Notes forming part of the consolidated financial statements

for the year ended 31 December 2022

 

1      General information

 

The principal activity of Verici Dx plc (the "Company") is the development of prognostic and diagnostic tests for kidney transplant patients.

 

The Company is a public limited company incorporated in England and Wales and domiciled in the UK. The address of the registered office is Avon House, 19 Stanwell Road, Penarth, Cardiff CF64 2EZ and the company number is 12567827.

 

The Company was incorporated as Verici Dx Limited on 22 April 2020 as a private company and on 9 September 2020 the Company was re-registered as a public company and changed its name to Verici Dx plc.

 

 

2      Summary of significant accounting policies

 

The principal accounting policies adopted in the preparation of the historical financial information of the Company, which have been applied consistently to the period presented, are set out below:

 

Basis of preparation

 

Information in this preliminary announcement does not constitute statutory accounts of the Group within the meaning of section 434 of the Companies Act 2006. The annual financial information presented in this preliminary announcement is based on, and is consistent with, that in the Group's audited financial statements for the year ended 31 December 2022. Those financial statements will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The financial statements of the Group are prepared in accordance with UK-adopted International Accounting Standards ("UK IFRS") and applicable law. The independent auditors' report on those financial statements is unqualified and does not contain any statement under section 498 (2) or 498 (3) of the Companies Act 2006. The independent auditors' report draws attention to the material uncertainty referred to below under 'Going concern'.  

                                                                                                                                              

The functional currency and the presentational currency of the Company is United States dollars ("USD" or "US$") as this is the currency of the primary economic environment that the Company operates in.

 

New standards are not expected to impact the Company or Group as they are either not relevant to the Company's or Group's activities or require accounting which is consistent with the Company's and Group's current accounting policies. The Directors have considered those standards and interpretations which have not been applied in these financial statements but which are relevant to the Company's or Group's operations that are in issue but not yet effective and do not consider that they will have a material effect on the future results of the Company or Group.

 

Other

 

The Group does not expect any other standards issued by the IASB, but not yet effective, to have a material impact on the group.

 

Measurement convention

 

The financial information has been prepared under the historical cost convention. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

 

The preparation of the financial information in compliance with IFRS requires the use of certain critical accounting estimates and management judgements in applying the accounting policies. The significant estimates and judgements that have been made and their effect is disclosed in note 3.

 

Basis of consolidation

 

Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns.

Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

 

The consolidated financial statements present the results of the Company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.

 

The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date.  The results of acquired operations are included in the consolidated statement of profit or loss and other comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases.

 

Going concern

 

In view of the early stage of its commercial development the Group funds its activities from existing cash resources, the generation of cash receipts from commercial revenues in future periods and, if required, additional equity or debt funding for future working capital needs.

 

The Group did not generate any commercial revenue in the period but continues to execute the commercial introduction of Tutivia™, the first product for kidney transplant rejection. The Group will only expand its sales headcount if revenue demand exceeds current expectation and can also explore other strategic options to increase sales distribution of Tutivia and launch its second lead product, Clarava™ by the end of 2023. The Company retains sufficient funding to achieve further key milestones in 2023 and the first half of 2024, which will support commercial adoption including the publication of additional data and obtaining both Medicare and private payor pricing and coverage.

 

At 31 December 2022 the Group had available cash resources of $9.8 million (2021 - $10.3 million).  The Group is focused on early revenue generation and first revenue is expected during the first half of 2023. The Group will seek to extend and broaden its revenue streams from additional medical centres in the second half of 2023. There are, however, uncertainties in relation to the quantum and timing of cash receipts from revenue. The Group has therefore taken headcount reduction and clinical trial cost containment steps in recent months and, as a result, has extended the current cash runway.

 

The Directors have prepared cash flow forecasts for the Group for a period of at least 12 months from the date of approval of these financial statements. Those forecasts include estimates of cash receipts from commercial revenues at levels in line with market expectations. The Directors have also prepared a number of reasonably possible sensitivity scenarios including reduced levels of cash receipts from revenues, and a scenario in which the Group receives no cash at all from commercial revenues in the going concern period, even though that is not considered to be a reasonably possible outcome.

