Company Registration No. 09889431 (England and Wales)
Paragraf Limited
Annual report and
group financial statements
for the year ended 31 December 2023
Paragraf Limited
Company information
Directors
Alistair Crawford
Dr Simon Thomas
Professor Sir Colin Humphreys
Dr Andrew Lynn
John Halfpenny
Somasundaram Subramaniam
David Cummings
IQ Capital Directors Nominees Limited
Parkwalk Advisors Limited
Company number
09889431
Registered office
7-8 West Newlands
Somersham
Cambridgeshire
PE28 3EB
Independent auditor
Saffery LLP
Westpoint
Peterborough Business Park
Lynch Wood
Peterborough
PE2 6FZ
Paragraf Limited
Contents
Page
Strategic report
1 - 2
Directors' report
3 - 5
Independent auditor's report
6 - 8
Group statement of comprehensive income
9
Group statement of financial position
10 - 11
Parent company statement of financial position
12 - 13
Group statement of changes in equity
15
Parent company statement of changes in equity
16
Group statement of cash flows
14
Notes to the financial statements
17 - 55
Paragraf Limited
Strategic report
For the year ended 31 December 2023
1

The directors present the strategic report for the year ended 31 December 2023.

Fair review of the business

2023 was a successful year of growth for the Paragraf group. The board are pleased with the company’s progression, along with its expected financial position at the year end.

In February the Company moved into its new Huntingdon premises on the completion of its office fit out. This saw the relocation of non-laboratory based teams take up residence in the new facility. Work started on the build of manufacturing space and continues at the year end with expected completion in the middle of 2024. Part of this work involves key infrastructure of bringing on site a new 3MVA electricity supply to power the required capacity. Delivery was also taken of several key pieces of front end of line process equipment that will enable increased production capacity.

April saw the acquisition of Cardea Bio Inc, a biosensing company based in San Diego, California. This transaction enabled the expansion of the molecular sensor product offering and our global reach through expert know how, patents and a US base of operations. Dedication from the Paragraf & Cardea Bio teams delivered a structured plan with successful technology sharing and operational integration completed by the end of the summer, being finalised with a rebranding and company name change to Paragraf USA Inc.

Success was seen through the year via various awards and recognitions. Paragraf was named the Business of the Year at the Business Weekly annual awards and was a finalist in the Royal Academy of Engineering’s prestigious MacRobert Award; CEO Simon Thomas was named as one of WIRED magazine’s Trailblazers; and Paragraf was listed as one of Bloomberg’s 25 UK startups to watch and featured in several mainstream publications such as The New York Times, The Observer, Bloomberg, along with vlogs in partnership with The London Stock Exchange, The ICAEW and the European Magnetics Field Laboratory. These activities are enthusiastically supported by a cross section of employees keen to get in front of the camera and proudly show off their work.

Technology progression continued, with commercially led advancements made across all technology platforms; magnetic, current and position sensors; molecular sensors and solid-state devices. Some of this progression has been supported through grant funding from Innovate UK.

During the year key hires were made to bring on board Dr Andrew McInnes as Executive Materials Director and Mark Davis as Biosensor Director. These hires have enabled us to accelerate progression in these areas. The Company delivered a successful internship program, taking our first overseas interns from MIT, in total offering six summer placements and four year-long sandwich placements. We have supported two college students with long-term course-required work experience in business administration.

During the year, as a result of internal development and acquisition, we increased our number of granted patents granted from 58 to 128, and the number of pending patents from 106 to 127. The number of patent families grew from 45 to 60. Patents cover all our main technology streams of sensors, electronic devices and our USP of graphene growth. We finished the year with 38 registered Trademarks and 13 trademark applications.

During the year the Company launched its ESG policy and objectives focusing on environmental management, diversity & social mobility, and corporate governance and compliance. Our objectives are aligned to our Company values along with the UN’s Sustainable Development (SDG) goals.

Company spend was within planned budget, ensuring our series B runway was maintained and therefore providing us with the resources to deliver our planned milestones. Revenues have increased, through the sale of engineering samples and non-recurring engineering (NRE) projects.

Paragraf Limited
Strategic report (continued)
For the year ended 31 December 2023
2
Principal risks and uncertainties

The management of the business and the execution of Paragraf’s business strategy are subject to several risks which are recorded, reviewed, and considered in the company’s Context of the Organisation (COTO) business risk management log. The directors consider the following risks to generate the greatest threats to the company, these are mitigated against by the implementation of specific tailored strategies.

Risk

Mitigation strategies

Business financing

Investment round closing quarter 3 2024, to support near-term expenditure and manufacturing expansion plans. Monthly reviews of financial performance KPI’s completed to monitor business financing.

Commercial traction

Focus is made on high priority product releases which align to confirmed customer demands, with new products planned for release from quarter 2 2024.

Production scaling to meet demand

Construction of phase 1 of production facility on target to complete quarter 3 2024.

Key performance indicators

The directors’ goals are to:

These goals are disseminated into department, team, and individual objectives. The company reviews its position against these objectives through monthly KPI reporting, which is led by the management team, covering technical project progression, cash runway, budget deviation and revenues.

Other information and explanations

Going forward Paragraf will continue to be committed to materially transforming electronics through the development of high purity graphene, and other two-dimensional material, products that will facilitate massive improvements in the performance of technologies across all aspects of life. For 2024 this will be demonstrated through the delivery of commercial success and the capacity for high volume manufacturing.

On behalf of the board

Dr Simon Thomas
Director
26 June 2024
Paragraf Limited
Directors' report
For the year ended 31 December 2023
3

The directors present their annual report and financial statements for the year ended 31 December 2023.

Principal activities

The principal activity of the group continues to be the research, development and production of graphene electronic devices.

Results and dividends

The results for the year are set out on page 9.

No ordinary or preference 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:

Alistair Crawford
Dr Simon Thomas
Professor Sir Colin Humphreys
Dr Andrew Lynn
John Halfpenny
Somasundaram Subramaniam
David Cummings
IQ Capital Directors Nominees Limited
Parkwalk Advisors Limited
Directors' insurance

The group maintains insurance policies on behalf of all the directors against liability arising from negligence, breach of duty and breach of trust in relation to the group.

Supplier payment policy

The group's current policy concerning the payment of trade creditors is to follow the CBI's Prompt Payers Code (copies are available from the CBI, Centre Point, 103 New Oxford Street, London WC1A 1DU).

 

The group's current policy concerning the payment of trade creditors is to:

 

Trade creditors of the group at the year end were equivalent to 50 day's purchases, based on the average daily amount invoiced by suppliers during the year.

Cash flow risk

The Series B runway is expected to run until quarter 3 2025, therefore at year-end all group funds are held in instant access accounts across three financial institutions, for which we regularly check their bank ratings. There is risk to the group that cash may be lost through the collapse of a financial institution, the impact of which would decrease our runway. By spreading funds across financial institutions this risk is reduced.

Paragraf Limited
Directors' report (continued)
For the year ended 31 December 2023
4
Research and development

The group continues its research into the three product streams of magnetic sensors, molecular sensors and solid-state devices. The acquisition of Cardea Bio Inc has accelerated research and development in molecular sensors with the expectation of an accelerated product launch in 2024. Working with customer and partners the group continues its R&D program in the other product streams.

Future developments

The group completed an investment funding close in 2024, providing a runway into 2025.

Work on the first phase of the Huntington manufacturing facility is continuing, with an expected completion date in the summer. This will bring online the world’s first 2D materials foundry, enabling Paragraf to deliver at scale to meet customer demands.

Additionally, at the start of quarter 2 Paragraf launched its first products available to purchase through an online webstore. The products included a graphene field effect transition which is used for molecular sensing along with a supporting breakout board.

 

Auditor

The auditor, Saffery LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.

Statement of directors' responsibilities

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 group and parent company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the United Kingdom.

 

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 group and company and of the profit or loss of the group 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 group's and company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and 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 group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Paragraf Limited
Directors' report (continued)
For the year ended 31 December 2023
5
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.

Matters covered by the strategic report

Details of the Group's financial risk management objectives and policies are disclosed in the Strategic Report as permitted by s414c(11) of the Companies Act.

On behalf of the board
Dr Simon Thomas
Director
26 June 2024
Paragraf Limited
Independent auditor's report
To the members of Paragraf Limited
6
Opinion

We have audited the financial statements of Paragraf Limited (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 31 December 2023 which comprise the group statement of comprehensive income, the group and parent company statement of financial position, the group and parent company statement of changes in equity, the group statement of cash flows and the group and parent company 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.

In our opinion:

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.

Conclusions relating to going concern

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.

 

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

 

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 directors are responsible for the other information. The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

 

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.

