----------
Acquisition of plant and equipment and intangible
assets, net of loss on disposals (40) (97)
-------------------------------------------------- ---- ---------- ----------
Proceeds from disposal of discontinued operations - 56
-------------------------------------------------- ---- ---------- ----------
Net cash outflow from investing activities (42) (23)
-------------------------------------------------- ---- ---------- ----------
Cash flows from financing activities
-------------------------------------------------- ---- ---------- ----------
Proceeds from share issue 9 7,546 3,243
-------------------------------------------------- ---- ---------- ----------
Proceeds from bond issue - 2,366
-------------------------------------------------- ---- ---------- ----------
Cash paid to settle convertible bonds (685) -
-------------------------------------------------- ---- ---------- ----------
Cash paid to settle deferred consideration - (300)
-------------------------------------------------- ---- ---------- ----------
Net inflow from financing activities 6,861 5,309
-------------------------------------------------- ---- ---------- ----------
Net increase in cash equivalents 3,033 1,665
-------------------------------------------------- ---- ---------- ----------
Effects of exchange rate changes on cash
and cash equivalents 1 (10)
Cash and cash equivalents at beginning of
year 5,184 3,529
-------------------------------------------------- ---- ---------- ----------
Cash and cash equivalents at end of year 8,218 5,184
-------------------------------------------------- ---- ---------- ----------
Analysis of net funds
-------------------------------------------------- ---- ---------- ----------
Cash at bank and in hand 8,218 5,184
-------------------------------------------------- ---- ---------- ----------
Net funds 8,218 5,184
-------------------------------------------------- ---- ---------- ----------
Notes to the Consolidated Financial Statements
for the year ended 30 June 2020
General information
genedrive plc ('the Company') is a company incorporated and domiciled in the UK. The registered head office is The CTF Building, Grafton Street, Manchester M13 9XX, United Kingdom.
genedrive plc and its subsidiaries (together, 'the Group') is a molecular diagnostics business developing and commercialising a low-cost, rapid, versatile, simple-to-use and robust point-of-need or point-of-care diagnostics platform for the diagnosis of infectious diseases and for use in patient stratification (genotyping), pathogen detection and other indications.
genedrive plc is a public limited company, whose shares are listed on the London Stock Exchange Alternative Investment Market.
1. Significant accounting policies
The financial information for the year ended 30 June 2019 has been extracted from the Group's audited financial statements which were approved by the Board of Directors on 3 October 2019 and which have been delivered to the Registrar of Companies for England and Wales. The report of the auditor on these financial statements was unqualified, did not contain a statement under Section 498(2) or Section 498(3) of the Companies Act 2006, but did include a matter to which the auditors drew attention by way of emphasis without qualifying their report.
The report of the auditor on the 30 June 2020 financial statements was unqualified, did not contain a statement under Section 498(2) or Section 498(3) of the Companies Act 2006 but did include a matter to which the auditors drew attention by way of emphasis without qualifying their report relating to the basis of preparation which is reproduced below:
Material uncertainty relating to going concern
We draw attention to note 1 on going concern in the financial statements concerning the group and parent company's ability to continue as a going concern. The going concern status of the group and parent company is dependent upon the achievement of a certain level of sales. If an adequate sales level cannot be achieved to support the group and company, the Directors have the options to reduce ongoing spend and seek additional funding from shareholders. As stated in note 1 on going concern, these events or conditions, indicate that a material uncertainty exists which may cast significant doubt on the group and parent company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.
The information included in this preliminary announcement has been prepared on a going concern basis under the historical cost convention, and in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU and the International Financial Reporting Interpretations Committee (IFRIC) interpretations issued by the International Accounting Standards Board ("IASB") that are effective or issued and early adopted as at the date of these financial statements and in accordance with the provisions of the Companies Act 2006.
The information in this preliminary announcement has been extracted from the audited financial statements for the year ended 30 June 2020 and as such, does not contain all the information required to be disclosed in the financial statements prepared in accordance with the International Financial Reporting Standards ('IFRS').
This announcement was approved by the board of directors and authorised for issue on 16 November 2020.
