CONSOLIDATED BALANCE SHEET

30 JUNE 2022

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2022

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 30 JUNE 2022

NOTES TO THE FINANCIAL STATEMENTS

1.         BASIS OF PREPARATION

The financial statements of Sareum Holdings plc ("the Company") have been prepared in accordance with UK-adopted international accounting standards, and in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006, with IFRIC interpretations.  On 1 January 2021 the UK-adopted IAS and EU-adopted IFRS were identical. Since this date timing differences in endorsement have arisen, however no amendments would be required to these financial statements if they were prepared in accordance with EU-adopted IFRS as at 30 June 2022.  The financial statements have been prepared under the historical cost convention.

Going concern

The Group made a loss after tax of £2.2 million (2021: £1.5 million), as it continued to progress its research and development activities. These activities, and the related expenditure, are in line with the budgets previously set and are funded by regular cash investments.

The Directors consider that the cash held at the year-end, together with that projected to be received, will be sufficient for the Group to meet its forecast expenditure for at least one year from the date of signing the financial statements. If there is a shortfall the Directors will implement cost savings to ensure that the cash resources last for this period of time.

For these reasons the financial statements have been prepared on a going concern basis.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiary and an associate, together, "the Group") made up to 30 June each year. Control is achieved where the Company has the power to govern the financial and operating policies of another entity or business, so as to obtain benefits from its activities. The consolidated financial statements present the results of the Company and its subsidiary as if they formed a single entity. Inter-company transactions and balances between group companies are eliminated on consolidation.

2.         STATUTORY INFORMATION

Sareum Holdings plc is a public limited company, registered in England and Wales.

3.         ACCOUNTING POLICIES

The principal accounting policies applied are set out below.

Property, plant and equipment

Depreciation is provided on a straight-line basis over three years in order to write off each asset over its estimated useful life.

Financial instruments

Financial instruments are classified and accounted for, according to the substance of the contractual arrangement, as either financial assets, financial liabilities or equity instruments. An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and demand deposits and other short term highly liquid investments that are readily convertible to a known amount of cash and are subject to insignificant risk of change in value.

Pension contributions

The Group does not operate a pension scheme for the benefit of its employees but instead makes contributions to their personal pension plans.  The contributions due for the period are charged to the profit and loss account.

Employee share schemes

The Group has in place a share option scheme for employees, which allows them to acquire shares in the Company. Equity settled share-based payments are measured at fair value at the date of grant. The fair value of options granted is recognised as an expense spread over the estimated vesting period of the options granted. Fair value is measured using the Black-Scholes model, taking into account the terms and conditions upon which the options were granted.

Research and development

Research expenditure is written off in the period in which it is incurred.  Development expenditure incurred is capitalised as an intangible asset only when all of the following criteria are met:

-     It is technically feasible to complete the intangible asset so that it will be available for use or sale;

-     There is the intention to complete the intangible asset and use or sell it;

-     There is the ability to use or sell the intangible asset;

-     The use or sale of the intangible asset will generate probable future economic benefits;

-     There are adequate technical, financial and other resources available to complete the development and to use or sell the intangible asset; and

-     The expenditure attributable to the intangible asset during its development can be measured reliably.

Expenditure that does not meet the above criteria is expensed as incurred.

Taxation

Current taxes are based on the results shown in the financial statements and are calculated according to local tax rules, using tax rates enacted or substantially enacted by the balance sheet date.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events have occurred at that date that will result in an obligation to pay more, or a right to pay less or to receive more tax, with the following exception:

Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on the tax rates and laws enacted or substantively enacted at the balance sheet date.  Deferred tax assets are recognised only to the extent that the Directors consider that it is more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.

Revenue recognition

Revenue is measured as the fair value of the consideration received or receivable in the normal course of business, net of discounts, VAT and other sales related taxes and is recognised to the extent that it is probable that the economic benefits associated with the transaction will flow to the Group. Revenues from licensing agreements are recognised in line with the performance obligations being met, as outlined in the terms of the agreement. Grant income is recognised as earned based on contractual conditions, generally as expenses are incurred. Such income is recognised as Other Operating Income.

Critical accounting estimates and areas of judgement

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.  Actual results may differ from these estimates.  The estimates and assumptions that have the most significant effects on the carrying amounts of the assets and liabilities in the financial information are considered to be research and development costs and equity settled share-based payments.

Investment in associates

An associate is an entity over which the Company has significant influence.  Significant influence is the power to participate in the financial and operating policy decisions of the Investee but is not control or joint control over those policies. Investments in associates are accounted for using the equity method, whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition change in the associate's net assets with recognition in the profit and loss of the share of the associate's profit or loss.

Impairment of assets

At the date of the statement of financial position, the Group reviews the carrying amounts of its non-current assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).

Recoverable amount is the higher of fair value less cost 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 is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

New or revised accounting standards

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2022 reporting periods and have not been early adopted by the Company or the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

4.         EMPLOYEES AND DIRECTORS

There are 2 (2021: 2) Directors who are members of third party held money purchase retirement benefits schemes.

The Directors comprise the key management personnel of the Company. All Directors and staff are employed and paid by the subsidiary, Sareum Limited.

5.         NET FINANCE INCOME

6.         LOSS BEFORE INCOME TAX

7.         INCOME TAX

The tax rate of 19% used above is the average corporation tax rate applicable in the United Kingdom.

