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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Salvarx Group Plc | LSE:SALV | London | Ordinary Share | IM00BZ4SS228 | ORD 2.5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 4.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMSALV
RNS Number : 7138J
SalvaRx Group plc
30 June 2017
SalvaRx Group plc
("SalvaRx", "the Company" or "the Group")
Final Results
Chairman's Statement
I am pleased to present the audited final results for SalvaRx. As a reminder, in March 2016, SalvaRx Limited became a wholly owned subsidiary of 3Legs via a reverse takeover ("RTO"), as part of our plan to create a multi-product drug development portfolio company focused on cancer immunotherapy. 3Legs also changed its name to SalvaRx Group plc ("SalvaRx") and was re-admitted to trading on the Alternative Investment Market ("AIM") of the London Stock Exchange (AIM: SALV), on 22 March 2016. Since then, the team has executed upon its strategy to grow a pipeline of novel treatments for cancer.
The cancer immunotherapy market continues to be a rapidly growing therapeutic area. As of today, there are five approved anti-PD1 agents in the United States. This is the first time in the oncology field where five of the large cap pharma companies (Pfizer, Merck, BMS, Astra Zeneca, and Roche) are competing with similar drugs. Given the lack of differentiation, each company is striving to create novel combinations with second agents to compete with one another. BMS is in the lead in this area with their proprietary combination of Opdivo and Yervoy. Collectively, large cap pharma companies are running hundreds of other studies looking at combinations of new agents with their PD1 products. Former BMS executives created SalvaRx with a specific strategy to develop state of the art combination agents for these PD1 products and to seek exits with these pharma companies early on.
Since the RTO, SalvaRx has continued delivering its mission by advancing its products into the clinic and acquiring exciting additional products in the immunotherapy sector. The Group has reviewed hundreds of opportunities, and has now invested in four exciting platform companies where it is actively helping drive strategy and execution. As of the publishing of this report, SalvaRx portfolio companies have a total of eight products in development with one in the clinic. This is truly remarkable given the total capital invested and reflects creative deal making and strong utilisation of non-dilutive capital.
The loss for the year ended 31 December 2016 was GBP2,445,000 (2015: GBP466,000). This reflects continued investment in research and development of GBP693,000 (2015: GBP260,000) and exceptional costs related to the RTO of GBP871,000.
Since the year end, the Company has raised $3m in the form of loan notes, of which $2m has come from Greg Bailey and myself. This additional funding will help us to support our current business and add selectively to our portfolio when we identify the right opportunities. It is our intention to provide further financial support if required.
I am encouraged by the progress that has been made and am confident that further advances will be made in the current financial year. It will be quite exciting to track the performance of our treatments in advanced cancer patients. By this time next year, many more patients will be given new options to help combat their disease. The SalvaRx team continues to innovate and seek out the world's best technologies to bring to cancer patients.
Jim Mellon
Non-executive Chairman
29 June 2017
Enquiries
Hot Features
Premium
SalvaRx Group PLC
Ian Walters (Chief Executive) Tel: +1 203 441
5451
Northland Capital Partners Limited Tel: +44 (0) 20
Nominated Adviser and Broker 3861 6625
Matthew Johnson / Edward Hutton
(Corporate Finance)
John Howes (Corporate Broking)
Peterhouse Corporate Finance Limited Tel: +44 (0) 20
Joint Broker 7469 0932
Lucy Williams / Duncan Vasey
CEO's Strategic Report
In its second year of operations, SalvaRx has continued to execute on its strategy to grow its pipeline of products and help develop innovative medicines for the treatment of cancer. This report covers activity both during the period under review and post period end and highlights our ability to advance drugs through the development and regulatory process to begin testing on humans. Ultimately our goal is to help as many cancer patients as possible with our medicines, and we have been able to grow our innovative pipeline to eight products. We are continuing to review new opportunities as well as interfacing with big pharma companies to discuss possible strategic collaborations.
iOx Therapeutics (60.49% subsidiary undertaking)
iOx has been progressing its two products through preclinical development and manufacturing. Although there have been some challenges with the manufacturing process for lead product IMM60, the management team and its expert advisers have resolved the issues and iOx is now progressing to large scale manufacturing for clinical trial use. There are many activities going on in parallel to enable the first human patient to be treated in the near future.
In parallel, the PRECIOUS team, a consortium of academic experts from five leading European universities, continues to make progress in the development of our second product, IMM65, a combination of IMM60 with a tumor vaccine (NY-ESO1). These development activities are fully funded through a Horizon 2020 grant with the result being that there is scope to make significant progress with no cost to iOx. We announced in August 2016 that The Ludwig Institute has granted iOx the rights to use their NY-ESO1 cancer vaccine on a commercial scale, if the grant-funded clinical trial proves the efficacy of the new combination product.
iOx continues to prosecute and progress its patent applications and in 2016, a US patent was issued for its lead program. Under US Patent Number 9,365,496, IMM60 is covered as a standalone treatment, along with additional uses in a co-formulation with a tumour vaccine or given as a combination therapy alongside an immunomodulatory agent, including PD-1 pathway inhibitors. PD-1 drugs were part of the new vanguard of cancer therapies, allowing the human immune system to fight cancer, instead of traditional chemical treatments, and there are now five approved anti-PD1 therapies. iOx's clinical programs all explore their iNKT technology alone and in combination with an anti-PD1 agent. It is our goal to improve the anti-tumor immune response by targeting many components of the immune system.
Intensity Therapeutics ($2million investment, representing 8.5% equity)
Intensity has been releasing data over the past year at multiple international congresses along with its partners at the National Cancer Institute (a division of the National Institutes of Health). Most importantly, the company submitted an application to begin testing its lead product INT230-6 in cancer patients in both United States and Canada. Intensity announced on 30 May 2017 that it has started to treat its first patient in the clinical trial. This is an exciting milestone which represents the positive assessment by the FDA of results of the trials carried out on animals and the related safety procedures, and validates the integrity of Intensity's manufacturing procedures.
New Activities in 2017
In order to continue executing our plans to invest and operate other exciting opportunities in immunotherapy, in March 2017 SalvaRx Limited announced the issue of a debt instrument for up to $5million. To date approximately $3million has been raised, and I am delighted to report the continuing support of two of our directors, Greg Bailey and Jim Mellon, who have each subscribed for $1million. In addition, the Company effected a reorganization whereby all its interests were integrated under SalvaRx Limited, and it is anticipated that this structure will open additional avenues for fundraising in the future. The new investment into the Company has already enabled SalvaRx Limited to complete two new investments, namely Nekonal Oncology and Rift Biotherapeutics.
Nekonal Oncology
In February 2017, we announced a joint investment with Nekonal SARL, called Nekonal Oncology. Nekonal was founded by a former Harvard professor Nalân Utku, MD who was exploring a unique antibody for autoimmune diseases. Later she discovered that the opposite antibody held promise for use in oncology indications. SalvaRx scientific and business leadership has joined forces with Dr. Utku to start Nekonal Oncology with a licence to two oncology antibodies. Nekonal was able to recruit a very senior biotech executive, John Edwards, chairman of two other cancer immunotherapy companies to join the board of Nekonal Oncology.
Rift Biotherapeutics
We advanced to Rift Biotherapeutics Inc. ("Rift") by way of convertible notes total amount of $90,000 between December 2016 and January 2017 and further invested $1million in March 2017 for an initial holding of approximately 30% in Rift. Rift has a lab in San Diego California, and has brought the SalvaRx portfolio new capabilities in antibody engineering. Its management team has been strengthened by the appointment of Briggs Morrison, MD to the board. Briggs is the CEO of Syndax (NASDAQ: SNDX) and a managing director of MPM Capital, a healthcare-focused venture capital firm and previously held senior positions at AstraZeneca, Pfizer's and Merck. Rift develops novel antibodies which modulate numerous suppressive factors that exist in the tumor microenvironment. There is some synergy and possibility for collaboration with the Nekonal Oncology team. In addition to the initial equity investment, SalvaRx has the option to invest an additional $1.5million at the same valuation and to acquire all the outstanding shares of Rift for new shares in SalvaRx on the same basis.
Outlook
We expect that our iOx subsidiary and investments will all continue their manufacturing and preclinical testing during the rest of the year. We are anticipating iOx to start new clinical trials in 2018 and we are also expecting preliminary clinical trial data from Intensity's human studies also in 2018. At the SalvaRx corporate level, we continue to identify potential investments or acquisitions. We expect to grow further by acquisition, investment or licensing arrangements as we identify novel cancer immunotherapies.
Our hard work is paying off, as advanced cancer patients can now participate in clinical trials of Intensity's first product (INT230-6). Many people are still suffering with their disease and have limited options for treatment. We are striving to expedite access to our novel medicines by working closely with health authorities and innovating how we prepare products for human testing. We believe that over the next two years SalvaRx will see the rewards of these efforts. Thank you for your continued support as we try to improve the care for people with cancer.
Dr Ian Walters
Chief Executive Officer
29 June 2017
Directors' report
Introduction
The Directors present their report and financial statements of SalvaRx Group PLC ("the Group") for the year ended 31 December 2016.
Principal activity
The Group's principal activity is that of drug discovery and development, focused on immune-oncology.
Business and financial review and future developments
The plans for the future are set out in the Chairman's Statement and CEO's Strategic Report.