Paragraf Limited
Independent auditor's report (continued)
To the members of Paragraf Limited
7

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

Matters on which we are required to report by exception

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 strategic report or 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:

 

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 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.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the group and parent company 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.

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 specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud are detailed below.

Identifying and assessing risks related to irregularities:

We assessed the susceptibility of the group and parent company’s financial statements to material misstatement and how fraud might occur, including through discussions with the directors, discussions within our audit team planning meeting, updating our record of internal controls and ensuring these controls operated as intended. We evaluated possible incentives and opportunities for fraudulent manipulation of the financial statements. We identified laws and regulations that are of significance in the context of the group and parent company by discussions with directors and by updating our understanding of the sector in which the group and parent company operate.

Paragraf Limited
Independent auditor's report (continued)
To the members of Paragraf Limited
8

Laws and regulations of direct significance in the context of the group and parent company include The Companies Act 2006, and UK Tax legislation as well as similar laws and regulations prevailing in each country in which we identified a significant component.

Audit response to risks identified:

We considered the extent of compliance with these laws and regulations as part of our audit procedures on the related financial statement items including a review of group and parent company financial statement disclosures. We reviewed the parent company’s records of breaches of laws and regulations, minutes of meetings and correspondence with relevant authorities to identify potential material misstatements arising. We discussed the parent company’s policies and procedures for compliance with laws and regulations with members of management responsible for compliance.

During the planning meeting with the audit team, the engagement partner drew attention to the key areas which might involve non-compliance with laws and regulations or fraud. We enquired of management whether they were aware of any instances of non-compliance with laws and regulations or knowledge of any actual, suspected or alleged fraud. We addressed the risk of fraud through management override of controls by testing the appropriateness of journal entries and identifying any significant transactions that were unusual or outside the normal course of business. We assessed whether judgements made in making accounting estimates gave rise to a possible indication of management bias. At the completion stage of the audit, the engagement partner’s review included ensuring that the team had approached their work with appropriate professional scepticism and thus the capacity to identify non-compliance with laws and regulations and fraud.

As group auditors, our assessment of matters relating to non-compliance with laws or regulations and fraud differed at group and component level according to their particular circumstances. Our communications included a request to identify instances of non-compliance with laws and regulations and fraud that could give rise to a material misstatement of the group financial statements in addition to our risk assessment.

There are inherent limitations in the audit procedures described above 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. Also, 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 deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.

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.

Gareth Norris FCA (Senior Statutory Auditor)
For and on behalf of Saffery LLP
26 June 2024
Chartered Accountants
Statutory Auditor
Westpoint
Peterborough Business Park
Lynch Wood
Peterborough
PE2 6FZ
Paragraf Limited
Group statement of comprehensive income
For the year ended 31 December 2023
9
2023
2023
2022
2022
Notes
£
£
£
£
Revenue
4
797,341
228,923
Other operating income
132,747
255,969
930,088
484,892
Raw materials and consumables used
1,182,582
1,044,883
Employee benefits expense
5
8,734,075
5,367,602
Depreciation and amortisation expense
6
4,256,851
1,024,930
Other operating expenses
5,519,683
4,195,964
Total operating expenses
(19,693,191)
(11,633,379)
Operating loss
6
(18,763,103)
(11,148,487)
Investment revenues
9
423,192
231,977
Finance costs
10
(575,147)
(114,096)
Loss before taxation
(18,915,058)
(11,030,606)
Income tax income
11
1,529,581
1,443,405
Loss for the year
(17,385,477)
(9,587,201)
Other comprehensive income:
Items that will not be reclassified to profit or loss
Currency translation differences
(19,087)
-
0
Total items that will not be reclassified to profit or loss
(19,087)
-
0
Total other comprehensive income for the year
(19,087)
-
0
Total comprehensive income for the year
(17,404,564)
(9,587,201)
Loss for the financial year is all attributable to the owners of the parent company.
Total comprehensive income for the year is all attributable to the owners of the parent company.
Paragraf Limited
Group statement of financial position
As at 31 December 2023
10
2023
2022
Notes
£
£
Non-current assets
Intangible assets
12
39,513,162
936,384
Property, plant and equipment
13
15,445,640
8,775,986
Investments
-
0
7
54,958,802
9,712,377
Current assets
Trade and other receivables
16
1,535,086
4,019,318
Current tax recoverable
1,415,160
1,455,225
Cash and cash equivalents
6,902,158
27,139,215
9,852,404
32,613,758
Current liabilities
Trade and other payables
22
3,977,640
1,808,146
Convertible loan notes
20
5,156,655
-
0
Lease liabilities
23
215,448
79,104
9,349,743
1,887,250
Net current assets
502,661
30,726,508
Non-current liabilities
Lease liabilities
23
3,560,119
3,286,335
Long term provisions
24
113,573
186,195
3,673,692
3,472,530
Net assets
51,787,771
36,966,355
Equity
Called up share capital
28
7,768
6,569
Share premium account
26
59,684,401
59,709,153
Merger reserve
29
32,207,916
-
Retained earnings
(40,112,314)
(22,749,367)
Total equity
51,787,771
36,966,355
Paragraf Limited
Group statement of financial position (continued)
As at 31 December 2023
11
The financial statements were approved by the board of directors and authorised for issue on 26 June 2024 and are signed on its behalf by:
Dr Simon Thomas
Director
Company Registration No. 09889431 (England and Wales)
Paragraf Limited
Company statement of financial position
As at 31 December 2023
31 December 2023
12
2023
2022
as restated
Notes
£
£
Non-current assets
Intangible assets
39
1,148,265
936,384
Property, plant and equipment
40
15,018,260
8,775,986
Investments
41
35,179,725
7
51,346,250
9,712,377
Current assets
Trade and other receivables
42
9,773,387
4,019,318
Current tax recoverable
1,415,160
1,455,225
Cash and cash equivalents
6,610,617
27,139,215
17,799,164
32,613,758
Current liabilities
Trade and other payables
45
3,508,838
1,690,860
Convertible loan notes
44
5,156,655
-
0
Lease liabilities
46
125,730
79,104
8,791,223
1,769,964
Net current assets
9,007,941
30,843,794
Non-current liabilities
Lease liabilities
46
3,551,956
3,286,335
Long term provisions
47
113,573
186,195
3,665,529
3,472,530
Net assets
56,688,662
37,083,641
Equity
Called up share capital
49
7,768
6,569
Share premium account
59,684,401
59,709,153
Merger reserve
32,207,916
-
0
Retained earnings
(35,211,423)
(22,632,081)
Total equity
56,688,662
37,083,641

During the year ended 31 December 2023, the Company generated a loss of £13,169,560 (2022 - £9,916,259 loss).

