Preliminary Results

RNS Number : 6444D

C4X Discovery Holdings PLC

28 October 2015

Preliminary results for the year ended 31 July 2015

28 October, 2015 - C4X Discovery Holdings plc ("C4XD"), a leader in rational drug discovery and design, is pleased to announce its preliminary results for the year ended 31 July 2015.

Corporate Highlights

· Successful IPO on AIM completed in October 2014 raising £11.0 million before expenses

· Orexin programme candidate drug progressed into formal pre-clinical and safety studies

· Renewal of our collaboration with Evotec AG ("Evotec") providing access to C4XD's conformational design technology

· Renewal of our collaboration with Takeda Cambridge Ltd ("Takeda") providing access to C4XD's conformational design technology

· Entered into research agreement with Evotec to develop back up series for C4XD's Orexin programme

· Expansion of senior team to provide biology, pre-clinical and early stage clinical expertise

Financial highlights

· Cash, cash equivalents and deposits at 31 July 2015 of £7.5 million (31 July 2014: £0.7 million)

· Total assets at 31 July 2015 of £8.7 million (31 July 2014: £1.2 million)

Progress since year end

· Collaboration with the University of Oxford's Structural Genomics Consortium department ("SGC-Oxford"), providing access to protein structural information, expressed protein and assays

· Identified novel lead molecules that activate GPR142, a key factor in the production of insulin

· Designed novel activators for the NRF-2 pathway, important in mediating diseases such as Chronic Obstructive Pulmonary Disease ("COPD") and Multiple Sclerosis ("MS")

Chairman's statement

"With the successful IPO, C4XD has secured the funding that enables us to advance our lead programme in Orexin, for the treatment of addiction, into formal pre-clinical safety and toxicity studies," stated Clive Dix, Chairman of C4XD. "We have also designed lead compounds against multiple targets, further validating our platform. The support and confidence of our collaboration partners, AstraZeneca, Evotec and Takeda, now joined by the Structural Genomics Consortium provides independent recognition of the significant impact our novel approach can make in enabling ultra rational drug design. I am delighted with the progress made since IPO and believe the business is well positioned to deliver future value for shareholders."

For further information please contact:

C4X Discovery Holdings plc

Piers Morgan, CEO 07912 293832

Zeus Capital

Dan Bate / Jonathan Sharp 0161 831 1512

Dominic Wilson 020 3829 5000

FTI Consulting

Matthew Cole / Brett Pollard / Rob Winder / Matthew Moss 020 3727 1000

C4XD began trading on the AIM market of the London Stock Exchange in October 2014 under the ticker symbol C4XD. For further information please visit: www.c4xdiscovery.com.

CHAIRMAN'S AND CHIEF EXECUTIVE OFFICER'S JOINT REVIEW

C4XD is a drug discovery and development company with a unique platform that enables us to develop therapies to treat a wide range of diseases. We are currently working on proprietary programmes against certain targets to treat:

· addiction via Orexin-1 (Ox-1);

· Chronic Obstructive Pulmonary Disease (COPD) and inflammation via NRF-2;

· diabetes via GPR142 and GLP-1; and

· inflammation and autoimmune diseases via Interleukin 17 (IL-17),

all of which represent multi-billion dollar market opportunities and where there is substantial unmet medical need.

C4XD's proprietary platform enables it to generate better and safer drug candidates much faster and more affordably than is generally possible using conventional small molecule pharmaceutical industry approaches.

The C4XD platform is the only technology in the world that can generate accurate, experimentally-derived dynamic solution 3D structures of drug molecules in just a matter of days, helping to accelerate product development. Our conformational insights can be used in conjunction with existing technologies for rational drug design and can make a particularly high impact when protein crystallography for the drug target is not routinely available, as is the case for GPCRs (G-protein-coupled receptors, such as Orexin receptors) and ion channels.

Addiction

The treatment of addiction represents a substantial area of unmet medical need, forecast to be worth an estimated $13 billion per annum by 2018. C4XD's lead programme, targeting Orexin-1, could represent a major new method of treating addiction. We have patented a number of distinct chemical series, providing us with a lead programme and multiple follow-up programmes. We expect to file the application for our lead programme to enter clinical development by the end of 2016, and we continue development of other follow-up programmes. We believe this broad approach will underpin a substantial licensing transaction with a pharmaceutical company in the future.

The Orexin-1 receptor is of particular interest to the pharmaceutical industry for the development of treatments for stress-related addictive disorders (e.g. binge eating, alcohol, nicotine, cocaine and opiate addictions). However, to date no drug candidate that specifically targets Orexin-1 has progressed into clinical development, in large part due to the difficulty in identifying candidates that are specific only to Orexin-1. In particular, there is another receptor, Orexin-2, that appears to be structurally very similar to Orexin-1 but which has a very different biological function, and it has proved highly challenging to develop drug candidates which will target Orexin-1 selectively, without targeting Orexin-2.

C4XD's programme has identified multiple lead compounds with more than 1,000-fold selectivity for Orexin-1 over Orexin-2. From these we have selected a candidate drug which we have progressed into formal development. This represents a key step for the Company and we expect to file with regulatory authorities by the end of 2016 to enable clinical development.

Chronic Obstructive Pulmonary Disease (COPD)

COPD, an umbrella term for a group of progressive lung diseases including chronic bronchitis and emphysema (or smokers cough), is another area of substantial unmet medical need, and the market opportunity is estimated at $44-48 billion per annum.

The pathway targeted by C4XD, the NRF-2/Keap-1 protein complex ("NRF-2"), plays a significant role in COPD, and which also has other potential applications in areas such as Inflammatory Bowel Disease, Multiple Sclerosis, Rheumatoid Arthritis and Cancer.