Going concern
The Directors have concluded that it is necessary to draw attention to the revenue and cost forecasts in the business plans. In order for the Company to continue as a going concern, there is a requirement to achieve a certain level of sales. If an adequate sales level cannot be achieved to support the Group and Company, the Directors have the options to reduce ongoing spend and seek additional funds from shareholders or debt providers. While the Board is confident that it will achieve the required revenue, and has a successful track record in both reducing costs and raising funds, there remains uncertainty as to the level of sales that will be achieved in the forthcoming months, especially in light of on-going regulatory delays on the Genedrive(R) 96 SARS CoV-2 test, in addition to uncertainty around the amount of cost reduction that may be required and the amount of funding that could be raised from shareholders or debt providers. This combination of factors represents a material uncertainty that may cast significant doubt on the Group and Company's ability to continue as a going concern. However, based on the relative likelihood of achieving versus not achieving, the Board believe it is appropriate to continue to adopt the going concern basis of accounting in preparing these financial statements. These financial statements do not include the adjustments that would result if the Company was unable to continue as a going concern.
2. Operating Segments
For internal reporting and decision-making, the Group is organised into one segment, Diagnostics. Diagnostics is commercialising the Genedrive(R) point-of need molecular testing platform. In future periods, and as revenue grows, the Group may review management account information by type of assay and thus split out Diagnostics into segments - however for now the single segment is appropriate.
The chief operating decision-maker primarily relies on turnover and operating profit to assess the performance of the Group and make decisions about resources to be allocated to each segment. Geographical factors are reviewed by the chief operating decision-maker, but as substantially all operating activities are undertaken from the UK, geography is not a significant factor for the Group. Accordingly, only sales have been analysed into geographical statements.
The results of the operating division of the Group are detailed below.
Diagnostics Administrative
segment costs Total
Business segments GBP'000 GBP'000 GBP'000
----------------------------------------- ----------- -------------- --------
Year ended 30 June 2020
----------------------------------------- ----------- -------------- --------
Revenue 1,059 - 1,059
----------------------------------------- ----------- -------------- --------
Segment EBITDA (3,584) (1,999) (5,583)
----------------------------------------- ----------- -------------- --------
Less depreciation and amortisation (30) (27) (57)
----------------------------------------- ----------- -------------- --------
Operating loss (3,614) (2,026) (5,640)
----------------------------------------- ----------- -------------- --------
Net finance costs (14,744)
----------------------------------------- ----------- -------------- --------
Loss on ordinary activities before tax (20,384)
----------------------------------------- ----------- -------------- --------
Taxation 965
----------------------------------------- ----------- -------------- --------
Loss for the financial year (19,419)
----------------------------------------- ----------- -------------- --------
Total comprehensive expense for the year (19,419)
----------------------------------------- ----------- -------------- --------
Diagnostics Administrative
segment costs Total
Business segments GBP'000 GBP'000 GBP'000
----------------------------------------- ----------- -------------- --------
Year ended 30 June 2019
----------------------------------------- ----------- -------------- --------
Revenue 2,362 - 2,362
----------------------------------------- ----------- -------------- --------
Segment EBITDA (2,483) (1,868) (4,351)
----------------------------------------- ----------- -------------- --------
Less depreciation and amortisation (32) (66) (98)
----------------------------------------- ----------- -------------- --------
Exceptional items - 439 439
----------------------------------------- ----------- -------------- --------
Operating loss (2,515) (1,495) (4,010)
----------------------------------------- ----------- -------------- --------
Net Finance costs (508)
----------------------------------------- ----------- -------------- --------
Loss on ordinary activities before tax (4,518)
----------------------------------------- ----------- -------------- --------
Taxation 882
----------------------------------------- ----------- -------------- --------
Loss for the financial year (3,636)
----------------------------------------- ----------- -------------- --------
Total comprehensive expense for the year (3,636)
----------------------------------------- ----------- -------------- --------
Diagnostics Administrative
segment costs Total
GBP'000 GBP'000 GBP'000
------------------------ ----------- -------------- --------
Year ended 30 June 2020
------------------------ ----------- -------------- --------
Segment assets 800 9,653 10,453
------------------------ ----------- -------------- --------
Segment liabilities (1,323) (12,472) (13,795)
------------------------ ----------- -------------- --------
Year ended 30 June 2019
