The directors present their annual report and financial statements for the year ended 31 December 2022.
The results for the year are set out on page 6.
The majority of the group's products are still under development and not yet revenue generating. Total administrative expenses for the year increased to £593,995 from £433,914. The loss before tax for the year was £867,503 (2021 - £643,670), largely due to increased spending. At the year end, the group had cash and cash equivalents of £35,039 (2021 - £208,824) and net liabilities of £3,223,225(2021 - £3,099,915).
No ordinary dividends were paid. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The auditor, Gilberts Chartered Accountants, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
As the group has not consumed more than 40,000 kWh of energy in this reporting period, it qualifies as a low energy user under these regulations and is not required to report on its emissions, energy consumption or energy efficiency activities.
The group's principal activity is developing intellectual property ("IP"). This IP is still in the research phase and the group will therefore continue to generate losses for the foreseeable future.
Management have produced cashflow forecasts for the twelve months from the approval of the financial statements and have determined that with current and future committed resources the group can continue to operate as a going concern . The future resources have been formally committed by a director and shareholder of the group and are necessary for the group to continue as a going concern.
The directors have satisfied themselves that the future committed resources are readily available to the group and on that basis, they have a reasonable expectation that the group and company can continue in operational existence for the foreseeable future. Although this expectation is reasonable the long term reliance on external funding coupled with the lack of clinical trials activity in the year ended 31 December 2022 does give rise to a level of uncertainty, and the going concern status of the group is contingent on the receipt of said funding.
This report has been prepared in accordance with the provisions applicable to companies entitled to the small companies exemption.
We have audited the financial statements of Helperby Therapeutics Group Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2022 which comprise the group profit and loss account, the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
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 and parent company 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, 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.
Material uncertainty related to going concern
We draw attention to Note 1.3 in the financial statements, the group incurred a net loss of £854,514 during the year ended 31 December 2022 and, as of that date, the group’s current liabilities exceeded its total assets by £933,074.
As stated in Note 1.3, these events or conditions, along with other matters as set forth in Note 1.3, indicate that a material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. 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. 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 course of 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 this gives rise to a material misstatement in the financial statements themselves. 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.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the directors' report has been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the directors' report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit; or
the directors were not entitled to prepare the financial statements in accordance with the small companies regime and take advantage of the small companies' exemption in preparing the directors' report and from the requirement to prepare a strategic report.
As explained more fully in the directors' responsibilities statement, 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 parent company'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 parent company or to cease operations, or have no realistic alternative but to do so.
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 is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the 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.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £845,684 (2021 - £426,898 loss).
These financial statements have been prepared in accordance with the provisions applicable to groups and companies subject to the small companies regime.
Helperby Therapeutics Group Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is 66 Lincoln's Inn Fields, London, WC2A 3LH.
The group consists of Helperby Therapeutics Group Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006 as applicable to companies subject to the small companies regime. The disclosure requirements of section 1A of FRS 102 have been applied other than where additional disclosure is required to show a true and fair view.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
The consolidated group financial statements consist of the financial statements of the parent company Helperby Therapeutics Group Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 December 2022. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
The group's principal activity is developing intellectual property ("IP"). This IP is still in the research phase and the group will therefore continue to generate losses for the foreseeable future.
Management have produced cashflow forecasts for the twelve months from the approval of the financial statements and have determined that with current and future committed resources the group can continue to operate as a going concern . The future resources have been formally committed by a director and shareholder of the group and are necessary for the group to continue as a going concern.
The directors have satisfied themselves that the future committed resources are readily available to the group and on that basis, they have a reasonable expectation that the group and company can continue in operational existence for the foreseeable future. Although this expectation is reasonable the long term reliance on external funding coupled with the limited clinical trials activity in the year ended 31 December 2022 does give rise to a level of uncertainty, and the going concern status of the group is contingent on the receipt of said funding.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income.
Research and development expenditure is written off against profits in the year in which it is incurred.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible 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).
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
The group has elected to apply the provisions of Section 11 and Section 12 of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the company becomes party to the contractual provisions of the instrument.
Basic financial assets
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present fair value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Basic financial liabilities
Basic financial liabilities, which include trade and other payables and bank loans, are initially measured at transaction price and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present fair value of the future receipts discounted at a market rate of interest.
The component parts of compound instruments issued by the group are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortised cost basis using the effective interest method until extinguished upon conversion or at the instrument's maturity date. The equity component is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognised and included in equity net of income tax effects and is not subsequently remeasured.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
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 profit and loss account 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 reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Equity-settled share-based payments are measured at fair value at the date of grant by reference to the fair value of the equity instruments granted using the Black-Scholes option pricing model. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the estimate of shares that will eventually vest. A corresponding adjustment is made to equity.
The expense in relation to options over the parent company’s shares granted to employees of a subsidiary is recognised by the company as a capital contribution, and presented as an increase in the company’s investment in that subsidiary.
