The directors of the company have elected not to include a copy of the profit and loss account within the financial statements.true

These financial statements have been prepared and delivered in accordance with the provisions applicable to companies subject to the small companies regime.

Lario Therapeutics Limited is a private company limited by shares incorporated in Scotland. The registered office is 137a George Street, Edinburgh, EH2 4JY.

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006. The disclosure requirements of section 1A of FRS 102 have been applied other than where additional disclosure is required to show a true and fair view.

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

The financial statements have been prepared under the historical cost convention, modified to include certain financial instruments at fair value. The principal accounting policies adopted are set out below.

At 31 December 2024, the company had net liabilities of £4.8m and net current liabilities of £5.9m after generating a loss before tax in the period of £2.0m.true

In assessing whether the financial statements should continue to be prepared on a going concern basis, the directors have considered a period of twelve months from the date of approval of these financial statements and have reviewed cash flow projections through to June 2027.

The material uncertainties which include events or conditions which may cast significant doubt on the company's ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business are outlined below:

Securing additional funding: The financial forecasts show that the ability of the company to meet its liabilities over the next twelve months from the date of approval of these financial statements as they fall due is dependent on the continuing financial support of the current and/or new investors, with securing additional funding being required within this period. The company is in active discussions with existing and potential new investors and the directors are confident that this funding will be obtained.

Convertible Loan Note Facility: As at 31 December 2024, the company held £5.35m Convertible Loan Notes which were due to mature in 2025. Subsequent to the year end, these have all been converted to equity with a further £1.25m Convertible Loan Notes being issued by the company's investors, which have a maturity date of March 2026. If a funding round has not been completed by the upcoming maturity date, the company will rely on the continuing financial support of the Note holders to extend the maturity date or convert these to equity. As the Note holders previously extended the maturity date and subsequently converted previous loan notes held, the company is confident that they will do so again provided that a funding round seems likely to be completed.

The directors are satisfied that whilst material uncertainties on the above exist, on balance, and on the basis of the anticipated continued support from current and potential new investors, the company will have sufficient resources to enable it to meet its liabilities as they fall due for at least 12 months from the date of signing these financial statements. The directors consider it is therefore appropriate to prepare the financial statements on the going concern basis.

Research expenditure is written off against profits in the period in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated. In this situation, the expenditure is deferred and amortised over the period during which the company is expected to benefit.

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

Intangible assets acquired on business combinations are recognised separately from goodwill at the acquisition date where it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the fair value of the asset can be measured reliably; the intangible asset arises from contractual or other legal rights; and the intangible asset is separable from the entity.

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

If there is an indication that there has been significant change in amortisation rate or residual value of an asset, the amortisation of that asset is revised prospectively to reflect the new expectations.

At each reporting period end date, the company reviews the carrying amounts of its 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 company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

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.

Cash and cash equivalents are basic financial assets and 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.

The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method. The convertible debt is carried at fair value through the profit and loss accounts on the basis that the conversion is at a discount and there is no fixed number of shares on conversion.

Trade creditors 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 creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Convertible loans that are not basic financial instruments and do not contain an equity element are initially recognised at fair value on the date a contract is entered into and are subsequently re-measured to fair value, at each reporting date. Fair value gains and losses are recognised in profit or loss.

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

Research and development tax credits are recognised on a systematic basis as the entity recognises costs which are eligible for research and development tax credits, and only to the extent on previous claims, that amounts will be recoverable.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax 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.

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

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 stock or fixed assets.

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

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

Grant income is recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.

The company is applying the accruals model to grant income. Grants are classified as either a grant relating to revenue or a grant relating to assets. Grants relating to revenue are recognised as income on a systematic basis over the periods in which the entity recognises the related costs for which the grant is intended to compensate. Grants relating to assets are recognised in income on a systematic basis over the asset's expected useful life. If part of such a grant is deferred it is recognised as deferred income rather than being deducted from the asset's carrying amount.

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.

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

The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.

The key assumptions used in the directors' assessment of going concern are outlined in note 1.2.

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

The convertible loans are subscribed by the shareholders of the company and bear interest at the rate of 8% and 10% per annum. The accounting standards require such loans to be accounted for as liabilities measured at fair value through the profit and loss account. Management used a discount rate of 20% on the basis the consider this to be an appropriate market rate of interest for an early stage technology company. It is this discount based on expectations of loan repayment or conversion that is recorded through the profit and loss account. This unwinds through the profit and loss account up to the date of conversion or settlement at a future date. The underlying creditor is included within note 6 of these financial statements.

At each reporting end date, the company reviews the carrying amounts of intangible assets for indicators of impairment. Where impairment indicators exist, a full assessment of impairment is performed (note 1.5).

The average monthly number of persons (excluding directors) employed by the company during the year was 1 (2023: 1).

Convertible loans from shareholders totalling £3,100,000 incur interest at 8% per annum with conversion dates of 31 January 2025 as at the reporting date. Convertible loans from shareholders totalling £2,250,000 incur interest at 10% per annum with conversion dates of 31 January 2025 as at the reporting date.

The convertible loans are recognised at fair value through the profit and loss account with £664,675 being recognised as a fair value loss for the year (2023 loss - £268,936).

No conditions had been met at the reporting date that would trigger a conversion and as such these remain within liabilities at 31 December 2024. Subsequent to the year end, the maturity dates for the convertible loans were extended and all were then converted to equity on 14 March 2025.

The terms of the preference shares provide the following rights:

Each Series Seed Preference Share carry one vote.

All shares rank pari passu.

On 14 March 2025, the company converted its loan notes referenced in note 6 of the financial statement to equity, with 207,608 0.1p Series A shares being issued for a total consideration of £6,350,000.

On 16 June 2025, the company issued a further 38,693 0.1p A Ordinary shares at par.

Share premium represents amounts paid above the par value of each share.

As the income statement has been omitted from the filing copy of the financial statements, the following information in relation to the audit report on the statutory financial statements is provided in accordance with s444(5B) of the Companies Act 2006:

The auditor's report was unqualified.

We draw attention to note 1.2 of the financial statements, which indicates that the company incurred a net loss before tax of £2m for the year ended 31 December 2024 and acknowledges the ability of the company to meet its liabilities over the next twelve months as they fall due is dependent on securing additional funding and continuing reliance on financial support from convertible loan note holders.

As stated in note 1.2, these events or conditions, along with other matters as set forth in note 1.2, indicate that a material uncertainty exists that may cast significant doubt on the company's ability to continue as a going concern. Our opinion is not modified in respect of the matter.

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

The convertible loan notes, which are all held by shareholders of the company, are recognised at fair value of £6,202,041 (2023: £5,037,377) as shown in note 6.