Registered number: 09851330
DIGITAL THERAPEUTICS LTD
FINANCIAL STATEMENTS
INFORMATION FOR FILING WITH THE REGISTRAR
FOR THE YEAR ENDED 31 DECEMBER 2022
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DIGITAL THERAPEUTICS LTD
COMPANY INFORMATION
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Ps.03. Third Floor, Peer House
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Chartered Accountants & Statutory Auditors
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DIGITAL THERAPEUTICS LTD
CONTENTS
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Statement of changes in equity
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Notes to the financial statements
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DIGITAL THERAPEUTICS LTD
REGISTERED NUMBER: 09851330
BALANCE SHEET
AS AT 31 DECEMBER 2022
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Debtors: amounts falling due after more than one year
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Debtors: amounts falling due within one year
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Creditors: amounts falling due within one year
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Total assets less current liabilities
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DIGITAL THERAPEUTICS LTD
REGISTERED NUMBER: 09851330
BALANCE SHEET (CONTINUED)
AS AT 31 DECEMBER 2022
The financial statements have been prepared in accordance with the provisions applicable to companies subject to the small companies regime and in accordance with the provisions of FRS 102 Section 1A - small entities.
The financial statements have been delivered in accordance with the provisions applicable to companies subject to the small companies regime.
The Company has opted not to file the statement of income and retained earnings in accordance with provisions applicable to companies subject to the small companies' regime.
The financial statements were approved and authorised for issue by the board and were signed on its behalf on 27 November 2023.
The notes on pages 5 to 15 form part of these financial statements.
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DIGITAL THERAPEUTICS LTD
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
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Comprehensive income for the year
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Other comprehensive income for the year
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Total comprehensive income for the year
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Contributions by and distributions to owners
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Share based payments charge
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Total transactions with owners
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The notes on pages 5 to 15 form part of these financial statements.
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DIGITAL THERAPEUTICS LTD
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
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At 1 January 2021 (as previously stated)
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Prior year adjustment - correction of error
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At 1 January 2021 (as restated)
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Comprehensive income for the year
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Loss for the year (as restated)
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Other comprehensive income for the year
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Total comprehensive income for the year
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Contributions by and distributions to owners
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Share based payments charge
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Total transactions with owners
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At 31 December 2021 (as restated)
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The notes on pages 5 to 15 form part of these financial statements.
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DIGITAL THERAPEUTICS LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
Digital Therapeutics Ltd is a private company limited by shares. The company was incorporated in the United Kingdom and is registered in England and Wales. The registration number is 09851330. The registered office address of the company is Ps 03, Third Floor, Peer House, 8-14 Verulam Steet, Holborn, London, England.
2.Accounting policies
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Basis of preparation of financial statements
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The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Section 1A of Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The following principal accounting policies have been applied:
The company made a loss in the period. As the company is supported by its parent company, the directors consider that it is appropriate to prepare the financial statements on the going concern basis.
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Foreign currency translation
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Functional and presentation currency
The Company's functional and presentational currency is GBP.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.
At each period end foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.
Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss except when deferred in other comprehensive income as qualifying cash flow hedges.
Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the Statement of income and retained earnings within 'finance income or costs'. All other foreign exchange gains and losses are presented in profit or loss within 'other operating income'.
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DIGITAL THERAPEUTICS LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes. The following criteria must also be met before revenue is recognised:
Sale of goods
Revenue from the sale of goods is recognised when all of the following conditions are satisfied:
∙the Company has transferred the significant risks and rewards of ownership to the buyer;
∙the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
∙the amount of revenue can be measured reliably;
∙it is probable that the Company will receive the consideration due under the transaction; and
∙the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Rendering of services
Revenue from a contract to provide services is recognised in the period in which the services are provided in accordance with the stage of completion of the contract when all of the following conditions are satisfied:
∙the amount of revenue can be measured reliably;
∙it is probable that the Company will receive the consideration due under the contract;
∙the stage of completion of the contract at the end of the reporting period can be measured reliably; and
∙the costs incurred and the costs to complete the contract can be measured reliably.
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Operating leases: the Company as lessee
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Rentals paid under operating leases are charged to profit or loss on a straight-line basis over the lease term.
Benefits received and receivable as an incentive to sign an operating lease are recognised on a straight-line basis over the lease term, unless another systematic basis is representative of the time pattern of the lessee's benefit from the use of the leased asset.
All expenditure on research and development is recognised as an expense when it is incurred.
Finance costs are charged to profit or loss over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.
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DIGITAL THERAPEUTICS LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
Defined contribution pension plan
The Company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. Once the contributions have been paid the Company has no further payment obligations.
The contributions are recognised as an expense in profit or loss when they fall due. Amounts not paid are shown in accruals as a liability in the Balance sheet. The assets of the plan are held separately from the Company in independently administered funds.