Results and dividends
The Group's loss for the year after taxation, net of non-controlling interest was GBP2.10million (2015: loss of GBP0.4 million). The Directors do not recommend the payment of a dividend for the year.
Directors
The Directors of the Group that served during the year and subsequently were as follows:
Jim Mellon, Non-Executive Chairman
Dr Ian Walters, Chief Executive Officer (appointed 22 March 2016)
Kam Shah, Chief Financial Officer (appointed 22 March 2016)
Dr Greg Bailey, Non-Executive Director
Richard Armstrong, Non-Executive Director
Colin Weinberg, Non-Executive Director
Biographical details of serving Directors can be found in the Board of Directors section.
Annual General Meeting and re-election of Directors
The Annual General Meeting will be held on 31 July 2017.
Directors' Interests
The table below sets out the Directors interests in the Company's Ordinary Shares, including their connected persons, together with details of options held by the directors over New Ordinary Shares of the Company:
Director Number Percentage Number Exercise Number Exercise
of Ordinary of issued of Options Price of options price
shares share in iOx* GBP
capital
J Mellon 13,320,291 36.53% 86,230 23.2p - -
G Bailey 13,320,291 36.53% 86,230 23.2p - -
I Walters - - 428,786 35.5p 389 120
K Shah - - 364,666 35.5p 130 120
R Armstrong 64,635 0.18% 86,230 23.2p - -
R Armstrong - - 91,166 35.5p - -
C Weinberg 43,103 0.12% 86,230 23.2p - -
C Weinberg - - 91,166 35.5p - -
26,748,320 1,320,704 519
------------- ------------ ------------
*iOx Therapeutics Ltd is a subsidiary, in which the Company holds 60.49% equity.
Note: options with an exercise price of 23.2p are exercisable at any time until 16 February 2021. Options with an exercise price of 35.5p are exercisable in three equal annual tranches from 22 March 2017, except such options granted to Richard Armstrong and Colin Weinberg which are exercisable immediately in event that they step down from the Board in due course on the appointment of new non-executive directors.
The interests of Jim Mellon in the table above include Ordinary Shares in the Company held by Port Erin Biopharma Investments Limited and Galloway Limited. Jim Mellon holds controlling interests in these companies.
On 21 April 2016, the Company issued a total of US$1 million of zero coupon Convertible Loan Notes to Jim Mellon and Dr. Greg Bailey. The Loan Notes had a term of three years and were convertible at the Noteholders' discretion at a price of 35.5p per Ordinary share. However, in February 2017, the entire loan note liability was transferred to SalvaRx Limited and the Note holders agreed to accept 4,000 ordinary shares of SalvaRx Limited in full settlement of the Loan Notes.
Directors' insurance and indemnity provisions
Subject to the conditions set out in the Isle of Man Companies Act 2006 and the Company's Articles of Association, the Company has arranged appropriate Directors' insurance to indemnify the Directors against liability in respect of proceedings brought by third parties. The annual cost of the cover is not material to the Group.
Significant shareholders
Other than the Directors' interests shown above, as at 23 June 2017, the Company had been notified that the following were holders of 3% or more of the Company's issued Ordinary Share capital:
Number of Shares %
Hon & Co Holdings Limited 2,122,676 5.79
Share capital
Details of the issued share capital, together with details of the movement in issued share capital during the year, are shown in note 20 to the financial statements.
Principal risks and uncertainties
The principal risks faced by the Company and the actions taken to mitigate them, are shown in the table below:
Risk/Description Principal mitigation
------------------------------- -----------------------------------
Intellectual property:
In common with other The Company and its partners
companies engaged in actively manage all intellectual
pharmaceutical development, property (IP) rights,
the Company faces the engaging with specialists
risk that intellectual to apply for and defend
property rights necessary IP rights in appropriate
to exploit its research territories.
and development efforts
may not be adequately
secured or defended.
The Group's intellectual
property may also become
obsolete, preventing
commercial exploitation.
------------------------------- -----------------------------------
Research and development:
The Company may not The lead product candidate
generate further attractive has successfully completed
drug candidates and a comprehensive preclinical
candidates already in development programme
development may fail and the safety and efficacy
clinical trials because profile is well understood.
of lack of efficacy, The clinical trials will
unacceptable side effects, be designed based on
or insurmountable challenges the data from the development
in conducting studies programme completed to
adequate to support date.
regulatory approvals.
Practical issues, such
as inability to devise
acceptable formulations
for products or inability
to manufacture products
at an acceptable cost,
may also lead to failure
of candidates in development.
------------------------------- -----------------------------------
Risk/Description Principal mitigation
-------------------------------- --------------------------------
Regulatory:
Drug development is The Company's and its
a highly regulated activity partners' drug development
governed by different teams include specialists
regulatory authorities in regulatory affairs
in different jurisdictions. who consult with other
It can be difficult experts to ensure that
to predict the exact internal control processes
requirements of different and clinical trial design
regulatory bodies. Decisions meet current regulatory
by regulators may lead requirements. The Company
to delays in development also engages directly
and approval of drugs with regulatory authorities
or lack of marketing when appropriate.
authorisations in some
or all territories
-------------------------------- --------------------------------
Financial:
The successful development The Company has successfully
of the Company's assets partnered with the University
requires financial investment of Oxford, which will
which can come from conduct the clinical
revenues, commercial trials without any charge
partners, or investors. to the Company.
Failure to generate
additional funding from The Company has raised
these sources may compromise sufficient additional
the Company's ability development capital which
to execute its business is considered sufficient
plans or to continue to fund current plans.
in business. The Group operates robust
controls over expenditures
including budgeting and
authorisation of individual
expenditures.
-------------------------------- --------------------------------
Commercial and economic:
The Company may be unable The Company consults
to effectively commercialise with commercial, clinical,
or license its products and scientific experts
to partners or may not to assess the payer and
be able to execute licensing prescriber environment
deals that provide significant and the potential impact
revenues. Development of competing products
of alternative technologies or changes in the economic
or products may undermine landscape pertaining
the Company's capacity to hospital infections.
to generate revenue The management actively
flowing from commercialisation monitors performance
of its assets. If the of key competitors in
Company's drugs are terms of pricing, market
commercialised, they share, and prescribing
may not generate significant behaviour.
revenues if their use
and sale is restricted
by regulators or by
failure of healthcare
payors to provide adequate
reimbursement of drug
costs.
-------------------------------- --------------------------------
Operational:
The Company may not The Company's recruitment
be able to recruit and processes are tailored
retain appropriately to identify and attract
qualified staff. Facilities the best candidates for
and other resources specific roles. The Company
may become unavailable. aims to provide competitive
rewards and incentives
to staff and directors,
and informally benchmarks
the level of benefits
provided to its people
against similar companies.
-------------------------------- --------------------------------
Key Performance Indicators
At this stage, the success of the Group is dependent upon the success of future clinical trials. When the outcomes of these trials are known, if and when the Company moves into production, financial, operational, health and safety and environmental KPIs will become relevant and be measured and reported accordingly.
Political donations
There were no political donations made by the Group in the current or prior year.
Charitable donations
There were no charitable donations made by the Group in the current or prior year.
Going concern
The Directors have a reasonable expectation that the Group has adequate resources to continue in existence for the foreseeable future, based on the cash raised subsequent to the year-end. This is expected to meet the next twelve months projections of the operational and research and development activities to be carried out.
At 31 December 2016, the Group had cash and cash equivalents of approximately GBP1.0 million. Subsequent to the balance sheet date, the Group's subsidiary, SalvaRx Limited raised approximately GBP2.4 million (US$3 million) through debt financing.
The Board has evaluated the cash flow and proposed budget and has reached the conclusion there is sufficient funding for the current workload projected until June 2018. This budget includes some estimation of the R&D tax credits that are available to the Group. There is some minor risk as to the timing and total amount of this cash flow, but the board has considered the availability of future funding, cost deferral and that existing shareholders have indicated their intention to provide further funding should this be required. That being said, major costs of drug development going forward are covered by external non-dilutive funding (collaborative research agreements and grants).
The Group believes that these available resources will be sufficient to meet its cash requirements through to the clinical trial, for its operational, portfolio expansion through strategic acquisitions and investments in entities engaged in immunotherapy and research and development activities.
As the Group continues to incur losses, transition to profitability is dependent upon achieving a level of revenues adequate to support the Group's cost structure and unless, and until doing so, intends to fund future operations through additional debt or equity offerings. There can be no assurance, however, that additional funding will be available on terms acceptable to the Group, if at all.
The Directors therefore consider it appropriate to prepare the financial statements on a going concern basis.
Payment of suppliers
It is the Group's policy that payments to suppliers are made in accordance with terms and conditions agreed between the Group and its suppliers. The average payment period for creditors for the year was 40 days (2015: 31 days).
Post balance sheet events
Events after the balance sheet date have been disclosed in note 27 to the financial statements.
Statement as to disclosure of information to the auditor
Each Director in office at the date of this report has confirmed, as far as he is aware, that there is no relevant audit information of which the auditor is unaware. Each such Director has confirmed that he has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the auditor is aware of that information.
Auditor
A resolution to reappoint RSM UK Audit LLP as auditor, at a fee to be agreed, will be proposed by the Board.