A potential deferred tax asset as at 30 June 2022 of £2.8 million (2021: £1.9 million) has not been recognised, as there remains a significant degree of uncertainty that the Group will make sufficient profits in the foreseeable future to justify recognition.

8.         EARNINGS PER SHARE

As the Group has generated a loss for the period, there is no dilutive effect in respect of share options.

* The weighted average number of shares in issue during 2022 and 2021 has been restated as if the share consolidation referred to in note 16 had been in effect for the whole of each year.

9.         PROPERTY PLANT AND EQUIPMENT

10.       INVESTMENTS

Interest in associate

The investment in associate represents the investment by the Group in the partnership with the Cancer Research Technology Pioneer Fund to advance the SRA737 programme and has been accounted for using the equity method. Sareum's interest in the associate partnership is 27.5%. As at 30 June 2022 the partnership had net assets of £0.1 million (2021: £0.1 million) and had incurred cumulative losses of £0.7 million (2021: £0.7 million).

11.       TRADE AND OTHER RECEIVABLES

12.       CASH AND CASH EQUIVALENTS S

13.       TRADE AND OTHER PAYABLES

Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit term agreed with suppliers is 30 days and payment is generally made within the agreed terms.

14.       LEASING AGREEMENTS

The lease on the office occupied by the Group is of low value, expiring in December 2023. The rent payments in the year are also not material to the financial statements

15.       FINANCIAL INSTRUMENTS

The Group's principal financial instruments are trade and other receivables, trade and other payables and cash. The main purpose of these financial instruments is to finance the Group's ongoing operational requirements. The Group does not trade in derivative financial instruments. 

The major financial risks faced by the Group, which remained unchanged throughout the year, are interest rate risk, foreign exchange risk and liquidity risk.  Policies for the management of these risks are shown below and have been consistently applied.

MARKET RISKS

Interest rate risk

The Group is exposed to interest rate risk as cash balances in excess of immediate needs are placed on short term deposit. The Group seeks to optimise the interest rates received by continuously monitoring those available. The value of the Group's financial instruments is not considered to be materially sensitive to these risks and therefore no sensitivity analysis has been provided.

Foreign exchange risk

The Group's activities expose it to fluctuations in the exchange rate for the Euro and the US dollar. Funds are maintained in sterling and foreign currency is acquired on the basis of committed expenditure. The value of the Group's financial instruments is not considered to be materially sensitive to these risks and therefore no sensitivity analysis has been provided.

NON-MARKET RISKS

Liquidity risk

The Board has responsibility for reducing exposure to liquidity risk and ensures that adequate funds are available to meet anticipated requirements from existing operations by a process of continual monitoring. The value of the Group's financial instruments is not considered to be materially sensitive to these risks and therefore no sensitivity analysis has been provided.

16.       SHARE CAPITAL

The Ordinary Shares carry equal rights in respect of voting at a general meeting of shareholders, payment of dividends and return of assets in the event of a winding up.

On 20 July 2021, 6,428,581 new Ordinary Shares of 0.025 pence were issued at 2.8 pence per share in respect of a warrant exercise that raised, in aggregate, £180,000 before expenses.

On 23 July 2021, 14,285,714 new Ordinary Shares of 0.025 pence were issued at 7 pence per share in respect of a fundraise that raised, in aggregate, £1,000,000 before expenses.

On 17 August 2021, 12,121,212 new Ordinary Shares of 0.025 pence were issued at 8.25 pence per share in respect of a fundraise that raised, in aggregate, £1,000,000 before expenses.

On 10 November 2021, 5,133,332 new Ordinary Shares of 0.025 pence were issued at 0.6 pence per share in respect of a fundraise that raised, in aggregate, £30,800 before expenses.

On 23 December 2021, 32,636,311 new Ordinary Shares of 0.025 pence were issued at 5 pence per share in respect of a fundraise that raised, in aggregate, £1,631,816 before expenses.

On 28 February 2022, in order to facilitate the Consolidation, 9 new Ordinary Shares of 0.025 pence were issued at 3.4 pence per share in respect of a fundraise that raised, in aggregate, £nil before expenses.

*  On 28 February 2022, a resolution was made to consolidate every 50 shares with a nominal value of 0.025 pence into 1 share with a nominal value of 1.25 pence per share (the "Consolidation"). The number of shares as at 30 June 2021 has been restated assuming that the Consolidation had happened at that date.

17.       RESERVES

Details of movements in each reserve are set out in the Consolidated Statement of Changes in Equity.

18.       PENSION COMMITMENTS

The Group makes contributions to its employees' own personal pension schemes.  The contributions for the period of £26,000 (2021: £26,000) were charged to the profit and loss account.  At the balance sheet date contributions of £4,000 (2021: £4,000) were owed and are included in creditors.

19.       RECONCILIATION OF LOSS BEFORE INCOME TAX TO CASH GENERATED FROM OPERATIONS

20.       RECONCILIATION CASH AND CASH EQUIVALENTS

The amounts disclosed on the Cash Flow Statement in respect of cash and cash equivalents are in respect of these Balance Sheet amounts which comprise bank balances only:

21.       PRIOR YEAR ADJUSTMENT

Earnings per share has been restated for the share consolidation in February 2022 referred to in note 16. The impact of this has £nil impact on equity.