 

Having considered the cash flow forecasts and sensitivity scenarios above and taken into account the information and estimates available at the date of approving these financial statements, the directors consider it is appropriate to adopt the going concern basis in preparing the financial statements for the group. Although the company's projections, including expected levels of revenue generation, indicate sufficient funds through to the second half of 2024, it is reasonably possible that the group will require additional funding during, or shortly after a period of 12 months from the date of approval of these financial statements. The directors will seek to put in place funding arrangements which may from time to time be required but such arrangements are not presently committed. This represents a material uncertainty in relation to the group's funding arrangements.

 

Taxation

 

Income tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

 

Current tax payable is based on taxable profit for the year. Taxable profit differs from net profits 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 Company's liability for current tax is calculated using tax rates that have been enacted or substantially enacted by the reporting end date.

 

Deferred tax

 

          Deferred tax is the tax expected to be payable or recoverable on temporary differences between the carrying amounts of assets and liabilities in the historical financial information 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 differences arise from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

 

          The carrying amount of deferred tax assets is reviewed at each reporting end 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 the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

 

Share-based payments

 

Where equity settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the consolidated statement of comprehensive income over the vesting period.  Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest.  Non-vesting conditions and market vesting conditions are factored into the fair value of the options granted.  As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied.  The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied.

 

Where equity instruments are granted to persons other than employees, the consolidated statement of comprehensive income is charged with the fair value of goods and services received.

 

Foreign currency translation

 

a)   Function and presentational currency

          Items included in the financial statements of the Group are measured using USD, the currency of the primary economic environment in which the entity operates ('the functional currency'), which is also the Company's presentation currency.

 

b)   Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates, of monetary assets and liabilities denominated in foreign currencies to USD, are recognised in the income statement.

 

Intangible assets

 

Intangible assets are measured at cost less accumulated amortisation and any accumulated impairment losses.

 

Patents are recognised at fair value at the acquisition date. Patents have a finite useful life and are subsequently carried at cost less accumulated amortisation and impairment losses.

 

The Company amortises intangible assets with a limited useful life on a straight-line basis. The following rates are applied:

 

Licence and patents - the shorter of the remaining life of the license and 15 years

 

Tangible assets

 

Tangible fixed assets are stated at cost net of accumulated depreciation and accumulated impairment losses. Costs comprise purchase costs together with any incidental costs of acquisition.

 

Depreciation is provided to write down the cost less the estimated residual value of all tangible fixed assets by equal instalments over their estimated useful economic lives on a straight-line basis. The following rates are applied:

 

Plant and machinery - 3 years

 

The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, if there is an indication of a significant change since the last reporting date. Low value equipment including computers is expensed as incurred.

 

Impairment of tangible and intangible assets

 

At each reporting end date, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

 

The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

 

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit and loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

 

Where an impairment subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit and loss.

Leases

 

All leases are accounted for by recognising a right-of-use asset and a lease liability except  for:

 

·      Leases of low value assets; and

·      Leases with a duration of 12 months or less.

 

Lease liabilities are measured at the present value of the contractual payments due to the  lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the Company's incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate.

 

On initial recognition, the carrying value of the lease liability also includes:

 

·      amounts expected to be payable under any residual value guarantee

·      the exercise price of any purchase option granted in favour of the Company if it is reasonably certain to assess that option

·      any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised.

 

Right of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:

 

·      lease payments made at or before commencement of the lease

·      initial direct costs incurred; and

·      the amount of any provision recognised where the Company is contractually required to dismantle, remove or restore the leased asset (typically leasehold dilapidations - see note 19).

 

Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term.

When the company revises its estimate of the term of any lease (because, for example, it re-assesses the probability of a lessee extension or termination option being exercised) it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted using a revised discount rate. The carrying value of lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revised, except the discount rate remains unchanged. In both cases an equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease  term. If the carrying amount of the right-of-use asset is adjusted to zero, any further reduction is recognised in profit or loss.

 

Financial instruments

 

The Company classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. Financial assets and financial liabilities are recognised on the statement of financial position when the Company becomes a party to the contractual provisions of the instrument.

 

a)   Financial assets

 

Financial assets are classified, at initial recognition, at amortised cost or carrying value.  The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow characteristics and the Company's business model for managing them.

 

The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition and re-evaluates this classification at every reporting date.

 

As at the reporting date, the Company did not have any financial assets subsequently measured at fair value.