The Directors' Report was approved by the Board of Directors and signed on its behalf by:
Kam Shah
Director
29 June 2017
Corporate Governance Statement
The Directors recognise the importance of the Financial Reporting Council's UK Corporate Governance Code (compliance with which is not mandatory for companies admitted to trading on AIM) and intend to comply with its principles so far as is practicable and appropriate given the nature and size of the Company and the size and constitution of the Board. The Directors also intend to comply with the principles of the Corporate Governance Guidelines for AIM Companies published by the Quoted Companies Alliance in 2010, to the extent that they consider it appropriate and having regard to the Company's size, board structure, stage of development and resources.
The Directors hold regular board meetings and are responsible for formulating, reviewing and approving the Company's strategy, budget and major items of capital expenditure. An audit committee, a remuneration committee and a nomination committee are in place with formally delegated rules and responsibilities. Each of these committees meets as and when appropriate save in the case of the remuneration and audit committees which meet at least twice each year.
The Audit Committee comprises Richard Armstrong (Chairman), Jim Mellon and Dr Greg Bailey. The Audit Committee, inter alia, determines and examines matters relating to the financial affairs of the Company including the terms of engagement of the Company's auditors and, in consultation with the auditor, the scope of the audit. It receives and reviews reports from management and the Company's auditors relating to the half yearly and audited annual accounts and the accounting and the internal control systems in use throughout the Enlarged Group.
The Remuneration Committee comprises Jim Mellon (Chairman), Richard Armstrong, Dr Greg Bailey and Colin Weinberg. The Remuneration Committee reviews and makes recommendations in respect of the Directors' remuneration and benefits packages, including share options and the terms of their appointment. The Remuneration Committee also make recommendations to the Board concerning the allocation of Options under the Plan.
The Nomination Committee comprises Colin Weinberg (Chairman), Jim Mellon and Richard Armstrong. The Nomination Committee monitors the size and composition of the Board and the other Board committees and is responsible for identifying suitable candidates for Board membership.
Statement of Directors' Responsibilities
The directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare group financial statements in accordance with generally accepted accounting principles. The directors are required by the AIM Rules of the London Stock Exchange to prepare group financial statements in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU").
The financial statements of the group are required by law to give a true and fair view of the state of the group's affairs at the end of the financial year end and of the profit or loss of the group for that period and are required by IFRS as adopted by the EU to present fairly the financial position of the group and the financial performance of the group.
In preparing the statements, the directors should:
-- select suitable accounting policies and then apply them consistently; -- make judgements and accounting estimates that are reasonable and prudent; -- state whether they have been prepared in accordance with IFRS adopted by the EU; and
-- prepare the financial statements on a going concern basis unless it is inappropriate to presume that the group will continue in business.
The directors are responsible for keeping reliable accounting records which correctly explain the group's transactions and enable them to determine, with reasonable accuracy, the financial position of the group at any time and allow financial statements to be prepared. They are also responsible for safeguarding the assets of the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the SalvaRx Group PLC website. Legislation in Isle of Man governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
SALVARX GROUP PLC
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF SALVARX GROUP PLC
Opinion on financial statements
We have audited the group financial statements ("the financial statements") which comprise the Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated Cash Flow Statement, Consolidated Statement of Changes in Equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
In our opinion, the financial statements:
-- give a true and fair view of the state of the Group's affairs as at 31 December 2016 and of the Group's loss for the year then ended;
-- have been properly prepared in accordance with IFRSs as adopted by the European Union; and
-- have been properly prepared in accordance with the requirements of the Isle of Man Companies Act 2006.
Other matter
Due to the application of reverse acquisition accounting (as explained in note 3), the consolidated comparative figures are unaudited.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements arising from the requirements of International Standards on Auditing (UK and Ireland) is provided on the Financial Reporting Council's website at http://www.frc.org.uk/auditscopeukprivate
Respective responsibilities of directors and auditor
As more fully explained in the Directors' Responsibilities Statement set out on page 13, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.
We read the other financial and non-financial information contained in the annual report and consider the implications for our report if we become aware of any material inconsistency with the financial statements or with knowledge acquired by us in the course of performing the audit, or any material misstatement of fact within the other information. We also read the information in the directors' report and consider the implications for our report if we become aware of any material inconsistency with the financial statements.
This report is made solely in accordance with section 80C of the Isle of Man Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
MICHAEL THORNTON (Senior Statutory Auditor)
For and on behalf of RSM UK AUDIT LLP, Statutory Auditor
Chartered Accountants
2 Whitehall Quay
Leeds
LS1 4HG
29 June 2017
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2016
Year ended Unaudited
31 December *6 May
2016 2015 to
GBP'000 31 December
2015
Notes GBP'000
Research and development (693) (260)
Exceptional items 7 (871) -
Other operating costs (913) (221)
Operating loss 8 (2,477) (481)
Financing income 17 1 -
Loss before tax (2,476) (481)
Tax 11 31 15
Loss and comprehensive loss
for the year (2,445) (466)
Loss and comprehensive loss
attributable to:
Equity holders of the parent (2,038) (326)
Non-controlling interest (407) (140)
___________ __________
(2,445) (466)
Loss per ordinary share
Basic and diluted, pence
per share 12 (0.06p) (0.01p)
* In accordance with note 3, and the adoption of reserve takeover accounting principles, comparatives are for the consolidated results of SalvaRx Limited
Consolidated Balance Sheet
As at 31 December 2016
2016 Unaudited
GBP'000 2015*
Notes GBP'000
Assets
Non-current assets
Investments 13 1,431 -
Intangible assets 14 1,184 1,366
2,615 1,266
Current assets
Trade and other receivables 15 34 236
Cash and cash equivalents 16 967 567
1,001 803
Total assets 3,616 2,169
Liabilities
Current liabilities
Trade and other payables 18 (295) (244)
(295) (244)
Non-current liabilities
Equity option on convertible
loan 17 (78) -
Convertible loan notes 17 (616) -
Deferred tax liabilities 11 (201) (232)
________ _________
(895) (232)
________ _________
Total liabilities (1,190) (476)
Net assets 2,426 1,693
Equity
Share capital 20 911 155
Share premium account 22 - 52,533
Reverse acquisition reserve 23 3,065 (51,748)
Own shares 21 (215) -
Share-based payment reserves 24 382 25
Accumulated deficit (2,364) (326)
Equity attributable to equity
holders of the parent 1,779 639
Non-controlling interests 647 1,054
_________ __________
Total equity 2,426 1,693
*In accordance with note 3, and the adoption of reverse takeover accounting principles, comparatives are for the consolidated financial position of SalvaRx Limited.
The financial statements of SalvaRX Group plc were approved by the Board of Directors and authorised for issue on 29 June 2017. They were signed on its behalf by:
Kam Shah
Chief Financial Officer
Notes 1 to 27 form part of these financial statements.
Consolidated Cash Flow Statement
For the year ended 31 December 2016
Unaudited
*6 May 2015 to 31 December 2015
Year ended GBP'000
31 December 2016
GBP'000
Loss for the year (2,445) (466)
Adjustments for:
Deferred taxation (31) (15)
Amortisation 182 91
Share-based payments 357 25
Finance cost (1) -
Non cash exceptional items (note 7) 563 -
Operating cash flows before movements in working
capital (1,375) (365)
Decrease/ (increase) in receivables 202 (237)
(Decrease)/increase in payables (332) 229
------------------- ---------------------------------
Cash used in operations (1,505) (373)
Taxation paid - -
Net cash outflow from operating activities (1,505) (373)
------------------- ---------------------------------
Investing activities
Cash acquired through reverse acquisition 2,564 -
Purchase of trading investment (1,431) -
Net cash obtained in investing activities 1,133 -
------------------- ---------------------------------
Financing activities
Proceeds from the issue of share capital - 940
Proceeds on issue of convertible loan notes 760 -
Net cash from financing activities 760 940
------------------- ---------------------------------
Net increase in cash and cash equivalents 388 567
Cash and cash equivalents at beginning of year 567 -
Effect of exchange rate on cashflow 12 -
Cash and cash equivalents at end of year 967 567
=================== =================================
*In accordance with note 3, and the adoption of reverse takeover accounting principles, comparatives are for the consolidated cash flows of SalvaRx Limited.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2016
Equity attributable to equity holders of the parent
Non-controlling Total
interest equity
Share Reverse Share-based
Share premium acquisition Own payment
capital (note reserve shares reserves Accumulated
(note 22) (note (note deficit
20) 23) 21) Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2016 155 52,533 (51,748) - 25 (326) 639 1,054 1,693
Net loss of
the year - - - - - (2,038) (2,038) (407) (2,445)
Total
comprehensive
income - - - - - (2,364) (1,399) 647 (752)
Transactions
with
owners in
their
capacity
as owners:
- Issue of
equity
for cash 136 1,813 (1,949) - - - - - -
- Cost of
share issue - (173) 173 - - - - - -
- Reverse
acquisition 620 8,180 (5,764) (215) - - 2,821 - 2,821
Cancellation
of share
premium
account - (62,353) 62,353 - - - - - -
Share based
payment
charge - - - -- 357 - 357 - 357
Total
transactions
with owners
in their
capacity as
owners 756 (52,533) 54,813 (215) 357 - 3,178 - 3,178
At 31 December
2016 911 - 3,065 (215) 382 (2,364) 1,779 647 2,426
Equity attributable to equity holders of the parent
Own shares Share-based
Reverse (note payment
Share Share acquisition 21) reserves
capital premium reserve Non-controlling
(note (note (note Accumulated interest Total
20) 22) 23) deficit Total equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance as at 6
May
2015 155 52,533 (52,688) - - - - - -
Net loss for the
period - - - - - (326) (326) (140) (466)
Total
comprehensive
income - - - - - (326) (326) (140) (466)
Transactions
with
owners in their
capacity
as owners:
- Share capital
issued
by SalvaRx
Limited - - 940 - - - 940 - 940
-
Non-controlling
interest
arising
on acquisition
of
iOx
Therapeutics
Limited (note
14) - - - - - -- - 1,194 1,194
- Share-based
payment
charge - - - - 25 - 25 - 25
Total
transactions
with owners in
their
capacity as
owners - - 940 - 25 - 965 1,194 2,159
At 31 December
2015 155 52,533 (51,748) - 25 (326) 639 1,054 1,693
Notes to the consolidated financial statements
For the year ended 31 December 2016
1 General information
SalvaRx Group PLC (the 'Company' and, together with its subsidiaries, the 'Group') is incorporated in the Isle of Man, British Isles under the Isle of Man Companies Act 2006. The address of the registered office is Commerce House, 1 Bowring Road, Ramsey, Isle of Man, British Isles, IM8 2LQ.
