TIDMSALV
RNS Number : 8283D
SalvaRx Group plc
28 June 2019
SalvaRX Group PLC
("SalvaRX" or "the Company")
Annual audited results for the year ending 31 December 2018
Final Results
The Board of SalvaRX is pleased to announce its annual results
for the year ending 31 December 2018.
Copies of the 2018 Audited Report and Financial Statements will
be posted to shareholders and will shortly be available from the
Company's website www.salvarx.io
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) 596/2014.
For further information, please contact
SalvaRX Group PLC S.P. Angel Corporate Peterhouse Capital
Finance LLP Limited
The Company Nominated Advisor Broker
& Broker
Denham Eke Matthew Johnson / Lucy Williams / Duncan
+44 (0) 1624 639396 Jamie Spotswood Vasey
+44 (0) 20 3470 0470 +44 (0) 20 7469 0932
Chairman's Statement
I am pleased to present the audited final results for SalvaRx
Group PLC ("SalvaRx", "the Company" or "the Group"), for the year
ended 31 December 2018.
Results and business review
The total loss for the year ended 31 December 2018 was
GBP3,366,000 (2017: loss of GBP2,234,000). GBP2,817,000 (2017:
GBP1,776,000) of this loss relates to discontinued operations
following the disposal and demerger described below. The Group's
expenditure on research and development activities during the year
amounted to GBP861,000 (2017: GBP1,185,000).
On 14 August 2018, the Company announced that it had entered
into a conditional sale agreement for the disposal of its 94.2%
interest in SalvaRx Limited to Portage Biotech Inc. ("Portage"),
for a consideration of US$67.5 million, to be satisfied by Portage
issuing and allotting 757,943,784 new Portage shares. The
transaction was finally completed on 8 January 2019. The Company
retained approximately 57 million Portage shares for its operating
needs and distributed most of the remaining shares to its
shareholders.
I believe that the disposal and the demerger was the best way to
unlock and maximise value for shareholders without causing the
dilution inherent in raising additional funds at a price which I
did not believe reflected the value of the Company's underlying
oncology assets.
The disposal and the demerger resulted in the divestment of
substantially all of the Company's existing business, assets and
investments. As such, the Company is now classified as an AIM Rule
15 cash shell and is required to make an acquisition or
acquisitions which constitute a reverse takeover under AIM Rule 14
(or seek re-admission as an investing company (as defined under the
AIM Rules)) on or before the date falling six months from
completion of the disposal and the demerger (namely 9 July 2019).
Failing which, the Ordinary Shares will be suspended from trading
on AIM pursuant to AIM Rule 40. Admission to trading on AIM will be
cancelled six months from the date of suspension should the reason
for the suspension not have been rectified.
As a result, your board is in the process of evaluating suitable
opportunities for the Company and I will make a further
announcement as soon as is practicable.
Jim Mellon
Non-executive Chairman
27 June 2019
Strategic Report
As described in the Chairman's Statement, the Company disposed
of its interests in SalvaRx Limited on 8 January 2019. Whilst the
Company is now classified as AIM Rule 15 cash shell, the following
review describes the development of the Group's interests during
the year and up to the disposal date.
During the year under review, the Group continued to make
progress on advancing its oncology assets.
iOx Therapeutics Limited (56.95% subsidiary undertaking)
iOx Therapeutics Ltd ("iOx") continued to advance its first set
of products through development. During this period, the company
was granted additional patents covering liposomal formulation of
its iNKT agonist. It also worked with its contract manufacturing
partners to scale up the production to enable large scale runs. In
July 2018, however, the Group announced a delay to the
manufacturing process of our lead candidate IMM60. iOx also made
progress with its second therapy, IMM65, to enable the
determination of the final formulation.
To fund its ongoing research and development activities, in
March 2018 iOx announced an issue of US$1 million of unsecured
convertible loan notes and a further issue of US$1 million of loan
notes was announced in December 2018.
Intensity Therapeutics Inc. (8.5% equity investment)
On 22 October 2018, Intensity Terapeutics Inc. ("Intensity")
announced the results from its clinical trial IT-01 at the European
Society for Medical Oncology (ESMO) 2018 Congress in Munich,
Germany. The preliminary data from a Phase 1/2 clinical study
demonstrated that INT230-6, Intensity's novel lead product
candidate designed for direct intratumoral injection, was well
tolerated in patients with advanced solid tumours.
On 2 November 2018, Intensity announced the completion of a $6.5
million Series B financing. Intensity plans to use the proceeds of
the financing to advance the clinical development of lead product
candidate INT230-6. Intensity also intends to expand the study by
adding clinical sites outside the U.S. and Canada, as well as
adding combination arms with an anti-PD-1 antibody.
On 8 November 2018, Intensity announced that additional data
from a phase 1/2 clinical study of INT230-6 and preclinical
research highlighting the company's proprietary DfuseRx SM
technology had been presented at a poster session at the Society
for Immunotherapy of Cancer's 33rd annual meeting in Washington
D.C.
Other portfolio companies
The remaining portfolio companies - Nekonal Oncology and
Saugatuck Therapeutics - continued to characterize, manufacture and
test their products to enable decision making on further
development. Activities at Rift Biotherapeutics Inc. remained
suspended due to a lack of funding.
Financing
During the year, iOx Therapeutics Ltd issued $2 million of loan
notes (as described further in note 18). The Company also received
$1 million of funding from J Mellon and G Bailey. The combined
effect of these facilities enabled the Group to continue its
development strategy.
Disposal of interest in SalvaRx Limited
All the Company's investments and business interests were held
by SalvaRx Limited, its 94.2% owned subsidiary, following a group
restructuring conducted in March 2017.
Subsequent to the year end, on 8 January 2019, the Company
disposed of its interest in SalvaRx Limited to Portage Biotech Inc
("Portage"), for a consideration of US$67.5 million, satisfied by
the issue of new Portage shares ("Disposal").
Concurrent with the Disposal, the Company's Shareholders
received 18 Demerger Shares (i.e. Portage consideration shares) for
every share in SalvaRx Group plc held on the Demerger Record Date.
This mechanism allowed qualifying Shareholders to retain an
interest in the investments and business interests held by SalvaRx
Limited (through their resultant interest in Portage following
completion of the Demerger).
Portage, a company listed on the Canadian Securities Exchange,
has existing interests in four promising biotech companies and cash
resources of approximately $4 million which will be used to fund
the ongoing development of the portfolio of oncology assets owned
by SalvaRx Limited.
It is our hope that the Disposal will further facilitate our
efforts to reach proof of concept and advance the products into
clinical testing. Portage has a history of creating value for its
shareholders - one of its portfolio companies, Biohaven
Pharmaceutical Holding Company Ltd ("Biohaven") (NYSE:BHVN), was
the second largest biotech IPO on NASDAQ in 2017. Portage
subsequently announced a distribution in specie of its stock in
Biohaven to its shareholders. Their initial US$7 million investment
was worth in excess of US$100 million at the time of the IPO in
2017 and has almost doubled since then. Biohaven is now worth
approximately US$1.9 billion. Portage has provided seed capital to
four other biotech companies and will seek to evaluate new
opportunities.
Outlook
The disposal and the demerger resulted in the divestment of
substantially all of the Company's existing business, assets and
investments. As such, the Company is now classified as an AIM Rule
15 cash shell and as such will be required to make an acquisition
or acquisitions which constitutes a reverse takeover under AIM Rule
14 (or seek re-admission as an investing company (as defined under
the AIM Rules)) on or before the date falling six months from
completion of the disposal. Failing which, the Ordinary Shares
would then be suspended from trading on AIM pursuant to AIM Rule
40.
Jim Mellon
Non-executive Chairman
27 June 2019
Directors' Report
Introduction
The Directors present their report and consolidated financial
statements of SalvaRx Group plc ('the Group') for the year ended 31
December 2018.
Principal activity
The Group's principal activity was that of drug discovery and
development, focused on immune-oncology. As explained in the
Chairman's Statement and the Strategic Report, following disposal
of SalvaRx Limited on 8 January 2019 the company is classified as a
cash shell under AIM Rule 15.
Business and financial review and future developments
The plans for the future are set out in the Chairman's Statement
and Strategic Report and are dependent upon the Company making an
acquisition or acquisitions which constitute reverse takeover under
AIM Rule 14 on or before the date falling six months from the
disposal of SalvaRx Limited (namely 9 July 2019). Failing which,
the Ordinary Shares will be suspended from trading on AIM pursuant
to AIM Rule 40. Admission to trading on AIM will be cancelled six
months from the date of suspension should the reason for the
suspension not have been rectified.