------------------------ ----------- -------------- --------
Segment assets 720 6,532 7,252
------------------------ ----------- -------------- --------
Segment liabilities (598) (9,132) (9,730)
------------------------ ----------- -------------- --------
Geographical segments
The Group's operations are located in the United Kingdom. The following table provides an analysis of the Group's revenue by customer location:
Year ended Year ended
30 June 30 June
2020 2019
All on continuing operations GBP'000 GBP'000
----------------------------- ---------- ----------
United Kingdom 597 1,439
Europe 35 16
----------------------------- ---------- ----------
United States of America 420 907
----------------------------- ---------- ----------
Rest of world 7 -
----------------------------- ---------- ----------
1,059 2,362
----------------------------- ---------- ----------
Revenues from customers accounting for more than 10% of total revenue in the current or prior years are detailed below:
GBP420k of revenue was derived from the US Department of Defense (2019: GBP907k);
GBP280k of revenue was derived from Innovate UK (2019: GBP1,107k); and
GBP210k of revenue was derived from the UK National Institute for Health Research (2019: GBP300k).
3. Exceptional items
Year ended Year ended
30 June 30 June
2020 2019
GBP'000 GBP'000
--------------------------------------------------------- ---------- ----------
Exceptional gain on settlement of deferred consideration
payable - 635
--------------------------------------------------------- ---------- ----------
Impairment of deferred consideration receivable - (196)
--------------------------------------------------------- ---------- ----------
- 439
--------------------------------------------------------- ---------- ----------
During the year to June 2019 the Company entered into a fifth Deed of Amendment in relation to the Visible Genomics Sale and Purchase Agreement. The fifth Deed of Amendment became effective on 10 December 2018 and varied the remaining GBP1,250,000 consideration payable. The difference between the total fair value of amended consideration payable and the GBP1,250,000 created a gain of GBP635,000 which was treated as exceptional.
4. Finance income/(costs)
Year ended Year ended
30 June 30 June
2020 2019
Group GBP'000 GBP'000
-------------------------------------------------- ---------- ----------
Interest income on bank deposits 13 18
Gain on amendment to convertible bonds - 325
-------------------------------------------------- ---------- ----------
Movement in fair value of derivative embedded in
convertible bonds (13,807) 318
-------------------------------------------------- ---------- ----------
Finance cost on liabilities measured at amortised
cost (808) (889)
-------------------------------------------------- ---------- ----------
Foreign exchange movement in convertible bonds (142) (280)
-------------------------------------------------- ---------- ----------
(14,744) (508)
-------------------------------------------------- ---------- ----------
5. Taxation on ordinary activities
(a) Recognised in the income statement
Total
----------------------------------------- ------------------
Year Year
ended ended
30 June 30 June
2020 2019
Current tax: GBP'000 GBP'000
----------------------------------------- -------- --------
Research and development tax credits (1,018) (971)
----------------------------------------- -------- --------
Less: recognised as ATL Research credits 53 89
----------------------------------------- -------- --------
Total tax credit for the year (965) (882)
----------------------------------------- -------- --------
(b) Reconciliation of the total tax charge
The tax assessed on the loss on ordinary activities for the year is lower (2019: lower) that the weighted average applicable tax rate for the year ended 30 June 2020 of 19.0% (2019: 19.0%). The differences are explained below:
Year ended Year ended
30 June 30 June
2020 2019
GBP'000 GBP'000
-------------------------------------------------------- ---------- ----------
Loss before taxation on continuing operations (20,384) (4,518)
-------------------------------------------------------- ---------- ----------
Tax using UK corporation tax rate of 19.0% (2019:19.0%) (3,873) (858)
-------------------------------------------------------- ---------- ----------
Adjustment in respect of R&D tax credit recognised
as Above The Line ('ATL') 13 4
-------------------------------------------------------- ---------- ----------
Adjustment in respect of R&D tax credit claimed (415) (379)
-------------------------------------------------------- ---------- ----------
Items not deductible for tax purposes - permanent 2,807 11
-------------------------------------------------------- ---------- ----------
Items not deductible for tax purposes - temporary (6) -
-------------------------------------------------------- ---------- ----------
Deferred tax not recognised 777 304
-------------------------------------------------------- ---------- ----------
Rate differences (268) 36
-------------------------------------------------------- ---------- ----------
Total tax credit for the year (965) (882)
-------------------------------------------------------- ---------- ----------
(b) Reconciliation of the total tax charge continued
No deferred tax assets are recognised at 30 June 2020 (2019: GBPnil). Having reviewed future profitability in the context of trading losses carried, it is not probable that there will be sufficient profits available to set against brought-forward losses.