On 22 March 2016, the Company acquired the 88.9% of the share capital of SalvaRx Limited not already owned by it for a consideration of GBP8.8m satisfied by the issue of 24,788,732 New Ordinary Shares. The Acquisition was of sufficient size to constitute a reverse takeover under the AIM Rules and is accounted for as a reverse acquisition in these financial statements (note 3). As a result, SalvaRx Limited is an accounting acquirer and comparative figures provided in these financial statements are those of SalvaRx Limited.
In conjunction with the above, the name of the Company was changed to SalvaRx Group PLC, the shares were consolidated on the basis of 1 new Ordinary Share for every 100 Ordinary Shares, and there was a placing of 5,492,958 new Ordinary Shares at a price of 35.5p per share to raise GBP1.95m before expenses.
The principal activity of the Group is drug development, pre-clinical development with particular focus on developing series of compounds for cancer immunotherapy.
These financial statements are presented in pounds sterling, which is the Group's functional and presentational currency, and all values are rounded to the nearest thousands (GBP'000) except loss per ordinary share and certain figures in the notes.
2 Adoption of new and revised Standards
Standards affecting presentation and disclosure
For the preparation of these consolidated financial statements, the following new or amended standards are mandatory for the first time for the financial year beginning 1 January 2016:
-- Amendments to IAS 1 titled Disclosure Initiative (issued in December 2014) - The amendments, applicable to annual periods beginning on or after 1 January 2016, clarify guidance on materiality and aggregation, the presentation of subtotals, the structure of financial statements and the disclosure of accounting policies. The amendments had no material effect on the Group's consolidated financial statements.
-- Amendments to IAS 27 titled Equity Method in Separate Financial Statements (issued in August 2014) - The amendments, applicable to annual periods beginning on or after 1 January 2016, reinstate the equity method option allowing entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements. This amendment has no effect on consolidated financial statements.
-- Amendment to IFRS 5 (Annual Improvements to IFRSs 2012-2014 Cycle, issued in September 2014) - The amendment, applicable prospectively to annual periods beginning on or after 1 January 2016, adds specific guidance when an entity reclassifies an asset (or a disposal group) from held for sale to held for distribution to owners, or vice versa, and for cases where held-for-distribution accounting is discontinued. This amendment had no effect on the Group's consolidated financial statements.
-- Amendment to IFRS 7 (Annual Improvements to IFRSs 2012-2014 Cycle, issued in September 2014) - The amendment, applicable to annual periods beginning on or after 1 January 2016, adds guidance to clarify whether a servicing contract is continuing involvement in a transferred asset. The amendment had no effect on the Group's consolidated financial statements.
2 Adoption of new and revised Standards (continued)
-- Amendments to IFRS 10, IFRS 12 and IAS 28 titled Investment Entities: Applying the Consolidation Exception (issued in December 2014) - The amendments, applicable to annual periods beginning on or after 1 January 2016, clarify the application of the consolidation exception for investment entities and their subsidiaries. The amendments had no effect on the Group's consolidated financial statements.
At the date of authorisation of the financial statements, the following Standards and Interpretations which have not been applied in the financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):
-- Amendments to IAS 7 titled Disclosure Initiative (issued in January 2016) - The amendments, applicable to annual periods beginning on or after 1 January 2017.
-- Amendments to IAS 12 titled Recognition of Deferred Tax Assets for Unrealised Losses (issued in January 2016) - The amendments, applicable to annual periods beginning on or after 1 January 2017.
-- Amendments to IFRS 2 titled Classification and Measurement of Share-based Payment Transactions (issued in June 2016) - The amendments, applicable to annual periods beginning on or after 1 January 2018.
-- IFRS 9 Financial Instruments (issued in July 2014) - This standard will replace IAS 39 (and all the previous versions of IFRS 9) effective for annual periods beginning on or after 1 January 2018.
-- Amendments to IFRS 10 and IAS 28 titled Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (issued in September 2014). The effective date of the amendments, initially set for annual periods beginning on or after 1 January 2016, is now deferred indefinitely but earlier application is still permitted.
-- IFRS 15 Revenue from Contracts with Customers (issued in May 2014 and amended for clarifications in April 2016) -The new standard, effective for annual periods beginning on or after 1 January 2018, replaces IAS 11, IAS 18 and their interpretations.
-- IFRS 16 Leases (issued in January 2016) - The new standard, effective for annual periods beginning on or after1 January 2019, replaces IAS 17 and its interpretations.
The Directors do not expect that the adoption of these Standards or Interpretations in future periods will have a material impact on the financial statements of the Group.
3 Reverse acquisition transaction
On 30 September 2015, the Company acquired 11.14% of the issued share capital of SalvaRx Limited ("SalvaRx"), a private company incorporated in the British Virgin Islands.
On 22 March 2016, the Company acquired the remaining issued share capital of SalvaRx by issuing 24,788,732 ordinary shares of the Company.
Although the transaction resulted in SalvaRx becoming a wholly owned subsidiary of the Company, the transaction constitutes a reverse acquisition in as much as the shareholders of SalvaRx own a substantial majority of the outstanding ordinary shares of the Company and four out of six members of the Board of Directors of the Company are SalvaRx shareholders and management.
In substance, the shareholders of SalvaRx acquired a controlling interest in the Company and the transaction has therefore been accounted for as a reverse acquisition in accordance with guidance provided in IFRS 2 Share-based payment and IFRS 3 Business Combinations. As the Company previously discontinued its investment activities and was engaged in acquiring SalvaRx and raising equity financing to provide the required funding for the operations of the proposed acquisition and re-listing on AIM, it did not meet the definition of a business according to the definition in IFRS 3. Accordingly, this reverse acquisition does not constitute a business combination and in accordance with IFRIC guidance the difference between the equity value given up by the SalvaRx shareholders and the share of the fair value of net assets gained by the SalvaRx shareholders is charged to the statement of comprehensive income representing the cost of acquiring an AIM quoted listing.
In accordance with reverse acquisition accounting principles, these consolidated financial statements represent a continuation of the consolidated financial statements of SalvaRx and include:
a. The assets and liabilities of SalvaRx and iOx Therapeutics Limited (its 60.49% owned subsidiary acquired on 24 June 2015) ("iOx") at their pre-acquisition carrying amounts and their results for both periods; and
b. The assets and liabilities of the Company as at 31 December 2016 and it's results from 23 March 2016 to 31 December 2016,
The fair value of net assets of the Company acquired by SalvaRx was as follows:
GBP'000
Cash 2,564
Other assets 14
Liabilities (309)
2,269
The deemed cost of the acquisition represents the difference between the fair value of the shareholding given up by SalvaRx Limited shareholders and the share of the fair value of the assets and liabilities of the Company gained by those shareholders. Whilst the deemed cost of acquisition is recorded in equity, the share capital and share premium must reflect that of the Company and therefore the difference arising is recorded in the reverse acquisition reserve (note 23).
Consequently, based on an assessment of the purchase consideration for an 88.9% holding in SalvaRx of GBP8.8m, the deemed cost of the acquisition of the Company by SalvaRx is GBP2,832,000. The difference between this deemed cost and the fair value of the net assets acquired (above) of GBP563,000 has been expensed in accordance with IFRS 2, Share based payments, reflecting the economic cost to the SalvaRx shareholders of acquiring a quoted entity. Given its significance, this cost has been treated as an exceptional item (note 7).
At the point of acquisition, the net assets of the company included a GBP215,000 investment in SalvaRx Limited. As SalvaRx Limited is the acquirer under reverse accounting principles, this investment has been treated as a purchase of own shares and recorded in equity (note 21).
4 Summary of significant accounting policies
Basis of accounting
The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSs") as issued by the International Accounting Standards Board ("IASB") and as adopted by the European Union ("EU"), and therefore the Group financial statements comply with Article 4 of the EU IAS Regulation.
The financial statements have been prepared on the historical cost convention basis except for the revaluation of certain financial instruments. Historic cost is generally based on the fair value of the consideration given in exchange for the assets. The principal accounting policies adopted are set out below.