Results and dividends
The Group's loss for the year after taxation was GBP3.37 million
(2017: loss of GBP2.23 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 (resigned on 8 January
2019)
Kam Shah, Chief Financial Officer (resigned on 8 January
2019)
Denham Eke, Chief Financial Officer (appointed on 8 January
2019)
Dr Greg Bailey, Non-Executive Director
Richard Armstrong, Non-Executive Director (resigned on 8 January
2019)
Colin Weinberg, Non-Executive Director (resigned on 8 January
2019)
Biographical details of serving Directors can be found in the
Board of Directors section.
Annual General Meeting and re-election of Directors
The date of the Annual General Meeting will be announced in due
course.
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 of Ordinary shares Percentage of issued share capital Number of Options Exercise price
J Mellon 13,406,521 36.53% - -
G Bailey 13,406,521 36.53% - -
I Walters - - 428,786 35.5p
K Shah - - 364,666 35.5p
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
_________ _________
26,920,780 1,148,244
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 in event that they step down from
the Board in due course on the appointment of new non-executive
directors.
The interests of J Mellon in the table above include Ordinary
Shares in the Company held by Agronomics Limited (formerly Port
Erin Biopharma Investments Limited) and Galloway Limited. J Mellon
holds controlling interests in these companies.
In the annual general meeting held on 8 January 2019,
shareholders approved cancellation of the existing options and
issuance of new options to acquire Portage shares from the Company.
As a result, new options granted to the directors in place of their
existing options were as follows:
Number of Options
Director in Portage shares granted Exercise price
I Walters 6,234,373 US$0.00001
K Shah 5,302,094 US$0.00001
R Armstrong 2,730,871 US$0.00001
C Weinberg 2,730,871 US$0.00001
New Options have the following terms and conditions:
(a) Exercise Period: the New Options are exercisable during the
period commencing three months from the Date of Grant and expiring
on the first anniversary of the Date of Grant, being, 5.00 p.m. on
8 January 2020; and
(b) Vesting Condition: the Portage Shares have traded above
US$0.03 (three cents) for a period of at least five consecutive
trading days during the Exercise Period.
The New Options will lapse irrevocably in the event that they
are not exercised before the expiry of the Exercise Period.
In addition to the above, J Mellon and G Bailey hold options
over shares in SalvaRx Limited relating to warrants issued on the
non-convertible loan notes in the prior year. Details of the terms
of these loans are included in note 18.
I Walters and K Shah both hold 1,139 and 190 options
respectively over shares in iOx Therapeutics Limited, a subsidiary
in which the Group holds 56.95% equity.
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, the Company had
been notified that the following is a holder of 3% or more of the
Company's issued Ordinary Share capital:
Number of Shares %
Yongxiong Zheng 2,318,676 6.31
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 21 to the financial statements.
Principal risks and uncertainties
Prior to the disposal of SalvaRx Limited on 8 January 2019, the
principal risks faced by the Group and the actions taken to
mitigate them, are shown in the table below. After 8 January 2019,
the Company is an AIM Rule 15 cash shell. The principal risk is
therefore considered to relate solely to funding and finding a
suitable acquisition target.
Risk/Description Principal mitigation
Intellectual property:
In common with other companies The Group and its partners actively
engaged in pharmaceutical development, manage all intellectual property
the Group faces the risk that (IP) rights, engaging with specialists
intellectual property rights to apply for and defend IP rights
necessary to exploit its research in appropriate 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 Group may not generate The lead product candidate has
further attractive drug candidates successfully completed a comprehensive
and candidates already in development preclinical development programme
may fail clinical trials because and the safety and efficacy profile
of lack of efficacy, unacceptable is well understood. The clinical
side effects, or insurmountable trials will be designed based
challenges in conducting studies on the data from the development
adequate to support regulatory programme completed to date.
approvals. Practical issues,
such as inability to devise
acceptable formulations for
products or inability to manufacture
products at acceptable cost,
may also lead to failure of
candidates in development.
-----------------------------------------
Regulatory:
Drug development is a highly The Group's and its partners'
regulated activity governed drug development teams include
by different regulatory authorities specialists in regulatory affairs
in different jurisdictions. who consult with other experts
It can be difficult to predict to ensure that internal control
the exact requirements of different processes and clinical trial
regulatory bodies. Decisions design meet current regulatory
by regulators may lead to delays requirements. The Group also
in development and approval engages directly with regulatory
of drugs or lack of marketing authorities when appropriate
authorisations in some or all
territories.
-----------------------------------------
Financial:
The successful development To date the Group has raised
of the Group's assets requires the capital necessary to fund
financial investment which its development through a mixture
can come from revenues, commercial of debt and equity funding. The
partners, or investors. Failure Board continuously monitor the
to generate additional funding ongoing funding requirement and
from these sources may compromise take action as appropriate.
the Group's ability to execute
its business plans or to continue The Group also operates robust
in business. controls over expenditures including
budgeting and authorisation of
individual expenditures.
-----------------------------------------
Risk/Description Principal mitigation
Commercial and economic:
The Group may be unable to The Group consults with commercial,
effectively commercialise or clinical, and scientific experts
license its products to partners to assess the payer and prescriber
or may not be able to execute environment and the potential
licensing deals that provide impact of competing products
significant revenues. Development or changes in the economic landscape
of alternative technologies pertaining to hospital infections.
or products may undermine the The management actively monitors
Group's capacity to generate performance of key competitors
revenue flowing from commercialisation in terms of pricing, market share,
of its assets. If the Group's and prescribing behaviour.
drugs are commercialised, they
may not generate significant
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 Group may not be able to The Group's recruitment processes
recruit and retain appropriately are tailored to identify and
qualified staff. Facilities attract the best candidates for
and other resources may become specific roles. The Group aims
unavailable. 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 Company has divested all its operating assets
by disposing of SalvaRx Limited to Portage Biotech Inc. on 8
January 2019 and has become a cash shell. If and when the Company
acquires new business, 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 Disposal of SalvaRx Limited on 8 January 2019 resulted in
the divestment of substantially all of the Company's existing
business, assets and investments. The Company has now been
classified as an AIM Rule 15 cash shell and as such is required to
make an acquisition or acquisitions which constitutes a reverse
takeover under AIM Rule 14 (or seek re-admission as an investing
company (as defined under the AIM Rules)) on or before the date
falling six months from completion of the Disposal failing which
the Ordinary Shares would then be suspended from trading on AIM
pursuant to AIM Rule 40. Admission to trading on AIM would be
cancelled six months from the date of suspension should the reason
for the suspension not have been rectified.
Following the disposal and demerger, the Company has limited
cash reserves and its principal assets are up to 56,657,531
Retained Shares in Portage Biotech Inc. worth approximately
US$5,043,000 (approximately, GBP3,897,000), as shares in a Canadian
listed entity these are readily convertible into cash and are to be
set aside for general working capital requirements.
As a cash shell, the Company has a low level of underlying
overhead. The Directors have prepared forecasts that demonstrate
that the Company has adequate resources (comprising cash in hand
and the Retained Shares) to cover these costs for at least the next
twelve months from the date of this report.
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 (2017: 45 days).
Post balance sheet events
Events after the balance sheet date have been disclosed in the
Chairman's Statement and note 26 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:
Denham Eke
Chief Financial Officer
27 June 2019
Corporate Governance Statement
All members of the board believe strongly in the value and
importance of good corporate governance and in our accountability
to all of SalvaRx Group plc's stakeholders, including shareholders,
staff, clients and suppliers.
Changes to AIM rules on 30 March 2018 required AIM companies to
apply a recognised corporate governance code by 28 September
2018.
The Directors recognize the importance of good corporate
governance and have chosen to apply the Quoted Companies Alliance
Corporate Governance Code (the 'QCA Code').
Full details of our Corporate Governance approach can be found
on our website:
https://www.salvarx.io/investors/aim-rule-26.html
Jim Mellon
Non-executive Chairman
27 June 2019
Statement of Directors' Responsibilities
The directors are responsible for preparing the Directors'
Report and the financial statements in accordance with applicable
law and regulations.
Isle of Man 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 period 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 financial 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 the 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.