The Group had trading losses, as computed for tax purposes, of approximately GBP16,151k (2019: GBP10,989k) available to carry forward to future periods; this excludes management expenses.
The Finance Bill 2020, which was subsequently enacted on 19 March 2020, includes provisions to keep the corporation tax rate at 19.0% and not reduce the rate to 17.0%.
In accordance with the provisions of the Finance Act 2000 in respect of research and development allowances, the Group is entitled to claim tax credits for certain research and development expenditure. These credits are disclosed partly as Above The Line research and development credits ('ATL Research credits') within research and development costs and partly as research and development tax credits within taxation on ordinary activities. The total amount included in the financial statements in respect of the year ended 30 June 2020 was GBP1,018k which included GBP53k disclosed as ATL Research credits deducted from research and development costs with the balance of GBP965k disclosed within taxation on ordinary activities as detailed above.
6. Earnings per share
2020 2019
Group GBP'000 GBP'000
--------------------------------- -------- --------
Loss for the year after taxation (19,419) (3,636)
--------------------------------- -------- --------
2020 2019
Group Number Number
---------------------------------------------------- ---------- ----------
Weighted average number of ordinary shares in issue 35,556,905 26,037,433
---------------------------------------------------- ---------- ----------
Potentially dilutive ordinary shares - -
---------------------------------------------------- ---------- ----------
Adjusted weighted average number of ordinary shares
in issue 35,556,905 26,037,433
---------------------------------------------------- ---------- ----------
Loss per share on continuing operations
---------------------------------------------------- ---------- ----------
- Basic (55)p (14)p
---------------------------------------------------- ---------- ----------
- Diluted (55)p (14)p
---------------------------------------------------- ---------- ----------
The basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders for the year by the weighted average number of ordinary shares in issue during the year.
As the Company is loss-making, no potentially dilutive options have been added into the EPS calculation. Had the Company made a profit in the period:
Group Number --------------------------------------------------------- ---------- Potentially dilutive shares on the convertible bond, net of interest charge* 11,025,134 Potentially dilutive shares on deferred consideration 500,000 --------------------------------------------------------- ---------- Potentially dilutive shares from share options 4,125,562 --------------------------------------------------------- ---------- Potentially dilutive shares within the SIP 198,050 --------------------------------------------------------- ---------- Potentially dilutive ordinary shares 15,848,746 --------------------------------------------------------- ---------- * 4,478,681 of these shares were issued on 30 September 2020, see note 9.
7. Contingent consideration receivable
Greater
than Less than
12 months 12 months Total
GBP'000 GBP'000 GBP'000
------------------------ ---------- ---------- --------
Balance at 30 June 2018 340 172 512
------------------------ ---------- ---------- --------
Received in the period - (57) (57)
------------------------ ---------- ---------- --------
Impairment of (187) (9) (196)
------------------------ ---------- ---------- --------
Balance at 30 June 2019 153 106 259
------------------------ ---------- ---------- --------
Balance at 30 June 2020 47 212 259
------------------------ ---------- ---------- --------
Under the terms of sale and purchase agreement for the disposal of the Services business, a total of GBP512k of future contingent consideration was held on the balance sheet at June 2018. In June 2019 GBP57k was received for the first six months of trading of the new entity. The amount received in 2019 was lower than the amount expected and so an impairment charge of GBP196k was posted to value the deferred consideration at the new fair value.