 

b)   Financial liabilities

 

All financial liabilities are initially measured at fair value and, in the case of loans and borrowings, net of directly attributable transaction costs. They are subsequently measured at amortised cost, where applicable, using the effective interest method, with interest expense recognised on an effective yield basis.

 

c)   Cash and cash equivalents

 

Cash and cash equivalents comprise cash balances and deposits with a maturity of less than three months at balance sheet date.

 

 

Financing expenses

 

Financing expenses comprise interest payable. Foreign exchange gains and losses arising on foreign currency transactions are reported within administrative expenses in the statement of comprehensive income.

 

Interest payable is recognised in the statement of comprehensive income as it accrues, using the effective interest method.

 

Exceptional items

 

Items considered of such significance to enable the reader to better understand the results for the year are presented separately as exceptional items on the face of the statement of comprehensive income.

 

Research and development costs

 

Development costs and expenditure on pure and applied research and the clinical trials are charged to the Income Statement in the year in which they are incurred.  Expenditure incurred on the development of internally generated products will be capitalised based on the recognition criteria set aside in IAS 38 "Intangible Assets".

 

Operating segments

 

The directors are of the opinion that the business of the Group comprises a single activity, that of the development of prognostic and diagnostic tests for kidney transplant patients. Consequently, all activities relate to this segment.

 

All the non-current assets of the Company are located in, or primarily relate to, the USA.

 

 

3	Judgements and key sources of estimation uncertainty

 

The preparation of the Company's historical financial information under UK IFRS requires the Directors to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. Estimates and judgements are continually evaluated and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

 

The Directors consider that the following estimates and judgements are likely to have the most significant effect on the amounts recognised in the financial information.

 

Carrying value of intangible assets, property, plant and equipment

In determining whether there are indicators of impairment of the Company's intangible assets, the Directors take into consideration various factors including the economic viability and expected future financial performance of the asset and when it relates to the intangible assets arising on a  business combination, the expected future performance of the business acquired. 

 

Carrying value of amounts owed by subsidiary undertaking

The operations of the wholly owned subsidiary, Verici Dx Inc, are funded by the parent company, Verici Dx Plc.  As such a receivable balance arises reflecting the funds advanced.  The recoverability of this balance is dependent upon the economic viability and expected performance of the Group's developed products.

 

 

4	Financial instruments - Risk Management

 

The Group is exposed through its operations to the following financial risks:

 

-     Credit risk

-     Foreign exchange risk

-     Liquidity risk and

-     Capital disclosures

 

The Group is exposed to risks that arise from its use of financial instruments.  This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them.  Further quantitative information in respect of these risks is presented throughout these financial statements.

 

(i) Principal financial instruments

 

The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:

-     Cash and cash equivalents

-     Trade and other payables

 

(ii) Financial instruments by category

 

Financial asset

		Group	Company	Group	Company
		Amortised	Amortised	Amortised	Amortised
		cost	cost	cost	cost
		2022	2022	2021	2021
		US$'000	US$'000	US$'000	US$'000
	Cash and cash equivalents	9,805	9,345	10,340	10,024
	Trade and other receivables	177	18	250	17
	Amounts due from subsidiary	-	18,122	-	8,226
		_________	_________	_________	_________
		9,982	9,363	10,590	10,041
	Total financial assets	_________	_________	_________	_________

 

Financial liabilities

 

		Group	Company	Group	Company
		Amortised	Amortised	Amortised	Amortised
		cost	cost	cost	cost
		2022	2022	2021	2021
		US$'000	US$'000	US$'000	US$'000
	Trade and other payables	2,096	105	1,754	131
	Leases	700	-	-	-
		_________	_________	_________	_________
	Total financial liabilities	2,796	105	1,754	131
		_________	_________	_________	_________

 

(iii) Financial instruments not measured at fair value

 

Financial instruments not measured at fair value includes cash and cash equivalents, trade and other receivables, and trade and other payables.

 

Due to their short-term nature, the carrying value of cash and cash equivalents, trade and other receivables, and trade and other payables approximates their fair value.

(iv) Financial instruments measured at fair value

 

General objectives, policies and processes

 

The Board has overall responsibility for the determination of the Group's risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group's finance function. 