Where share options are awarded to employees, the fair value of the options at the date of grant is charged to profit or loss over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. The cumulative expense is not adjusted for failure to achieve a market vesting condition.
The fair value of the award also takes into account non-vesting conditions. These are either factors beyond the control of either party (such as a target based on an index) or factors which are within the control of one or other of the parties (such as the Company keeping the scheme open or the employee maintaining any contributions required by the scheme).
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to profit or loss over the remaining vesting period.
Where equity instruments are granted to persons other than employees, profit or loss is charged with fair value of goods and services received.
Tax is recognised in profit or loss except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.
The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the balance sheet date in the countries where the Company operates and generates income.
Tangible fixed assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
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DIGITAL THERAPEUTICS LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
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Tangible fixed assets (continued)
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Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
Depreciation is provided on the following basis:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
Stocks are stated at the lower of cost and net realisable value, being the estimated selling price less costs to complete and sell. Cost is based on the cost of purchase on a weighted average basis.
At each balance sheet date, stocks are assessed for impairment. If stock is impaired, the carrying amount is reduced to its selling price less costs to complete and sell. The impairment loss is recognised immediately in profit or loss.
Short-term debtors are measured at transaction price, less any impairment. Loans receivable are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method, less any impairment.
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Cash and cash equivalents
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Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are highly liquid investments that mature in no more than three months from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.
Short-term creditors are measured at the transaction price. Other financial liabilities, including bank loans, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method.
The Company has elected to apply the provisions of Section 11 “Basic Financial Instruments” of FRS 102 to all of its financial instruments.
The Company has elected to apply the recognition and measurement provisions of IFRS 9 Financial Instruments (as adopted by the UK Endorsement Board) with the disclosure requirements of Sections 11 and 12 and the other presentation requirements of FRS 102.
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DIGITAL THERAPEUTICS LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
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Financial instruments (continued)
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Financial instruments are recognised in the Company's Balance sheet when the Company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets
Basic financial assets, which include trade and other receivables, cash and bank balances, are initially measured at their transaction price including transaction costs and are subsequently carried at their amortised cost using the effective interest method, less any provision for impairment, unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest.
Discounting is omitted where the effect of discounting is immaterial. The Company's cash and cash equivalents, trade and most other receivables due with the operating cycle fall into this category of financial instruments.
Other financial assets
Other financial assets, which includes investments in equity instruments which are not classified as subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the recognised transaction price. Such assets are subsequently measured at fair value with the changes in fair value being recognised in the profit or loss. Where other financial assets are not publicly traded, hence their fair value cannot be measured reliably, they are measured at cost less impairment.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at each reporting date.
Financial assets are impaired when events, subsequent to their initial recognition, indicate the estimated future cash flows derived from the financial asset(s) have been adversely impacted. The impairment loss will be the difference between the current carrying amount and the present value of the future cash flows at the asset(s) original effective interest rate.
If there is a favourable change in relation to the events surrounding the impairment loss then the impairment can be reviewed for possible reversal. The reversal will not cause the current carrying amount to exceed the original carrying amount had the impairment not been recognised. The impairment reversal is recognised in the profit or loss.
Financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instruments any contract that evidences a residual interest in the assets of the Company after the deduction of all its liabilities.
Basic financial liabilities, which include trade and other payables, bank loans and other loans are initially measured at their transaction price after transaction costs. When this constitutes a financing
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DIGITAL THERAPEUTICS LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
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Financial instruments (continued)
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transaction, whereby the debt instrument is measured at the present value of the future receipts discounted at a market rate of interest. Discounting is omitted where the effect of discounting is immaterial.
Debt instruments are subsequently carried at their amortised cost using the effective interest rate method.
Trade payables are obligations to pay for goods and services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if the payment is due within one year. If not, they represent non-current liabilities. Trade payables are initially recognised at their transaction price and subsequently are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial.
Derecognition of financial instruments
Derecognition of financial assets
Financial assets are derecognised when their contractual right to future cash flow expire, or are settled, or when the Company transfers the asset and substantially all the risks and rewards of ownership to another party. If significant risks and rewards of ownership are retained after the transfer to another party, then the Company will continue to recognise the value of the portion of the risks and rewards retained.
Derecognition of financial liabilities
Financial liabilities are derecognised when the Company's contractual obligations expire or are discharged or cancelled.
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The average monthly number of employees, including directors, during the year was 44 (2021 - 26).