Going concern
The Group's business activities, together with the factors likely to affect its future development and position, are set out in the Directors' Report.
The consolidated financial statements of the group have been prepared on a basis which assumes that the Group will continue as a going concern, which contemplates the realisation of assets and satisfaction of liabilities and commitments in the normal course of business.
At 31 December 2016, the Group had cash and cash equivalent of approximately GBP1.0 million. Subsequent to the balance sheet date, the Group's subsidiary, SalvaRx Limited raised approximately GBP2.4 million (US$3.0 million) through debt financing.
The Board has evaluated the cash flow and proposed budget and has reached the conclusion there is sufficient funding for the current workload projected until June 2018. This budget includes some estimation of the R&D tax credits that are available to the Group. There is some minor risk to the timing and total amount of this cash flow, but the board has considered the availability of future funding, cost deferral and that existing shareholders have indicated their intention to provide further funding should this be required. That being said, major costs of drug development going forward are covered by external non-dilutive funding (collaborative research agreements and grants).
The Group believes that these available resources will be sufficient to meet its cash requirements through to the clinical trial, for its operational, portfolio expansion through strategic acquisitions and investments in entities engaged in immunotherapy and research and development activities.
As the Group continues to incur losses, transition to profitability is dependent upon achieving a level of revenues adequate to support the Group's cost structure and unless and until doing so, intends to fund future operations through additional debt or equity offerings. There can be no assurance, however, that additional funding will be available on terms acceptable to the Group, if at all.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring accounting policies used into line with those used by the Group. All intra-Group transactions, balances, income and expenses are eliminated on consolidation.
These consolidated financial statements include the accounts of the Company and:
i. SalvaRx Limited, ("SalvaRx") incorporated on 6 May 2015 in the British Virgin Islands. SalvaRx is a wholly owned subsidiary of the Company.
ii iOx Therapeutics Limited ("iOx") incorporated in the U.K. as a private company (Company Number 9430782) under the Companies Act 2006 on 10 February, 2015. SalvaRx holds 60.49% equity in iOx.
These consolidated financial statements have been prepared using reverse acquisition, as detailed in note 3.
Significant accounting policies
Research and Development Expenses
(i) Research and development
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in profit or loss as incurred.
Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditures are capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to, and has sufficient resources to, complete development and to use or sell the asset. No development costs have been capitalised to date.
Research and development expenses include all direct and indirect operating expenses supporting the products in development
(ii) Subsequent expenditure
Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditures are recognized in profit or loss as incurred.
(iii) Clinical trial expenses
Clinical trial expenses are a component of the Company's research and development costs. These expenses include fees paid to contract research organizations, clinical sites, and other organizations who conduct development activities on the Company's behalf. The amount of clinical trial expenses recognized in a period related to clinical agreements are based on estimates of the work performed using an accrual basis of accounting. These estimates incorporate factors such as patient enrolment, services provided, contractual terms, and prior experience with similar contracts.
(iv) Government grants
Government grants relate to financial grants from governments, public authorities, and similar local, national or international bodies. These are recognised when there is a reasonable assurance that the Company will comply with the conditions attaching to them, and that the grant will be received. Government grants relating to research and development are off-set against the relevant costs.
Business Combinations
The Company applies the acquisition method to account for all acquired businesses, whereby the identifiable assets acquired and the liabilities assumed are measured at their acquisition-date fair values (with few exceptions as required by IFRS 3 Business Combinations).
The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Company.
Acquisition-related costs (e.g. finder's fees, consulting fees, administrative costs) are recognized as expenses in the periods in which the costs are incurred and the services are received. On acquisition date, goodwill is measured as the excess of the aggregate of consideration transferred, any non-controlling interests in the acquiree, and acquisition-date fair value of the Company's previously held equity interest in the acquiree (if business combination achieved in stages) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.
If, after appropriate reassessment, the amount as calculated above is negative, it is recognized immediately in profit or loss as a bargain purchase gain.
At acquisition date, non-controlling interests in the acquiree that are present ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation are measured at either fair value or the present ownership instruments' proportionate share in the recognized amounts of the acquiree's identifiable net assets. This choice of measurement is made separately for each business combination. Other components of non-controlling interests are measured at their acquisition-date fair values, unless otherwise required by IFRS.
The acquisition-date fair value of any contingent consideration is recognised as part of the consideration transferred by the Company in exchange for the acquiree. Changes in the fair value of contingent consideration that result from additional information obtained during the measurement period (maximum one year from the acquisition date) about facts and circumstances that existed at the acquisition date are adjusted retrospectively against goodwill.
Intangible Assets Acquired in business combinations
Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment loses, on the same basis as intangible assets that are acquired separately.
Foreign currencies
The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed in pound sterling, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual companies, transactions in currencies other than the functional currency of each Group company ("foreign currencies") are recorded in the functional currency at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated into the functional currency at the rates prevailing on the balance sheet date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the group's foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during the period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity (attributed to non-controlling interest as appropriate).
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years, and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill, or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Financial instruments
Recognition of financial assets and financial liabilities
Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes party to the contractual provisions of the instrument.
Derecognition of financial assets and financial liabilities
The Group derecognises a financial asset only when the contractual rights to cash flows from the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for the amount it may have to pay.
The Group derecognises financial liabilities when the Group's obligations are discharged, cancelled or expired.
Financial assets
a) Investments - Available for sale financial assets
AFS financial assets are non-derivatives that are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss. The Group's AFS investment does not have a quoted market price in an active market and the Directors are of the opinion that fair value cannot be reliably be measured. The investment is therefore measured at cost, less any identified impairment loss.
b) Loans and receivables
Trade and other receivables
Trade and other receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost less any provision for impairment.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and on-demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash with three months or less remaining to maturity and are subject to an insignificant risk of changes in value.
Financial liabilities
Trade and other payables
Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.
Convertible loan notes
The component parts of compound instruments (convertible loan notes) issued by the Group are classified separately between the loan and equity option elements. The Group has one convertible loan note in issue which is denominated in a currency different to the currency of the equity option and accordingly at inception the equity option is treated as an embedded derivative and recorded at fair value as a financial liability (the "equity option") and the fair value of the instrument as a whole less the value of the equity option is recorded as a financial liability
(the "loan element"). At subsequent balance sheet dates the fair value of the equity option is remeasured with movements in fair value being recorded in the income statement. The loan element is recorded at amortised cost and is subject to a notional interest charge in each reporting period which is recorded in the income statement.
Share-based payments
The Group has applied the requirements of IFRS 2 Share-based Payment for all grants of equity instruments.
The Group operates an equity-settled share option plan to certain shareholders. The fair value of the service received in exchange for the grant of options and warrants is recognised as an expense. Equity-settled share-based payments are measured at fair value (excluding the effect of non-market based vesting conditions) at the date of grant. The fair value determined at the grant date of equity-settled share-based payment is expensed on a graded vesting basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effect of non-market based vesting conditions.
Fair value is measured by use of the Black-Scholes model. The expected life used in the models has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments and making strategic decision, has been identified as the Board of Directors.
5 Critical accounting judgements and key sources of estimation and uncertainty
In the application of the Group's accounting policies, which are described in note 4, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of the assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both the current and future periods.
The following are the critical judgements and estimations that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the financial statements:
Convertible loan notes (note 17)
The convertible notes have an embedded derivative in the form of equity conversion rights. The fair value of derivatives is determined by using appropriate valuation techniques and inputs to the model. The Group has determined that it is appropriate to use the Black-Scholes mode for this option given that the instrument has been converted after the year end on 2 March 2017. The key assumptions made in drawing this conclusion relate to foreign exchange and time to exercise. Further details are set out in note 17.
Share-based payments
The Group has an equity-settled share option scheme available to certain Directors and consultants. In accordance with IFRS 2 Share-based payment, in determining the fair value of options granted, the Group has applied the Black-Scholes model. As a result, the Group makes assumptions for expected volatility and expected life. The fair value of options granted in the years reported is shown in note 24.
6 Business and geographical segments
Throughout the year, the Directors consider there to be only one business and operating segment from continuing operations, namely research and development.
The Group has no revenue and therefore no geographical analysis is presented.
