Company Registration No. SC367684 (Scotland)
LKM INNOVATIONS LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
LKM INNOVATIONS LIMITED
COMPANY INFORMATION
Directors
Dr S Keatch
(Appointed 7 March 2022)
Dr P Lowe
(Appointed 7 March 2022)
B McGuigan
(Appointed 7 March 2022)
Company number
SC367684
Registered office
Unit 18 Stirling University Innovation Park Ltd
Scion House
Stirling University Innovation Park
Stirling
Scotland
FK9 4NF
Auditor
Johnston Carmichael LLP
227 West George Street
Glasgow
G2 2ND
LKM INNOVATIONS LIMITED
CONTENTS
Page
Directors' report
1 - 2
Directors' responsibilities statement
3
Independent auditor's report
4 - 6
Income statement
7
Statement of financial position
8
Statement of changes in equity
9
Statement of cash flows
10
Notes to the financial statements
11 - 26
LKM INNOVATIONS LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 1 -

The directors present their annual report and financial statements for the year ended 31 December 2022. These are the first published financial statements of the company prepared in accordance with UK-adopted International Accounting Standards (“IFRS”). The financial statements were previously prepared under Financial Reporting Standard 101 Reduced Disclosure Framework (“FRS 101”).

 

In accordance with section 414B (b) of the Companies Act 2006, the directors are taking advantage of the small companies exemption to not prepare a strategic report.

Principal activities
The principal activity of the company is that of research in biotechnologies.
Results and dividends

The results for the year are set out on page 7.

No ordinary dividends were paid. The directors do not recommend payment of a final dividend.

Directors

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

Dr P Welch
(Resigned 7 March 2023)
Dr D Scott
(Resigned 7 March 2023)
Dr J McAleer
(Resigned 7 March 2022)
Dr S Keatch
(Appointed 7 March 2022)
Dr P Lowe
(Appointed 7 March 2022)
B McGuigan
(Appointed 7 March 2022)
Qualifying third party indemnity provisions

The company has made qualifying third party indemnity provisions for the benefit of its directors which were made during the year and remain in force at the reporting date.

Auditor

The auditor, Johnston Carmichael LLP, was appointed as auditor in the current year and is deemed to be reappointed under section 487(2) of the Companies Act 2006.

Statement of disclosure to auditor

Each director in office at the date of approval of this annual report confirms that:

 

This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.

LKM INNOVATIONS LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 2 -
Going concern

On 29 December 2023, LumiraDx Limited, the company’s ultimate parent, announced that administrators had been appointed to two of its subsidiaries, LumiraDx Group Limited (the company’s direct parent) and LumiraDx International Limited, which together hold substantially all of the assets of the LumiraDx group.

Following their appointment, the Administrators have entered into a sale and purchase agreement with Roche Diagnostics Limited (“Roche”) providing for Roche’s acquisition of certain of the LumiraDx group companies (the “Point of Care Diagnostics Companies”) engaged in the operation of LumiraDx group’s point-of-care diagnostics platform business and certain related assets (the “Transaction”) which includes the company. The Administrators have not been appointed to any of the Point of Care Diagnostics Companies.

Pursuant to the Transaction, Roche is to acquire all of the Point of Care Diagnostics Companies for the sum of $295 million, subject to customary closing adjustments. The completion of the Transaction is subject to certain conditions, including antitrust and foreign direct investment approvals, and is expected to close once the antitrust and other regulatory approvals have been obtained and the conditions have otherwise been met.

LumiraDx UK Ltd is the only source of income for the entity and there is no likely alternative source of income outside of the LumiraDx group. If the Transaction is unable to close, LumiraDx UK Ltd would have insufficient liquidity to fund payment of the amounts that would be due to its lenders and if unsuccessful in raising additional capital, there can be no assurance that it could continue as a going concern.

Although the financial statements have been prepared on a going concern basis, the directors acknowledge that there is a material uncertainty over the company’s inability to close the Transaction. This may cast significant doubt on the entity's ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business.

 

Small companies exemption

This report has been prepared in accordance with the provisions applicable to companies entitled to the small companies exemption.