The amount provided on the balance sheet of GBP259k represents 30 months' trading. The amount owing for the period to June 2020 was overdue at the balance sheet date and so there is effectively 24 months of consideration within the balance of GBP212k. A payment of GBP137k was received in August 2020.
8. Convertible bonds
GHIF GHIF BGF BGF Total Total
host derivative host derivative host derivative Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ -------- ----------- -------- ----------- -------- ----------- --------
Balance at 30 June 2018 5,621 4 - - 5,621 4 5,625
------------------------------ -------- ----------- -------- ----------- -------- ----------- --------
Fair value impact of Deed
of Amendment (563) 238 (563) 238 (325)
Issue of loan note (BGF) - - 2,104 396 2,104 396 2,500
------------------------------ -------- ----------- -------- ----------- -------- ----------- --------
Prepaid arrangement fees
(BGF) - - (122) - (122) - (122)
Movement in fair value of
embedded derivative - (99) - (219) - (318) (318)
Finance cost of convertible
bonds 710 - 168 - 878 - 878
------------------------------ -------- ----------- -------- ----------- -------- ----------- --------
Foreign exchange movement
(GHIF) 280 - - - 280 - 280
------------------------------ -------- ----------- -------- ----------- -------- ----------- --------
Balance at 30 June 2019 6,048 143 2,150 177 8,198 320 8,518
------------------------------ -------- ----------- -------- ----------- -------- ----------- --------
Amortised arrangement fees
(BGF) - - 36 - 36 - 36
Arrangement costs - - (15) - (15) - (15)
Movement in fair value of
embedded derivative - 4,841 - 8,966 - 13,807 13,807
Finance cost of convertible
bonds 487 - 285 - 772 - 772
------------------------------ -------- ----------- -------- ----------- -------- ----------- --------
Foreign exchange movement
(GHIF) 142 - - - 142 - 142
------------------------------ -------- ----------- -------- ----------- -------- ----------- --------
Balance prior to settlement 6,677 4,984 2,456 9,143 9,133 14,127 23,260
------------------------------ -------- ----------- -------- ----------- -------- ----------- --------
Payment of cash at settlement
date (685) - - - (685) - (685)
------------------------------ -------- ----------- -------- ----------- -------- ----------- --------
Conversion to shares at
settlement date (5,992) (4,984) - - (5,992) (4,984) (10,976)
------------------------------ -------- ----------- -------- ----------- -------- ----------- --------
Balance at 30 June 2020 - - 2,456 9,143 2,456 9,143 11,599
------------------------------ -------- ----------- -------- ----------- -------- ----------- --------
None of the fair value movements relate to changes in the entity credit risk.
Global Health Investment Fund 1 LLC ('GHIF')
On 21 July 2014, the Company entered into a Collaboration and Convertible Bond Purchase Agreement ('Agreement') with the Global Health Investment Fund 1 LLC ('GHIF'). The purpose of the Agreement was to fund the Company's development, production and commercialisation of Genedrive(R) to address Global Health Challenges and achieve Global Health Objectives. Further, as part of the Agreement, GHIF and the Company entered into a Global Access Commitment. Under the Global Access Commitment, the Company will undertake appropriate regulatory strategic steps and registrations to secure access for Genedrive(R) in developing countries in tuberculosis, malaria or other infectious diseases as agreed between the parties.
On 23 June 2016, the Company and GHIF entered into a Deed of Amendment and Restatement of the Agreement, which came into effect on 11 July 2016. The principal effects of the Deed of Amendment were to extend the maturity of the GHIF bond by two years to 21 July 2021, and to split the GHIF bond into two tranches: the first tranche of US$2.0m has a conversion price of GBP1.50 per ordinary share and the second tranche of US$6.0m has a conversion price remaining at GBP4.89 per ordinary share.