Paragraf Limited
Company statement of financial position (continued)
As at 31 December 2023
31 December 2023
13
The financial statements were approved by the board of directors and authorised for issue on 26 June 2024 and are signed on its behalf by:
26 June 2024
Dr Simon Thomas
Director
Company Registration No. 09889431 (England and Wales)
Paragraf Limited
Group statement of cash flows
For the year ended 31 December 2023
14
2023
2022
Notes
£
£
£
£
Cash flows from operating activities
Cash absorbed by operations
35
(19,963,370)
(13,663,792)
Income taxes refunded
1,569,646
1,443,405
Net cash outflow from operating activities
(18,393,724)
(12,220,387)
Investing activities
Cash acquired on purchase of subsidiary
668,055
-
0
Purchase of intangible assets
(479,549)
(368,600)
Purchase of property, plant and equipment
(7,104,158)
(2,773,150)
Investment in subsidiary
-
0
(7)
Interest received
423,192
231,977
Net cash used in investing activities
(6,492,460)
(2,909,780)
Financing activities
Proceeds from issue of shares
7,419
40,289,043
Share issue costs
(31,795)
(229,279)
Issue of convertible loans
5,000,000
-
0
Payment of lease liabilities
(326,238)
(125,000)
Interest paid
(259)
(2)
Net cash generated from financing activities
4,649,127
39,934,762
Net (decrease)/increase in cash and cash equivalents
(20,237,057)
24,804,595
Cash and cash equivalents at beginning of year
27,139,215
2,334,620
Cash and cash equivalents at end of year
6,902,158
27,139,215
Paragraf Limited
Group statement of changes in equity
For the year ended 31 December 2023
15
Share capital
Share premium account
Merger reserve
Retained earnings
Total
Notes
£
£
£
£
£
Balance at 1 January 2022
4,194
19,651,764
-
(13,211,159)
6,444,799
Year ended 31 December 2022:
Loss and total comprehensive income
-
-
-
(9,587,201)
(9,587,201)
Transactions with owners:
Issue of share capital
28
2,375
40,057,389
-
-
40,059,764
Credit to equity for equity settled share-based payments
27
-
-
-
48,993
48,993
Balance at 31 December 2022
6,569
59,709,153
-
(22,749,367)
36,966,355
Year ended 31 December 2023:
Loss for the year
-
-
-
(17,385,477)
(17,385,477)
Other comprehensive income:
Currency translation differences
-
-
-
(19,087)
(19,087)
Total comprehensive income
-
-
-
(17,404,564)
(17,404,564)
Transactions with owners:
Issue of share capital
28
1,199
(24,752)
-
-
(23,553)
Share premium generated from acquisition
-
-
32,207,916
-
0
32,207,916
Credit to equity for equity settled share-based payments
27
-
-
-
41,617
41,617
Balance at 31 December 2023
7,768
59,684,401
32,207,916
(40,112,314)
51,787,771
Paragraf Limited
Company statement of changes in equity
For the year ended 31 December 2023
16
Share capital
Share premium account
Merger reserve
Retained earnings
Total
Notes
£
£
£
£
£
As restated for the period ended 31 December 2022:
Balance at 1 January 2022
4,194
19,651,764
-
(13,211,159)
6,444,799
Year ended 31 December 2022:
Loss and total comprehensive income
-
-
-
(9,916,259)
(9,916,259)
Transactions with owners:
Issue of share capital
49
2,375
40,057,389
-
-
40,059,764
Credit to equity for equity settled share-based payments
48
-
-
-
48,993
48,993
Balance at 1 January 2023, as previously reported
6,569
59,709,153
-
(23,078,425)
36,637,297
Prior period adjustment
37
-
-
-
446,344
446,344
Adjusted balance at 1 January 2023
6,569
59,709,153
-
(22,632,081)
37,083,641
Year ended 31 December 2023:
Loss and total comprehensive income
-
-
-
(12,620,959)
(12,620,959)
Transactions with owners:
Issue of share capital
49
1,199
(24,752)
-
-
(23,553)
Share premium generated from acquisition
-
-
32,207,916
-
32,207,916
Credit to equity for equity settled share-based payments
48
-
-
-
41,617
41,617
Balance at 31 December 2023
7,768
59,684,401
32,207,916
(35,211,423)
56,688,662
Paragraf Limited
Notes to the group financial statements
For the year ended 31 December 2023
17
1
Accounting policies
Company information

Paragraf Limited is a private company limited by shares incorporated in England and Wales. The registered office is 7-8 West Newlands, Somersham, Cambridgeshire, PE28 3EB.

 

The group consists of Paragraf Limited and all of its subsidiaries.

 

The principal activities of the group continue to be the research, development and production of graphene electronic devices.

1.1
Accounting convention

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the United Kingdom and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS, except as otherwise stated.

The financial statements are prepared in sterling, which is the functional currency of the group. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared under the historical cost convention, except for the revaluation of fair value measurement on share based payment awards. The principal accounting policies adopted are set out below.

1.2
Basis of consolidation

The consolidated group financial statements consist of the financial statements of the parent company Paragraf 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 2023. 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.

Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.

The Company has taken advantage of the exemption granted by Section 408 of the Companies Act 2006 from presenting its own Income Statement. The loss (2022: loss) generated by the Company is disclosed under the Company Statement on Financial Position.

 

In the prior year, the group took advantage of the exemption under Section 402 of the Companies Act 2006 not to prepare consolidated financial statements on the basis that none of the subsidiaries were required to be consolidated. The only subsidiary held at this point was Paragraf USA Inc which was excluded on the grounds of immateriality.

 

Therefore, this is the first year the group has prepared consolidated financial statements.

Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
1
Accounting policies (continued)
18
1.3
Going concern

At the time of approving the financial statements the board have a reasonable expectation that the group will have adequate resources to continue in operational existence for the foreseeable future.true

 

The group completed an investment funding close in 2024, providing a runway into 2025. The Board has carried out cash flow scenario planning that demonstrates that if there were any delays in additional funding or customer engagement, the group can continue to operate for a period of 12 months from the date of the approval of these financial statements. Therefore, the board concludes that it is appropriate to prepare these financial statements on a going concern basis.

1.4
Revenue

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.

 

To determine whether to recognise revenue, the group follows a five step process:

 

1. Identifying the contract with a customer

2. Identifying the performance obligations

3. Determining the transaction price

4. Allocating the transaction price to the performance obligations

5. Recognising revenue when/as performance obligation(s) are satisfied

The group recognises revenue from the following major sources:

 

The nature, timing of satisfaction of performance obligations and significant payment terms of the group's major sources of revenue are as follows:

Product sales

Revenue represents sales to external customers at invoiced amounts less value added tax or local taxes on sales. Revenue is recognised at the point where control is considered to pass to the customer. With the application of the EXWorks Incoterm (EXW), this is typically on the shipment date once all performance obligations have been fulfilled. In all instances, the transaction price is agreed with the customer prior to transfer of goods on a stand-alone basis.

Non-recurring engineering

Non-recurring engineering design and research revenue is recognised as revenue over time on a percentage of completion method unless the outcome of the contract cannot be reliably determined, in which case contract revenue is only recognised to the extent of contract costs incurred that are recoverable. Foreseeable losses, if any, are provided for in full as and when it can be reasonably ascertained that the contract will result in a loss.

 

Revenue is invoiced in accordance with the terms of the contract which are written on an individual basis. At each reporting period, receivables are recognised for revenues yet to be invoiced or settled to the extent that it is highly probable that there will not be a significant reversal of the amounts accrued in the future. Where invoices are raised in excess of the value of the consideration recognised as revenue based on the stage of completion, deferred income balances are recorded that represent unfulfilled performance obligations. These performance obligations are expected to be fulfilled within a year of the reporting date.

Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
1
Accounting policies (continued)
19
1.5
Intangible assets other than goodwill

Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

 

Amortisation is recognised and charged to Administrative expenses so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

 

1.6
Property, plant and equipment

Property, plant and equipment are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses. The cost of property, plant and equipment includes expenditure that is directly attributable to the acquisition of the assets.

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

Right of use assets
Straight line over lease term
Leasehold improvements
Straight line over lease term
Plant and equipment
10-20% reducing balance or straight line
Computers
5-10% straight line
Asset under course of construction
See below

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

 

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.

Assets under construction represent installation of offices at the company premises which is not yet complete or ready for use. Once in use they will be transferred to leasehold improvements and will be depreciated over the useful economic life of each asset.

1.7
Non-current investments

Interests in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.

1.8
Impairment of tangible and intangible assets

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

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, and whenever there is an indication that the asset may be impaired.

Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
1
Accounting policies (continued)
20

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

 

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

Where an impairment 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 profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

1.9
Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

1.10
Financial assets

Financial assets are recognised in the group's statement of financial position when the group 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.

 

The group classifies its financial assets in one category - "loans and receivables". The classification

depends on the purpose for which the financial assets were acquired and management determines the classification of its financial assets at initial recognition. The group’s loans and receivables comprise 'trade and other receivables' and cash balances in the Statement of Financial Position.

 

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the Statement of Financial Position date. These are classified as non-current assets.

 

Recognition and measurement

Trade and other receivables are initially measured at their transaction price. Receivables are held to collect the contractual cash flows which are solely payments of principal and interest. Those classified as receivable within one year are not amortised. Receivables classified as non-current assets are subsequently measured at amortised cost using the effective interest rate method.

 

For trade receivables, expected credit losses are measured by applying an expected loss rate to the gross carrying amount. The expected loss rate comprises the risk of a default occurring and the expected cash flows on default based on the aging of the receivable. The risk of a default occurring always takes into consideration all possible default events over the expected life of those receivables (“the life time expected credit losses”). Different provision rates and periods are used based on groupings of historic credit loss experience by age of receivable.

Impairment of financial assets

Impairment losses and any subsequent reversals of impairment losses, are adjusted against the carrying amount of the receivable and are recognised in profit or loss.

Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
1
Accounting policies (continued)
21
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.

1.11
Financial liabilities

The group recognises financial debt when the group 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'.

 

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary

course of business from suppliers. Amounts payable are classified as current liabilities if payment is due

within one year or less. If not, they are presented as non-current liabilities. Trade payables are

recognised initially at transaction price and subsequently measured at amortised cost using the

effective interest method.

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 group’s obligations are discharged, cancelled, or they expire.

1.12
Compound instruments

The component parts of compound instruments issued 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.

1.13
Equity instruments

Equity instruments issued by the parent 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 payable at the discretion of the company.

1.14
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 group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
1
Accounting policies (continued)
22
Deferred tax

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. Such assets and liabilities are not recognised if the timing 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.

1.15
Provisions

Provisions are recognised when the group has a legal or constructive present obligation as a result of a past event and it is probable that the group will be required to settle that obligation, and a reliable estimate can be made of the amount of the obligation.

