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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
Page 17
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COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2024
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CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2024
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CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2024
Page 20
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CONSOLIDATED ANALYSIS OF NET DEBT
FOR THE YEAR ENDED 31 DECEMBER 2024
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
Touchlight Holdings Limited is a private company, limited by shares and incorporated in England and Wales. The address of the registered office is Morelands & Riverdale Buildings, Lower Sunbury Road, Hampton, England, TW12 2ER.
2.Accounting policies
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies (see note 3).
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of comprehensive income in these financial statements.
The following principal accounting policies have been applied:
The parent Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006, and has not presented its own Profit and Loss Account in these financial statements.
In addition, the parent Company has taken advantage of the disclosure exemptions available in FRS 102 from presenting a Statement of Cash flows for the parent Company. In preparing these financial statements, the Company has taken advantage of the requirements of Sections 11 and 12 in respect of the disclosure of financial instruments.
The consolidated financial statements present the results of the Company and its own subsidiaries ("the Group") as if they form a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the purchase method. In the Statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the Consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date control ceases. In accordance with the transitional exemption available in FRS 102, the Group has chosen not to retrospectively apply the standard to business combinations that occurred before the date of transition to FRS 102. Therefore, the Group continues to recognise a merger reserve which arose on a past business combination that was accounted for as a merger in accordance with UK GAAP as applied at that time.
Page 22
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
2.Accounting policies (continued)
In preparing the financial statements the directors are required to assess the Group and Company's ability to continue to trade as a going concern for the foreseeable future.
The closing net liabilities position in December 2024 was £55.9 million (FY2023: £42.2 million restated). The closing cash balance was £11.8 million in December 2024 (FY2023: £17.8million). The business environment remains uncertain due to the impact of inflation and increasing interest rates on global financial markets. This environment could lead to a slow-down of funding for Biotechs and potentially slower adoption of our technology by clients. The directors have performed an assessment of going concern. Assessments have been undertaken around customer and supply continuity as well as stress-testing forecasted cash flow for delays in signing new contracts. Any future impact is most likely to come from customers and their purchasing requirements. Interruptions to customer operations could potentially impact their ability to pay on time leading to a reduction in the Group's cash receipts. The directors have sought to reduce this potential impact by maintaining communication channels with customers in order to anticipate any risks. The duration and severity of the impact of the economic climate has been carefully monitored. If the period of impact was to extend further or the assessed impact on revenue and cash flows to be more severe than anticipated, the Group would look to adjust its operations as and when required. The Group also has a £10,000,000 Shareholder Facility which can be drawn upon for general corporate purposes if required, committed through 31 March 2027 and permitting interest capitalisation with no financial maintenance covenants. Having considered the Group’s cash-flow forecasts for a period of 12 months from the date of approval of these financial statements, together with the availability of the Shareholder Facility, the Directors believe that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the financial statements have been prepared on a going concern basis.
Functional and presentation currency
Transactions and balances
Page 23
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
2.Accounting policies (continued)
Turnover from licensing intellectual property rights is recognised in accordance with the stage of completion of the contract when all of the following conditions are satisfied:
∙the amount of turnover can be measured reliably;
∙it is probable that the Company will receive the consideration due under the contract;
Where the Company grants a customer a licence to use specified intellectual property (e.g., non exclusive patent and know how rights) and the customer can benefit from that licence without requiring material further performance from the Company, revenue from any up front licence fee is recognised at the point in time the licence is granted.
Where a licence arrangement requires continuing activities that are integral to the licence (for example, substantive technology transfer or on going enablement that significantly enhances the licensed rights for the customer), revenue is recognised over time by reference to the stage of completion of those activities when the outcome can be measured reliably. Development or regulatory milestone payments are recognised only when the milestone is achieved (i.e., when the underlying uncertainty is resolved) and it is highly probable that the revenue recognised will not reverse. Fixed annual fees that are contingent on the licence remaining in force to a contract anniversary date are recognised when the fee becomes due/non refundable (i.e., on the anniversary date), rather than on a straight line basis over the year.
Turnover from royalties is recognised in the period in which it is due.
Page 24
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
2.Accounting policies (continued)
Cost of Sales represents the direct and attributable costs incurred in the production and delivery of goods and services sold by the Group during the financial year. These costs include:
∙Raw materials and consumables used in the manufacture of synthetic DNA and related products.
∙Direct labour costs associated with manufacturing and rendering of services.
∙External facility costs and other third party materials and costs directly related to client programmes.
∙Third-party service costs, such as outsourced activities and logistics where applicable.
Costs are recognised in the period in which the associated revenue is recognised, in accordance with the Group’s revenue recognition policy.