During the year to 30 June 2019, the Company entered into a second Deed of Amendment with the Global Health Investment Fund 1 LLC ('GHIF') that became effective on 10 December 2018. The principal effects of the Deed of Amendment were to alter the June 2016 Deed of Amendment and Restatement of the five-year US$8.0m and 5% coupon convertible bond with GHIF as follows:
-- The maturity date of the GHIF bond was extended from December 2021 to December 2023 -- The deferment of interest period was extended from January 2019 to January 2022 -- The strike price of the first US$2.0m tranche was reduced from 150p to 28.75p -- The strike price of the second US$6.0m tranche was reduced from 489p to 150p
On 6 June 2020, GHIF exercised its rights to convert tranches 1 and 2 simultaneously. Under the terms of the conversion, GHIF was allotted and issued 7,100,000 new ordinary shares, which was the capped number of shares which can be issued under the convertible bond, and was also be paid approximately GBP685k in cash reflecting the balance of accrued interest owed, in full satisfaction of the obligations of the Company under the convertible bond. As part of the conversion, GHIF has entered into a lock-in and orderly marketing agreement with Peel Hunt LLP, the Company's Nominated Adviser and Joint Broker. Under this arrangement 5,100,000 of the GHIF shares are subject to an orderly marketing agreement until 30 June 2021 and the remaining 2,000,000 GHIF shares will not be sold prior to 30 June 2021 (subject to various carve outs).
Business Growth Fund ('BGF')
The Company entered into an agreement with the Business Growth Fund ('BGF') that became effective on 10 December 2018. Under the terms of the agreement BGF and the Company entered into a convertible loan arrangement. The main terms of the convertible loan note are:
-- GBP2.5m loan that matures on 30 June 2025 -- Interest accrues on the loan at a rate of 7%, payable quarterly
-- Interest can be deferred into the principal up until 31 December 2021 and then needs to be paid in full
-- The loan converts at 28.75p which was 125% of the share price on 10 December
-- Certain warranties have been granted by the Company and the Executive Directors to BGF and BGF consent is required on certain matters
-- The loan came conditional with a GBP1m subscription to the December 2018 fundraising process
-- The maximum number of shares to be issued to BGF on conversion of the Loan Notes, when aggregated with the ordinary shares held by BGF and persons acting in concert with BGF, is capped at 29.9% of the issued share capital of the Company
Accounting for the convertible bonds
GHIF
Whilst the bond holder has the option to convert into a fixed number of shares, due to the GHIF convertible bond being denominated in a different currency to the Company's functional currency, IFRS requires the convertible bond to be accounted for as a compound instrument, comprising a debt host (liability component) and a derivative (equity component). The debt host was required to be recorded initially at fair value and subsequently measured at amortised cost.
The derivative was measured at the settlement date using a Quanto Option Valuation model which takes account of the multicurrency aspects of the convertible bond. Changes in fair value are recorded in profit and loss. The variables used in running the model were volatility of the Company's share price of 40%, expected life of the derivative of 0.008 years, risk free interest rate of 0.098% and no dividend yield.
On conversion, the compound instrument has been derecognised. The consideration received for the issue of shares was measured by reference to the face value of the debt of GBP7,199,000, being the outstanding principal and accrued interest. The difference of GBP3,177,000 between the carrying amount of the instrument and the consideration received has been recognised directly in equity. No gain or loss has been recorded in the profit and loss account as a result of the conversion.
BGF
The convertible nature of the loan grants BGF an option to convert to equity but the instrument includes adjustments to the conversion price if additional equity is issued by the Company meaning that the number of shares that would be issued is not fixed. The bond also includes options relating to early redemption by the Company subject to it making an early redemption payment. These features represent embedded derivatives which are recognised separately from the debt host.
The debt host was initially recorded at fair value and is subsequently measured at amortised cost.
The derivative is measured at fair value and movements recorded in profit and loss. At 30 June 2020, the derivative has been valued using a Black-Scholes pricing model using the following inputs: volatility of the Company's share price of 40%, expected life of the derivative of 1.5 years, risk free interest rate of 0.098% and no dividend yield.