 

The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility.  Further details regarding these policies are set out below:

 

Credit risk

 

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Due to the absence of revenue, the Group's exposure to credit risk is on cash at bank.  The Company only deposits cash with major banks with high quality credit standing for amounts in excess of US$500,000.

 

Cash in bank and short-term deposits

 

The credit quality of cash has been assessed by reference to external credit rating, based on Standard and Poor's long-term / senior issuer rating:

 

		Group	Group	Company	Company
		2022	2022	2022	2022
			Cash		Cash
		Rating	at bank	Rating	at bank
			US$'000		US$'000
	Bank A	A+	9,345	A+	9,345
	Bank B		260		-
	Bank C	A+	200		-
			_________		_________
			9,805		9,345
			_________		_________

 

		Group	Group	Company	Company
		2021	2021	2021	2021
			Cash		Cash
		Rating	at bank	Rating	at bank
			US$'000		US$'000
	Bank A	A+	10,024	A+	10,024
	Bank B		316		-
			_________		_________
			10,340		10,024
			_________		_________

 

Foreign exchange risk

 

Foreign exchange risk arises when individual Group entities enter into transactions denominated in a currency other than their functional currency.  The Group's policy is, where possible, to allow group entities to settle liabilities denominated in their functional currency. In the period before commercial revenues US dollars are transferred from the Company to its US subsidiary to enable it to meet its local obligations.  Currently the Group's liabilities are either US dollar or UK sterling.  No forward contracts or other financial instruments are entered into to hedge foreign exchange movements, with funds being transferred from the Company to its US subsidiary using spot rates. 

 

As at 31 December 2022 assets held in Sterling amounted to US$270,000 (2021 - US$3,538,000) and liabilities held in Sterling amounted to US$105,000 (2021 - US$131,000). 

 

The effect of a 5% strengthening of the Sterling against US dollar at the reporting date on the Sterling denominated net assets carried at that date would, all other variables held constant, have resulted in a decrease in post-tax loss for the period and increase of net assets of US$8,000 (2021 - US$170,000).  A 5% weakening in the exchange rate would, on the same basis, have increased post-tax loss and decreased net assets by US$8,000 (2021 - US$170,000).

 

Liquidity risk

 

Liquidity risk is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.  This risk is managed by the production of rolling cash flow projections.  The Group's continued future operations depend on its ability to raise sufficient working capital through the issue of share capital and generating revenue.

 

The following table sets out the contractual maturities (representing undiscounted contractual cash-flows) of financial liabilities which can all be met from the cash resources currently available:

 

			Between	Between	Between
	Group	Up to 3	3 and 12	1 and 2	2 and 5
		months	months	years	years
	At 31 December 2022	US$'000	US$'000	US$'000	US$'000
	Trade and other payables	960	-	-	-
	Leases	45	111	167	377
		_________	________	________	________
	Total	1,005	111	167	377
		_________	________	________	________

 

			Between
	Company	Up to 3	3 and 12
		months	Months
	At 31 December 2022	US$'000	US$'000
	Trade and other payables	19	-
		_________	_________
	Total	19	-
		_________	_________

 

 

			Between
	Group	Up to 3	3 and 12
		Months	months
	At 31 December 2021	US$'000	US$'000
	Trade and other payables	159	-
	Leases	-	-
		_________	_________
	Total	159	-
		_________	_________

 

			Between
	Company	Up to 3	3 and 12
		Months	Months
	At 31 December 2021	US$'000	US$'000
	Trade and other payables	16	-
		_________	_________
	Total	16	-
		_________	_________

 

Capital Disclosures

 

The Group monitors capital which comprises all components of equity (i.e. share capital, share premium, and accumulated losses).

 

The Group's objectives when maintaining capital are to safeguard the entity's ability to continue as a going concern.