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DIGITAL THERAPEUTICS LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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Charge for the year on owned assets
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DIGITAL THERAPEUTICS LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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Due after more than one year
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Called up share capital not paid
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Prepayments and accrued income
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Cash and cash equivalents
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Creditors: Amounts falling due within one year
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Amounts owed to group undertakings
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Other taxation and social security
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Accruals and deferred income
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DIGITAL THERAPEUTICS LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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Allotted, called up and fully paid
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6,231,715 (2021 - 6,231,715) Ordinary shares of £0.02 each
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Share premium account
The share premium account records the amount above nominal value received for shares sold, less transaction costs.
Other reserves
Charges relating to share based payments are included within other reserves.
Profit and loss account
The profit and loss account records the cumulative profits or losses of the company since incorporation, less any dividends.
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DIGITAL THERAPEUTICS LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
Digital Therapeutics Ltd's parent company, Digital Therapeutics, Inc. has an equity-settled Enterprise Management Incentive Scheme ("EMI") which is available to employees who work for the Company or a group company and satisfy the qualifying conditions and the EMI working time requirements. In addition to the EMI scheme, the parent company also operates an unapproved option scheme.
The options vest over a period of four years. The option pricing model (OPM) valuation method was used to determine the fair-value of the options vested during the year.
A charge of £608,622 (2021 - £158,153) relevant to the Company's employees has been recognised within the profit and loss in relation to the share based payment transactions.
During the year it was identified that the PAYE payroll amounts paid over to the payroll provider for the December payroll, which is due to HMRC, are only paid to HMRC by the payroll provider in January. As a result the 2021 Balance Sheet has been restated to account for the unpaid HMRC taxes as at 31 December 2021 with an increase in both Other debtors and Other taxation and social security of £104,988. This has a nil impact on the Balance Sheet.
Therefore, the Balance Sheet as well as Note 5 Debtors and Note 7 Creditors have been restated. There is no impact on tax.
During the year it was also identified that the amounts owing to the parent company are denominated in USD. As such the 2020 and 2021 year end loan balances had to be revalued using the appropriate USD to GBP rate at the respective year ends. This has lead to a opening balance adjustment in 2021 of £139,349 being a decrease of the carried forward losses in retained earnings and a decrease in the amount owed to the parent. Further this has lead to an adjustment of the 2021 unrealised foreign currency losses increasing by £76,784 as well as an increase in the amount owed to the parent.
This therefore impacts the Statement of income and retained earnings, Statement of changes in equity, Balance Sheet and Note 7 Creditors being restated. There is no impact on tax.
R&D claim
During the fiscal period 2023, HMRC opened an enquiry into the R&D claim submitted for 2021 and on 18 October 2023 concluded that the 2021 claim did not satisfy the required criteria and as such was rejected. The amount of the claim being £516,91 as such has been derecognised as an asset in the 2022 period.
As a result of the above, there is a contingent liability in place with respect to periods prior to 2021 for R&D claims submitted being £338,521 for 2020 and £199,809 for 2019. There is currently insufficient evidence to suggest that these claims will in fact be rejected and required to be repaid hence no liability or provision has raised on the Balance Sheet.
Registration of charge
On 15 November 2022, a registration of charge was entered into between Digital Therapeutics Ltd and Kreos Capital VII (UK) Limited. This is as a result of a loan entered into between Kreos Capital VII (UK) Limited and Digital Therapeutics Inc. where Digital Therapeutics Inc. would be advanced monies. Kreos Capital VII (UK) Limited as a result perfected first security over all the assets of Digital Therapeutics Ltd. As of 31 December 2022 no money had been advanced to Digital Therapeutics Inc.
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DIGITAL THERAPEUTICS LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
The company operates a defined contributions pension scheme. The assets of the scheme are held seperately from those of the company in an independently administered fund. The pension cost charge represents contributions payable to the fund and amounted to £77,090 (2021 - £91,853). Contributions totalling £12,002 (2021 - £19,437) were payable to the fund at the balance sheet date and are included in other creditors.
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Commitments under operating leases
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At 31 December 2022 the Company had future minimum lease payments due under non-cancellable operating leases for each of the following periods:
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Later than 1 year and not later than 5 years
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Related party transactions
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At the year end included in creditors is £11,495,090 (2021 as restated- £6,714,945) owed to the parent company. During the year, management fees of £1,221,622 (2021 - £235,096) have been charged to the parent company.
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The ultimate controlling party is Digital Therapeutics, Inc. a company incorporated in the United States of America. The registered address of Digital Therapeutics, Inc. is 251 Little Falls Drive, Wilmington, New Castle 19808, United States.
The auditors' report on the financial statements for the year ended 31 December 2022 was unqualified.
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In the previous accounting period, the directors have taken advantage of the small companies exemptions provided by 477 of the Companies Act 2006. As such, the previous period financial statements were not subject to audit.
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The audit report was signed on 27 November 2023 by Jacqui Williams (FCA) (Senior statutory auditor) on behalf of Donald Reid Limited.
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