On behalf of the board
Dr P Lowe
Director
19 April 2024
LKM INNOVATIONS LIMITED
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 3 -

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

 

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with UK adopted international accounting standards. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, International Accounting Standard 1 requires that directors:

 

 

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

LKM INNOVATIONS LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBER OF LKM INNOVATIONS LIMITED
- 4 -

Disclaimer of opinion

We were engaged to audit the financial statements of LKM Innovations Limited (the 'company') for the year ended 31 December 2022 which comprise the income statement, the statement of financial position, the statement of changes in equity, the statement of cash flows 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 UK adopted international accounting standards.

We do not express an opinion on the accompanying financial statements of the company. Because of the significance of the matter described in the basis for disclaimer of opinion section of our report, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements.

Basis for disclaimer of opinion

As described in the Going Concern accounting policy (Note 1.3), the directors have concluded that there are events or conditions which indicate that a material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern.

As a result of this material uncertainty, we were unable to obtain sufficient appropriate evidence to support the directors’ assessment that the intercompany loan receivable of £95,751 due from LumiraDx UK Limited is not impaired.

We were unable to determine whether any adjustments might have been found necessary in respect of the carrying value of the intercompany loan receivable. This would have a potential impact on the profit and loss account, balance sheet and statement of changes in equity.

Due to the magnitude and interaction of these individual material uncertainties and their possible cumulative effect on the financial statements, we are unable to form an opinion on the financial statements.

Opinions on other matters prescribed by the Companies Act 2006

Because of the significance of the matter described in the basis for disclaimer of opinion section of our report, we have been unable to form an opinion whether, based on the work undertaken in the course of the audit:

Matters on which we are required to report by exception

Notwithstanding our disclaimer of an opinion on the financial statements, in the light of the knowledge and understanding of the company and its environment obtained in the course of the audit performed subject to the pervasive limitation described above, we have not identified material misstatements in the directors’ Report.

Arising from the limitation of our work referred to above:

 

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:

LKM INNOVATIONS LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBER OF LKM INNOVATIONS LIMITED
- 5 -
Responsibilities of directors

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 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 company or to cease operations, or have no realistic alternative but to do so.

Auditor responsibilities for the audit of the financial statements

Our responsibility is to conduct an audit of the company’s financial statements in accordance with International Standards on Auditing (UK) and to issue an auditor’s report. However, because of the matter described in the basis for disclaimer of opinion section of our report, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements. We are independent of the 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, as applied to listed public entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

Extent to which the audit is considered capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.

We assessed whether the engagement team collectively had the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations by considering their experience, past performance and support available.

All engagement team members were briefed on relevant identified laws and regulations and potential fraud risks at the planning stage of the audit. Engagement team members were reminded to remain alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

We obtained an understanding of the legal and regulatory frameworks that are applicable to company and the sector in which it operates, focusing on those provisions that had a direct effect on the determination of material amounts and disclosures in the financial statements. The most relevant frameworks we identified include:

We gained an understanding of how the company is complying with these laws and regulations by making enquiries of management and those charged with governance. We corroborated these enquiries through our review of submitted returns.

We assessed the susceptibility of the financial statements to material misstatement, including how fraud might occur, by meeting with management and those charged with governance to understand where it was considered there was susceptibility to fraud. This evaluation also considered how management and those charged with governance were remunerated and whether this provided an incentive for fraudulent activity. We considered the overall control environment and how management and those charged with governance oversee the implementation and operation of controls. We identified a heightened fraud risk in relation to:

LKM INNOVATIONS LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBER OF LKM INNOVATIONS LIMITED
- 6 -

In addition to the above, the following procedures were performed to provide reasonable assurance that the financial statements were free of material fraud or error:

Our audit procedures were designed to respond to the risk of material misstatements in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve intentional concealment, forgery, collusion, omission or misrepresentation. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it.

Use of our report

This report is made solely to the company’s member 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 member those matters we are required to state to the member 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 member for our audit work, for this report, or for the opinions we have formed.