 

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting end date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

 

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

1.16
Employee benefits

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of inventories or non-current assets.

 

The group offers employees the opportunity to participate in a salary sacrifice electric vehicle scheme, which is administered by a third party. Having considered the key points of the scheme, management has concluded that the group does not hold a lease with the lessor, thus the appropriate accounting treatment is as an employee benefit and the arrangement is accounted for under IAS 19.

 

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

1.17
Retirement benefits

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

 

The group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The company has no further payment obligations once the contributions have been paid.

1.18
Share-based payments

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 agreed valuation with HMRC and the Black Scholes 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.

Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
1
Accounting policies (continued)
23

When the terms and conditions of equity-settled share-based payments at the time they were granted are subsequently modified, the fair value of the share-based payment under the original terms and conditions and under the modified terms and conditions are both determined at the date of the modification. Any excess of the modified fair value over the original fair value is recognised over the remaining vesting period in addition to the grant date fair value of the original share-based payment. The share-based payment expense is not adjusted if the modified fair value is less than the original fair value. Cancellations or settlements (including those resulting from employee redundancies) are treated as an acceleration of vesting and the amount that would have been recognised over the remaining vesting period is recognised immediately.

1.19
Leases

At inception, the group 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 tangible asset is acquired through a lease, the group 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.

Right of use assets

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.

Lease liability - initial measurement

The lease liability is initially measured at the present value of the lease payments that are unpaid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the group's incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise fixed payments, variable lease payments that depend on an index or a rate, amounts expected to be payable under a residual value guarantee, and the cost of any options that the company is reasonably certain to exercise, such as the exercise price under a purchase option, lease payments in an optional renewal period, or penalties for early termination of a lease.

Lease liability - remeasurement

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in: future lease payments arising from a change in an index or rate; the group's estimate of the amount expected to be payable under a residual value guarantee; or the group's assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

Low value assets and short term

The group 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.

Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
1
Accounting policies (continued)
24
1.20
Grants

Where revenue grants are received, the grant is recognised within Other operating income at the date at which it is reasonably assured that the entity will comply with the conditions attached; and the grants will be received. Grants received in advance of the income being recognised in the Statement of Comprehensive Income are included in deferred income. When grant income is received for capital expenditure, it is held as deferred income on the balance sheet and released on a straight line basis over the useful economic life of the asset to which it relates.

1.21

Research and development expenditure

If it is not possible to distinguish the research phase of an internal project from the development phase, then all expenditure is treated as if it were incurred in the research phase. Research expenditure is written off against profits in the year in which it is incurred. Identifiable development costs are recognised as an intangible asset only if the company can demonstrate all of the following:

 

a. the technical feasibility of completing the intangible asset so that it will be available for use or sale.

b. the intention to complete the intangible asset and use or sell it.

c. the ability to use or sell the intangible asset.

d. how the intangible asset will generate probable future economic benefits.

e. the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset.

f. an ability to measure reliably the expenditure attributable to the intangible asset during its development.

2
Adoption of new and revised standards and changes in accounting policies

In the current year, the Group has adopted the following new IFRSs (including amendments thereto) and IFRIC interpretations, that became effective for the first time:

Disclosure of Accounting Policies (Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements)
1 January 2023
Definition of Accounting Estimates (Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors)
1 January 2023

Their adoption has not had any material impact on the disclosures or amounts reported in the financial statements.

Standards which are in issue but not yet effective

At the date of authorisation of these financial statements, the following standards and interpretations relevant to the Group and which have not been applied in these financial statements, were in issue but were not yet effective:

Classification of Liabilities as Current or Non-Current, Non-current Liabilities with Covenants (Amendments to IAS 1
1 January 2024
Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7)
1 January 2024
Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
2
Adoption of new and revised standards and changes in accounting policies (continued)
25

There have been small amendments to other IFRS in issue however, the Directors anticipate that the adoptions of these standards and interpretations in future periods will have no material impact on the financial statements of the company.

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
Leases

Management exercises judgement in determining the likelihood of exercising break options in determining the lease term. Break options are included to provide operational flexibility should the economic outlook for an asset be different to expectations, and hence at commencement of the lease, break options are not typically considered reasonably certain to be exercised.

 

The discount rate used to calculate the lease liability has been determined by management as the company's incremental borrowing rate which is a rate of interest that the company would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain a value similar to the right-of-use asset. The rate of the incremental borrowing is a key judgement made by management and is determined with reference to both internal and external data or benchmarks. This rate is determined as 8% plus the Bank of England base rate at the date of measurement.

 

At 31 December 2023 the carrying amount of total lease liabilities was £3,776k (2022: £3,365k).

Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
3
Critical accounting estimates and judgements (continued)
26
Acquisition of subsidiary

In the year, Paragraf acquired Cardea Bio Inc (“Cardea”). Cardea is an early stage development company which holds a number of patents and associated know-how, which are considered to be critical to the ongoing development of Paragraf.

 

Management considered the definition of a business combination in accordance with IFRS 3 and in particular the optional concentration test under IFRS 3.B7B. A key judgement was made that the value of Cardea as a whole is substantially equal to the value of the patents and developed technology owned by Cardea; this judgement reflects the absence of other non-monetary assets and the fact that Cardea does not have any existing trading revenues. As a result of this judgement, management determined that the concentration test was met, specifically that substantially all of the fair value of the gross assets acquired is concentrated in the patents and development technology, and that this explained the value agreed for the consideration paid for Cardea.

 

As a result of this test being met, management have accounted for this transaction as an asset acquisition.

 

Had this judgement not have been made, Cardea would have met the definition of a business under IFRS 3 and been accounted for as a business combination. Therefore goodwill would have arisen on the acquisition, and required the determination of fair values associated with the acquisition. It is likely, but not a foregone conclusion, that the fair value determined for patents and developed technology would have approximated to the consideration paid for Cardea. However, material transaction costs associated with the acquisition would have been expensed to the Income Statement, whereas using the concentration test these are capitalised as a cost of the intangible asset acquired and amortised over the associated estimated useful life of that asset.

Impairment of assets and assessment of cash-generating units

At the end of the reporting period management assesses whether any indication of impairment exists in relation to any assets held at the balance sheet date.

 

If there is any indication that an asset may be impaired, the recoverable amount shall be estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, an entity shall determine the recoverable amount of the cash-generating unit (CGU) to which the asset belongs.

 

In management's view, the Paragraf Group CGU has been identified as the smallest identifiable unit for this purpose due to its generation of largely independent cash flows and the presence of an active market for its products.

Key sources of estimation uncertainty
Decommissioning costs

In accordance with IFRS 16 the cost of the right-of-use asset includes an estimate of costs to be incurred in dismantling and removing the underlying asset and restoring it to the condition required by the terms and conditions of the lease, known as decommissioning.

 

Determining the level of costs which may be incurred in relation to decommissioning is a key estimate made by management. A provision has been calculated as 20% of laboratory build and service installation costs on a rolling basis and is recorded as a non-current liability on the Statement of Financial Position. This rate has been determined using the professional judgement and experience of management.

 

At 31 December 2023 the carrying amount of the provision was £64k (2022: £186k).

Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
3
Critical accounting estimates and judgements (continued)
27
Fair value of assets acquired

The acquisition of a subsidiary during the year was effected in part via share for share exchange which in turn required management to assess the fair value of those shares. There is significant estimation uncertainty in ascribing fair value to shares in an unlisted and pre-revenue business. Management's estimate was informed by other valuation exercises undertaken and using the support of third party experts.

4
Revenue
2023
2022
£
£
Revenue analysed by class of business
Product sales
188,491
83,320
Non-recurring engineering
608,850
145,603
797,341
228,923
2023
2022
£
£
Revenue analysed by geographical market
United Kingdom
12,228
181,018
North America
710,605
32,907
Europe
31,975
833
Asia
42,533
3,333
Rest of world
-
10,832
797,341
228,923
2023
2022
£
£
Other income
Grants received
122,955
191,665
Research and development expenditure credit
(9,891)
61,685
Sale of scrap metal bi products
19,683
2,619
132,747
255,969
Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
28
5
Employees

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

2023
2022
Number
Number
Directors
2
2
Technology & IP
63
41
Operations & Commercial
54
32
Finance, HR & Business Administration
10
9
Total
129
84

Their aggregate remuneration comprised:

2023
2022
£
£
Wages and salaries
7,727,071
4,653,129
Social security costs
694,602
501,301
Pension costs
312,402
213,172
8,734,075
5,367,602
6
Operating loss
2023
2022
Operating loss for the year is stated after charging/(crediting):
£
£
Government grants
(122,955)
(191,665)
Fees payable to the company's auditor for the audit of the company's financial statements
46,042
29,550
Depreciation of property, plant and equipment
1,337,164
913,108
Profit on disposal of property plant and equipment
5,978
5,863
Amortisation of intangible assets (included within administrative expenses)
2,913,709
105,959
Share-based payments
41,617
48,993
7
Directors' remuneration
2023
2022
£
£
Remuneration for qualifying services
269,521
291,284
Company pension contributions to defined contribution schemes
13,266
11,158
282,787
302,442

The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 1 (2022 - 1).

Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
7
Directors' remuneration (continued)
29
Remuneration disclosed above includes the following amounts paid to the highest paid director:
2023
2022
£
£
Remuneration for qualifying services
156,001
178,604
Company pension contributions to defined contribution schemes
13,266
11,158
8
Auditor's remuneration
2023
2022
Fees payable to the company's auditor and associates:
£
£
For audit services
Audit of the financial statements of the group and company
46,042
29,550
For other services
Tax services
19,000
10,900
Accounts preparation
6,858
4,950
Other services
14,950
27,560
Total non-audit fees
40,808
43,410
9
Investment income
2023
2022
£
£
Interest income
Financial instruments measured at amortised cost:
Bank deposits
423,192
231,977
10
Finance costs
2023
2022
£
£
Interest on bank overdrafts and loans
69,455
2
Interest on convertible loan notes
156,655
-
0
Interest on lease liabilities
332,663
98,512
Total interest expense
558,773
98,514
Unwinding of discount on provisions
16,374
15,582
575,147
114,096
Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
30
11
Income tax expense
2023
2022
£
£
Current tax
UK corporation tax on profits for the current period
15,818
12,396
Adjustments in respect of prior periods
(1,545,399)
(1,455,801)
Total UK current tax
(1,529,581)
(1,443,405)

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

2023
2022
£
£
Loss before taxation
(18,915,058)
(11,030,606)
Expected tax credit based on a corporation tax rate of 23.52% (2022: 19.00%)
(4,448,822)
(2,095,815)
Effect of expenses not deductible in determining taxable profit
820,848
101,625
Income not taxable
(45,244)
-
Change in unrecognised deferred tax assets
3,317,504
2,229,415
Adjustment in respect of prior years
(130,329)
(576)
Research and development tax credit
(1,408,389)
(1,442,829)
Other permanent differences
484,482
-
Fixed asset differences
24,894
(152,968)
Other differences
(144,525)
(82,257)
Taxation credit for the year
(1,529,581)
(1,443,405)

Deferred tax balances at the reporting date are measured at 25% (2022 - 25%).

 

The company has recognised deferred tax assets and liabilities, which are offset on the grounds that these unwind against each other and are with the same tax authority. Deferred tax assets are recognised on losses to the extent that these cancel out net liabilities arising on other timing differences only. The Directors do not consider there is sufficient certainty around the timing of future profits to recover tax losses for any further deferred tax asset to be recognised in respect of these losses.

 

The total value of deferred tax assets and liabilities as at 31 December 2023 is £7.8m (2022 £5.5m) resulting in a recognised deferred tax balance of nil. Unrecognised deferred tax assets total £10.1m (2022: £6.6m).

Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
31
12
Intangible assets
Patents & licences
Developed technology
Total
£
£
£
Cost
At 1 January 2022
784,321
-
0
784,321
Additions - purchased
368,600
-
368,600
At 31 December 2022
1,152,921
-
0
1,152,921
Additions -asset aquisition
-
0
41,010,938
41,010,938
Additions - purchased
479,549
-
0
479,549
At 31 December 2023
1,632,470
41,010,938
42,643,408
Amortisation and impairment
At 1 January 2022
110,578
-
110,578
Charge for the year
105,959
-
105,959
At 31 December 2022
216,537
-
216,537
Charge for the year
179,646
2,734,063
2,913,709
At 31 December 2023
396,183
2,734,063
3,130,246
Carrying amount
At 31 December 2023
1,236,287
38,276,875
39,513,162
At 31 December 2022
936,384
-
936,384

As detailed in the critical accounting estimates and judgements section the concentration test under IFRS 3.B7B has been applied and met. As a result, management have accounted for the acquisition of Cardea Bio Inc as an asset acquisition.

 

This gives rise to an addition of developed technology on consolidation comprising of the amount of consideration allocated to technology and know-how acquired from the purchase of Cardea Bio Inc and directly attributable transaction costs.

 

Management have reviewed the intangible assets for impairment at the balance sheet date. They have determined that it is not possible to estimate the recoverable amount of the individual intangible assets held. As a result, management have determined the recoverable amount of the cash-generating unit (CGU) to which these assets belong. That being the enlarged Paragraf group as noted in the critical accounting estimates and judgements section of these statements.

 

Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
32
13
Property, plant and equipment
Right of use assets
Leasehold improvements
Plant and equipment
Computers
Asset under course of construction
Total
£
£
£
£
£
£
Cost
At 1 January 2022
901,836
1,742,939
3,070,772
20,421
-
5,735,968
Additions
2,792,120
253,896
2,193,858
1,330
255,080
5,496,284
Disposals
-
0
(8,590)
-
0
-
0
-
(8,590)
At 31 December 2022
3,693,956
1,988,245
5,264,630
21,751
255,080
11,223,662
Additions
51,355
148,015
5,689,857
20,957
1,405,639
7,315,823
Additions - asset aquisition
152,411
47,263
268,845
44,891
-
513,410
Disposals
-
0
-
0
(12,185)
-
0
-
(12,185)
Lease modification
(115,933)
-
0
-
0
-
0
-
(115,933)
Transfers
-
0
384,706
-
0
-
0
(384,706)
-
0
At 31 December 2023
3,781,789
2,568,229
11,211,147
87,599
1,276,013
18,924,777
Accumulated depreciation and impairment
At 1 January 2022
103,182
301,271
1,127,637
5,205
-
1,537,295
Charge for the year
143,082
248,436
515,916
5,674
-
913,108
Eliminated on disposal
-
0
(2,727)
-
0
-
0
-
(2,727)
At 31 December 2022
246,264
546,980
1,643,553
10,879
-
2,447,676
Charge for the year
311,865
302,159
703,070
20,070
-
1,337,164
Eliminated on disposal
-
0
-
0
(6,207)
-
0
-
(6,207)
Eliminated on lease modification
(299,496)
-
0
-
0
-
0
-
(299,496)
At 31 December 2023
258,633
849,139
2,340,416
30,949
-
3,479,137
Carrying amount
At 31 December 2023
3,523,156
1,719,090
8,870,731
56,650
1,276,013
15,445,640
At 31 December 2022
3,447,692
1,441,265
3,621,077
10,872
255,080
8,775,986

All right-of-use assets recognised under IFRS 16 are considered to be under one class, leasehold property. All leases have terms ending on 31 January 2029 or 1 November 2037 and are for properties used in the company's operations. An assumption has been made that no break clauses will be exercised until this date and is disclosed as a critical judgement in Note 3.

 

Details on the recognition and measurement of right-of-use assets are disclosed as accounting policies in Note 1.

Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
13
Property, plant and equipment (continued)
33

During the year the lease of one of the right of use assets was renegotiated, as a result the right of use asset cost and accumulated depreciation includes modification adjustments to reflect the modified lease liability in relation to the revised lease agreement.

 

Within the plant and equipment category are assets with a value of £4,939k (2022: £442k) which are not yet in use and therefore not depreciated.

 

Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
34
14
Subsidiaries

Details of the company's subsidiaries at 31 December 2023 are as follows:

Name of undertaking
Registered office
Class of
shares held
% Held
Direct
Paragraf USA Inc (formerly Cardea Bio Inc)
1
Ordinary
100.00
Nanosens Innovations Inc
2
Ordinary
100.00

Registered office addresses (all UK unless otherwise indicated):

1
8969 Kenamar Dr Ste 104, San Diego 92121
2
9640 Towne Centre Dr Ste 100, San Diego 92121

 

15
Credit risk

Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions.

 

The company has implemented policies that require maintaining appropriate credit limits on all customers. The company's credit risk is primarily attributable to its trade receivables balance. The amounts presented in the Statement of Financial Position are net of allowances for doubtful debts.

 

The company does not have significant concentrations of credit risk. The deposits with banks are only held with reputable financial institutions for which credit worthiness is reviewed through the use of industry standard credit scores. All customers that are not Government Institutes or Universities are credit checked by obtaining a credit report from a reputable credit agency, from which credit limits and terms are set. Regular reviews for repeat customers are undertaken.

 

The company applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. Owing to a limited customer base over which Management maintain high visibility, the expected loss allowance at the reporting date is determined to be immaterial. On this basis, no allowance for doubtful debts has been recognised.

 

The directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value.

Except as detailed below, the carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the group's maximum exposure to credit risk.

