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Registered number: 08190142
Levicept Ltd
Financial statements
For the year ended 30 September 2019
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Levicept Ltd
Registered number: 08190142
Balance sheet
As at 30 September 2019
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Debtors: amounts falling due within one year
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Creditors: amounts falling due within one year
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Total assets less current liabilities
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Creditors: amounts falling due after more than one year
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The financial statements have been prepared in accordance with the provisions applicable to companies subject to the small companies regime and in accordance with the provisions of FRS 102 Section 1A - small entities.
The financial statements have been delivered in accordance with the provisions applicable to companies subject to the small companies regime.
The company has opted not to file the statement of comprehensive income in accordance with provisions applicable to companies subject to the small companies' regime.
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 2 to 10 form part of these financial statements.
Page 1
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Levicept Ltd
Notes to the financial statements
For the year ended 30 September 2019
Levicept Limited is a private company limited by shares and is incorporated in England with the registration number 08190142. The address of the registered office is Office 20, Second Floor, Innovation House, Ramsgate Road, Sandwich, Kent, CT13 9FF.
2.Accounting policies
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Basis of preparation of financial statements
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The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Section 1A of Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The company has elected to apply all amendments to FRS 102, as set out in the triennial review published in December 2017, prior to the mandatory adoption for accounting periods beginning on or after 1 January 2019.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the company's accounting policies (see note 3).
The financial statements are rounded to the nearest pound.
The following principal accounting policies have been applied:
The company is engaged in research and development activities and is reliant upon funding from its investors to meet its operational and working capital needs. The company's forecasts and projections, taking account of expected expenditure and future investment, show that the company should be able to continue these activities within the level of its available facilities for the foreseeable future. The company has secured additional funding following the year end (see note 9).
While the impact of the COVID-19 pandemic has been assessed by the directors so far as reasonably possible, due to its uprecedented impact of the wider economy, it is difficult to evaluate with any certainty the potential outcomes on the company's operations and suppliers. However, taking into consideration the UK Government's response, its range of measures to support business and the company's own resources and planning, the directors have reasonable expectation that the company will contrinue in operational existence for the forseeable future.
Consequently the going concern basis has been adopted in preparing these financial statements.
Page 2
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Levicept Ltd
Notes to the financial statements
For the year ended 30 September 2019
2.Accounting policies (continued)
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Foreign currency translation
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Functional and presentation currency
The company's functional and presentational currency is pounds sterling.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.
At each period end foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.
Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss except when deferred in other comprehensive income as qualifying cash flow hedges.
Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the statement of comprehensive income within 'finance income or costs'. All other foreign exchange gains and losses are presented in profit or loss within 'other operating income'.
In the research phase of an internal project it is not possible to demonstrate that the project will generate future economic benefits and hence all expenditure on research shall be recognised as an expense when it is incurred. Intangible assets are recognised from the development phase of a project if and only if certain specific criteria are met in order to demonstrate the asset will generate probable future economic benefits and that its cost can be reliably measured. The capitalised development costs are subsequently amortised on a straight line basis over their useful economic lives.
If it is not possible to distinguish between the research phase and the development phase of an internal project, the expenditure is treated as if it were all incurred in the research phase only.
Finance costs are charged to profit or loss over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.
Page 3
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Levicept Ltd
Notes to the financial statements
For the year ended 30 September 2019
2.Accounting policies (continued)
Tax is recognised in profit or loss except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.
The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the balance sheet date in the countries where the company operates and generates income.
Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the balance sheet date, except that:
∙The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits; and
∙Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met.
Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheet date.
Tangible fixed assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
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.
The company adds to the carrying amount of an item of fixed assets the cost of replacing part of such an item when that cost is incurred, if the replacement part is expected to provide incremental future benefits to the company. The carrying amount of the replaced part is derecognised. Repairs and maintenance are charged to profit or loss during the period in which they are incurred.
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:
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.