 

 

5	Expenses by nature
		Year to	Year to
		31 December	31 December
		2022	2021
		US$'000	US$'000
	Employee benefit expenses (see note 7)	2,889	2,392
	Depreciation of property, plant and equipment	497	295
	Amortisation of intangible assets	143	143
	Research and development costs	4,832	3,344
	Licenses	550	250
	Professional costs	1,325	921
	Share-based payment expense for non-employees	129	309
	Foreign exchange loss / (gain)	36	(182)
	Other costs	964	857
	Costs of share issue	90	-

 

6	Auditors' remuneration

 

During the year the Group obtained the following services from the Company's auditor:

 

		Year to	Year to
		31 December	31 December
		2021	2021
		US$'000	US$'000
	Fees payable to the Company's auditor for the audit of the parent Company and consolidated financial statements	48	43
	Fees payable to the Company's auditor for other services:
	Tax advisory and compliance services	-	1
		_________	_________
	Total	48	44
		_________	_________

 

 

7	Employee benefit expenses
		Year to	Year to
		31 December	31 December
		2022	2021
		US$'000	US$'000
	Employee benefit expenses (including directors) comprise:
	Wages and salaries	2,279	1,658
	Benefits	191	143
	Share-based payment expense (note 20)	189	431
	Social security contributions and similar taxes	146	104
	Pension contributions	84	56
		_________	_________
		2,889	2,392
		_________	_________

 

Key management personnel compensation

 

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, including the Directors of the Company.

		Year to	Year to
		31 December	31 December
		2022	2021
		US$'000	US$'000
	Salary	493	560
	Share based payment expense	7	-
		_________	_________
		500	560
		_________	_________

 

The average number of employees (including Directors) in the Group in the year was 17 (2021 - 13).

 

8	Segment information

 

The Group has one division being the development of prognostic and diagnostic tests for kidney transplant patients.

 

 

9	Finance income and expense
		Year to	Year to
		31 December	31 December
		2022	2021
		US$'000	US$'000
	Finance income
	Bank interest	53	-
		_________	_________
	Total finance income	53	-
		_________	_________

 

	Finance expense
		-	-
	Interest on lease liabilities	5	-
		_________	_________
	Total finance expense	5	-
		_________	_________

 

 

 

 

10	Tax expense
		Year to	Year to
		31 December	31 December
		2022	2021
		US$'000	US$'000
	Current tax expense
	Current tax on loss for the year	-	-
		_________	_________
	Total current tax	-	-
	Deferred tax asset
	On losses generated in the year	-	-
		_________	_________
		-	-
		_________	_________

The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the United Kingdom applied to profits for the year are as follows:

 

		Year to	Year to
		31 December	31 December
		2022	2021
		US$'000	US$'000
	Loss for the period	(11,407)	(8,329)
		_________	_________
	Tax using the Company's domestic tax rate of 19%	(2,167)	(1,583)
	Expenses not deductible for tax purposes	79	58
	Accelerated capital allowances	(251)	(143)
	Unrecognised deferred tax assets	3,240	2,328
	Different tax rates applied in overseas jurisdictions	(901)	(660)
		_________	_________
	Total tax expense	-	-
		_________	_________

 

 

 

The unrecognised deferred tax relates to two elements: the unrecognised deferred tax arising on share-based payments of US$85,000 (2021 - US$199,000) and unrecognised deferred tax on taxable losses of US$3,155,000 (2021 - US$2,129,000). Total taxable losses carried forward comprise of Federal US losses of $6,334,000 (US$4,848,000) which do not expire but can only offset against 80% of taxable profits from the same trade.  In addition, US tax losses of $13,316,000 (US$3,708,000) are carried forward as research and development taxable asset to be used against future profits from the same trade.  Tax losses in the UK at US$1,449,000 (US$897,000).  No deferred tax asset is recognised for these losses due to early stage in the development of the Group's activities.

 

 

11	Earnings per share
		Year to	Year to
		31 December	31 December
		2022	2021
		Total	Total
	Numerator	US$	US$
	Loss for the period used in basic EPS	(11,407,527)	(8,329,829)
	Denominator
	Weighted average number of ordinary shares used in basic EPS	164,667,754	141,747,816
	Resulting loss per share	(US$0.069)	(US$0.059)

 

The Company has one category of dilutive potential ordinary share, being share options (see note 19). The potential shares were not dilutive in the period as the Group made a loss per share in line with IAS 33.  