Independent Auditor's Report to the Members of SalvaRx Group
plc
Opinion
We have audited the financial statements of SalvaRx Group plc
and its subsidiaries (the 'group') for the year ended 31 December
2018 which comprise the consolidated statement of profit and other
comprehensive income, the consolidated balance sheet, the
consolidated cash flow statement, the consolidated statement of
changes of equity and notes to the financial statements, including
a summary of significant accounting policies. 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 2018 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;
-- have been properly prepared in accordance with the
requirements of the Isle of Man Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the group
in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
FRC's Ethical Standard as applied to SME listed entities and we
have fulfilled our other ethical responsibilities in accordance
with these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which the ISAs (UK) require
us to report to you where:
-- the directors' use of the going concern basis of accounting
in the preparation of the financial statements is not appropriate;
or
-- the directors have not disclosed in the financial statements
any identified material uncertainties that may cast significant
doubt about the group's ability to continue to adopt the going
concern basis of accounting for a period of at least twelve months
from the date when the financial statements are authorised for
issue.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on the overall audit strategy, the allocation of resources in the
audit and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Accounting for the loan note instruments constituted on 8 March
2018 and 10 December 2018
As detailed in note 18, on 8 March 2018 iOx Therapeutics Limited
issued US $1 million of unsecured convertible loan notes followed
by a further US $1 million unsecured loan notes on 10 December
2018. The terms of the loan notes are set out in detail in note
18.
As disclosed in the accounting policies, the Directors have
presented these instruments as liabilities and measured them at
fair value through profit or loss. At 31 December 2018 the fair
value of the 8 March 2018 loan note instrument was GBP8,099,000 and
the 10 December 2019 loan note instrument was GBP1,053,000. Due to
the significance of these liabilities, and the judgements and
estimates involved in determining both appropriate presentation and
measurement, the treatment of these instruments is considered to be
one of the most significant risks of material misstatement.
Management provided us with details of their proposed
presentation and measurement of each instrument. We reviewed their
proposed treatment in conjunction with a valuation specialist and
considered the proposed accounting, challenging management where
relevant.
Management also provided us with calculations of the fair values
attributable to the instruments. We challenged these calculations
and subjected them to arithmetical checking. We assessed the inputs
and estimates within these calculations, consulted with valuation
specialists, and considered the valuations with specific reference
to the consideration received on the disposal of SalvaRx Limited on
8 January 2019.
In light of our work, we also considered the adequacy of
disclosures relating to the instruments set out in notes 4 and 18
to the financial statements.
Our application of materiality
When establishing our overall audit strategy, we set certain
thresholds which help us to determine the nature, timing and extent
of our audit procedures. When evaluating whether the effects of
misstatements, both individually and on the financial statements as
a whole could reasonably influence the economic decisions of the
users we take into account the qualitative nature and the size of
the misstatements. During planning materiality for the financial
statements as a whole was calculated as GBP223,000, which was not
changed during the course of our audit. We agreed with the Audit
Committee that we would report to them all unadjusted differences
in excess of GBP5,000, as well as differences below that threshold
that, in our view, warranted reporting on qualitative grounds.
An overview of the scope of our audit
Our audit approach covered 100% of group loss and total group
assets and liabilities. It was performed to the materiality levels
set out above.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the annual
report, other than the financial statements and our auditor's
report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We
have nothing to report in this regard.
Responsibilities of directors
As explained more fully in the directors' responsibilities
statement set out on page 15, the directors are responsible for the
preparation of the financial statements and for being satisfied
that they give a true and fair view, and for such internal control
as the directors determine is necessary to enable the preparation
of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the group's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of
the financial statements is included in the Appendix at the end of
this auditor's report. This description, which is located on page
19, forms part of our auditor's report.
Use of our report
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.
RSM UK AUDIT LLP, Statutory Auditor
Chartered Accountants
Central Square
5th Floor
29 Wellington Street
Leeds
LS1 4DL
27 June 2019
Appendix: Auditor's responsibilities for the audit of the
financial Statements
As part of an audit in accordance with ISAs (UK), we exercise
professional judgment and maintain professional scepticism
throughout the audit. We also:
-- Identify and assess the risks of material misstatement of the
financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal
control.
-- Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the group's internal control.
-- Evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related disclosures
made by the directors.
-- Conclude on the appropriateness of the directors' use of the
going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the group's
ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in
our auditor's report to the related disclosures in the financial
statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained
up to the date of our auditor's report. However, future events or
conditions may cause the group to cease to continue as a going
concern.
-- Evaluate the overall presentation, structure and content of
the financial statements, including the disclosures, and whether
the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
-- Obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities within
the group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for
our audit opinion.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide those charged with governance with a statement
that we have complied with relevant ethical requirements regarding
independence, including the FRC's Ethical Standard, as applied to
SME listed entities, and communicate with them all relationships
and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements
of the current period and are therefore the key audit matters. We
describe these matters in our auditor's report unless law or
regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not
be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
Consolidated Statement of Profit and Loss and Other
Comprehensive Income
2018 2017
GBP'000 GBP'000
Notes (as restated)
Continuing operations
Other operating costs 6 (522) (445)
Operating loss (522) (445)
Net finance cost 7 (27) (13)
Loss before tax (549) (458)
Tax 10 - -
Net loss for the year from continuing
operations (549) (458)
Net loss for the year from discontinued
operations 28 (2,817) (1,776)
Net loss for the year (3,366) (2,234)
Net (loss)/gain for the year attributable
to:
Equity holders of the parent 342 (1,744)
Non-controlling interest (3,708) (490)
___________ ___________
(3,366) (2,234)
Other comprehensive income
Items that may be reclassified to profit
or loss:
Exchange differences on translating
foreign operations (37) (47)
Total comprehensive loss for the year (3,403) (2,281)
Total comprehensive loss attributable
to:
Equity holders of the parent 300 (1,791)
Non-controlling interest (3,703) (490)
___________ ___________
(3,403) (2,281)
Total comprehensive loss attributable
to equity holders of the
parent arises from:
Continuing operations (549) (458)
Discontinued operations 249 (1,333)
___________ ___________
300 (1,791)
2018 2017
Notes GBP GBP
Profit/(loss) per ordinary share
Continuing operations, GBP per share 0.02 (0.01)
Discontinued operations, GBP per share (0.01) (0.04)
___________ ___________
Basic and diluted, GBP per share 11 0.01 (0.05)
Consolidated Balance Sheet
2018 2017
Notes GBP'000 GBP'000
Assets
Non-current assets
Investments 12 - 1,480
Intangible assets 13 - 1,002
Investments in associates 14 - 1,297
Prepayment 15 - 259
- 4,038
Current assets
Trade and other receivables 16 33 598
Cash and cash equivalents 17 - 570
33 1,168
Assets of disposal group classified
as held for sale 28 13,429 -
Total assets 13,462 5,206
Liabilities
Current liabilities
Trade and other payables 19 (989) (1,106)
Non-current liabilities
Loan notes 18 - (2,603)
Equity derivatives 18 - (361)
Deferred tax liabilities 10 - (170)
- (3,134)
Liabilities of disposal group classified
as held for sale 28 (13,904) -
Total liabilities (14,893) (4,240)
Net (liabilities)/assets (1,431) 966
Equity
Share capital 21 917 911
Share premium 21 56 -
Reverse acquisition reserve 22 3,065 3,065
Own shares (215) (215)
Share-based payment reserves 1,517 573
Accumulated deficit (3,452) (3,752)
Equity attributable to equity holders
of the parent 1,888 582
Non-controlling interests 25 (3,319) 384
_________ _________
Total equity (1,431) 966
The financial statements of SalvaRX Group plc were approved by
the Board of Directors and authorised for issue on
27 June 2019. They were signed on its behalf by:
Denham Eke
Chief Financial Officer
27 June 2019
Notes 1 to 28 form part of these financial statements.