Unaudited
7 Exceptional items Year ended 6 May
31 December 2015
2016 to
31 December
GBP'000 2015
GBP'000
Excess of deemed cost over fair (563) -
value of assets acquired under
reverse takeover transaction (Note
3)
Legal and other professional fees
relating to reverse takeover transaction (308) -
(871) -
8 Operating loss
Unaudited
6 May
Year ended 2015
31 December to
The operating loss has been arrived 2016 31 December
at after (crediting)/charging: GBP'000 2015
GBP'000
Research and development costs 693 260
Amortisation of intangible assets 182 91
Staff costs (note 10) 203 80
Share-based payments (note 24) 357 25
Audit fees (note 9) 37 -
Net foreign exchange (gains)/losses (95) 1
9 Auditor's remuneration
Amounts payable to RSM UK Audit LLP and its associates in respect of both audit and non-audit services:
Year ended Unaudited
31 December 6 May
2016 2015
GBP'000 to
Amounts payable to RSM UK Audit 31 December
LLP and it's associates 2015
GBP'000
Audit fees
Fees payable to the Group's auditor
for the statutory audit of the 29 -
Group's annual accounts
Fees payable to the group's auditor
for the statutory audit of subsidiary 8 -
undertakings
Total audit fees 37 -
Non-audit fees
Tax services 2 -
Other assurance services - -
Total non-audit fees 2 -
10 Staff costs
Year ended Unaudited
31 December 6 May
2016 2015
GBP'000 to
The average monthly number of employees 31 December
and senior management (including 2015
Executive Directors) was: GBP'000
Non-executive Directors 4 2
Executive Directors of Group companies 2 -
6 2
Year ended Unaudited
31 December 6 May
2016 2015
GBP'000 to
31 December
2015
The aggregate remuneration comprised: GBP'000
Salaries and consulting fee 203 80
Share-based payments (note 24) 138 25
Non-Executive directors fee 52 -
393 105
Year ended Unaudited
31 December 6 May
2016 2015
GBP'000 to
31 December
Directors remuneration (all representing 2015
fees) GBP'000
J Mellon (from 22 March 2016) 8 -
G Bailey (from 22 March 2016) 8 -
R Armstrong (from 22 March 2016) 26 -
C Weinberg (from 22 March 2016) 26 -
I Walters (from 1 January 2016) 220 -
K Shah (from 22 March 2016) 105 -
393 -
Details of shares and options held by the Directors are disclosed in the Directors' report.
11 Tax
The tax credit for the year of GBP31,000 (2015: GBP15,000) relates entirely to the release of deferred tax liabilities in respect of intangible assets.
The tax assessed for the year is at the standard rate of corporation tax in the Isle of Man of 0% (2015: 0%) and is calculated as follows:
Year ended Unaudited
31 December 6 May
2016 2015
GBP'000 to
31 December
2015
GBP'000
Loss on ordinary activities before
tax (2,476) (481)
Loss on ordinary activities by - -
the standard rate of tax
Foreign tax - -
Release of deferred tax related
to subsidiaries operating in other
jurisdictions (31) (15)
Tax credit for the year (31) (15)
The Company's subsidiary, iOX Therapeutics ltd ("IOX") is subject to tax in the UK. There is no tax charge for the reporting periods due to losses.
IOX has potential research and development cash credits of approximately GBP244,000 consisting of GBP53,000 for 2015 and GBP191,000 for 2016. The credits will be recognised when they are accepted by the UK tax authorities, given that these are the first claims made by the company.
Deferred Taxation
As at 31 December 2016, iOx tax losses were approximately GBP1,045,000 (2015: GBP54,000). Tax losses will be carried forward and are potentially available for utilisation against taxable profits in future years. The Group has not recognised a deferred tax asset in respect of these tax losses as there is insufficient evidence of suitable future profit being available against which these losses can be offset. The asset will be recognised in future periods when its recovery (against appropriate taxable profits) is considered probable.
At 31 December 2016 the Group had a deferred tax liability of GBP201,000 (2015: GBP232,000) recognised in respect of intangible assets arising on the acquisition of iOx. The intangible asset relates to in process research residing in the UK and therefore deferred tax has been recorded at 17% being the rate applicable in that country. The Group has no other provided or unprovided deferred tax liabilities. The reduction in the liability in the year of GBP31,000 (2015: GBP15,000) has been recorded in full in the income statement
12 Loss per Ordinary Share
Basic loss per Ordinary Share is calculated by dividing the net loss for the year attributable to Ordinary equity holders of the parent by the weighted average number of Ordinary Shares outstanding during the year. The calculation of the basic and diluted loss per Ordinary Share is based on the following data:
Year ended Unaudited
31 December 6 May
2016 2015
GBP'000 to
31 December
2015
GBP'000
Losses
Loss for the purposes of basic
loss per share being net loss
attributable to equity holders
of the parent 2,038 326
Number Number Number
Weighted average number of Ordinary 34,561,950 27,883,852
Shares for the purposes of basic
loss per share
2016 2015
GBP GBP
Loss per Ordinary Share
Basic and diluted, pence per share (0.06p) (0.01p)
The weighted average number of shares is adjusted for the impact of the reverse acquisition as follows:
-- Prior to the reverse takeover, the number of shares is based on SalvaRx Limited, adjusted using the share exchange ratio arising on the reverse takeover; and
-- From the date of the reverse takeover, the number of share is based on the Company.
Dilutive loss per Ordinary Share equals basic loss per Ordinary Share as, due to the losses incurred in 2016 and 2015, there is no dilutive effect from the subsisting share options.
13 Investments
2016 Unaudited
GBP'000 2015
GBP'000
Available-for-sale investments 1,395 -
Investment in Intensity (i)
Loan receivable at amortised cost
RIFT loan (ii) 36 -
1,431 -
(i) On 22 April 2016, the Company acquired 1 million Series A preferred stock in Intensity Therapeutics Inc., a Delaware corporation ("Intensity") for US$2m in cash. All Series A Preferred stock is convertible into equal number of common shares in Intensity. The Company's holdings represent less than 10% of the equity of Intensity.
13 Investments (continued)
(ii) On 13 December 2016, SalvaRx Limited, a wholly owned subsidiary of the Company, invested US$45,000 in cash in convertible promissory note issued by Rift Biotherapeutics Inc., a Delaware corporation ("Rift"). The Note carries interest at 5% and matures on the earliest of 31 December 2017 and a change in control at Rift. SalvaRx Limited made further investments into Rift subsequent to the balance sheet date and agreed to convert into equity in Rift as explained in note 27(a).
As at 31 December 2016, the Company has determined that there was no evidence of any impairment in the carrying value of investments and as a result no adjustment was considered necessary in its carrying value.
14 Intangible assets
In process
research
GBP'000
Cost
At 6 May 2015 -
Additions 1,457
At 31 December 2015 and 2016 1,457
Amortisation
At 1 January 2016 -
Charge for the year (91)
At 31 December 2015 (91)
Charge for the year (182)
At 31 December 2016 (273)
Carrying amounts
At 6 May 2015 -
At 31 December 2015 1,366
At 31 December 2016 1,184
On 1 July 2015, SalvaRx acquired 15,313 new Seed Preferred Shares in iOx at a price of GBP120 per Seed Preferred Share, which represents 60.49 %. equity in iOx for GBP1,837,560.
Except for a preference over Ordinary Shares on winding up, Seed Preferred Shares have the same voting rights as Ordinary Shares and are convertible into equal number of ordinary shares.
SalvaRx has a majority equity interest and also has significant control over the management of iOx. As a result, management have concluded that iOx is a subsidiary undertaking and these financial statements include results of operations for iOx for the year ended 31 December 2016 and assets and liabilities as at 31 December 2016 and comparative figures include results of operations for IOX from 1 July 2015 to 31 December 2015 and assets and liabilities as at December 2015.
14 Intangible assets (continued)
The non-controlling interest in iOx on the date of acquisition was valued at GBP1.2 million, based on their 39.51% equity being valued on the basis of the price SalvaRx paid for 60.49% equity in iOx. As at 1 July 2015, net assets acquired were determined as per IFRS 3 - business combinations, as follows:
GBP'000 GBP'000
Intangible assets 1,458
Other net assets
Liability assumed (10)
Assets assumed * 1,838
1,828
Deferred tax liability (note 11) (248)
Net assets acquired 3,038
Allocated to
Cash consideration paid for company's
interest 1,838
Non-controlling interest (39.51%)** 1,200
3,038
* Consideration was paid for new Seed Preferred Shares in iOx. As SalvaRx has control over iOx and the consideration paid by
SalvaRx will remain within the Group, the net cash impact of the acquisition on the Group is GBPnil.
** Non-controlling interest has been valued based on 39.51 per cent. of the grossed up consideration paid by SalvaRx ((GBP1,837,560 /60.49 per cent.) x 39.51 per cent.)
As part of this business combination, and also on 1 July 2015, iOx Therapeutics Limited ("iOx") entered into an Investment Agreement with The University of Oxford, ISIS, the Ludwig Institute, SalvaRx Limited and Professor Cerundolo. As part of this agreement, iOx also entered into a Clinical Trials Sponsorship agreement with The University of Oxford and also entered into a licence agreement with the Ludwig Institute to access intellectual property rights and know-how relating to cell agonists. Accordingly, the Directors have determined that the excess of consideration over identifiable assets and liabilities relates entirely to an in-process research intangible asset.
The intangible asset thus arising is being amortised over 8 years, being the Directors assessment of the period over which the technologies are likely to be developed and at the end of which commercial products will hopefully be available for sale. The remaining life of the intangible asset is 6.5 years. Given that the progress of iOx is satisfactory, there is no indication of impairment.
15 Trade and other receivables
2016 Unaudited
GBP'000 2015
GBP'000
VAT recoverable 5 6
Prepayments and other receivables 29 230
34 236
16 Cash and cash equivalents
Cash and cash equivalents as at 31 December 2016 of approximately GBP1.0 million (As at 31 December 2015 (unaudited): GBP0.6 million) comprise cash held by the Group.