Research and development expenditure is written off as incurred and recognised in the Statement of Comprehensive Income.
Development costs have been capitalised in accordance with FRS 102 Section 18 Intangible Assets other than Goodwill and are therefore not treated, for dividend purposes, as a realised loss.
Tax credits relating to research and development are recognised in the Statement of Comprehensive Income on a receivable basis.
Patent maintenance costs are recognised in the Statement of Comprehensive Income as they are incurred.
The deferred element of grants is included in creditors as deferred income.
Staff costs relating to time spent on specific projects are allocated to cost of sales and research and development costs, as appropriate. All other staff costs, including sickness, holidays and time spent training are allocated to administrative expenses.
Page 25
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
2.Accounting policies (continued)
Where share options are awarded to employees, the fair value of the options are charged to the Consolidated Statement of Comprehensive Income over the vesting period. Where share options previously awarded to employees lapse, the fair value of these options at the date of grant are credited to the Consolidated Statement of Comprehensive Income. The fair value of the award also takes into account non-vesting conditions. These are either factors beyond the control of either party (such as a target based on an index) or factors which are within the control of one or other of the parties (such as the Group keeping the scheme open or the employee maintaining any contributions required by the scheme). Where equity instruments are granted to persons other than employees, the Consolidated Statement of Comprehensive Income is charged with the fair value of goods and services received, allocated based on the Group's use of the services. The fair value of the share options granted was determined using an equity-allocation model based on the Black-Scholes-Merton option-pricing methodology, taking into account factors such as management's assessment of equity value at each valuation date, expected term to exit, expected equity volatility, exercise price, risk-free interest rate and assumed dividend yield. These assumptions were based on (i) information and an exit timetable determined by management and (ii) market data, including UK government bond yields for the risk-free rate and volatility benchmarks derived from comparable biotechnology companies.
Page 26
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
2.Accounting policies (continued)
Goodwill
Goodwill represents the difference between amounts paid on the cost of a business combination and the acquirer's interest in the fair value of the Group's share of its identifiable assets and liabilities of the acquiree at the date of acquisition. Subsequent to initial recognition, goodwill is measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is amortised on a straight- line basis to the Consolidated Statement of Comprehensive Income over its useful economic life.
Other intangible assets
All intangible assets are considered to have a finite useful life. If a reliable estimate of the useful life cannot be made, the useful life shall not exceed ten years.
The estimated useful lives range as follows:
Assets in the course of construction are not amortised until they are brought into use. At each reporting date the Company assesses whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is determined, which is the higher of its fair value less costs to sell and its value in use. An impairment loss is recognised where the carrying amount exceeds the recoverable amount.
Amortisation of intangible assets is recognised within both cost of sales and administrative expenses in the Statement of Comprehensive Income, depending on the nature and use of the underlying asset.
Page 27
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
2.Accounting policies (continued)
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
Depreciation is provided on the following basis:
Assets in the course of construction are not depreciated until they are brought into use.
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
Assets that are subject to depreciation or amortisation are assessed at each balance sheet date to determine whether there is any indication that the assets are impaired. Where there is any indication that an asset may be impaired, the carrying value of the asset is tested for impairment. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. Non- financial assets that have been previously impaired are reviewed at each balance sheet date to assess whether there is any indication that the impairment losses recognised in prior periods may no longer exist or may have decreased.
An entity is treated as a joint venture where the Group is a party to a contractual agreement with one or more parties from outside the Group to undertake an economic activity that is subject to joint control.
An entity is treated as an associated undertaking where the Group exercises significant influence in that it has the power to participate in the operating and financial policy decisions. In the consolidated financial statements, interests in associated undertakings are accounted for using the equity method of accounting. Under this method an equity investment is initially recognised at the transaction price (including transaction costs) and is subsequently adjusted to reflect the investor's share of the profit or loss, other comprehensive income and equity of the associate. The Consolidated Statement of Comprehensive Income includes the Group's share of the operating results, interest, pre-tax results and attributable taxation of such undertakings applying accounting policies consistent with those of the Group. In the Consolidated Balance Sheet, the interests in associated undertakings are shown as the Group's share of the identifiable net assets, including any unamortised premium paid on acquisition. Any premium on acquisition is dealt with in accordance with the goodwill policy.
Page 28
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
2.Accounting policies (continued)
Provisions are recognised when an event has taken place that gives rise to a legal or constructive obligation, a transfer of economic benefits is probable and a reliable estimate can be made.
Provisions are measured as the best estimate of the amount required to settle the obligation, taking into account the related risks and uncertainties. Increases in provisions are generally charged as an expense to profit or loss.