Maximum credit risk
2023
2022
£
£
Trade and other receivables
1,010,865
2,776,547

The group does not hold any collateral or other credit enhancements to cover this credit risk.

Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
35
16
Trade and other receivables
2023
2022
£
£
Trade receivables
319,430
-
0
Provision for bad and doubtful debts
(109,128)
-
210,302
-
0
VAT recoverable
319,947
391,436
Amounts owed by fellow group undertakings
-
0
167,348
Other receivables
456,273
2,548,652
Prepayments
548,564
911,882
1,535,086
4,019,318
17
Trade receivables - credit risk
Fair value of trade receivables

The directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value.

Impaired trade receivables

Allowances for receivables represent bad and doubtful debts from customers, which are deemed unlikely to be recovered.

Movement in the allowances for doubtful debts
2023
2022
£
£
Additional allowance recognised
109,128
-
Balance at 31 December 2023
109,128
-
18
Fair value of financial liabilities

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

Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
36
19
Liquidity risk

The following table details the remaining contractual maturity for the group's financial liabilities with agreed repayment periods. The contractual maturity is based on the earliest date on which the group may be required to pay.

Less than 1 year
Between 1 and 5 years
Over 5 years
Total
£
£
£
£
At 31 December 2022
Trade and other payables
648,572
-
-
648,572
Lease liabilities
265,000
2,005,000
4,265,417
6,535,417
913,572
2,005,000
4,265,417
7,183,989
At 31 December 2023
Trade and other payables
961,111
-
-
961,111
Lease liabilities
522,927
2,418,017
3,725,000
6,665,944
1,484,038
2,418,017
3,725,000
7,627,055
Liquidity risk management

The company manages liquidity risk by maintaining sufficient cash to enable it to meet its operational requirements. Operating cash flows are actively managed with annual cash flow forecasts updated as required and subject to board review.

Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
37
20
Convertible loan notes

The net proceeds received from the issue of the convertible loan notes have been split between the financial liability element and an equity component, representing the fair value of the embedded option to convert the financial liability into equity as follows:

2023
£
Net proceeds of issue of convertible loan note
5,000,000
Equity component
-
Liability component at date of issue
5,000,000

The liability component is measured at amortised cost, and the difference between the carrying amount of the liability at the date of issue and the amount reported in the statement of financial position represents the effective interest rate less interest paid to that date.

The effective rate of interest is 6%.

Movements and balance at the period end
Liability
£
Liability component at 31 December 2022
-
Issue of convertible loan notes
5,000,000
Interest charged
156,655
Liability component at 31 December 2023
5,156,655
Liability component due within 12 months
5,156,655

The equity component of the convertible loan notes has been credited to the equity reserve.

Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
38
21
Market risk
Market risk management

The company's operations expose it to a variety of financial risks that include the effects of foreign exchange risk, credit risk, liquidity risk and interest rate risk. The company's overall risk management programme focuses on the unpredictability of the markets in which it operates and seeks to minimise associated volatility of the company's financial performance. The company does not use derivative financial instruments to manage interest rate costs and as such, no hedge accounting is applied.

 

Foreign exchange risk

The company purchases products from international sources and is exposed to foreign exchange risk arising from various currency exposure, primarily with respect to the US Dollar and the Euro. Foreign exchange risk arises from future commercial transactions and recognised trade payables. The company has implemented policies to monitor movements in the exchange rate and buying decisions are timed to minimise the impact of foreign exchange gains and losses.

 

Interest rate cash flow risk

The company has both interest bearing assets and interest bearing liabilities. Interest bearing assets comprise only cash balances which earn interest at floating rates, interest bearing liabilities include preferred shares.

 

Disclosure of credit risk, liquidity risk and capital risk management is covered in the proceeding notes.

22
Trade and other payables
2023
2022
£
£
Trade payables
961,111
648,572
Accruals
785,566
892,927
Deferred consideration
2,045,230
-
0
Social security and other taxation
177,651
149,361
Other payables
8,082
117,286
3,977,640
1,808,146
23
Lease liabilities
2023
2022
Maturity analysis
£
£
Within one year
522,927
265,000
In two to five years
2,418,017
2,005,000
In over five years
3,725,000
4,265,417
Total undiscounted liabilities
6,665,944
6,535,417
Future finance charges and other adjustments
(2,890,377)
(3,169,978)
Lease liabilities in the financial statements
3,775,567
3,365,439
Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
23
Lease liabilities (continued)
39

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:

2023
2022
£
£
Current liabilities
215,448
79,104
Non-current liabilities
3,560,119
3,286,335
3,775,567
3,365,439
Amounts in the reporting period
2023
2022
Amounts recognised in profit or loss include the following:
£
£
Interest on lease liabilities
332,663
98,512

Total cash outflows for leases during the reporting period was £326,368 (2022: £125,000).

 

All relevant leases recognised under IFRS 16 have lease terms ending on 31 January 2025, 31 January 2029 or 1 November 2037 and are for properties used in the company's operations. An assumption has been made that no break clauses will be exercised until this date and is disclosed as a critical judgement in Note 3.

 

Lease liabilities are calculated by discounting future lease payments to their present value by the company's incremental borrowing rate, which is a rate of interest that the company would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain a value similar to the right-of-use asset. This rate is determined as 8% plus the Bank of England base rate at the date of measurement.

24
Provisions for liabilities
2023
2022
£
£
Decommissioning provision
63,573
186,195
Dilapidation provision
50,000
-
113,573
186,195
All provisions are expected to be settled after more than 12 months from the reporting date.
Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
24
Provisions for liabilities (continued)
40
Movements on provisions:
Decommissioning provision
Dilapidation provision
Total
£
£
£
At 1 January 2023
186,195
-
186,195
Additional provisions in the year
51,355
50,000
101,355
Reversal of provision
(190,351)
-
(190,351)
Unwinding of discount
16,374
-
16,374
At 31 December 2023
63,573
50,000
113,573
25
Retirement benefit schemes
2023
2022
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
312,402
213,172

The group operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.

26
Share premium account
2023
2022
£
£
At the beginning of the year
59,709,153
19,651,764
Issue of new shares
7,043
40,286,668
Share issue expenses
(31,795)
(229,279)
At the end of the year
59,684,401
59,709,153
27
Share-based payments

The company operates approval EMI and CSOP share option schemes for the benefit of all UK employees, an ISO share option scheme for the benefit of all US employees and an unapproved share option scheme for any employees who are not able to benefit from an approved scheme. Granted options vest over a 5 year period. The first vesting date is 12 months from date of grant, at which 20% of granted options can be exercised, and every 6 months following, at which 10% of granted options can be exercised. The options are accounted for as equity settled share based payment transactions.

 

The following table illustrates the number and weighted average exercise prices of, and movements in, share options during the year:

Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
27
Share-based payments (continued)
41
Number of share options
Average exercise price
2023
2022
2023
2022
£
£
Outstanding at 1 January 2023
521,308
562,354
1.34
1.35
Granted in the period
163,000
-
3.82
-
Forfeited in the period
(49,900)
(34,110)
3.16
1.51
Exercised in the period
(4,250)
(6,936)
1.51
0.83
Outstanding at 31 December 2023
630,158
521,308
1.84
1.34
Exercisable at 31 December 2023
375,579
310,756
1.33
1.27
Options outstanding
Share options outstanding at the end of the year have the following expiry dates and exercise prices:
2023
2022
Grant date
Expiry date
Exercise price
Number
Number
2018-2019
10 years from grant date
£0.42
78,960
78,960
2019-2021
10 years from grant date
£1.51
423,498
442,348
2023
10 years from grant date
£3.77
89,700
-
2023
10 years from grant date
£3.90
38,000
-
630,158
521,308
Expenses
Related to equity settled share based payments
41,617
48,993
28
Share capital
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of 0.1p each
4,939,376
4,112,669
4,939
4,113
Growth shares of 0.1p each
372,745
-
373
-
5,312,121
4,112,669
5,312
4,113
Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
28
Share capital (continued)
42
2023
2022
2023
2022
Preferred share capital
Number
Number
£
£
Issued and fully paid
Preferred 1 shares of 0.1p each
1,980,480
1,980,480
1,980
1,980
Preferred 2 shares of 0.1p each
475,910
475,910
476
476
2,456,390
2,456,390
2,456
2,456
Preferred shares classified as equity
2,456
2,456
Total equity share capital
7,768
6,569
Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
28
Share capital (continued)
43

Share capital contains amounts subscribed for share capital at nominal value.

 

Ordinary Shares
Each ordinary share is entitled to one vote in any circumstances. Each ordinary share is entitled pari passu to dividend payments or any other distribution. Each ordinary share is entitled pari passu to participate in a distribution arising from a winding up of the company.