Consolidated Cash Flow Statement
2018 2017
GBP'000 GBP'000
Loss for the year (3,366) (2,234)
Adjustments for:
Taxation credit (187) (573)
Amortisation of intangible assets 122 182
Share-based payments 944 191
Finance cost (375) 118
Share of loss in associate 68 309
Foreign exchange differences - (296)
Impairment of investments in associates 113 -
Impairment of other receivables 259 -
Fair value gain on investments (8,353) -
Fair value loss on loan notes 8,119 -
________ ________
Operating cash flows before movements in working capital (2,656) (2,303)
Increase in receivables (21) (76)
Increase in payables 496 434
________ ________
Cash used in operations (2,181) (1,945)
Taxation received 156 54
________ ________
Net cash outflow from operating activities (2,025) (1,891)
________ ________
Investing activities
Investments in associates - (1,413)
Prepaid equity option (note 16) - (259)
________ ________
Net cash used in investing activities - (1,672)
________ ________
Financing activities
Proceeds on issue of ordinary shares 62 -
Proceeds on issue of loans (note 19) 754 -
Proceeds on issue of loan notes (note 18) 1,537 3,119
________ ________
Net cash from financing activities 2,353 3,119
________ ________
Net increase/(decrease) in cash and cash equivalents 328 (444)
Cash and cash equivalents at beginning of year 570 967
Effect of exchange rate on cashflow 47 47
________ ________
Cash and cash equivalents at end of year (note 17) 945 570
Consolidated Statement of Changes in Equity Equity attributable
to equity holders of the parent
Reserve Share
acquisition based Non-controlling
Share reserve payments Accumulated interest Total
capital (note 22) Own reserves deficit Total equity
(note 21) shares (note 23)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At January 2017 911 3,065 (215) 382 (2,364) 1,779 647 2,426
Net loss for the
year - - - - (1,744) (1,744) (490) (2,234)
Foreign exchange
gain on
retranslation
of foreign
subsidiaries - - - - (47) (47) - (47)
________ ________ ________ ________ ________ ________ ________ ________
Total
comprehensive
income - - - - (1,791) (1,791) (490) (2,281)
________ ________ ________ ________ ________ ________ ________ ________
Transactions
with owners in
their capacity
as owners:
- Conversion of
2016 loans
notes
(note 25) - - - - 482 482 148 630
- Equity
contribution to
non-controlling
shareholders
(note 25) - - - - (79) (79) 79 -
Share based
payment charge - - - 191 - 191 - 191
________ ________ ________ ________ ________ ________ ________ ________
Total
transactions
with owners in
their capacity
as owners - - - 191 403 594 227 821
________ ________ ________ ________ ________ ________ ________ ________
At 31 December
2017 911 3,065 (215) 573 (3,752) 582 384 966
________ ________ ________ ________ ________ ________ ________ ________
Reserve Share
Share acquisition based Non-controlling
Share premium reserve payments Accumulated interest Total
capital (note 21) (note 22) Own reserves deficit Total equity
(note 21) shares (note 23)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At January 2018 911 - 3,065 (215) 573 (3,752) 582 384 966
Net loss for the
year - - - - - 342 342 (3,708) (3,366)
Foreign exchange
gain on
retranslation
of foreign
subsidiaries - - - - - (42) (42) 5 (37)
________ ________ ________ ________ ________ ________ ________ ________ ________
Total
comprehensive
income - - - - - 300 300 (3,703) (3,403)
________ ________ ________ ________ ________ ________ ________ ________ ________
Transactions
with owners in
their capacity
as owners:
- Issue of
equity for cash 6 56 - - - - 62 - 62
Share based
payment charge - - - - 944 - 944 - 944
________ ________ ________ ________ ________ ________ ________ ________ ________
Total
transactions
with owners in
their capacity
as owners 6 56 - - 944 - 1,006 - 1,006
________ ________ ________ ________ ________ ________ ________ ________ ________
At 31 December
2018 917 56 3,065 (215) 1,517 (3,452) 1,888 (3,319) (1,431)
________ ________ ________ ________ ________ ________ ________ ________ ________
Notes to the financial statements for the year ended 31 December
2018
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.
Until 8 January 2019, the principal activity of the Group was
drug pre-clinical development with particular focus on developing a
series of compounds for cancer immunotherapy. Following the
disposal of SalvaRx Limited, the Company became an AIM Rule 15 cash
shell.
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 (GBP000) except
loss per ordinary share and certain figures in the notes.
2 Adoption of new and revised standards
Interpretations of standards
The Group has applied IFRS 9 Financial Instruments for the first
time in the year ended 31 December 2018. IFRS 9 replaces IAS 39
Financial Instruments: Recognition and Measurement. As a result of
the adoption of IFRS 9, the Group has applied the consequential
amendments to IFRS 7 Financial Instruments: Disclosures to the
current year only.
The classification of financial assets under IFRS 9 is based on
whether the contractual cash flows of the instrument are solely
payments of principal and interest, and whether the business model
is to collect those contractual cash flows and/or sell the
financial assets. All of the Group's financial assets that were
previously classified as loans and receivables under IAS 39 are now
classified as assets at amortised cost under IFRS 9.
Investments classified as available for sale comprises an
investment in Intensity Therapeutics Inc. of GBP1,480,000 at 31
December 2017. The Directors' exercised judgement in the prior year
determining that the investment should be recorded at cost in
accordance with IAS 39.46(c) as they concluded that it was not
possible to ascertain a reliable fair value for the investment.
Under IFRS 9 the directors have elected to measure the investment
at fair value through profit or loss. Under IFRS 9.7.2.12 a
difference between the previous carrying amount of this investment
and its fair value at the date of initial application should be
recognised in the opening retained earnings. At the date of initial
application the fair value of the investment was considered to be
equal to its carrying amount and no transitional adjustment was
made.
The application of IFRS 9 has not changed the measurement of the
Group's financial liabilities or the Group's accounting policies
for the recognition and derecognition of financial instruments.
There was no impact of adoption of IFRS 15 Revenue from
contracts with customers and the Board do not expect that the
adoption of IFRS 16 Leases in future periods will have a material
impact on the financial statements of the Group.
3 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 valuation of certain financial
instruments held at fair value through profit or loss. 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.
The Disposal of SalvaRx Limited on 8 January 2019 resulted in
the divestment of substantially all of the Company's existing
business, assets and investments. The Company has now been
classified as an AIM Rule 15 cash shell and as such is required to
make an acquisition or acquisitions which constitutes a reverse
takeover under AIM Rule 14 (or seek re-admission as an investing
company (as defined under the AIM Rules)) on or before the date
falling six months from completion of the Disposal failing which
the Ordinary Shares would then be suspended from trading on AIM
pursuant to AIM Rule 40. Admission to trading on AIM would be
cancelled six months from the date of suspension should the reason
for the suspension not have been rectified.
Following the disposal and demerger, the Company has limited
cash reserves and its principal assets are up to 56,657,531
Retained Shares in Portage Biotech Inc. worth approximately
US$5,043,000 (approximately, GBP3,897,000), as shares in a Canadian
listed entity these are readily convertible into cash and are to be
set aside for general working capital requirements.
As a cash shell, the Company has a low level of underlying
overhead. The Directors have prepared forecasts that demonstrate
that the Company has adequate resources (comprising cash in hand
and the Retained Shares) to cover these costs for at least the next
twelve months from the date of this report.
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 the following subsidiary undertakings:
i) SalvaRx Limited, ("SalvaRx") incorporated on 6 May 2015 in
the British Virgin Islands. SalvaRx Group plc owns 94.15% 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 Group plc holds 56.95% equity in
IOX.
iii) Saugatuck Therapeutics Limited incorporated in the British
Virgin Islands. SalvaRx Limited holds 70% equity in the
company.
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 recognized 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 capitalized only if development costs
can be measured reliably, the product or process is technically and
commercially feasible, future economic benefits are probable, and
the Group intends to and has sufficient resources to complete
development and to use or sell the asset. No development costs have
been capitalized 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 Group'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 Group'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 the financial grants from
governments, public authorities, and similar local, national or
international bodies. These are recognised when there is reasonable
assurance that the Group 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.
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, etc.) 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.
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.
Impairment of intangible assets other than goodwill
At the end of each reporting period, the Group reviews the
carrying amounts of its 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). When it is not possible to
estimate the recoverable amount of any individual asset, the Group
estimates the recoverable amount of the cash-generating unit to
which the asset belongs. When a reasonable and consistent basis of
allocation can be identified, corporate assets are also allocated
to individual cash-generating units, or otherwise they are
allocated to the smallest group of cash-generating units for which
a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible
assets not yet available for use are tested for impairment at lease
annually, and wherever there is an indication that the assets may
be impaired.
Recoverable amount is the higher of fair value less costs of
disposal 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.
Investments in associates
An associate is an entity over which the Group has significant
influence. Significant influence is the power to participate in the
financial and operating policy decisions of the investee but is not
control or joint control over those policies.
The results and assets and liabilities of associates are
incorporated in these consolidated financial statements using the
equity method of accounting, except when the investment, or a
portion thereof, is classified as held for sale, in which case it
is accounted for in accordance with IFRS 5. Under the equity
method, an investment in an associate is initially recognised in
the consolidated statements of financial position at cost and
adjusted thereafter to recognise the Group's share of the profit or
loss and other comprehensive income of the associate. When the
Group's share of losses of an associate exceeds the Group's
interest in that associate (which includes any long-term interest
that, in substance, form part of the Group's net investment in the
associate), the Group discontinues recognising its share of further
losses. Additional losses are recognised only to the extent that
the Group has incurred legal or constructive obligations or made
payments on behalf of the associate.