17 Convertible Loan Notes
2016 Unaudited
GBP'000 2015
GBP'000
(616) -
Convertible loan notes
Equity option on convertible loan (78) -
(694) -
On 21 April 2016, the Company issued US$1 million of zero coupon convertible unsecured loan notes ("Loan Notes") to Jim Mellon, the Non-Executive Chairman and Greg Bailey, a Non-Executive Director ("the Noteholders"), who are both substantial shareholders in the Company. Mr Mellon and Dr Bailey subscribed for US$0.5 million of Loan Notes each. The Loan Notes have a term of three years, with a zero coupon and may be converted in whole or in part at the Noteholder's discretion at a price of 35.5p per ordinary share. The Noteholders have undertaken not to convert their Loan Notes in circumstances where (i) the conversion would result in the Concert Party's holding in the Company exceeding 74.66% on a fully diluted basis or (ii) the percentage of shares in public hands would fall below 10%.
On 2 March 2017, The Note liability was transferred to SalvaRx Limited and the note holders agreed to accept 4,000 shares of SalvaRx Limited at a price of $250 per share in settlement of the loan notes, which would give them 5.85% equity in SalvaRx Limited.
The recognition of this investment, and the movements to the balance sheet date, can be summarised as follows:
Equity
Option Loan
GBP'000 GBP'000
On issue - 21 April 2016 211 484
(Credit)/charge to finance income (133) -
Movement in fair value - 46
Notional interest
Foreign exchange loss - 86
At 31 December 2016 78 616
These notes have an embedded derivative in the form of the equity conversion rights whose value was defined due to the conversion into SalvaRx Limited shares subsequent to the balance sheet date as explained above. The fair value of the derivative has been estimated using a Black-Scholes pricing model with the following assumptions:
21 April 31 December
2016 2016
Risk free interest rate 1% 1%
Expected dividend Nil Nil
Expected volatility 102.75% 102.75%
Expected life 315 61 days
days
Market price GBP0.32 GBP0.31
The Company has therefore determined the fair value of the derivative at the balance sheet date to be GBP78,094. The difference in derivative value from the previous value of GBP211,267 at the date of inception has been credited to the income statement as a financing cost.
The Directors have valued the option using the Black Scholes model. In determining the valuation the Directors have assumed:
-- An option life consistent with the actual exercise date of 2 March 2017 reflecting their original assessment of time to exercise, and
-- Spot FX rate at both measurement date. In making this assumption, the Directors have considered the impact on the valuation of a reasonable range of possible exchange rates and noted that the impact on valuation is reasonably small.
The value of the option at issue has been deducted from the overall fair value of the convertible loan note and is accounted for separately on the balance sheet. It will be subject to revaluation on each balance sheet date through the income statement in accordance with IAS 39.
The residual loan balance of GBP484,000 at inception is held at amortised cost and is subject to a notional interest at 12.83%, which for the year to 31 December 2016 was GBP46,000. The interest amount is expensed as finance cost and included within the loan balance. The loan balance is subject to revaluation at the spot exchange rate.
18 Trade and other payables
2016 Unaudited
GBP'000 2015
GBP'000
Trade payables 224 244
Accruals 71 -
295 244
Trade payables and accruals principally comprise amounts outstanding for trade purchases and on-going costs. The average credit period taken for trade purchases is 40 days (2015: 31 days). The Group has financial risk management policies to ensure that all payables are paid within the credit timeframe.
The Directors consider that the carrying amount of trade and other payables approximates to their fair value. No interest is generally charged on balances outstanding.
19 Financial instruments
Capital risk management
The Group manages its capital resources so as to ensure that entities in the Group will be able to continue as a going concern, while maximising the return to shareholders. Until it achieves positive cash-flow, the Group expects to fund its operations through a combination of equity capital raised from the market and, where appropriate, debt finance.
The capital resources of the Group consist of cash and cash equivalents arising from equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in the Consolidated Statement of Changes in Equity.
Externally imposed capital requirement
The Group is not subject to externally imposed capital requirements.
Categories of financial instruments
2016 Unaudited
GBP'000 2015
GBP'000
Financial assets: Available for 1,395 -
sale
Investments
Financial assets: Loans and Receivables
Investments 36 -
Cash and cash equivalents 967 567
Trade and other receivables - 215
2,398 782
Financial liabilities: At amortised
cost
Trade and other payables 295 244
Convertible loan notes 616 -
Financial Liabilities: At fair
value through profit or loss
Equity option on convertible loan 78 -
989 244
Financial risk management objectives
Management provides services to the business, co-ordinates access to domestic and international financial markets, and monitors and manages the financial risks relating to the operations of the Group. These risks include foreign currency risk, credit risk and liquidity risk. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes and any currency hedging transactions.
In order to effectively manage these risks, the Board of Directors has approved strategies for the management of financial risks, which are in line with corporate objectives. These strategies set up guidelines for the short term and long term objectives and action to be taken in order to manage the financial risks that the Group faces.
The major guidelines are the following:
-- Maximise the use of "natural hedge" favouring as much as possible the natural off-setting of costs, payables and receivables denominated in the same currency.
-- All financial risk management activities are carried out and monitored central level and discussed at Board level.
-- The Group will not invest temporary excess liquidity in shares or similar instruments unless authorised by the Board of Directors.
Foreign exchange risk and foreign currency risk management
The Group is exposed to currency risk since its main source of funding is in British pounds while a significant part of its expenses are in US dollars. While the Group aims to minimise exposure to foreign exchange risk by matching the currency of income and related expenditure flows where possible, fluctuations in the exchange rate between these two currencies can have significant effect.
Trade and other Cash and cash equivalent
receivable
Financial assets by Investments Total
currency:
GBP'000 GBP'000 GBP'000 GBP'000
Currency
British pounds - - 729 729
US dollars 1,431 - 238 1,669
Balance at 31 December 2016 1,431 - 967 2,398
Currency
British pounds - 215 567 782
US dollars - - - -
Balance at 31 December 2015 - 215 567 782
Trade and other payables
Financial liabilities by Borrowings Total
currency:
GBP'000 GBP'000 GBP'000
Currency
British pounds - 78 78
US dollars 694 217 911
Balance at 31 December 2016 694 295 989
Currency
British pounds - 134 134
US dollars - 110 110
Balance at 31 December 2015 - 244 244
Sensitivity analysis
A 10% increase/decrease in exchange rate of the British Pound against the USD would reduce/increase the loss after tax by GBP67,300.
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations, resulting in financial loss to the Group. The Group has minimal trade and other receivables at the year end.
The Group makes allowances for impairment of receivables where there is an identified event which, based on previous experience, is evidence of a reduction in the recoverability of cash flows.
The credit risk on liquid funds (cash) is considered to be limited because the counterparties are financial institutions with good credit ratings assigned by international credit-rating agencies. The carrying amount of financial assets recorded in the financial statements represents the Group's maximum exposure to credit risk.
There are no significant concentrations of credit risk.
The credit risk arising in respect of investments is inevitably higher risk. The nature of the Group's business is developing innovative solutions for the treatment of cancer and there is no guarantee that any individual investment will be successful. This risk is partly mitigated through representation on its Board of Directors and the Group's CEO monitors its progress on a regular basis.
The maximum credit risk to which the Group is exposed is summarised in the following table.
2016 Unaudited
GBP'000 2015
GBP'000
Investments 1,431 -
Cash and cash equivalents 967 567
Trade and other receivables - 215
Balance at 31 December 2,398 782
As explained in note 16, cash and cash equivalents balances represent bank balances.
The Group does not hold collateral for any of its receivables.
There were no past due receivables.
Investments are in the form of equity investment in private companies in which the Group is represented on its Board of Directors and the Group's CEO monitors its progress on a regular basis.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management framework for the management of the Group's short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate cash reserves and by continuously monitoring forecast and actual cash flows.
All financial liabilities held by the Group are non-interest bearing.
The following tables analyse financial liabilities by remaining contractual maturity.
Trade and other payables
Financial liabilities by contractual maturity Convertible loan note
Total
GBP'000 GBP'000 GBP'000
Less than 1 year - 295 295
1 - 3 years 694 - 694
Balance at 31 December 2016 694 295 989
Less than 1 year - 244 244
1 - 3 years - - -
Balance at 31 December 2015 - 244 244
With the exception of the convertible loan note, the Group expects to pay all liabilities at their contractual maturity. As described in note 27(c), the convertible loan note was converted into equity shortly after the year end.
However, as a biotech company at an early stage of development and without significant internally generated cash flows, there are inherent liquidity risks, including the possibility that additional financing may not be available to the Company, or that actual drug development expenditures may exceed those planned. The current uncertainty in global markets could have an impact on the Company's future ability to access capital on terms that are acceptable to the Company. There can be no assurance that required financing will be available to the Company.
20 Share capital
Authorised and issued equity share capital
2016 Unaudited
2015
Number Number
'000 GBP'000 '000 GBP'000
Authorised
Ordinary Shares of 2.5p
each (2015: 0.025p) 80,000 2,000 1,040,000 260
Issued and fully paid
Ordinary Shares of 2.5p
each (2015: 0.025p) 36,467 911 618,493 155
The Company has one class of Ordinary Shares, which carry no right to fixed income.
Movements during the year:
Year ended Unaudited
31 December 6 May 2015
2016 to
31 December
2015
Number Number
'000 GBP'000 '000 GBP'000
Balance at beginning
of year 618,493 155 618,493 155
Share consolidation (612,308) - - -
Issued during the year
for cash 5,493 136 - -
Issued on reverse acquisition
(note 3) 24,789 620 - -
Issued and fully paid
Ordinary Shares of 2.5p
each 36,467 911 618,493 155
In March 2016, the Company completed a share consolidation on the basis of 1 new Ordinary Share for every 100 Ordinary Shares.