 

Preferred 1 and 2 shares
1. The company will, with the approval of the board and the consent of a preferred investor majority, pay in respect of each Preferred Share, a cash preferential dividend at the annual rate of 8 per cent of the issue price per Preferred Share. Such dividend shall be paid when a dividend or distribution on any Shares is to be declared by the board. If the company has insufficient profits to pay in full on the due date any preference dividend, then it will pay it to the extent that it is then able to do so. Ordinary shares shall not be entitled to such a cash preferential dividend.

 

2. Subject to the below, on a distribution of assets on a liquidation or a return of capital, the surplus assets of the company remaining after payment of its liabilities shall be applied:

 

(a) first, in paying a sum equal to £x plus £100 (where x is an amount equal to the aggregate issue price of all the Preferred Shares in issue), to be distributed as to 0.0001% per cent to the holders of Ordinary Shares (pro rata according to the number of Ordinary Shares held), with the balance to the holders of the Preferred Shares, up to the issue price of each Preferred Share. The available assets shall be distributed to the holders of the Preferred Shares and the Ordinary Shares pro rata to the amounts they would have received under this section; and

 

(b) the balance of the surplus assets (if any) shall be distributed as to 0.0001% per cent to the holders of the Preferred Shares, with the balance distributed among the holders of the Ordinary Shares (both pro rata to the number of shares held).

 

If on a distribution of assets as above, holders of the Preferred Shares would be entitled to a greater pro rata portion per share of such assets if such shares were converted to Ordinary Shares, the holder shall be entitled to receive such amounts as if they had been converted. A holder of Preferred Shares shall be entitled, on notice to the company, to require conversion into Ordinary Shares of all their fully paid Preferred Shares, at any time and provided that the holder may state that conversion is conditional upon certain events.

 

3. Preferred Shares shall automatically convert into Ordinary Shares on the date of a notice given by the holders of a majority of the Preferred Shares. Preferred Shares shall automatically convert into Ordinary Shares on an IPO.

 

Growth shares

Growth shares have no voting rights and no entitlements to dividends. They do participate on acquisition or liquidation. In the opinion of the directors the fair value of growth shares is not considered to be material. Therefore, no IFRS 2 charge has been recognised in the financial statements.

Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
28
Share capital (continued)
44
Reconciliation of movements during the year:
Ordinary
Preferred 1
Preferred 2
Growth
Number
Number
Number
Number
At 1 January 2023
4,112,669
1,980,480
475,910
-
Issue of fully paid shares
826,707
-
-
372,745
At 31 December 2023
4,939,376
1,980,480
475,910
372,745

During the year the following issues of share capital were made:

 

4,250 share options with nominal value 0.1p were exercised.

 

372,745 growth shares with nominal value of 0.1p were issued to two employees.

 

822,457 ordinary shares with nominal value 0.1p were issued as part consideration for an acquisition.

29
Merger reserve
2023
2022
£
£
At the beginning of the year
-
-
Additions
32,207,916
-
At the end of the year
32,207,916
-

The merger reserve at 31 December 2023 arose from a share for share exchange as part of the consideration for the acquisition of Paragraf USA Inc (formerly Cardea Bio Inc).

30
Capital commitments
2023
2022
£
£

At 31 December 2023 the group had capital commitments as follows:

Contracted for but not provided in the financial statements:
Acquisition of property, plant and equipment
5,060,938
2,837,554
31
Events after the reporting date

On 23 February investment funding of £14,491,949 was completed, through the issue of 754,789 preferred 3 shares over 2 tranches. With tranche 1 amounting to £7,245,984 received on signing and the remaining balance scheduled for receipt by the end of quarter 2.

 

Additionally, the £5,000,000 convertible loan note issued in 2023 (shown in note 20) was converted on 21 February 2024 through the issue of 338,498 preferred 3 shares.

Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
45
32
Capital risk management

Management regard the capital structure of the company to consist of the ordinary and preferred shares in issue.

 

The company's objectives when managing capital are to safeguard the company's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital.

 

In order to maintain or adjust the capital structure, the company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

 

The company keeps the capital structure under review through the use of monthly financial forecasts. These forecasts, including a detailed run rate forecast, provide the Board with an assessment of the company's capital adequacy for the period under review. Management consider the current management of capital to be satisfactory.

 

The group is not subject to any externally imposed capital requirements.

33
Related party transactions
Remuneration of key management personnel

The remuneration of key management personnel, including directors, is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures.

2023
2022
£
£
Short-term employee benefits
957,794
656,438
Post-employment benefits
52,166
74,642
Share-based payments
19,372
24,430
1,029,332
755,510

In addition to the above, fees of £134,192 were awarded to other members of key management personnel in respect of services provided to the company.

34
Controlling party

As of the reporting date, the entity does not have an ultimate controlling party.

Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
46
35
Cash absorbed by operations
2023
2022
£
£
Loss for the year before income tax
(18,915,058)
(11,030,606)
Adjustments for:
Finance costs
575,147
114,096
Investment income
(423,192)
(231,977)
Loss on disposal of property, plant and equipment
5,978
5,863
Amortisation and impairment of intangible assets
2,913,709
105,959
Depreciation and impairment of property, plant and equipment
1,337,164
913,108
Foreign exchange gains on cash equivalents
(19,087)
-
Equity settled share based payment expense
41,617
48,993
Decrease in provisions
(72,622)
(2,976)
Movements in working capital:
Decrease in inventories
-
65,322
Decrease/(increase) in trade and other receivables
2,648,393
(3,782,158)
(Decrease)/increase in trade and other payables
(8,055,419)
130,584
Cash absorbed by operations
(19,963,370)
(13,663,792)
36
Analysis of changes in net funds/(debt)
1 January 2023
Cash flows
New finance leases
Other non-cash changes
31 December 2023
£
£
£
£
£
Cash at bank and in hand
27,139,215
(20,237,057)
-
-
6,902,158
Finance lease obligations
(3,365,439)
326,238
(203,766)
(532,600)
(3,775,567)
Convertible loan notes
-
(5,000,000)
-
(156,655)
(5,156,655)
23,773,776
(24,910,819)
(203,766)
(689,255)
(2,030,064)
1 January 2022
Cash flows
New finance leases
Other non-cash changes
31 December 2022
Prior year:
£
£
£
£
£
Cash at bank and in hand
2,334,620
24,804,595
-
-
27,139,215
Finance lease obligations
(668,793)
125,000
(2,723,134)
(98,512)
(3,365,439)
1,665,827
24,929,595
(2,723,134)
(98,512)
23,773,776
Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
47
37
Prior period adjustment

Transaction costs directly attributable to the acquisition of subsidiary amounting to £446,344 were expensed to the profit or loss in the prior year in accordance with IFRS 3:53. However, as the concentration test was subsequently met, the acquisition of the subsidiary has been accounted for as an asset acquisition as detailed in the critical accounting estimates and judgements section of these statements.

 

As such, the transaction falls under the scope of IAS 38, whereby any directly attributable expenditure on preparing the asset for its intended use are incorporated into the cost of the asset acquired. Therefore, a restatement was required to ensure these costs were included in the cost of the investment in subsidiary in the parent company statement of financial position.

 

This is the first year that the group has prepared consolidated financial statements. As a result, there has been no restatement of the group statement of financial position or income statement on this basis.

 

 

Changes to the statement of financial position
At 31 December 2022
Previously reported
Adjustment
As restated
£
£
£
Current assets
Debtors due within one year
5,028,199
446,344
5,474,543
Net assets
36,520,011
446,344
36,966,355
Capital and reserves
Retained earnings
(23,195,711)
446,344
(22,749,367)
Total equity
36,520,011
446,344
36,966,355
Changes to the income statement
Period ended 31 December 2022
Previously reported
Adjustment
As restated
£
£
£
Administrative expenses
(9,926,662)
446,344
(9,480,318)
Loss for the financial period
(10,033,545)
446,344
(9,587,201)
Paragraf Limited
Notes to the group financial statements (continued)
For the year ended 31 December 2023
37
Prior period adjustment (continued)
48
Reconciliation of changes in equity
1 January
31 December
2022
2022
Notes
£
£
Equity as previously reported
6,444,799
36,520,011
Adjustments to prior year
-
446,344
Equity as adjusted
6,444,799
36,966,355
Analysis of the effect upon equity
Retained earnings
-
446,344
Reconciliation of changes in loss for the previous financial period
2022
Notes
£
Loss as previously reported
(10,033,545)
Adjustments to prior year
446,344
Loss as adjusted
(9,587,201)
Paragraf Limited
Notes to company financial statements
Paragraf Limited
Notes to the company financial statements
For the year ended 31 December 2023
49
38
Employees

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

2023
2022
Number
Number
Directors
2
2
Technology & IP
59
41
Operations & Commercial
44
32
Finance, HR & Business Administration
9
9
Total
114
84

Their aggregate remuneration comprised:

2023
2022
£
£
Wages and salaries
6,139,531
4,653,129
Social security costs
618,685
501,301
Pension costs
312,402
213,172
7,070,618
5,367,602
Paragraf Limited
Notes to the company financial statements (continued)
For the year ended 31 December 2023
50
39
Intangible assets
Patents & licences
£
Cost
At 1 January 2022
784,321
Additions
368,600
At 31 December 2022
1,152,921
Additions - purchased
361,598
At 31 December 2023
1,514,519
Amortisation and impairment
At 1 January 2022
110,578
Charge for the year
105,959
At 31 December 2022
216,537
Charge for the year
149,717
At 31 December 2023
366,254
Carrying amount
At 31 December 2023
1,148,265
At 31 December 2022
936,384
At 31 December 2021
673,743

 

Paragraf Limited
Notes to the company financial statements (continued)
For the year ended 31 December 2023
51
40
Property, plant and equipment
Right of use assets
Leasehold improvements
Plant and equipment
Computers
Asset under course of construction
Total
£
£
£
£
£
£
Cost
At 1 January 2022
901,836
1,742,939
3,070,772
20,421
-
5,735,968
Additions
2,792,120
253,896
2,193,858
1,330
255,080
5,496,284
Disposals
-
0
(8,590)
-
0
-
0
-
(8,590)
At 31 December 2022
3,693,956
1,988,245
5,264,630
21,751
255,080
11,223,662
Additions
51,355
148,015
5,689,857
20,957
1,405,639
7,315,823
Disposals
-
0
-
0
(12,185)
-
0
-
(12,185)
Modifications
(115,933)
-
0
-
0
-
0
-
(115,933)
Transfers
-
0
384,706
-
0
-
0
(384,706)
-
0
At 31 December 2023
3,629,378
2,520,966
10,942,302
42,708
1,276,013
18,411,367
Accumulated depreciation and impairment
At 1 January 2022
103,182
301,271
1,127,637
5,205
-
1,537,295
Charge for the year
143,082
248,436
515,916
5,674
-
913,108
Eliminated on disposal
-
0
(2,727)
-
0
-
0
-
(2,727)
At 31 December 2022
246,264
546,980
1,643,553
10,879
-
2,447,676
Charge for the year
301,628
272,114
669,042
8,350
-
1,251,134
Eliminated on disposal
-
0
-
0
(6,207)
-
0
-
(6,207)
Eliminated on modification
(299,496)
-
0
-
0
-
0
-
(299,496)
At 31 December 2023
248,396
819,094
2,306,388
19,229
-
3,393,107
Carrying amount
At 31 December 2023
3,380,982
1,701,872
8,635,914
23,479
1,276,013
15,018,260
At 31 December 2022
3,447,692
1,441,265
3,621,077
10,872
255,080
8,775,986

All right-of-use assets recognised under IFRS 16 are considered to be under one class, leasehold property. All leases have terms ending on 31 January 2029 or 1 November 2037 and are for properties used in the company's operations. An assumption has been made that no break clauses will be exercised until this date and is disclosed as a critical judgement in Note 3.

 

Details on the recognition and measurement of right-of-use assets are disclosed as accounting policies in Note 1.

Paragraf Limited
Notes to the company financial statements (continued)
For the year ended 31 December 2023
40
Property, plant and equipment (continued)
52

During the year the lease of one of the right of use assets was renegotiated, as a result the right of use asset cost and accumulated depreciation includes modification adjustments to reflect the modified lease liability in relation to the revised lease agreement.

 

Within the plant and equipment category are assets with a value of £4,939k (2022: £442k) which are not yet in use and therefore not depreciated.

41
Investments
Investment in subsidiary undertakings

Details of the company's principal operating subsidiaries are included in note 14.

Movements in non-current investments
Shares in subsidiaries
£
Cost or valuation
At 1 January 2023
7
Additions
35,179,725
Disposals
(7)
At 31 December 2023
35,179,725
Carrying amount
At 31 December 2023
35,179,725
At 31 December 2022
7

During 2023 Paragraf Inc. closed and the name was transferred to Paragraf USA Inc (Formely Cardea Bio Inc). As such, the carrying amount of the investment in this company was disposed of in the year.

42
Trade and other receivables
2023
2022
£
£
Trade receivables
62,466
-
VAT recoverable
319,947
391,436
Amounts owed by fellow group undertakings
8,400,825
167,348
Other receivables
446,262
2,548,652
Prepayments
543,887
911,882
9,773,387
4,019,318
Paragraf Limited
Notes to the company financial statements (continued)
For the year ended 31 December 2023
53
43
Fair value of financial liabilities

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

44
Convertible loan notes

The net proceeds from the issue of the convertible loan notes have been split between the financial liability element and an equity component, representing the fair value of the embedded option to convert the financial liability into equity as follows:

The liability component is measured at amortised cost, and the difference between the carrying amount of the liability at the date of issue and the amount reported in the statement of financial position represents the effective interest rate less interest paid to that date.

The effective rate of interest is 6%.

Movements and balance at the period end
Liability
£
Liability component at 31 December 2022
-
Issue of convertible loan notes
5,000,000
Interest charged
156,655
Liability component at 31 December 2023
5,156,655
Liability component due within 12 months
5,156,655

The equity component of the convertible loan notes has been credited to the equity reserve.

45
Trade and other payables
2023
2022
£
£
Trade payables
839,221
648,572
Accruals
446,736
892,927
Deferred consideration
2,045,230
-
0
Social security and other taxation
177,651
149,361
3,508,838
1,690,860
Paragraf Limited
Notes to the company financial statements (continued)
For the year ended 31 December 2023
54
46
Lease liabilities
2023
2022
Maturity analysis
£
£
Within one year
427,298
265,000
In two to five years
2,410,019
2,005,000
In over five years
3,725,000
4,265,417
Total undiscounted liabilities
6,562,317
6,535,417
Future finance charges and other adjustments
(2,884,631)
(3,169,978)
Lease liabilities in the financial statements
3,677,686
3,365,439

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:

2023
2022
£
£
Current liabilities
125,730
79,104
Non-current liabilities
3,551,956
3,286,335
3,677,686
3,365,439

The fair value of the company's lease obligations is approximately equal to their carrying amount.

Total cash outflows for leases during the reporting period was £278,750 (2022: £125,000).

 

All relevant leases recognised under IFRS 16 have lease terms ending on 31 January 2029 or 1 November 2037 and are for properties used in the company's operations. An assumption has been made that no break clauses will be exercised until this date and is disclosed as a critical judgement in Note 3.

 

Lease liabilities are calculated by discounting future lease payments to their present value by the company's incremental borrowing rate, which is a rate of interest that the company would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain a value similar to the right-of-use asset. This rate is determined as 8% plus the Bank of England base rate at the date of measurement.

47
Provisions for liabilities
2023
2022
£
£
Decommissioning provision
63,573
186,195
Dilapidation provision
50,000
-
113,573
186,195
All provisions are expected to be settled after more than 12 months from the reporting date in accordance with the lease term.
Paragraf Limited
Notes to the company financial statements (continued)
For the year ended 31 December 2023
47
Provisions for liabilities (continued)
55
Movements on provisions:
Decommissioning provision
Delapidation provision
Total
£
£
£
At 1 January 2023
186,195
-
186,195
Additional provisions in the year
51,355
50,000
101,355
Reversal of provision
(190,351)
-
(190,351)
Unwinding of discount
16,374
-
16,374
At 31 December 2023
63,573
50,000
113,573

Decommissioning provision

This provision is the discounted present value of estimated future costs to be incurred in dismantling and removing modifications made to leasehold properties occupied by the company at 1 Tower Road and restoring these to the conditions required by the terms and conditions of the respective lease. The provision has been calculated as 20% of laboratory build and service installation costs on a rolling basis. This rate has been determined using the professional judgement and experience of Management. The relevant lease has a lease term ending 1 November 2037.

Dilapidation provision

In accordance with the lease for units 7&8 and 17/18 West Newlands Road, 6 months before the end of the lease the properties must be decorated. Management have taken a best estimate of the future expenditure, based on current property condition, and typical costs incurred with other decoration projects. The provision reflects the present value of expenditure to settle this obligation which will fall due between 1 August 2028 and 31 January 2029.

48
Share-based payments
The company information for share-based payments is the same as the group information and is shown in note 27.
49
Share capital
Refer to note 28 of the group financial statements.
2023-12-312023-01-01falseCCH SoftwareCCH Accounts Production 2023.300Alistair CrawfordDr Simon ThomasProfessor Sir Colin HumphreysDr Andrew LynnJohn HalfpennySomasundaram SubramaniamDavid CummingsIQ Capital Directors Nominees LimitedParkwalk Advisors 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