 

 

12	Tangible assets
	Group	Leasehold property	Plant & machinery	Total
		US$'000	US$'000	US$'000
	Cost or valuation
	At 1 January 2021	-	594	594
	Additions	-	618	618
	Foreign exchange movements	-	(6)	(6)
		_________	_________	_________
	At 31 December 2021	-	1,206	1,206
	Additions	1,288	455	1,743
	Foreign exchange movements	-	(59)	(59)
		_________	_________	_________
	At 31 December 2022	1,288	1,602	2,890
		_________	_________	_________
	Accumulated depreciation and impairment
	At 1 January 2021	-	(130)	(130)
	Depreciation	-	(295)	(295)
	Foreign exchange movements	-	5	5
		_________	_________	_________
	At 31 December 2021	-	(420)	(420)
	Depreciation	(76)	(421)	(497)
	Foreign exchange movements	-	37	37
		_________	_________	_________
	At 31 December 2022	(76)	(804)	(880)
		_________	_________	_________
	Net book value
	At 31 December 2022	1,212	798	2,010
		_________	_________	_________
	At 31 December 2021	-	786	786
		_________	_________	_________

 

 

Included in leasehold property at 31 December 2022 are right of use assets with a cost of US$465,000 and accumulated depreciation of $28,000 relating to the lease of the Company's laboratory in Tennessee.  Included within plant and machinery is an asset financed under a leasing contract with a cost of US$238,000.  The liability is secured against the asset.

12	Tangible assets (continued)
	Company	Plant & machinery	Total
		US$'000	US$'000
	Cost or valuation
	At 1 January 2021	568	568
	Additions	-	-
	Foreign exchange movements	(6)	(6)
		_________	_________
	At 31 December 2021	562	562
	Additions	-	-
	Foreign exchange movements	(59)	(59)
		_________	_________
	At 31 December 2022	503	503
		_________	_________
	Accumulated depreciation and impairment
	At 1 January 2021	(126)	(126)
	Depreciation	(191)	(191)
	Foreign exchange movements	5	5
		_________	_________
	At 31 December 2021	(312)	(312)
	Depreciation	(172)	(172)
	Foreign exchange movements	37	37
		_________	_________
	At 31 December 2022	(447)	(447)
		_________	_________
	Net book value
	At 31 December 2022	56	56
		_________	_________
	At 31 December 2021	250	250
		_________	_________

13	Intangible assets
	Group	License and patents	Total
		US$'000	US$'000
	Cost
	At 1 January 2021	1,839	1,839
	Additions	398	398
	Foreign exchange movements	(18)	(18)
		_________	_________
	At 31 December 2021	2,219	2,219
	Additions	268	268
	Foreign exchange movements	(185)	(185)
		_________	_________
	At 31 December 2022	2,302	2,302
		_________	_________
	Accumulated amortisation and impairment
	At 1 January 2021	(72)	(72)
	Amortisation charge	(143)	(143)
	Foreign exchange movements	3	3
		_________	_________
	At 31 December 2021	(212)	(212)
	Amortisation charge	(143)	(143)
	Foreign exchange movements	23	23
		_________	_________
	At 31 December 2022	332	332
		_________	_________
	Net book value
	At 31 December 2022	1,970	1,970
		_________	_________
	At 31 December 2021	2,007	2,007
		_________	_________

 

 

13	Intangible assets (continued)
	Company	License and patents	Total
		US$'000	US$'000
	Cost
	At 1 January 2021	1,722	1,722
	Additions	54	54
	Foreign currency movements	(18)	(18)
		_________	_________
	At 31 December 2021	1,758	1,758
	Additions	15	15
	Foreign currency movements	(185)	(185)
		_________	_________
	At 31 December 2022	1,588	1,588
		_________	_________
	Accumulated amortisation and impairment
	At 1 January 2021	(71)	(71)
	Amortisation charge	(124)	(124)
	Foreign exchange movements	3	3
		_________	_________
	At 31 December 2021	(192)	(192)
	Amortisation charge	(104)	(104)
	Foreign exchange movements	23	23
		_________	_________
	At 31 December 2022	(273)	(273)
		_________	_________
	Net book value
	At 31 December 2022	1,315	1,315
		_________	_________
	At 31 December 2021	1,566	1,566
		_________	_________

 

 

The licence was acquired from Renalytix AI Plc on 4 May 2020 pursuant to a purchase of business assets..  This license in turn was granted to Renaltix AI Plc by the Icahn School of Medicine at Mount Sinai for rights to intellectual property and data to support the FractalDx families of diagnostic assays. In addition amounts are spent on the prosecution and protection of patent applications.