Page 4
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Levicept Ltd
Notes to the financial statements
For the year ended 30 September 2019
2.Accounting policies (continued)
Short term debtors are measured at transaction price, less any impairment. Loans receivable are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method, less any impairment.
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Cash and cash equivalents
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Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are highly liquid investments that mature in no more than three months from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.
Short term creditors are measured at the transaction price. Other financial liabilities, including bank loans, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method.
The company enters into basic financial instrument transactions that result in the recognition of financial assets and liabilities like trade and other debtors and creditors, loans from banks and other third parties, loans to related parties and investments in ordinary shares.
Debt instruments (other than those wholly repayable or receivable within one year), including loans and other accounts receivable and payable, are initially measured at present value of the future cash flows and subsequently at amortised cost using the effective interest method. Debt instruments that are payable or receivable within one year, typically trade debtors and creditors, are measured, initially and subsequently, at the undiscounted amount of the cash or other consideration expected to be paid or received. However, if the arrangements of a short-term instrument constitute a financing transaction, like the payment of a trade debt deferred beyond normal business terms or in case of an out-right short-term loan that is not at market rate, the financial asset or liability is measured, initially at the present value of future cash flows discounted at a market rate of interest for a similar debt instrument and subsequently at amortised cost, unless it qualifies as a loan from a director in the case of a small company, or a public benefit entity concessionary loan.
Financial assets that are measured at cost and amortised cost are assessed at the end of each reporting period for objective evidence of impairment. If objective evidence of impairment is found, an impairment loss is recognised in the statement of comprehensive income.
For financial assets measured at amortised cost, the impairment loss is measured as the difference between an asset's carrying amount and the present value of estimated cash flows discounted at the asset's original effective interest rate. If a financial asset has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.
For financial assets measured at cost less impairment, the impairment loss is measured as the difference between an asset's carrying amount and best estimate of the recoverable amount, which is an approximation of the amount that the company would receive for the asset if it were to be sold at the balance sheet date.
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is an 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.
Page 5
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Levicept Ltd
Notes to the financial statements
For the year ended 30 September 2019
2.Accounting policies (continued)
In accordance with the transitional provisions of FRS102 the company has elected not to apply FRS102 to equity instruments that were granted prior to the start of the first reporting period in which FRS102 has been adopted. Disclosure of these equity instruments is made at note 11.
Where share options are awarded to employees, the fair value of the options at the date of grant is charged to profit or loss over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. The cumulative expense is not adjusted for failure to achieve a market vesting condition.
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 company keeping the scheme open or the employee maintaining any contributions required by the scheme).
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to profit or loss over the remaining vesting period.
Where equity instruments are granted to persons other than employees, profit or loss is charged with fair value of goods and services received.
The proceeds received on issue of the company's convertible debt are allocated into their liability and equity components and presented separately in the balance sheet.
The amount initially attributed to the debt component equals the discounted cash flows using a market rate of interest that would be payable on a similar debt instrument that did not include an option to convert.
The difference between the net proceeds of the convertible debt and the amount allocated to the debt component is credited direct to equity and is not subsequently remeasured. On conversion, the debt and equity elements are credited to share capital and share premium as appropriate.
Transaction costs that relate to the issue of the instrument are allocated to the liability and equity components of the instrument in proportion to the allocation of proceeds.
Page 6
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Levicept Ltd
Notes to the financial statements
For the year ended 30 September 2019
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Judgements in applying accounting policies and key sources of estimation uncertainty
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The preparation of the financial statements requires the directors to make judgements, estimates and assumptions that can affect the amounts reported for assets and liabilities, and the results for the year. The nature of estimation is such though that actual outcomes could differ significantly from those estimates.
The following judgement has had the most significant impact on amounts recognised in the financial statements:
Share-based payments
The company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The estimation of fair value requires determination of the most appropriate valuation model by the directors, which is dependent on the terms and conditions of the grant. See note 11 for further details.