James Hamilton (Senior Statutory Auditor)
For and on behalf of Johnston Carmichael LLP
19 April 2024
Chartered Accountants
Statutory Auditor
227 West George Street
Glasgow
G2 2ND
LKM INNOVATIONS LIMITED
INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 7 -
2022
2021
Unaudited
Notes
£
£
Revenue
4
537,524
722,660
Gross profit
537,524
722,660
Administrative expenses
(517,082)
(658,793)
Operating profit
5
20,442
63,867
Finance costs
7
(61,701)
(87,517)
Loss before taxation
(41,259)
(23,650)
Income tax expense
8
-
-
Loss and total comprehensive expense for the year
18
(41,259)
(23,650)

The income statement has been prepared on the basis that all operations are continuing operations.

 

There are no other gains or losses, other than those shown above, hence no statement of other comprehensive income or expenditure is presented.

LKM INNOVATIONS LIMITED
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
31 December 2022
- 8 -
2022
2021
Unaudited and
as restated
Notes
£
£
Non-current assets
Property, plant and equipment
9
243,833
725,094
Right of use assets
9
-
21,924
243,833
747,018
Current assets
Trade and other receivables
10
110,871
1,113,164
Cash and cash equivalents
213,519
686,861
324,390
1,800,025
Current liabilities
Trade and other payables
11
19,513
72,365
Lease liabilities
12
-
0
25,709
19,513
98,074
Net current assets
304,877
1,701,951
Non-current liabilities
Borrowings
13
-
0
1,859,000
Net assets
548,710
589,969
Equity
Called up share capital
17
2
2
Retained earnings
18
548,708
589,967
Total equity
548,710
589,969
The financial statements were approved by the board of directors and authorised for issue on 19 April 2024 and are signed on its behalf by:
Dr P Lowe
Director
Company Registration No. SC367684
LKM INNOVATIONS LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
- 9 -
Share capital
Retained earnings
Total
£
£
£
As restated for the period ended 31 December 2021:
Balance at 1 January 2021
2
803,312
803,314
Effect of prior period restatement
-
(189,695)
(189,695)
As restated
2
613,617
613,619
Year ended 31 December 2021:
Loss and total comprehensive expense for the year
-
(23,650)
(23,650)
Balance at 31 December 2021
2
589,967
589,969
Year ended 31 December 2022:
Loss and total comprehensive expense for the year
-
(41,259)
(41,259)
Balance at 31 December 2022
2
548,708
548,710
LKM INNOVATIONS LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
- 10 -
2022
2021
Unaudited
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from operations
23
1,470,975
97,721
Interest paid
(61,701)
(87,517)
Net cash inflow from operating activities
1,409,274
10,204
Investing activities
Proceeds on disposal of property, plant and equipment
2,093
-
0
Net cash generated from investing activities
2,093
-
Financing activities
Repayment of borrowings
(1,859,000)
-
0
Payment of lease liabilities
(25,709)
(175,271)
Net cash used in financing activities
(1,884,709)
(175,271)
Net decrease in cash and cash equivalents
(473,342)
(165,067)
Cash and cash equivalents at beginning of year
686,861
851,928
Cash and cash equivalents at end of year
213,519
686,861
LKM INNOVATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
- 11 -
1
Accounting policies
Company information

LKM Innovations Limited ("the company") is a private company limited by shares and incorporated and domiciled in Scotland. The registered office is Unit 18, Stirling University Innovation Park Ltd, Scion House, Stirling University Innovation Park, Stirling, FK9 4NF.

1.1
Accounting convention

The financial statements have been prepared in accordance with UK-adopted International Accounting Standards (IFRS) and the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.

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.

 

Transition to IFRS

During the year, the company transitioned to International Financial Reporting Standards (IFRS). The financial statements were previously prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101) and in accordance with applicable accounting standards. Following the events outlined within Note 1.3 below, the company no longer meets the qualifying criteria for application of FRS 101 and has therefore adopted full IFRS. Except for presentation and disclosure differences, the transition to IFRS has had no impact on the recognition and measurement of amounts included within these financial statements and as such, no opening statement of financial position at the transition date (1 January 2021) has been presented within these financial statements.

1.2
Prior period error

The prior period financial statements have been restated to derecognise deferred tax assets previously recognised. In accordance with IAS 12, deferred tax assets should only be recognised to the extent that it is probable that taxable profit will be available against which the temporary differences can be utilised. The directors consider it necessary to revisit the assessment of probability supporting the recognition of a deferred tax asset at 31 December 2020 and to restate the financial statements accordingly.