On 30 September 2020, BGF Investments LP exercised its right to convert GBP1,000,000 of its GBP2,500,000 Loan Note instrument into new ordinary shares of 1.5p each in the Company. Under the conversion BGF was allotted and issued 4,478,681 new ordinary shares and was paid approximately GBP134,000 in accrued interest owed on this tranche of the loan.
9. Share capital
Allotted, issued and fully paid:
Number GBP'000
-------------------------------------------------- ---------- -------
Balance at 30 June 2018 18,783,115 282
-------------------------------------------------- ---------- -------
Shares issued 15,217,391 228
-------------------------------------------------- ---------- -------
Balance at 30 June 2019 34,000,506 510
-------------------------------------------------- ---------- -------
Share issue - deferred consideration 869,565 13
Share issue 10,000,000 150
-------------------------------------------------- ---------- -------
Share issue - equity-settled share-based payments 16,000 -
-------------------------------------------------- ---------- -------
Share issue - conversion of GHIF bond 7,100,000 107
-------------------------------------------------- ---------- -------
Balance at 30 June 2020 51,986,071 780
-------------------------------------------------- ---------- -------
At the balance sheet date there are three convertible and potentially convertible arrangements that could result in the issue of additional shares:
Note 8 details the option to convert the Loan Note held by BGF, being GBP2.5m at the balance sheet date and GBP1.5m following partial conversion on 30 September 2020 at 28.75p.
On 10 December 2021 the Company will issue 500,000 shares in genedrive plc to the former owner of Visible Genomics as part of a Deed of Amendment agreed in December 2018 to the Visible Genomics Sale and Purchase Agreement.
Note 20 of the full report and accounts details share options that could also be exercised and result in the issue of additional shares.
10. Other reserves
Employee
share
Share Shares incentive Share Reverse
premium to be plan options acquisition Total
account issued reserve reserve reserve equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- -------- -------- ---------- -------- ------------ --------
Balance at 30 June 2018 25,988 - (196) 1,437 (2,484) 24,745
------------------------------------- -------- -------- ---------- -------- ------------ --------
Share issue 3,015 - - - - 3,015
------------------------------------- -------- -------- ---------- -------- ------------ --------
Deferred consideration - equity
component - 315 - - - 315
Transfer of shares to SIP members - - - - - -
Equity-settled share-based payments - - - 49 - 49
------------------------------------- -------- -------- ---------- -------- ------------ --------
FX on translation of overseas
assets - - - - (12) (12)
------------------------------------- -------- -------- ---------- -------- ------------ --------
Transactions settled directly
in equity 3,015 315 - 49 (12) 3,367
------------------------------------- -------- -------- ---------- -------- ------------ --------
Balance at 30 June 2019 29,003 315 (196) 1,486 (2,496) 28,112
------------------------------------- -------- -------- ---------- -------- ------------ --------
Share issue - deferred consideration 187 (200) - - - (13)
Share issue 7,383 - - - - 7,383
------------------------------------- -------- -------- ---------- -------- ------------ --------
Share issue - conversion of GHIF
bond 7,092 - - - - 7,092
------------------------------------- -------- -------- ---------- -------- ------------ --------
Equity-settled share-based payments 14 - - 32 - 46
------------------------------------- -------- -------- ---------- -------- ------------ --------
Transactions settled directly
in equity 14,676 (200) - 32 - 14,508
------------------------------------- -------- -------- ---------- -------- ------------ --------
Balance at 30 June 2020 43,679 115 (196) 1,518 (2,496) 42,620
------------------------------------- -------- -------- ---------- -------- ------------ --------
Shares to be issued relate to the equity component of deferred consideration, full details are contained in note 9.
The employee Share Incentive Plan reserve represents 17,882 shares in genedrive plc (2019: 18,864 shares) all of which are held by Epistem SIP Trustee Ltd. These shares are listed on the Alternative Investment Market and their market value at 30 June 2020 was
GBP1.02 per share or GBP18,240 (2019: GBP3,867). The nominal value held at 30 June 2020 was GBP268 (2019: GBP283).
The reverse acquisition reserve arises as a difference on consolidation under merger accounting principles and is solely in respect of the merger of the Company and Epistem Ltd, during the year ended 30 June 2007.
END
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