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 losses, 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 pounds 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 a 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
Investments
Investments that are not held for collection of contractual cash
flows where those cash flows represent solely payments of principal
and interest are measured at fair value through profit or loss. A
gain or loss on such investments is recognised in profit or loss in
the period in which it arises.
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.
Derivative financial assets and liabilities
Derivative financial assets and liabilities are carried at fair
value, with gains and losses arising from changes in fair value
taken directly to the Statement of Profit and Loss and Other
Comprehensive Income. Fair values of derivatives are determined
using valuation techniques, including discounted cash flow models
and option pricing models as appropriate.
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.
2017 loan notes
As detailed in note 18, the 2017 loan notes comprise a loan and
a warrant over shares in SalvaRx Limited. At inception the loan
element and the warrant are recorded at their respective fair
values. The fair value of the loan is calculated by determining an
effective rate of interest determined by reference to the interest
rate applicable to comparable instruments with no warrant. The fair
value of the warrant is determined as the difference between the
fair value of the instrument issue price and the fair value of the
loan.
At subsequent balance sheet dates the loan is measured at
amortised cost and the warrant is measured at fair value.
2018 loan notes
As detailed in note 18, the whole of the 2018 convertible loan
note instruments have been designated as a liability and the
derivative element has not been separated from the host instrument.
At inception the entire instrument is recorded at its fair value.
The fair value of the liability is calculated by reference to the
expected fair value of the share price on conversion and any fair
value movements are recorded through profit and loss.
At subsequent balance sheet dates the liability is measured at
fair value.
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.
Discontinued operations
A discontinued operation is a component of the Group that has
been disposed of or is classified as held for sale and that
represents a separate major line of business or geographical area
of operations, is part of a single co-ordinated plan to dispose of
such a line of business or area of operations, or is a subsidiary
acquired exclusively with a view to resale. The results of
discontinued operations are presented separately on the face of the
Statement of Profit or Loss and Other Comprehensive Income.
Non-current assets or disposal groups classified as held for
sale
Non-current assets and assets of disposal groups are classified
as held for sale if their carrying amount will be recovered
principally through a sale transaction rather than through
continued use. They are measured at the lower of their carrying
amount and fair value less costs of disposal. For non-current
assets or assets of disposal groups to be classified as held for
sale, they must be available for immediate sale in their present
condition and their sale must be highly probable.
An impairment loss is recognised for any initial or subsequent
write down of the non-current assets and assets of disposal groups
to fair value less costs of disposal. A gain is recognised for any
subsequent increases in fair value less costs of disposal of a
non-current assets and assets of disposal groups, but not in excess
of any cumulative impairment loss previously recognised.
Non-current assets are not depreciated or amortised while they
are classified as held for sale. Interest and other expenses
attributable to the liabilities of assets held for sale continue to
be recognised.
4 Critical accounting judgements and key sources of estimation and uncertainty
In the application of the Group's accounting policies, which are
described in note 3, 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:
2017 loan note warrant (note 18)
The disposal of SalvaRx Limited on 8 January 2019 is a
qualifying event under the terms of the warrant and the exercise
price is at a 70% discount to market price. The Directors have used
their judgement in determining fair value for this liability with
reference to the disposal on 8 January 2019.
The warrant is stated at fair value based on a diluted share
price of $1,031 per share. This has been calculated based on the
market value allocated to SalvaRx Limited on its sale to Portage
Biotech Inc. on 8 January 2019.
2018 loan notes (note 18)
The directors have considered the treatment of the convertible
loan notes issued during the year, taking into account the terms of
the individual loan instruments as set out in note 18 and the
consequences of the subsequent disposal of SalvaRx Limited on 8
January 2019.
The loan note instrument issued on 8 March 2018 has no repayment
terms and due to the cross currency between the loan and the share
price, the number of shares that will be issued is variable.
Therefore, the instrument should be classified as a liability and
as there is no loan element the whole instrument has been valued at
fair value through profit and loss. The value attributed to iOx on
disposal of SalvaRx Limited on 8 January 2019 evidences that there
is substantial intrinsic value in the backstop option as it values
each share at approximately GBP1,200 per share. At fair value, the
liability is GBP8,099,000.
The loan note instrument issued on 10 December 2018 has no
repayment terms and has been treated as a liability because a
variable number of shares will be issued, since the number of
shares issued is based on the share price at the date of issue and
the amount of discount, which increases over the passage of time.
As there is no loan element the whole instrument has been valued at
fair value through profit and loss. However, in this case there is
a day one loss as if the qualifying event happened on the day after
issue the holder would receive shares with a fair value of $1.33m.
This represents a liability of GBP1,053,000 at 31 December
2018.
Investment in Intensity Therapeutics Inc.
The fair value of investments that are not traded in an active
market is determined by using valuation techniques. The Group uses
its judgement to select a variety of methods and make assumptions
that are mainly based on market conditions existing at the end of
each reporting period. The group has determined the fair value of
the investment in Intensity Therapeutics Inc. using the valuation
agreed on disposal of SalvaRx Limited of GBP9,919,000.
Share-based payment expense
The estimation of share-based payment expense requires the
selection of an appropriate valuation method, consideration as to
the inputs necessary for the valuation model chosen and the
estimation of the number of awards that will ultimately vest.
Inputs subject to judgement relate to the future volatility of the
share price based on the historic share price performance of the
Group, the Group's expected dividend yields, risk free interest
rates and expected lives of the options. The Directors draw on a
variety of sources to aid in the determination of the appropriate
data to use in such calculations.
5 Business and geographical segments
Throughout the year, the Directors consider there to be only one
business and operating segment, namely research and development of
compounds for cancer immunotherapy.
6 Operating loss (continuing operations)
The operating loss has been arrived at after 2018 2017
(crediting)/charging: GBP'000 GBP'000
Staff costs (note 9) 75 89
Other consulting fees 40 116
Legal and professional fees 93 131
Share-based payments (note 23) 92 184
Audit fees (note 8) 40 38
Net foreign exchange gains - (122)
7 Net finance cost (continuing operations)
2018 2017
GBP'000 GBP'000
Loan note interest - 13
Other interest 27 -
27 13
The loan note interest charge for the prior year includes a
notional interest of GBP13,000.
Other interest relates to loans provided to the company by J
Mellon and G Bailey of US$500,000 each. Interest is payable on the
loans at 7% per annum and the loans are unsecured and repayable on
20 June 2019.
8 Auditor's remuneration
Amounts payable to RSM UK Audit LLP and its associates in
respect of both audit and non-audit services:
2018 2017
GBP'000 GBP'000
Audit fees
Fees payable to the Group's auditor for the
statutory audit of the Group's annual accounts 31 30
Fees payable to the Group's auditor for the
statutory audit of subsidiary undertakings 9 8
Total audit fees 40 38
Non-audit fees
Tax services 8 4
Other services 13 9
Total non-audit fees 21 13
9 Staff costs
The average monthly number of employees and senior management
(including Executive Directors) was:
2018 2017
GBP'000 GBP'000
Non-executive Directors 4 4
Executive Directors of Group companies 2 2
6 6
Their aggregate remuneration comprised (continuing 2018 2017
operations): GBP'000 GBP'000
Salaries and consulting fee 75 89
Share-based payments 6 14
Non-executive directors' fees 40 40
121 143
Directors remuneration (all representing fees) and share based
payments (continuing and discontinued operations)
2018 2017
GBP'000 GBP'000
J Mellon 10 10
G Bailey 10 10
R Armstrong 13 17
C Weinberg 13 17
I Walters 293 229
K Shah 78 116
417 399
Details of shares and options held by the Directors are
disclosed in the Directors' report.
10 Tax (continuing operations)
The Company is subject to income tax at a rate of 0% in the Isle
of Man and, accordingly, no tax has been provided in these
financial statements.
11 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:
2018 2017
GBP'000 GBP'000
(as restated)
Profit/(loss) for the purposes of basic loss
per share being net loss attributable to
equity holders of the parent
Continuing operations 549 (458)
Discontinued operations (207) (1,286)
Total 342 (1,744)
Number of shares Number Number
Weighted average number of ordinary shares
for the purposes of basic profit/(loss) per
share 36,506,384 36,467,123
2018 2017
GBP GBP
Profit/(loss) per ordinary share
Continuing operations, GBP per share 0.02 (0.01)
Discontinued operations, GBP per share (0.01) (0.04)
Basic and diluted, GBP per share 0.01 (0.05)
Dilutive loss per ordinary share equals basic loss per ordinary
share as there is no dilutive effect from the subsisting share
options.