 

The Group has tested the carrying value for impairment at 31 December 2022. The recoverable amount was assessed in the basis of value in use. The assessed value exceeded the carrying value and no impairment loss was recognised. The key assumptions in the calculation to assess value in use are future revenues and costs and the ability to generate future cash flows. Recent working capital projections approved by the Board were used as well as forecasts for a further four years, followed by an extrapolation of expected cash flows and the calculation of a terminal value.

14	Subsidiary

 

The principal subsidiary of Verici Dx plc, which has been included in these consolidated financial statements at a cost of US$10, is as follows:

 

		Country of incorporation and	Proportion of ownership
	Name	principal place of business	interest at 31 December
			2021 and 2022
	Verici Dx Inc	United States of America	100%

 

 

15	Trade and other receivables
		Group	Company	Group	Company
		2022	2022	2021	2021
		US$'000	US$'000	US$'000	US$'000
	Prepayments	343	60	406	101
	Other debtors	177	18	250	17
	Amount due from wholly owned subsidiary undertaking	-	18,122	-	8,226
		_________	_________	_________	_________
		520	18,200	656	8,344
		_________	_________	_________	_________

 

 

16	Trade and other payables
		Group	Company	Group	Company
		2022	2022	2021	2021
		US$'000	US$'000	US$'000	US$'000
	Trade payables	960	19	160	16
	Accruals	1,136	86	1,644	165
		_________	_________	_________	_________
	Total trade and other payables	2,096	105	1,804	181
		_________	_________	_________	_________

 

The carrying value of trade and other payables classified as financial liabilities measured at amortised cost approximates fair value.

 

The only movements within financial liabilities relate to payments for payable and leases within the Financial Instruments note.

17	Lease liabilities
				Land and		Plant and
	Group			buildings		machinery		Total
				US$'000		US$'000		US$'000
	At 1 January 2021			-		-		-
	Interest expense			-		-		-
	Repayments			-		-		-
				________		________		________
	At 31 December 2021			-		-		-
				________		________		________
	Additions			465		238		703
	Repayments			(8)		-		(8)
	Interest expense			4		1		5
				________		________		________
	At 31 December 2022			461		239		700
				________		________		________

 

The Company acquired an asset under capital lease financing arrangements.

 

The  Company operates from one office which is rented under a lease agreement ending on 1 November 2027 under which rent is payable monthly.

 

	2022	2021
	US$'000	US$'000
Maturity of lease liabilities
Within 3 months Between 3 - 12 months Between 1 - 2 years Between 2 - 5 years	45 111 167 377	- - - -
	________	________
	700	-
	________	________

 

18	Share capital
				Issued and fully paid
			2022		2022
			Number		US$
	Ordinary shares of £1 each
	On incorporation		1		1
			__________		__________
	Ordinary shares of £0.001 each
	Sub-division of existing shares into 1,000 ordinary shares		1,000		1
	Issue of new shares		59,415,135		74,864
	Issue of shares on conversion of Convertible Loan Notes		9,831,681		12,771
	Placing and offer of shares on admission to AIM		72,500,000		93,978
			__________		__________
	At 31 December 2021		141,747,816		181,614
	Issue of new shares		28,571,429		37,342
			__________		__________
	At 31 December 2022		170,319,245		218,956
			__________		__________

 

On 7 July 2020 the entire issued share capital of the Company was sub divided to create 1,000 ordinary shares of £0.001 each and 59,415,135 ordinary shares of £0.001 each were allotted pursuant to a dividend in specie by the then parent company, Renalytix AI Plc.  Those 59,416,135 shares were then immediately reclassified as 59,416,134 A shares and one Golden Share and all A shares and the Golden Share converted into ordinary shares at the time of the Company's admission to AIM on 3 November 2020.

On 28 October 2020 pursuant to the conversion of the Convertible Loan Notes is issue at that time of $2,500,000, a further 9,831,681 new ordinary shares were issued.

On 3 November 2020 pursuant to the Company's shares being admitted to AIM, a market operated by the London Stock Exchange, 72,500,000 new ordinary shares were issued at an issue price of £0.20 per share raising gross proceeds of US$18,795,500 (£14,500,000).

On 11 March 2022 the Company issued 28,571,429 ordinary shares of £0.001 at an issue price of £0.35 per share raising gross proceeds of US$13,070,000 ((£10,000,000).