 

The restatement has the following impact on financial statement line items:

 

LKM INNOVATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 12 -
1.3
Going concern

On 29 December 2023, LumiraDx Limited, the company’s ultimate parent, announced that administrators had been appointed to two of its subsidiaries, LumiraDx Group Limited (the company’s direct parent) and LumiraDx International Limited, which together hold substantially all of the assets of the LumiraDx group.

Following their appointment, the Administrators have entered into a sale and purchase agreement with Roche Diagnostics Limited (“Roche”) providing for Roche’s acquisition of certain of the LumiraDx group companies (the “Point of Care Diagnostics Companies”) engaged in the operation of LumiraDx group’s point-of-care diagnostics platform business and certain related assets (the “Transaction”) which includes the company. The Administrators have not been appointed to any of the Point of Care Diagnostics Companies.

Pursuant to the Transaction, Roche is to acquire all of the Point of Care Diagnostics Companies for the sum of $295 million, subject to customary closing adjustments. The completion of the Transaction is subject to certain conditions, including antitrust and foreign direct investment approvals, and is expected to close once the antitrust and other regulatory approvals have been obtained and the conditions have otherwise been met.

LumiraDx UK Ltd is the only source of income for the entity and there is no likely alternative source of income outside of the LumiraDx group. If the Transaction is unable to close, LumiraDx UK Ltd would have insufficient liquidity to fund payment of the amounts that would be due to its lenders and if unsuccessful in raising additional capital, there can be no assurance that it could continue as a going concern.

Although the financial statements have been prepared on a going concern basis, the directors acknowledge that there is a material uncertainty over the company’s inability to close the Transaction. This may cast significant doubt on the entity's ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business.

1.4
Revenue

Revenue is recognised at the fair value of the consideration received or receivable for services provided in the normal course of business, and is shown net of VAT, trade discounts and other sales related taxes. The company recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the company and the research and development services provided to other group companies are based on contracted terms over the service period. Revenue is wholly recognised as the services are provided.

1.5
Property, plant and equipment

Property, plant and equipment are initially measured at cost and subsequently measured at cost net of depreciation.

Depreciation is recognised so as to write off the cost of assets less their residual values over their useful lives on the following bases:

Tenant's improvements
3-7 years straight line
Plant and machinery
3-15 years straight line
Right of use assets
Over the term of the lease

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 income statement.

1.6
Impairment of non-current assets

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

LKM INNOVATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 13 -

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

1.7
Cash and cash equivalents

Cash and cash equivalents include cash in hand.

1.8
Financial assets

Financial assets are recognised in the company's statement of financial position when the company becomes party to the contractual provisions of the instrument. Financial assets are classified into specified categories, depending on the nature and purpose of the financial assets.

 

At initial recognition, financial assets classified as fair value through profit and loss are measured at fair value and any transaction costs are recognised in profit or loss. Financial assets not classified as fair value through profit and loss are initially measured at fair value plus transaction costs. The company had no financial assets classified as fair value through profit and loss at the reporting date.

Financial assets held at amortised cost

Financial instruments are classified as financial assets measured at amortised cost where the objective is to hold these assets in order to collect contractual cash flows, and the contractual cash flows are solely payments of principal and interest. They arise principally from the provision of goods and services to customers (eg trade receivables). They are initially recognised at fair value plus transaction costs directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment where necessary.

Impairment of financial assets

The company recognises loss allowances for expected credit losses (ECLs) on financial assets measured at amortised cost where appropriate. The company measures loss allowances at an amount equal to lifetime ECLs.

 

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the company’s historical experience and informed credit assessment and including forward-looking information.

 

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

 

The maximum period considered when estimating ECLs is the maximum contractual period over which the company is exposed to credit risk.

Derecognition of financial assets

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership to another entity.

1.9
Financial liabilities

The company recognises financial debt when the company becomes a party to the contractual provisions of the instruments. Financial liabilities are classified as either 'financial liabilities at fair value through profit or loss' or 'other financial liabilities'. The company has no financial liabilities at fair value through profit or loss at the reporting date.

LKM INNOVATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 14 -
Other financial liabilities

Other financial liabilities, including borrowings, trade payables and other short-term monetary liabilities, are initially measured at fair value net of transaction costs directly attributable to the issuance of the financial liability. They are subsequently measured at amortised cost using the effective interest method. For the purposes of each financial liability, interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding.