12 Investments
Investment
in Intensity
GBP'000
Valuation
At 1 January 2018 1,480
Fair value gain on valuation 8,353
Exchange gains 86
Transferred to disposal group classified
as held for sale (9,919)
At 31 December 2018 -
On 22 April 2016, the Group 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.
On 23 July 2018, the Group has determined the fair value of the
investment to be US$12.64m based on a valuation agreed on the sale
of SalvaRx Limited (see note 27). The full amount of the investment
relates to SalvaRx Limited group and was transferred to the
disposal group classified as held for sale (note 28).
13 Intangible assets
In process
research
GBP'000
Cost
At 1 January 2018 1,457
Transferred to disposal group classified
as held for sale (1,457)
At 31 December 2018 -
Amortisation
At 1 January 2017 (273)
Charge for the year (182)
At 31 December 2017 (455)
Charge for the year (122)
Transferred to disposal group classified
as held for sale 577
At 31 December 2018 -
Carrying amounts
At 31 December 2016 1,184
At 31 December 2017 1,002
At 31 December 2018 -
On 1 July 2015, iOx Therapeutics Limited ("iOx") entered into an
Investment Agreement with The University of Oxford, ISIS, the
Ludwig Institute, and Professor Cerundolo. As part of this
agreement, iOx also entered into a Clinical Trials Sponsorship
agreement with The University of Oxford and entered into a licence
agreement with the Ludwig Institute to access intellectual property
rights and know-how relating to cell agonists. The Directors
determined that the excess of consideration over identifiable
assets and liabilities arising on the acquisition of iOx on that
date related entirely to this in-process research asset.
The asset 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 4.5 years. In the opinion of the Directors, the
progress of iOx is satisfactory and there is therefore no
indication of impairment. The full amount of the asset relates to
SalvaRx Limited group and was transferred to the disposal group
classified as held for sale (note 28).
14 Investments in associates
Rift Nekonal Total
Biotherapeutics Oncology GBP'000
Inc Limited
GBP'000 GBP'000
At 1 January 2018 815 482 1,297
Share of loss in associates (discontinued
operations) (37) (31) (68)
Impairment on transfer to disposal
group - (113) (113)
Transferred to disposal group
classified as held for sale (778) (338) (1,116)
At 31 December 2018 - - -
Details of the Group's material associates at the end of the
reporting period are as follows:
Voting rights held by
the Group
31 December 31 December
Place of incorporation 2018 2017
Principal and principal
Name of associate activity place of business
RIFT Biotherapeutics Delaware -
Inc. Biotechnology USA San Diego 34.99% 34.99%
Nekonal Oncology British Virgin
Limited Oncology research Islands 31.07% 31.07%
All of the above associates are accounted for using the equity
method in these consolidated financial statements.
Rift Biotherapeutics Inc. ("RIFT")
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").
On 9 February 2017, SalvaRx Limited advanced a further US$45,000
and on 20 March 2017, SalvaRx invested US$ 1 million in RIFT. The
total investment of US$1,090,000 in RIFT was converted into a 33%
equity holding.
On 6 December 2017, SalvaRx Limited acquired a further 251,798
of Series A preferred stock for a total consideration of
US$349,999. This increased the Group's interest to 34.99%.
Subject to RIFT achieving certain development milestones,
SalvaRx Limited has an obligation to acquire a further 467,626 of
Series A preferred stock for a total consideration of US$650,000.
As the directors currently consider the achievement of the
development milestones to be possible but not certain this
obligation has been accounted for as a contingent liability, see
note 27.
In addition, SalvaRx Limited also has the option to invest up to
an additional US$500,000 at the same value of its original
investment. SalvaRx Limited has also entered an option to acquire
all outstanding shares of RIFT in exchange for new shares in
SalvaRx Limited on the same basis within 90 days of the milestone
investment referred to above being achieved.
Nekonal Oncology Limited ("Nekonal Oncology")
SalvaRx Limited, a subsidiary of the Group, has entered into an
agreement to invest in and form a collaboration with Nekonal SARL
("Nekonal"), a Luxembourg-based company holding intellectual
property rights for therapeutics and diagnostics in the field of
autoimmune disorders and oncology. As part of the agreement,
SalvaRx and Nekonal have formed Nekonal Oncology, which will
utilise SalvaRx's management and drug development expertise to
exclusively explore the applications of Nekonal's technology in
cancer immunotherapy.
SalvaRx Limited has made a nominal equity investment and a
capital contribution of EUR300,000 in Nekonal Oncology. Nekonal
Oncology has been treated as an associate company by the Group as
the equity interest is 33%.
SalvaRx Limited has an obligation to make a further capital
contribution of EUR300,000 once certain development milestones have
been achieved, as the milestones were expected to be achieved when
the investment was made this obligation of GBP269,000 has been
included in other creditors see note 19.
SalvaRx Limited also has acquired an option from Nekonal SARL
for a one-time fee of EUR300,000 that gives SalvaRx the right to
acquire option shares in any qualifying subsidiary of Nekonal.
Further disclosure is provided in note 15.
Summarised financial information in respect of each of the
associates is set out below.
2018
RIFT Biotherapeutics Inc. GBP'000
Revenue -
Loss for the year (160)
Reconciliation of the above summarised financial information to
the carrying amount of the interest in RIFT:
2018
GBP'000
Net assets of the associate -
Proportion of the groups ownership -
interest (34.99%)
Goodwill 778
Carrying amount of groups interest
included in the disposal group classified
as held for sale 778
2018
Nekonal Oncology Limited GBP'000
Current assets 73
Current liabilities (45)
28
2018
GBP'000
Revenue -
Loss for the year (100)
Reconciliation of the above summarised financial information to
the carrying amount of the interest in Nekonal Oncology
Limited:
2018
GBP'000
Net assets of the associate 28
Proportion of the Groups ownership
interest (31.07%) 9
Goodwill 329
Carrying amount of Groups interest
included in the disposal group classified
as held for sale 338
15 Prepayment - non-current
2018 2017
GBP'000 GBP'000
Prepayment (note 14) - 259
- 259
SalvaRx Limited has acquired an option from Nekonal SARL for a
one-time fee of EUR300,000 that gives SalvaRx the right to acquire
option shares in any qualifying subsidiary of Nekonal for EUR50 per
share subject to SalvaRx having made a total of EUR600,000 of
capital contributions to Nekonal Oncology Limited. As at 31
December 2018 SalvaRx Limited has made EUR300,000 of capital
contributions and has an obligation to make a further capital
contribution of EUR300,000 once certain development milestones have
been achieved. This obligation of GBP269,000 has been included in
other creditors. Subject to this further investment the option is
exercisable at any time within four years of the option agreement
dated 27 February 2017. The full amount of the prepayment relates
to the SalvaRx Limited group and was transferred to the disposal
group classified as held for sale (note 28).
16 Trade and other receivables
2018 2017
GBP'000 GBP'000
Amount due from associates - 21
VAT and corporation tax recoverable 25 498
Prepayments 8 79
33 598
Trade and other receivables that relate to the SalvaRx Limited
group were transferred to the disposal group classified as held for
sale (note 28).
17 Cash and cash equivalents
Cash and cash equivalents as at 31 December 2018 of
approximately GBP1 million (2017: GBP0.57 million) comprise cash
held by the Group. The full amount of cash and cash equivalents
relates to the SalvaRx Limited group and was transferred to the
disposal group classified as held for sale (note 28). The Directors
consider that the carrying amount of these assets approximates to
their fair value.
18 Loan notes and borrowings
2018 convertible loan notes 2017 loan Warrants on 2017 loan notes Total
GBP'000 Notes GBP'000 GBP'000
GBP'000
At 1 January 2018 - 2,603 361 2,964
New loans in the year 1,520 15 2 1,537
Imputed interest - 89 - 89
Change in fair value 7,585 - 534 8,119
Exchange losses 46 99 44 189
Transferred to disposal group
classified as held for sale (9,151) (2,806) (941) (12,898)
31 December 2018 - - - -
On 2 March 2017, the Company announced an offering by its
subsidiary SalvRx Limited of unsecured loan notes of up to US $5
million, carrying a coupon of 7% and repayable in four years. The
loan notes were subscribed in tranches during the year. The holders
of the loan notes were issued US $7,500 of warrant in respect of
each US $10,000 loan note. The warrants vest in the event of a
qualifying transaction (including the disposal on 8 January 2018)
and are exercisable at a 30% discount to the implied valuation of
SalvaRx Limited. SalvaRx Limited raised US $3,960,000 in unsecured
loan notes from the offering reflecting a sterling value of
GBP3,134,000 on issue.