In March 2016, the Company raised approximately GBP1.9 million before expenses in a private placement involving issuance of 5,492,958 ordinary shares at a price of 35.5p per share.
In March 2016, the Company issued 24,788,732 shares at a market price of 35.5p in exchange for a 88.9% of SalvaRx Limited. This resulted in the reverse takeover described in note 3.
21 Equity, purchase of own shares
In September 2015, the Company subscribed GBP215,000 to acquire 11.1% of the issued share capital of SalvaRx.
In March 2016, The Company acquired the remaining issued share capital of SalvaRx through share exchange, which was considered a reverse takeover transaction as explained in Note 3. As a result, the existing investment of GBP215,000 has been transferred to equity and treated as a purchase of own shares.
22 Share premium
GBP'000
At 6 May 2015 and at 31 December 2015 52,533
Issue of Ordinary Shares in a private
placement (note 20) 1,813
Issue of Ordinary Shares in a reverse
takeover transaction (note 3) 8,180
Costs directly related to issue of Ordinary
Shares (173)
-------------
62,353
Cancellation of Share Premium account (62,353)
At 31 December 2016 -
The shareholders of the Company in their meeting of 4 August 2016 approved the cancellation of the share premium account. Whilst this gave rise to distributable reserves for the Company, in these financial statements the credit entry is recorded in the reverse acquisition reserve.
23 Reverse acquisition reserve
GBP'000
At 6 May 2015 (52,688)
Capital of SalvaRx transferred to reverse
acquisition reserve (2) 940
At 31 December 2015 (51,748)
Issue of equity by Company (net of
costs) (3) (1,776)
Reverse acquisition(4) (5,764)
Share premium cancellation (note 22)(5) 62,353
At 31 December 2016 3,065
The movements on the Reverse acquisition reserve are as follows:
1) These consolidated financial statements present the legal capital structure of the Company. However, under reverse acquisition accounting rules, the Company was not acquired until 21 March 2016 and therefore the entry above is required to eliminate the initial equity of the Company.
2) SalvaRx Limited was incorporated on 6 May 2015 and on this date issued share capital of equivalent to GBP940,000. As these financial statements present the capital structure of the parent entity, the issue of equity by SalvaRx Limited has been recorded in this reserve.
3) Immediately prior to the reverse acquisition, the Company raised GBP1,776,000 through a placing (net of costs of GBP173,000). As the Company was not part of the consolidated SalvarRx Limited group at that time, the above entry is required to eliminate the balance sheet impact of this transaction.
4) The reverse acquisition accounting is described in detail in note 3. The entry above represents the difference between the value of the equity issued by the Company, and the deemed consideration given by SalvaRx Limited to acquire the Company.
5) As described in note 22, the Company cancelled the Share Premium account at the 2016 AGM. Whist this gives rise to distributable reserves of the Company, it is not distributable within these consolidated financial statements and therefore the credit entry has been recorded within this reserve.
24 Share-based payment reserves
Share options outstanding are as follows:
SalvaRx Group plc
2016 2015
Weighted average exercise Weighted average exercise
Options price GBP price GBP
'000 Options
'000
Outstanding at 1 January /6
May 474 23.2p -
Granted during the year 2,752 37.9p 474 23.2p
Outstanding at 31 December 3,226 35.74p 474 23.2p
iOx Therapeutics Limited
2016 2015
Weighted average exercise Weighted average exercise
price GBP price GBP
Options Options
'000 '000
Outstanding at 1 January/6
May 0.7 120 - -
Granted during the year 0.6 120 0.7 120
Outstanding at 31 December 1.3 120 0.7 120
24 Share-based payment reserves (continued)
The Company and its subsidiary do not operate a formal stock option scheme, however certain options to subscribe for the Company's or its subsidiary's shares have been granted to selected Directors and consultants on an ad hoc basis pursuant to individual option agreements (the 'Non-Plan Options').
(A) iOx Therapeutics Ltd
Details of the Options are as follows:
Value
based
on
Black-Scholes
option Graded Graded
Exercise pricing vesting vesting
Date Date price # of model in in 2015
of of GBP Vesting Options GBP'000 2016 GBP'000
grant expiry terms GBP'000
25% on
grant
and 25%
each
14-Dec-15 14-Dec-20 120 anniversary 675 57 23 25
28-Nov-16 28-Nov-21 120 vested 649 60 60 -
1,324 117 83 25
------------- -------------- ---------- ------------
(B) The Company
Value
based
on
Black-Scholes
option Graded Graded
Exercise pricing vesting vesting
Date Date price # of model in in 2015
of of GBP Vesting Options GBP'000 2016 GBP'000
grant expiry terms GBP'000
April
2015
to
July
2015 16-Feb-21 0.232 vested 431,153* - - -
16-Feb-15 16-Feb-18 0.232 vested 43,115* - - -
Three equal
tranches
- 1st on
22 March
2017, 2nd
on 22 March
2018 and
3rd on 22
22-Mar-16 22-Mar-21 0.355 March 2019 2,508,777 509 233 -
22-Mar-16 22-Mar-21 0.71 vested 182,333 31 31 -
22-Mar-16 22-Mar-19 0.355 vested 60,563 10 10 -
3,225,941 550 274 -
------------- -------------- ---------- ------------
* These options in the Company vested in full prior to the reverse takeover and accordingly there is no share based payment charge for these options in these financial statements.
24 Share-based payment reserves (continued)
The above Options include 519 Options in iOx and 1,320,704 Options in the Company granted to the directors.
The fair value of the options has been calculated using the Black Scholes model. The significant inputs into the model for the IFRS 2 valuation were as follows:
Grants
14 December 2015 28 November 2016
22 March 2016 22 March 2016
# of Options 675 649 2,691,110 60,563
Risk free interest rate 1% 1% 1% 1%
Expected volatility 91.60% 106.48% 92.91% 94.33%
Expected life in days 1,850 1,825 1,825 1,095
Market price GBP120 GBP120 GBP0.30 GBP0.30
25 Related party transactions
Transactions between the Company and its subsidiary, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
Payments to key management personnel
The remuneration of the Non-Executive Directors, Executive Directors and senior management, who are the key management personnel of the Group, is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures.
Year ended Unaudited
31 December 6 May
2016 2015
GBP'000 to
31 December
2015
GBP'000
Salary and consulting fee 203 80
Share based payments 138 25
Non-Executive directors
fee 52 -
393 105
26 Non-controlling interest
The Company's material non-controlling interests ("NCI") at 31 December 2016 and 2015 were associated with Therapeutics Limited ("iOx") in which the NCI is 39.51%. There were no dividends paid by iOx during 2016 and 2015.
The movement in the NCI is as follows:
GBP'000
At 6 May 2015 -
On acquisition 1,194
Loss attributable to NCI (140)
At 31 December 2015 1,054
Loss attributable to NCI (407)
At 31 December 2016 647
Summarised financial information based on those amounts included in these consolidated financial statements for iOx is as follows:
Statement of financial position: Year ended Unaudited
31 December 6 May
2016 2015
GBP'000 to
31 December
2015
GBP'000
Current assets 263 412
Current liabilities (217) (172)
Net assets 47 240
Statement of comprehensive Year ended Unaudited
loss: 31 December 6 May
2016 2015
GBP'000 to
31 December
2015
GBP'000
Research and development (815) (260)
Other operating costs (63) (20)
Net loss and comprehensive
loss (878) (280)
26 Non-controlling interest (continued)
Statement of cash flows:
Year ended Unaudited
31 December 6 May
2016 2015
GBP'000 to
31 December
2015
GBP'000
Cash flows used for operations (566) (105)
Cash flows from financing
activities 430 510
Net (decrease)/increase
in cash and cash equivalent (147) 405
27 Events after the balance sheet date
a. On 9 February 2017, SalvaRx Limited advanced a further US$45,000 and on 16 March 2016, SalvaRx Limited announced an investment of US$ 1 million in RIFT Biotechnologies Inc. Total investment of US$1,090,000 in RIFT is to be converted into an equity of approximately 30% in RIFT.
b. On 28 February 2017, SalvaRx Limited agreed to invest EUR300,000 convertible loan in Nekonal SARL to participate in the funding of its auto-immune programs and a EUR300,000 equity investment in Nekonal Oncology Inc., which will be a joint venture between SalvaRx Limited and Nekonal SARL.
c. On 2 March 2017, the Company announced that its investment in Intensity Therapeutics Inc. and Convertible notes of US$1 million were transferred to SalvaRx Limited. The convertible loan notes were converted into shares of SalvaRx Limited at a price of US$250 a share, thus reducing the Company's interest in SalvaRx Limited to 94.2%.
d. On 2 March 2017, the Company also announced an offering by SalvaRx Limited of unsecured loan notes of up to US$5 million, carrying coupon of 7% and repayable in four years. The holders of the loan will be issued US$7,500 of Warrant in respect of each US$10,000 of loan notes. The Warrants will vest in the event of a qualifying transaction and are exercisable at a price of the higher of US$250 per share and a price reflecting discount to the implied valuation of SalvaRx Limited. SalvaRx Limited has so far raised US$3 million in unsecured loan notes.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FMMRTMBBJMPR
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June 30, 2017 03:34 ET (07:34 GMT)
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