Derecognition of financial liabilities

Financial liabilities are derecognised when, and only when, the company’s obligations are discharged, cancelled, or they expire.

1.10
Equity instruments

Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.

1.11
Taxation

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

Current 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 company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax

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 goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

 

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

1.12
Leases

At inception, the company assesses whether a contract is, or contains, a lease within the scope of IFRS 16. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Where a non-current asset is acquired through a lease, the company recognises a right-of-use asset and a lease liability at the lease commencement date. Right-of-use assets are included within property, plant and equipment, apart from those that meet the definition of investment property.

LKM INNOVATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 15 -

The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date plus any initial direct costs and an estimate of the cost of obligations to dismantle, remove, refurbish or restore the underlying asset and the site on which it is located, less any lease incentives received.

 

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of other property, plant and equipment. The right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the company uses its incremental borrowing rate which is based on the company's recent borrowings.

 

Lease payments included in the measurement of the lease liability comprise:

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.

 

The company remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:

The company has elected not to recognise right-of-use assets and lease liabilities for short-term leases of machinery that have a lease term of 12 months or less, or for leases of low-value assets including IT equipment. The payments associated with these leases are recognised in profit or loss on a straight-line basis over the lease term.

1.13
Foreign exchange

The company's financial statements are presented in sterling, which is also the company's functional currency. 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 are included in the income statement for the period.

LKM INNOVATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 16 -
2
New standards and interpretations not yet adopted
Standards which are in issue but not yet effective

Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2022 reporting periods and have not been early adopted by the company. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

 

  • Initial application of IFRS 17 and IFRS 9: Comparative Information

  • Amendment to deferred tax related to assets and liabilities arising from a single Transaction; IFRS 1, IAS 12

 

1 January 2023

1 January 2023

  • Amendments to IAS 1 Presentation of Financial Statements: Classifications of Liabilities as Current or Non-current and Deferral of Effective Date

 

1 January 2023

  • IFRS 17 Insurance Contracts including Amendments to IFRS 17

 

1 January 2023

  • Amendments to IAS 1 Presentation of Financial Statements: Disclosure of Accounting Policies

 

1 January 2023

  • Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates

 

1 January 2023

  • Amendments to IAS 12 International Tax Reform – Pillar Two Model Rules

 

1 January 2023

  • Amendments to IFRS 16 related to lease liability in a sale and leaseback

 

1 January 2024

  • Amendments to IAS 1 related to non-current liabilities with covenants

 

1 January 2024

  • Amendments to IAS 7 and IFRS 7 Supplier Finance Arrangements

 

1 January 2024

  • Amendments to IAS 21 Lack of Exchangeability

 

1 January 2025

  • IFRS 18 Presentation and Disclosure in Financial Statements

 

1 January 2027

 

Date noted denotes IASB effective date (for periods commencing on or after).

LKM INNOVATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 17 -
3
Critical accounting estimates and judgements

In the application of the company’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, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

 

The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are outlined below.

Critical judgements
Going Concern

On 29 December 2023, LumiraDx Limited, the company’s ultimate parent, announced that administrators had been appointed to two of its subsidiaries, LumiraDx Group Limited (the company’s direct parent) and LumiraDx International Limited, which together hold substantially all of the assets of the LumiraDx group.

Following their appointment, the Administrators have entered into a sale and purchase agreement with Roche Diagnostics Limited (“Roche”) providing for Roche’s acquisition of certain of the LumiraDx group companies (the “Point of Care Diagnostics Companies”) engaged in the operation of LumiraDx group’s point-of-care diagnostics platform business and certain related assets (the “Transaction”) which includes the company. The Administrators have not been appointed to any of the Point of Care Diagnostics Companies.

Pursuant to the Transaction, Roche is to acquire all of the Point of Care Diagnostics Companies for the sum of $295 million, subject to customary closing adjustments. The completion of the Transaction is subject to certain conditions, including antitrust and foreign direct investment approvals, and is expected to close once the antitrust and other regulatory approvals have been obtained and the conditions have otherwise been met.