Convertible debt
As required under FRS 102 the debt and equity components of convertible preference shares have been calculated using an estimated market rate of interest that would be payable on a similar debt instrument that did not include an option to convert. Due to the lack of observable market prices for similar instruments the initial valuation of the debt element is subject to uncertainty. The convertible preference shares are convertible upon change of control of the company, further equity financing or at the option of the noteholder. The directors have made an estimate of when these events are likely to occur, in order to value the debt element of the instruments.
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The average monthly number of employees, including directors, during the year was 6 (2018 - 5).
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Page 7
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Levicept Ltd
Notes to the financial statements
For the year ended 30 September 2019
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Charge for the year on owned assets
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Prepayments and accrued income
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Creditors: Amounts falling due within one year
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Other taxation and social security
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Accruals and deferred income
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Included within other creditors are amounts owed to a director of the company in the sum of £351,004 (2018 - £NIL). Interest is payable on the loan at 2.5% per annum. The loan was due to be repaid on 31 December 2019. Following the period end the loan term has been extended to 31 July 2020.
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Page 8
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Levicept Ltd
Notes to the financial statements
For the year ended 30 September 2019
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Creditors: Amounts falling due after more than one year
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Convertible preference share premium treated as debt
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Allotted, called up and fully paid
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412,275 (2018 - 412,275) Ordinary shares of £0.0001- each
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119,376 (2018 - 110,135) Series A-1 shares of £0.0001- each
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1,542,740 (2018 - 1,392,741) Series A-2 shares of £0.0001- each
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177,425 (2018 - 171,182) Growth Shares shares of £0.0001- each
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The Series A-1 and Series A-2 shares are non-redeemable and entitle the holder to a cumulative dividend of 8% per annum upon the issue price of the shares. The shares are convertible to Ordinary shares upon the request of the holder on a one for one basis. The debt element of the shares represents the future dividend stream discounted to present value, which has been recognised within creditors due in greater than one year. The residual element of the consideration paid is shown within equity.
On 19 November 2018, the following shares were allotted and issued:
i) 149,999 Series A-2 shares were issued for total consideration of £1,499,999.
ii) 9,241 Series A-1 shares were issued for total consideration of £0.93.
iii) 6,243 Growth shares were issued for total consideration of £0.63.
Share premium account
This reserve records the amount above the nominal value received for shares issued by the company. Share premium may only be utilised to write-off any expenses incurred or commissions paid on the issue of those shares, or to pay up new shares to be allotted to members as fully paid bonus shares.
Other reserves
This reserve records the reduction in share capital arising from a share redenomination.
Profit & loss account
This reserve comprises all current and prior period retained profits and losses after deducting any distributions made to the company’s shareholders.
Page 9
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Levicept Ltd
Notes to the financial statements
For the year ended 30 September 2019
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The company operates a share options scheme for directors and consultants who receive part of their remuneration in the form of share-based payments.
During the year 19,335 (2018 - nil) options were granted to subscribe for shares. During the year no options were exercised, forfeited, expired or lapsed.
The number of share options in issue at the end of the year was 135,731 (2018 - 116,396).
The options in issue, vest between three to four years from the grant date. Each option will lapse on or after the tenth anniversary of the date of grant. There are no performance related conditions attached to the options.
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Related party transactions
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Other than as disclosed in note 7, all related party transactions during the current and prior periods were made under normal market conditions.
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Post balance sheet events
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i) Following the period end, the company has received additional funds through the issue of a short term loan in the sum of £900,000 from its investors.
ii) Substantive information about the COVID-19 disease only came to light in early 2020, with the World Health Organisation declaring a pandemic on 11 March 2020.
The directors have carefully considered the impact of the pandemic and its effect on the economic climate and have concluded that as at the approval date of these financial statements, there has been no material impact on the company.
The company continues to maintain a strong relationship with its investors and the directors will continue to closely monitor the company's operational activities.
In the opinion of the directors, there is no controlling party.
The auditor's report on the financial statements for the year ended 30 September 2019 was unqualified.
The audit report was signed on 30 June 2020 by Mark Attwood FCCA (senior statutory auditor) on behalf of Kreston Reeves LLP.
Page 10
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