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into, rather than the financial instrument’s legal form. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.
Page 29
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
2.Accounting policies (continued)
(i) Financial assets and liabilities
All financial assets and liabilities are initially measured at transaction price (including transaction costs), except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value (which is normally the transaction price excluding transaction costs), unless the arrangement constitutes a financing transaction. If an arrangement constitutes a financing transaction, the financial asset or financial liability is measured at the present value of the future payments discounted at a market rate of interest for a similar debt instrument. Financial assets and liabilities are only offset in the statement of financial position when, and only when there exists a legally enforceable right to set off the recognised amounts, and the Group intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Debt instruments which meet the following conditions of being ‘basic’ financial instruments as defined in paragraph 11.9 of FRS 102 are subsequently measured at amortised cost using the effective interest method. Debt instruments that have no stated interest rate (and do not constitute financing transaction) and are classified as payable or receivable within one year are initially measured at an undiscounted amount of the cash or other consideration expected to be paid or received, net of impairment. With the exception of some hedging instruments, other debt instruments not meeting conditions of being ‘basic’ financial instruments are measured at fair value through profit or loss. Commitments to make and receive loans which meet the conditions mentioned above are measured at cost (which may be nil) less impairment. Financial assets are derecognised when and only when a) the contractual rights to the cash flows from the financial asset expire or are settled, b) the Group transfers to another party substantially all of the risks and rewards of ownership of the financial asset, or c) the Group, despite having retained some, but not all, significant risks and rewards of ownership, has transferred control of the asset to another party. Financial liabilities are derecognised only when the obligation specified in the contract is discharged, cancelled or expires. (ii) Investments Investments in non-derivative instruments that are equity of the issuer (where shares are publicly traded or their fair value is reliably measurable) are measured at fair value through profit or loss. Where fair value cannot be measured reliably, investments are measured at cost less impairment. In the Company balance sheet, investments in subsidiaries and associates are measured at cost less impairment. (iii) Equity instruments Equity instruments issued by the Company are recorded at the fair value of cash or other resources received or receivable, net of transaction costs.
Page 30
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
2.Accounting policies (continued)
Financial risks are risks arising from financial instruments to which the Group is exposed during or at the end of the reporting period. The primary objectives of the financial risk management function are to establish risk limits, and then ensure that exposure to risks stays within these limits. The main risks arising from the Group's financial instruments are interest rate risk and fair value risk. The directors review and agree policies for managing such risks on an ongoing basis as summarised below.
(i)Interest rate risk. The Group holds loan notes at variable interest rates. If the interest rate were to move this would lead to either an increase or decrease in the interest payable. The Group maintains a natural hedge through interest received on its cash reserves. Interest rate risk is monitored on an ongoing basis and should cash reserves be projected to fall or rates move adversely the Group will consider hedging strategies.
(ii)Fair value risk. The Group holds preference shares which are recorded at fair value through profit and loss. The preference shares have a liability component. The liability component contains a conversion option which provides a variable return to the holder in the event of a non qualifying IPO. However, the probability of a non-qualifying IPO is considered minimal. Consequently, such risk is considered remote.
Page 31
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
The Company and Group make estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below. Key sources of estimation uncertainty: (i) Valuation of the share options As the shares in the parent Company are not publicly traded, the directors estimate the fair value of the share options on the date on which they are granted. In estimating the fair value of the share options, the directors have regard to the share price of the most recent issue of shares prior to issuing the shares, the results of recent fundraising, projected business performance, the assumed timing of an Exit or IPO, the net assets of the Group and the prevailing economic and market conditions at the date the option is granted. (ii) Impairment of licences Licences (with a carrying value of £25,649,304 (2023: £27,772,005)) are reviewed by the directors for impairment at each balance sheet date. If events or changes in circumstances indicate that the carrying amounts of the licences should be impaired, an impairment loss is recognised in the Statement of Comprehensive Income. The impairment review requires the use of estimates such as future cash flows from the licences and the discount rates applicable to those cash flows. (iii) Accounting for Preference shares and Preference dividends To calculate the liability for the preference shares and dividends, the directors estimate the discount factor to be applied and the expected payment date for the dividends based on the plans for the Group, including the assumed timing of an Exit or IPO, and commercial borrowing rates. At the year end the fair value of the preference debt is £90,630,000 (2023: £85,549,754). (iv) Valuation of loan notes Loan notes are initially measured at fair value through the profit and loss. The directors use the income approach, including assumptions around estimated repayment timing such as the assumed timing of an Exit or IPO, to estimate the present value of future interest payments using a discount rate based on commercial borrowing rates and adjusted for risk. At the year end the fair value of the loan notes is £27,843,321 (2023: £28,060,364).