LumiraDx UK Ltd is the only source of income for the entity and there is no likely alternative source of income outside of the LumiraDx group. If the Transaction is unable to close, LumiraDx UK Ltd would have insufficient liquidity to fund payment of the amounts that would be due to its lenders and if unsuccessful in raising additional capital, there can be no assurance that it could continue as a going concern.

Although the financial statements have been prepared on a going concern basis, the directors acknowledge that there is a material uncertainty over the company’s inability to close the Transaction.

LKM INNOVATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 18 -
4
Revenue

The company operates one principal area of activity in one principal geographical market being the United Kingdom, which is that of providing research and development services to other group companies within the LumiraDx Limited Group. The services provided are based on contracted terms over the service period with revenue recognised as the services are provided.

 

Any invoices raised for performance obligations that are unsatisfied or partly satisfied at the year end are recognised as contract liabilities. Contract assets relate to performance obligations partially satisfied or satisfied but not yet invoiced. There were no contract assets or liabilities at either the current or comparative reporting date.

 

An analysis of the company's revenue is as follows:

2022
2021
£
£
Revenue analysed by class of business
Research and development service income
537,524
722,660
5
Operating profit
2022
2021
£
£
Operating profit for the year is stated after charging/(crediting):
Research and development costs
6,241
54,520
Fees payable to the company's auditor for the audit of the company's financial statements
11,500
-
0
Depreciation of property, plant and equipment
479,168
600,030
Depreciation of right of use assets
21,924
158,974
6
Employees

The average monthly number of persons (including directors) employed by the company during the year was:

2022
2021
Number
Number
Directors
3
3

The cost of remunerating directors is borne by another Group entity. The company’s share of the directors’ cost based on time spent on this entity by the directors is considered to be trivial. The directors are also regarded as key management and thus key management remuneration paid in the current and comparative period would also be regarded as trivial. The directors are party to the liability insurance policies maintained by the Group.

LKM INNOVATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 19 -
7
Finance costs
2022
2021
£
£
Interest on lease liabilities
354
13,157
Other interest payable
61,347
74,360
Total interest expense
61,701
87,517
8
Income tax expense
2022
2021
£
£
Current tax
UK corporation tax on profits for the current period
-
0
-
0
Total tax charge
-
-

The charge for the year can be reconciled to the loss per the income statement as follows:

2022
2021
£
£
Loss before taxation
(41,259)
(23,650)
Expected tax credit based on a corporation tax rate of 19.00% (2021: 19.00%)
(7,839)
(4,494)
Effect of expenses not deductible in determining taxable profit
34,122
42,493
Change in unrecognised deferred tax assets
2,185
-
0
Group relief
(35,350)
(37,999)
Effect of changes in tax rates
6,882
-
0
Taxation charge for the year
-
-

At the reporting date, the company has an unrecognised deferred tax asset of £262k (2021 - £192k) in respect of decelerated capital allowances which has not been recognised.

9
Property, plant and equipment
Tenant's improvements
Plant and machinery
Right of use assets
Total
£
£
£
£
Cost
At 1 January 2021
1,679,212
2,029,510
509,816
4,218,538
Disposals
-
0
-
0
(93,255)
(93,255)
At 31 December 2021
1,679,212
2,029,510
416,561
4,125,283
Disposals
-
0
(31,394)
-
0
(31,394)
At 31 December 2022
1,679,212
1,998,116
416,561
4,093,889
LKM INNOVATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
9
Property, plant and equipment
Tenant's improvements
Plant and machinery
Right of use assets
Total
£
£
£
£
(Continued)
- 20 -
Accumulated depreciation and impairment
At 1 January 2021
1,017,897
1,365,701
328,918
2,712,516
Charge for the year
301,323
298,707
158,974
759,004
Eliminated on disposal
-
0
-
0
(93,255)
(93,255)
At 31 December 2021
1,319,220
1,664,408
394,637
3,378,265
Charge for the year
246,639
232,529
21,924
501,092
Eliminated on disposal
-
0
(29,301)
-
0
(29,301)
At 31 December 2022
1,565,859
1,867,636
416,561
3,850,056
Carrying amount
At 31 December 2022
113,353
130,480
-
243,833
At 31 December 2021
359,992
365,102
21,924
747,018
At 31 December 2020
661,315
663,809
180,898
1,506,022

As outlined at note 19 the company's property, plant and equipment has been pledged as security in respect of certain borrowings of the company's ultimate parent undertaking, LumiraDx Limited.