Grants received are credited to deferred revenue. Grants towards capital expenditure are released to the profit and loss account over the expected useful life of the assets. Grants towards revenue expenditure are released to the profit and loss account as the related expenditure is incurred.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of 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 where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
Corporation tax relief in respect of research and development tax credits is included in the income statement on the basis of the amount that the directors expect to receive in respect of the research and development expenditure incurred during the year. The balance due at the year end is disclosed in debtors.
The investments in subsidiary companies are included at cost. In the opinion of the directors the value of the group represents the value of the subsidiary companies which carry out the research and development activity of the group and therefore the directors believe that no impairment provision is necessary against the cost of these investments.
The convertible loan notes are complex financial instruments and required to be recognised at fair value. In assessing the fair value of the loan, the directors have taken into account the likelihood of the loan noted being converted or repaid, the terms of repayment, the applicable interest rate and the expected rate of a comparable, non-convertible instrument. Following this, it is the directors judgement that the difference between the fair value of the loan note and the carrying value is not material.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
At 2022 the company had deferred tax assets of £314,388 (2021 - £165,831), calculated at a corporation tax rate of 19% (2021 - 19%). At 2022 the group had deferred tax assets of £4,648,673 (2021 - £4,375,163), calculated at a corporation tax rate 19% (2021 - 19%). The deferred tax assets are mainly in relation to tax losses carried forward and are not included in the financial statements because recovery is uncertain. The deferred tax assets may be recovered against future profits from the same trades.
Details of the company's subsidiaries at 31 December 2022 are as follows:
The registered office of Helperby Therapeutics Limited, Helperby IP Development Limited and Helperby Management Limited is 66 Lincoln's Inn Fields, London, WC2A 3LH. The registered office of Helperby Therapeutics USA Inc is 1209 Orange Street, City of Wilmington 1989, County of New Castle, Delaware, USA. The registered office of Helperby Therapeutics Ireland Limited is 2 Grand Canal Square, Dublin 2,D02 A342, Ireland. The registered office of Helperby Infection Control Limited is c/o Dragon Argent Limited, 63, Bermondsey Street, London, SE1 3XF.
The companies marked with an asterisk are exempt from filing audited accounts under s394A of the Companies Act 2006 as they have been dormant throughout the period. Helperby Therapeutics USA Inc is exempt from filing audited accounts under the laws of the United States of America. Helperby Therapeutics Ireland Limited is exempt from filing audited accounts under the laws of Ireland.
The long-term loans are secured by fixed charges over the intellectual property rights.
Included within long-term loans is a loan of £120,000 with 2% APR interest plus Barclays base rate from time to time. This is repayable within 3 months notice after the first 12 months. No notice had been issued as at 31/12/2022 and there is no expectation that this loan will be repayable within the next year.
The convertible loan notes have been accounted for as financial liabilities as the number of shares that will be converted in the future is variable. As such they do not meet the fixed for fixed condition and there is no equity component.
The loan notes, worth £400,000 disclosed in 2019 were issued on 25 September 2019. They are repayable either by cash or equity conversion on the date 36 months from the beginning of the agreement.
The loan notes, worth £1,100,000 disclosed in 2020 were issued on 16 July 2020 and 3 September 2020 at a nominal amount of £800,000 and £300,000 respectively, A further subscription deed of £200,000 was received on 23 June 2022.
The effective rate of interest is 8%. The interest payable on the convertible loan notes in the year was £109,696 (2021 - £88,000).
The ordinary shares and 'B' shares have full dividend and voting rights.
The 'D' shares shall be converted into ordinary shares automatically and immediately prior to a public offering on a recognised stock exchange or following the receipt by the holders of the 'D' shares of the written consent of a simple majority of the ordinary shareholders. The number of ordinary shares that the holders of the 'D' shares receive after conversion shall be calculated by determining the number they will need to hold in order to be the holders of 4% of the entire share capital of the company after conversion.
The called up share capital not fully paid totals £22,651 (2021 - £22,651). The called up share capital fully paid totals £208,483 (2021 - £206,345).
During the year 21,872 (2021 - nil) share options at a weighted average price of £29.3 (2021 - nil) lapsed. The number of share options outstanding at the year end is 105,000 (2021 - 126,872).
The fair value of the share options has been calculated using the Black-Scholes model. The assumptions used in the calculation of the fair value of the share options outstanding during the year are as follows:
Exercise Price £24.60 £29.30 £39.85
Share Price at the date of grant £7.38 £8.79 £11.93
Expected Volatility 50% 50% 50%
Expected Life 5 years 5 years 5 years
The weighted average price in respect of the options subsisting at the year end was £31.71 (2021 - £30.57) per share with a weighted average life of 1.90 years (2021 - 2.92 years).
No share based payment charges arises from the share option scheme during the year (2021 - nil), as all options have already vested.
During the year consultancy services with a value of £76,608 (2021 - £167,580) were provided to Helperby Therapeutics Limited in exchange for the right to shares in Helperby Therapeutics Group Limited. The transactions have been recognised in the financial statements of both entities in accordance with section 26 of FRS 102.
The group has taken advantage of the exemption available in FRS 102 whereby it has not disclosed transactions with any wholly owned subsidiary undertaking.