The coupon interest of 7% arising on the 2017 loan notes is
included within accruals.
On 8 March 2018, iOx Therapeutics Limited has issued US $1
million of unsecured convertible loan notes. The Notes have the
following key terms:
1. the Notes entitle the holder thereof to interest of 7% per
annum on the principal amount of the Notes;
2. the Notes are convertible into ordinary shares in iOx on the
earlier of the first anniversary of the effective date or the date
on which iOx conducts a sale or listing or it undertakes an
eligible third party fundraising of not less than US$2M;
3. the conversion price of the Notes would be either (a) 25%
discount to the next financing, (b) the price per share of the
relevant sale, or, in the case of event that both (a) or (b) do not
occur within one year (c), GBP120 per share.
4. the Notes do not have any provision for repayment (other than in an event of default).
On 10 December 2018, iOx Therapeutics Limited has issued an
additional US $1 million of unsecured convertible notes. The Notes
have the following key terms:
1. the Notes entitle the holders thereof to interest of 7% per
annum on the principal amount of the Notes;
2. the Notes are convertible into ordinary shares of iOx only on
the date on which iOx conducts a sale or listing or it undertakes
an eligible third party fundraising of not less than US$2 million
(a "Qualifying Event"), or in the event of a default;
3. the conversion price of the Notes will be:
a. If a Qualifying Event occurs within 1 year of the issue of
the relevant Notes - the Qualifying Event price with a 25%
discount;
b. If a Qualifying Event occurs after 1 year of the issue of the
Notes - the Qualifying Event price with a 25% discount plus 5%
discount for each additional full year since the first anniversary
of the issue of the relevant Notes;
c. If there is an event of default, the higher of (i) the price
on the last Qualifying Event and (ii) GBP120 per share (if the
Noteholder chooses to convert rather than redeem the Notes for
cash).
4. the Notes do not have any provision for repayment (other than in an event of default).
19 Trade and other payables
2018 2017
GBP'000 GBP'000
Trade payables 124 488
Other creditors (note 15) - 267
Accruals 102 162
Directors loan account (note 24) - 189
Other loans 763 -
989 1,106
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 (2017: 45 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. Other creditors comprise funding
obligations to Nekonal Oncology Limited, as disclosed in note
15.
On 26 June 2018, J Mellon and G Bailey made loans to the company
of US$500,000 each. Interest is payable on the loans at 7% per
annum and the loans are unsecured and repayable on 20 June
2019.
Trade and other payables that relate to the SalvaRx Limited
group were transferred to the disposal group classified as held for
sale (note 28).
20 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.
Following the disposal of SalvaRx Limited on 8 January 2019, the
capital resources of the Group consist of cash and cash equivalents
and shares in Portage Biotech Inc. arising from equity attributable
to equity holders of the parent.
Externally imposed capital requirement
The Group is not subject to externally imposed capital
requirements.
Continued Discontinued 2018 2017
Categories of financial instruments GBP'000 GBP'000 GBP'000 GBP'000
Financial assets: At fair value through profit and loss
Investments - 9,919 9,919 1,480
Financial assets: At amortised cost
Cash and cash equivalents - 945 945 570
Amounts due from associates - 58 58 21
- 10,922 10,922 2,071
Financial liabilities: At amortised cost
Trade and other payables 989 867 1,856 1,106
Loan notes - 2,806 2,806 2,603
Financial liabilities: At fair value through profit and loss
Warrants on loan notes - 941 941 361
Loan notes - 9,151 9,151
989 13,765 14,754 4,070
The financial assets and liabilities attributed to discontinued
are included in the disposal group set out in note 28.
Financial risk management objectives
Following the disposal on 8 January 2019, the financial risk
management objective of the Group is to utilise capital resources
whilst seeking a suitable acquisition.
Foreign exchange risk and foreign currency risk management
Given the disposal of SalvaRx Limited on 8 January 2019, and the
formation of a disposal group, the following disclosure is
presented for continuing operations only:
Amounts Cash and
due from cash
Investments associates equivalent Total
Financial assets by currency: GBP'000 GBP'000 GBP'000 GBP'000
Currency
British pounds - - 6 6
US dollars 1,480 21 564 2,065
Balance at 31 December 2017
(continuing) 1,480 21 570 2,071
Currency
British pounds - - - -
US dollars - - - -
Balance at 31 December 2018 - - - -
Borrowings Trade and
and loan other
notes payables Total
Financial liabilities by currency: GBP'000 GBP'000 GBP'000
Currency
British pounds - 145 145
US dollars 2,964 694 3,658
Euros - 267 267
Balance at 31 December 2017
(continuing) 2,964 1,106 4,070
Currency
British pounds - 226 226
US dollars - 763 763
Euros - - -
Balance at 31 December 2018 - 989 989
Credit risk management
Following the disposal on 8 January 2019, the Directors consider
that there is no material credit risk. The primary asset held after
this date are shares in Portage Biotech Inc.
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 following tables analyse financial liabilities by remaining
contractual maturity. The balances for 2018 relate to continuing
group only, as the assets and liabilities within the disposal group
were disposed of on 8 January 2019.
Borrowings Trade and
and loan other payables
Financial liabilities by contractual notes GBP'000 Total
maturity GBP'000 GBP'000
Less than 1 year - 1,106 1,106
3-4 years 2,964 - 2,964
Balance at 31 December 2017 2,964 1,106 4,070
Less than 1 year - 989 989
Balance at 31 December 2018 - 989 989
The Group expects to pay all liabilities at their contractual
maturity.
21 Share capital and share premium
Authorised and issued equity share capital
2018 2017
Number Number
'000 GBP'000 '000 GBP'000
Authorised
Ordinary Shares of 2.5p each 80,000 2,000 80,000 2,000
Issued and fully paid
Ordinary Shares of 2.5p each 36,700 917 36,467 911
The parent company has one class of Ordinary Shares, which carry
no right to fixed income.
Movements during the year:
31 December 2018 31 December 2017
Number Number
'000 GBP'000 '000 GBP'000
Balance at beginning of year 36,467 911 36,467 911
Issues during the year 233 6 - -
36,700 917 36,467 911
During the year, 233,000 Ordinary Shares with a nominal value of
2.5p each were issued for a cash consideration of GBP62,000,
resulting in a share premium reserve of GBP56,000 (2017:
GBPnil).
22 Reverse acquisition reserve
The reverse acquisition reserve of GBP3,065,000 (2017:
GBP3,065,000) arose when SalvaRx Limited completed a reverse
takeover of 3 Legs Resources plc during 2016.
23 Share-based payment reserves
Share options outstanding are as follows:
2018 2017
Weighted Weighted
average average
exercise exercise
#'000 price #'000 price
of Options GBP'000 of Options GBP'000
SalvaRx Group plc
Outstanding at 1 January 3,226 35.74p 3,226 35.74p
Expired during the year (43) 23.2p - -
Exercised during the year (233) 26.40p - -
Outstanding at 31 December 2,950 36.62p 3,226 35.74p
iOx Therapeutics Limited
Outstanding at 1 January 1.3 120 1.3 120
Granted during the year 1.3 120 - -
Outstanding at 31 December 2.6 120 1.3 120
The parent 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').
The weighted average share price at the date of exercise of
options exercised during the year ended 31 December 2018 was
69.3p.
(A) iOx Therapeutics Limited (discontinued operations)
Value
based
on Black-Scholes
option Graded Graded
Option pricing vesting vesting
Date of Date of price model in 2018 in 2017
grant expiry GBP Vesting terms # of Options GBP'000 GBP'000 GBP'000
25% on grant
and 25% each
14 Dec 14 Dec anniversary
15 20 120 vested 675 57 2 7
28 Nov 28 Nov
16 21 120 649 60 - -
17 Apr 5 May
18 22 120 1,275 1,011 850
2,599 1,128 852 7
The weighted average remaining contractual life of options
outstanding at the end of the financial year was 3.38 years (2017:
3.93 years).