10
Trade and other receivables
2022
2021
£
£
Trade receivables
10,774
-
0
VAT recoverable
1,533
2,183
Amounts owed by fellow group undertakings
95,751
1,108,168
Other receivables
2,813
2,813
110,871
1,113,164

All trade receivables recognised in the year are generated from services provided to other group companies within the LumiraDx Limited Group. Standard credit terms for trade receivables are 30 days from invoice date, although certain credit terms are contract-specific. No loss allowance (2021: £Nil) has been recognised on trade receivables as none were in default at the year end.

 

Amounts owed by fellow group undertakings are unsecured, interest free and repayable on demand.

LKM INNOVATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 21 -
11
Trade and other payables
2022
2021
£
£
Trade payables
-
0
2,662
Amounts owed to fellow group undertakings
8,013
68,163
Accruals
11,500
1,540
19,513
72,365

Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. Trade and other payables are unsecured, interest free and have a typical maturity profile of between 0-1 months.

 

Amounts owed to fellow group undertakings are unsecured, interest free and repayable on demand.

12
Lease liabilities
2022
2021
Maturity analysis
£
£
Within one year
-
25,709

Finance lease liabilities are classified based on the amounts that are expected to be settled within the next 12 months and after more than 12 months from the reporting date, as follows:

2022
2021
£
£
Current liabilities
-
0
25,709
2022
2021
Amounts recognised in profit or loss include the following:
£
£
Interest on lease liabilities
354
13,157

The company's lease liabilities were in respect of right of use property, being rented property units.

13
Borrowings
Non-current
2022
2021
£
£
Borrowings held at amortised cost:
Loans from fellow group undertakings
-
1,859,000

Borrowings are classified based on the amounts that are expected to be settled within the next 12 months and after more than 12 months from the reporting date.

The company settled the above loans from fellow group undertakings during the current reporting period.

LKM INNOVATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 22 -
14
Financial instruments

An analysis of the carrying value of the company's financial assets and liabilities is as follows:

Current
Current
Non-current
Non-current
2022
2021
2022
2021
£
£
£
£
Financial assets at amortised cost
Cash and cash equivalents
213,519
686,861
-
-
Trade and other receivables
13,587
2,813
-
-
Amounts owed by group undertakings
95,751
1,108,168
-
-
322,857
1,797,842
-
-
Financial liabilities at amortised cost
Trade and other payables
11,500
4,202
-
-
Amounts owed to group undertakings
8,013
68,163
-
-
Lease liabilities
-
0
25,709
-
-
Loans from fellow group undertakings
-
-
-
1,859,000
19,513
98,074
-
1,859,000

As outlined at note 19 the company's financial assets have been pledged as security in respect of certain borrowings of the company's ultimate parent undertaking, LumiraDx Limited.

 

The directors consider that the carrying amounts of financial assets and liabilities carried at amortised cost in the financial statements approximate to their fair values.

 

Further aging analysis of the company's financial liabilities is outlined at notes 11, 12 and 13.

LKM INNOVATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 23 -
15
Change in liabilities arising from financing activities

The following table details the changes in the company's liabilities arising from financing activities.

At 1 January 2021
New loans
Repayments
Non-cash movements
At 31 December 2021
£
£
£
£
£
Loans from fellow group undertakings
1,859,000
-
-
-
1,859,000
Lease liabilities
200,980
-
(175,271)
-
25,709
2,059,980
-
(175,271)
-
1,884,709
At 1 January 2022
New loans
Repayments
Non-cash movements
At 31 December 2022
£
£
£
£
£
Loans from fellow group undertakings
1,859,000
-
(1,859,000)
-
-
Lease liabilities
25,709
-
(25,709)
-
-
1,884,709
-
(1,884,709)
-
-
LKM INNOVATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 24 -
16
Financial risk review and management
Capital management

The company’s capital management objectives are:

 

 

The capital structure of the company consists of debt (interest free borrowings from group undertakings) and equity (comprising issued capital and retained earnings). The company is not subject to any externally imposed capital requirements.