Page 32
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
Analysis of turnover by country of destination:
Page 33
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
Page 34
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
Page 35
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
Page 36
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
13.Taxation (continued)
The Group has tax losses amounting to approximately £56,047,971 (2023: £50,419,508) available to carry forward against future profits. The headline rate of corporation tax increased to 25% from 1 April 2023. Therefore, the deferred tax asset relating to the losses carried forward has been calculated at the rate of 25% (2023: 25%). At 31 December 2024, the deferred tax asset amounted to approximately £14,011,993 (2023: £8,234,849) for the Group and £401,625 (2023: £697,425) for the Company. No deferred tax asset has been recognised in these financial statements due to uncertainty over the timing of recoverability of the asset. The movement in deferred tax not recognised consists of deferred tax in relation to losses and capital allowances.
Page 37
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
Page 38
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
Page 39
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
Page 40
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
Page 41
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
Page 42
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
In the opinion of the directors, the balances owed to Group participating interests are interest free, have no fixed date of repayment and are repayable on demand.
Included within other loans due in 1 year are £Nil (2023: £150,000) of convertible loan notes issued by a subsidiary company during prior years. During the year, the loan notes were converted into share capital within Ceva Hampton Limited (formerly Touchlight Aquaculture Limited).
Loan notes due after more than 5 years comprises loan notes which were issued by the Company on 8 January 2021. A fair value movement of (£217,043) (£2023: £6,192,705) has been recognised in the Consolidated Statement of Comprehensive Income in respect of these loan notes. Included in the fair value is interest charged at 0.5% above the Lloyds PLC Commercial lending rate. These loan notes are unsecured.
The loan notes are due for repayment on the tenth anniversary of the instrument, on 8 January 2031, and so have been classified as being due in more than 5 years. The preference shares are converted into ordinary shares on a one-for-one basis, in the event of a qualifying IPO, and on a variable basis, in the event of a non-qualifying IPO. The instrument contains an equity component for the holder’s right to receive discretionary dividends on a pro-rata basis. The liability component contains a conversion option which provides a variable return to the holder, therefore, the liability component is classified as a non-basic financial instrument.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
24.Share capital (continued)
Share premium account
Non controlling interest
The reserve recorded losses as at 31 December 2024 of £165,737.
Share option reserve
Merger reserve
acquirer’s interest in the Group's share of its identifiable assets and liabilities of the acquiree at the beginning of the financial year in which the combination occurred.
Profit and loss account
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
The comparative figures in the primary statements and notes have been restated to reflect the following prior period errors.
The directors of Touchlight Holdings Limited identified that interest payable in the prior year was overstated for the years ended 31 December 2022 and 31 December 2023 of £657,246 and £1,425,249 respectively. This related to accrued interest payable on the loan notes which should have been removed at the time of adopting Fair Value measurement of the notes. This has resulted in a total reduction in creditors: amounts falling due within one year (note 20) of £2,082,495, increasing retained earnings by £2,082,495.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
In accordance with section 479A of the Companies Act 2006, the parent Company has guaranteed the liabilities of its subsidiary companies, Lightbio Limited (registered number: 11845932) and Touchlight IP Limited (registered number: 09272417). Accordingly, the subsidiary companies are exempt from the requirements of the Companies Act 2006 relating to the audit of its individual financial statements.
The Group operates a defined contributions pension scheme. The assets of the scheme are held separately from those of the Group in an independently administered fund.
The amount recognised in profit and loss as an expense in relation to defined contribution plans during the year was £32,423 (2023: £31,275). At the year end the amount included in creditors in respect of unpaid pension contributions was £86,527 (2023: £88,688).
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
31.Other financial commitments
As at 31 December 2024, the total contracted for capital expenditure and purchases of raw materials and services was £1,436,205 (2023: £1,320,253) for the Group and £7,170 (2023: £370,662) for the Company.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
Hampton facility receives GMP certification. Touchlight becomes the world’s first synthetic DNA manufacturer to receive regulatory approval to produce Active Pharmaceutical Ingredients (API). This milestone uniquely positions the Company to support its expanding customer base in developing DNA vaccines and non-viral gene therapies.
Disposes of Touchlight Aquaculture subsidiary to Ceva Animal Health (Ceva), the 5th largest global animal health company. Acquiror granted rights to develop and manufacture future products using Touchlight’s dbDNA technology across the animal health field. Enters into a Shareholder Loan Facility providing up to £10,000,000 which can be drawn upon for general corporate purposes if required. If utilised, the facility includes a right for lenders to be issued Warrants for ordinary shares of the Company.
It is in the opinion of the directors that there is no one controlling party.
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