The fair value of the options has been calculated using the
Black Scholes model. For the options granted during the current
financial year, the valuation model inputs used to determine the
fair value at the grant date, are as follows:
17 April
2018
Expiry date 5 May 2022
# of Options 1,275
Share price at grant
date GBP1,352
Exercise price GBP120
Expected volatility 95.32
Dividend yield 0%
Risk free interest
rate 1%
Fair value at grant GBP793
date
(B) SalvaRx Group plc (continuing operations)
Value
based
on Black-Scholes
option Graded Graded
Option pricing vesting vesting
Date of Date of price model in 2018 in 2017
grant expiry GBP Vesting terms # of Options GBP'000 GBP'000 GBP'000
Apr 15
to Jul 16 Feb
15 21 0.232 Vested 431,153 - - -
16 Feb 16 Feb
15 18 0.232 Expired 43,115 - - -
Three equal
tranches
1(st) on 22
March 2017
2(nd) on 22
March 2018
22 Mar 22 Mar 3(rd) on 22
16 21 0.355 March 2019 2,508,777 509 92 184
22 Mar 22 Mar
16 21 0.71 Vested 182,333 31 - -
22 Mar 22 Mar
16 19 0.355 Vested 60,563 10 - -
3,225,941 550 92 184
The weighted average remaining contractual life of options
outstanding at the end of the financial year was 2.72 years (2017:
3.68 years).
24 Related party transactions
Transactions between the parent company and its subsidiaries,
which are related parties, have been eliminated on consolidation
and are not disclosed in this note.
The Group has entered into related party transactions with its
associated entities RIFT Biotherapeutics Inc. and Nekonal Oncology
Limited. Full details of these transactions are included in notes
14 and 15.
Trade and other receivables includes amounts due from associates
of GBP58,000 (2017: GBP21,000). The amount is interest free and
repayable on demand.
Included in trade and other payables is amounts owing to
directors of GBP20,000 (2017: GBP189,000). This relates to
consulting fees due to the directors and GBP189,000 was the maximum
balance outstanding during the year. The balances are interest fee
and repayable on demand.
On 26 June 2018, J Mellon and G Bailey made loans to the company
of US$500,000 each. Interest is payable on the loans at 7% per
annum and the loans are unsecured and repayable on 20 June
2019.
During the year, Portage Biotech Inc. subscribed to the loan
notes of US $1.9 million issued by iOx Therapeutics Limited.
Portage Biotech Inc. is considered related as J Mellon, G Bailey, I
Walters and K Shah are directors of the Company and Portage Biotech
Inc.
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.
2018 2017
GBP'000 GBP'000
Consulting fees 377 469
Share based payments 565 76
Business expenses reimbursed - 5
942 550
25 Non-controlling interest
The group's non-controlling interests ("NCI") at 31 December
2018 were:
-- iOx Therapeutics Limited ("iOx") in which the NCI is 43.05%
-- Saugatuck Therapeutics Limited ("Saug") in which the NCI is 30%, and
-- SalvaRx Limited in which the NCI is 5.85%.
The movement in NCI during the year is as follows:
GBP'000
At 1 January 2017 647
Loss attributable to NCI (490)
Conversion of 2016 loan notes 148
Equity contributed to NCI on formation
of Saug 79
At 31 December 2017 384
Loss attributable to NCI (3,708)
Foreign exchange gain on retranslation
of foreign subsidiaries 5
At 31 December 2018 (3,319)
Summarised financial information in respect of each material
subsidiary undertaking with a non-controlling interest and prior to
the elimination of intra-group items is set out below.
2018 2017
SalvaRx Limited GBP'000 GBP'000
Non-current assets 11,973 5,020
Current assets 815 767
Current liabilities (2,611) (2,098)
Non-current liabilities (3,152) (2,968)
7,025 721
2018 2017
GBP'000 GBP'000
Revenue - -
Loss for the year (1,563) (814)
2018 2017
iOx Therapeutics Limited GBP'000 GBP'000
Non-current assets 10 -
Current assets 1,305 534
Current liabilities (691) (579)
Non-current liabilities (1,566) -
(942) (45)
2018 2017
GBP'000 GBP'000
Revenue - -
Loss for the year (951) (865)
26 Events after the balance sheet date
On 8 January 2019, shareholders approved the sale of the
Company's 94.2% interest in SalvaRx Limited to Portage Biotech Inc.
for a consideration of $67.5m in return for 757,943,784 new shares
in Portage Biotech Inc. 660,593,556 of those shares were
transferred to the Company's shareholders on a pro-rata basis. The
Company also completed the purchase of options over 2,767,470 new
Ordinary Shares in consideration of the grant of new options over a
total of 40,692,697 of Portage Biotech Inc.'s shares.
27 Contingent liabilities
SalvaRx Limited has entered an agreement with RIFT
Biotherapeutics Inc under which it is obliged to make further
investment of $650,000 in the company subject to certain
development milestones being achieved. As the directors currently
consider the achievement of the development milestones to be
possible but not certain this obligation is considered a contingent
liability, as set out in note 14. The Group no longer has any
potential liability following the disposal of SalvaRx Limited.
28 Discontinued operations and assets / liabilities of disposal
group classified as held for sale
On 14 August 2018, the Group proposed a disposal of interest in
the SalvaRx Limited group that was completed on 8 January 2019 (see
note 26). SalvaRx Limited group includes the following
investments:
Name Type of investment
iOx Therapeutics Limited Subsidiary
Intensity Therapeutics Inc. Subsidiary
Saugatuck Therapeutics Ltd Subsidiary
Nekonal Oncology Ltd Associate
Rift Biotherapeutics Inc. Associate
The Board determined that the SalvaRx Limited group was
available for immediate sale in its present condition subject only
to terms that are usual and customary for sales of such disposal
groups and the sale of the group was highly probable at the date of
the proposal announcement. As a result, assets and liabilities
related to the SalvaRx Limited group were recognised as held for
sale as at 14 August 2018.
At the same time results of the group were presented as
discontinued operations. Comparative figures were re-presented, so
that the disclosures relate to all operations that have been
discontinued by the end of the reporting period for the latest
period presented in accordance with IFRS 5.34.
The assets and liabilities of the disposal group at the year end
were the following:
2018
Notes GBP'000
Assets
Non-current assets
Investments 12 9,919
Intangible assets 13 880
Investments in associates 14 1,116
11,915
Current assets
Trade and other receivables A 569
Cash and cash equivalents 17 945
1,514
Total assets of disposal group classified
as held for sale 13,429
Liabilities
Current liabilities
Trade and other payables B (867)
Non-current liabilities
Loan notes 18 (11,957)
Equity derivatives 18 (941)
Deferred tax liabilities C (139)
________
(13,037)
________
Total liabilities of disposal group classified
as held for sale (13,904)
Analysis of the result of discontinued operations is as
follows:
2018 2017
Notes GBP'000 GBP'000
Continuing operations
Research and development (861) (1,185)
Exceptional items D (259) -
Other operating costs (1,702) (977)
Operating loss (2,822) (2,162)
Share of loss in associates 14 (68) (309)
Fair value gain on investments 12 8,353 -
Fair value loss on loan notes and warrants 18 (8,119) -
Net finance (cost)/income (348) 122
Loss before tax (3,004) (2,349)
Tax C 187 573
Net loss for the year (2,817) (1,776)
Other comprehensive income
Exchange differences on translating
foreign operations (37) (47)
Total comprehensive loss for the year (2,854) (1,823)
A Trade and other receivables
2018
GBP'000
Amount due from associates 58
VAT and corporation tax recoverable 471
Prepayments 40
569
B Trade and other payables
2018
GBP'000
Trade payables 100
Other creditors 269
Accruals 478
Directors loan account 20
867
C Tax
The Company's subsidiary, iOx Therapeutics ltd ("iOx") is
subject to tax in the UK. iOx has potential research and
development cash credits of approximately GBP142,000 for 2018. The
tax credits have been recognised in these financial statements. The
tax credit of GBP156,000 relating to 2017 was received during the
year as shown in the consolidated cash flow statement.
As at 31 December 2018, iOx tax losses were approximately
GBP1,322,000 (2017: GBP785,000). 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 2018 the Group had a deferred tax liability of
GBP139,000 (2017: GBP170,000) 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 (2017: GBP31,000) has been recorded in full in
the income statement. The full amount of the deferred tax liability
relates to SalvaRx Limited group and was transferred to the
disposal group classified as held for sale.
D Exceptional items
2018 2017
GBP'000 GBP'000
Nekonal SARL option impairment (note 15) 259 -
Analysis of total cash flows from discontinued operations is as
follows:
2018
GBP'000
Operating cash flows (1,209)
Investing cash flows -
Financing cash flows 1,537
Total cash flows 328
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR FPMLTMBJTMFL
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June 28, 2019 06:26 ET (10:26 GMT)
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