 

The company actively and regularly reviews and manages its capital structure to ensure an optimal capital structure and to maximise equity holder returns, taking into consideration the future capital requirements of the company and capital efficiency, projected capital expenditures, prevailing and projected profitability, projected cash flows, and projected strategic investment and development opportunities.

 

Management regards capital as total equity and reserves for capital management purposes. At the reporting date, this was £548,710 (2021 as restated - £589,969)

 

Financial risks management

The company’s operations expose it to a number of financial risks, principally credit risk and liquidity risk. The company manages these risks through an effective risk management programme which is coordinated by the Board of Directors.

 

Liquidity risk

Liquidity risk refers to the company being unable to settle its obligations as these fall due.

 

The company closely monitors its access to funding facilities principally provided by fellow group undertakings in comparison to its outstanding commitments on a regular basis to ensure that it has sufficient funds to meet these obligations.

 

The Board regularly reviews debt management forecasts which estimate the cash inflows and outflows for the next twelve months, so that management can ensure that sufficient funding is in place as it is required. The Board acknowledge that there is an existing level of uncertainty over the management of the company's liquidity as a result of the ongoing Roche Transaction outlined within Note 1.3.

 

Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss for the company. Credit risk predominantly arises from the company's transactions with LumiraDx UK Ltd who remain the company's sole customer and source of income. As outlined at Note 1.3, the Board acknowledge that counterparty credit risk is directly impacted by the ongoing Roche Transaction and the Board consider both quantitative and qualitative information and analysis in the assessment of any expected credit losses.

 

With regard to cash and cash equivalents, these are held with large and stable financial institutions.

 

The company's maximum exposure to credit risk relating to its financial assets and financial liabilities is equal to their carrying value.

LKM INNOVATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 25 -
17
Share capital
2022
2021
2022
2021
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary Shares of £1 each
2
2
2
2
18
Retained earnings

Retained earnings represent accumulated comprehensive income/(expenditure) for the year and prior periods less dividends paid.

19
Contingent liabilities

Following finance put in place in March 2021, the company is a guarantor in respect of certain borrowings of LumiraDx Limited, the ultimate parent company, and LumiraDx Investment Limited, a subsidiary of intermediate parent company LumiraDx Group Limited. These borrowings have been secured by a fixed and floating charge over the company's assets.

20
Events after the reporting date

On 29 December 2023, LumiraDx Limited, the company’s ultimate parent, announced that administrators had been appointed to two of its subsidiaries, LumiraDx Group Limited (the company’s direct parent) and LumiraDx International Limited, which together hold substantially all of the assets of the LumiraDx group.

21
Related party transactions

During the year the company entered into the following transactions with related parties:

Sale of goods
Purchase of goods
2022
2021
2022
2021
£
£
£
£
Parent company
537,524
722,660
-
0
-
0
Repayment of loan
2022
2021
£
£
Parent company
1,859,000
-

The following amounts were outstanding at the reporting end date:

2022
2021
Amounts due to related parties
£
£
Parent company
-
0
1,927,163
LKM INNOVATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
21
Related party transactions
(Continued)
- 26 -

The following amounts were outstanding at the reporting end date:

2022
2021
Amounts due from related parties
£
£
Other related parties
95,751
1,108,168
22
Controlling party

The company is controlled by its immediate parent company, LumiraDx Group Limited and its ultimate parent company, LumiraDx Limited, a company incorporated in the Cayman Islands.

 

LumiraDx Group Limited is the largest and smallest group preparing group accounts in which the company's results are included. Copies of the LumiraDx Group Limited consolidated group accounts are available from the Companies House website at https://www.gov.uk/government/organisations/companies-house.

 

On 29 December 2023, LumiraDx Limited announced that administrators had been appointed to LumiraDx Group Limited.

23
Cash generated from operations
2022
2021
£
£
Loss for the year after tax
(41,259)
(23,650)
Adjustments for:
Finance costs
61,701
87,517
Depreciation and impairment of property, plant and equipment
501,092
759,004
Movements in working capital:
Decrease/(increase) in trade and other receivables
1,002,293
(765,306)
(Decrease)/increase in trade and other payables
(52,852)
40,156
Cash generated from operations
1,470,975
97,721
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