 

 

19

Reserves

 

The following describes the nature and purpose of each reserve within equity:

 

	Reserve	Description and purpose
	Share premium	Amount subscribed for share capital in excess of nominal value.
	Foreign exchange reserve	Gains/losses arising on retranslating the net assets of parent company operations into US dollars.
	Retained earnings	All other net gains and losses and transactions with owners (e.g. dividends) not recognised elsewhere.

20	Share-based payment

 

On 28 October 2020, the Board adopted the Share Option Plan to incentivise certain of the Group's employees and Directors. The Share Option Plan provides for the grant of both EMI Options and non-tax favoured options. Options granted under the Share Option Plan are subject to exercise conditions as summarised below.

 

The Share Option Plan has a non-employee sub-plan for the grant of Options to the Company's advisors, consultants, non-executive directors, and entities providing, through an individual, such advisory, consultancy, or office holder services and a US sub-plan for the grant of Options to eligible participants in the Share Option Plan and the Non-Employee Sub-Plan who are US residents and US taxpayers.

 

With the exception of options over 10,631,086 shares, which vested immediately on grant in 2020, the options vest equally over twelve quarters from the grant date.  If options remain unexercised after the date one day before the tenth anniversary of grant such options expire. The Options are subject to exercise conditions such that they shall, subject to certain exceptions, vest in equal quarterly instalments over the three years immediately following the date of grant, which vesting shall accelerate in full in the event of a change of control of the Company.

		Weighted
		average
		exercise
		price (p)	Number
	Outstanding at 22 April 2020	-	-
	Granted during the period	32	14,574,782
	Exercised during the period	20	(10,631,086)
		________	_________
	Outstanding at 31 December 2020	32	3,943,696

 

	Granted during the year	62.61	990,000
		_________	_________
	Exercisable at 31 December 2021	26.03	4,933,696
		________	_________
	Cancelled in the year		(120,000)
	Granted in the year		1,564,370
		________	________
	Exercisable at 31 December 2022	23.86	6,378,066
		________	________

 

The exercise price of options outstanding at 31 December 2022 ranged between 20p and 69.5p and their weighted average contractual life was 3.85 years. 

 

The weighted average fair value of each option granted during the year was 25.98p.  The weighted average fair value of the options outstanding at 31 December 2022 was 23.86p.

 

The fair value of each share option granted has been estimated using a Black-Scholes model and ranges from 10p to 23p. The inputs into the model are a share prices of 20p, 40p,45.5p, 50p and 69.5p and exercise prices of 20p, 40p,45.5p, 50p and 69.5p and expected volatility of 52.34%, no expected dividend yield, contractual life of between 2.9 and 1.9 years and a risk-free interest rate of 0.925%. As of 31 December 2022, none of the granted stock options have been exercised.

 

20	Share-based payment (continued)

 

The Group recognised total expenses of $318,000 (2021 - $741,000) within administrative expenses relating to equity-settled share-based payment transactions during the period.

 

 

21	Related party transactions

 

The following items are included as disclosures in accordance with IFRS:

 

i.    In the year to 31 December 2022 an amount of US$51,000 (2021 - US$352,000) was invoiced by Renalytix Plc as full reimbursement for expenses incurred on behalf of the Company as a cost sharing arrangement for a quality management software product. As of 31 December 2022 the amount owed to Renalytix Plc was US$22,000 (2021 - US$22,000).

 

ii.    In the year to 31 December 2022 an amount of US$750,000 (2021 - US$35,000) was invoiced by Icahn School of Medicine at Mount Sinai for milestone fees due under the license agreement described in the Admission Document.  As of 31 December 2022 the amount owed to Icahn School at Medicine at Mount Sinai was US$Nil (2021 - US$Nil).

 

iii.   In the year to 31 December 2022 an amount of US$17,000 (2021 - US$Nil) was invoiced by EKF Diagnostic Holdings Plc for services rendered in the year.  As of 31 December 2022 the amount owed to EKF Diagnostic Holdings Plc was US$Nil (2021 - US$Nil). 

 

There are no additional AIM Rule 13 disclosures required in relation to these items.

 

22	Events after the reporting date

 

There have been no events subsequent to the year-end that require disclosure in these financial statements.