C4XD has already developed some of the most potent compounds so far reported against NRF-2, based on searches of scientific literature. We expect to test our compounds in a disease model during 2015 and, if the results are encouraging, this programme could progress to clinical development over the next two years.

Diabetes

Diabetes is a large and growing market, estimated to be worth $50 billion per annum by 2016. Although current treatments exist, healthcare professionals would prefer more oral treatments to replace current therapies which require injection. Oral therapies offer the opportunity of lower cost, easier administration, and improved patient compliance. C4XD currently holds two separate grants from the UK's innovation agency, Innovate UK, to research new therapies to treat diabetes, targeting GPR142 and GLP-1 respectively.

GPR142, is a key factor in the production of insulin. Targeting GPR142 may stimulate insulin production in a glucose-dependent manner, avoiding the hypoglycaemia risk associated with existing diabetes therapies. GPR142 has recently become the focus of considerable research and patent activity within the pharma industry. Using its proprietary technology, C4XD has identified critical drug design principles, enabling us to generate potent, orally available compounds in just a few months.

GLP-1 is another important diabetes target. The market leader for GLP-1 agonists, Victoza®, achieved 2014 sales of $2.4 billion. However it is a monoclonal antibody which requires injection and is expensive to manufacture. C4XD believes there is a significant opportunity to develop a more convenient oral therapy.

Inflammation and autoimmune diseases

IL-17 is implicated in multiple inflammatory and autoimmune diseases and is the subject of numerous clinical studies. Current attempts to target IL-17 are largely based around monoclonal antibodies, which have the necessary size required to inhibit the IL-17/IL-17R engagement. Historically, identifying small molecules that specifically inhibit the IL-17 pathway has been extremely challenging, but our technology has identified small molecules that can selectively block the IL-17/IL-17R interaction with high potency. These are conventional, drug-like compounds, for oral and/or topical use, which would offer benefits over injectable therapies such as IL-17 antibodies. We aim to advance our IL-17 programme towards optimisation and in vivo validation over the coming months.

The first significant market to be targeted by IL-17 antibodies is psoriasis, which is estimated to be worth $6bn per annum. Other significant IL-17 market opportunities include psoriatic arthritis and ankylosing spondylitis, together estimated to be worth a further $6bn per annum.

Conformational Design Platform

C4XD's platform enables the accurate measurement of the shapes of small molecules in solution. This is particularly relevant for the shapes of small molecule drugs in the human body because we can mimic the actual bodily conditions at the site where the drug will act, including temperature, pH and other factors.

The ability to measure molecular shapes enables C4XD to better understand how the small molecule binds to the target protein. C4XD uses this to design novel shapes that may bind more effectively to make better, more potent lead molecules. C4XD can also learn which shapes risk binding to other proteins, which could give rise to off-target effects (side effects), and can design lead molecules to exclude these conformations, giving safer lead molecules.

The C4XD proprietary software analyses data from conventional Nuclear Magnetic Resonance ("NMR") equipment through proprietary software, including a patented algorithm, to provide the conformational information which can then be used to drive medicinal chemistry structural design. C4XD is the only company able to generate this level of experimentally derived conformational information, giving it an advantage in efficiently designing and optimising novel small molecule candidate drugs.

Collaborations

C4XD has collaborations with AstraZeneca, Evotec and Takeda which enable them to access our conformational approach for use in their own programmes. These relationships validate the power and utility of our technology platform.

After the year end, C4XD has also signed an agreement with the University of Oxford's Structural Genomics Consortium department ("SGC-Oxford"). SGC-Oxford is part of the Nuffield Department of Clinical Medicine and consists of around 100 scientists who collaborate widely with major pharma companies and the worldwide academic network, including several other University Departments, such as the Kennedy Institute of Rheumatology, the Botnar Research Centre and the Nuffield Department of Orthopaedics, Rheumatology and Musculoskeletal Sciences (NDORMS). These scientists combine world-class expertise in therapeutic target validation, protein expression, assay development and protein structural information. To date, SGC has been funded by the members of a consortium of major pharmaceutical companies and public health bodies, including Abbvie, Bayer, Boehringer Ingelheim, Johnson & Johnson, Merck, Novartis, Pfizer, Takeda and the Wellcome Trust, each of whom donates $8 million towards running costs.

Under the terms of the collaboration C4XD will be granted access to structural, biological and therapeutic information that SGC-Oxford holds in relation to various therapeutic targets and related assays, as well as initial 'hit' molecules that SGC-Oxford has identified against these targets. C4XD's expertise in ligand design will be used to complement SGC-Oxford's expertise in x-ray crystallography, screening and chemical biology in the identification of new and improved hit molecules against the SGC-Oxford targets.

Improvements made to SGC-Oxford's existing hit molecules will be the exclusive property of SGC-Oxford, which will make them freely available in line with SGC-Oxford policy, while new compounds independently identified by C4XD will belong to C4XD. There are no cash payments due under the collaboration.

Other applications

The C4XD platform can also be used to predict and control the different crystalline forms which small molecules are able to adopt. These different forms have different properties and these insights are valuable in the development of robust, consistent manufacturing processes for small molecule therapies which are administered in solid form; different crystalline forms often dissolve at different rates which alters the effective dosing for patients. Control and consistency of solid formulations is therefore an important part of pharmaceutical supply.

Management

C4XD has expanded its management team during the year adding expertise in biology, pre-clinical and clinical development, and Project Management. Dr Almond has informed the company that he has stepped down as CTO to pursue his full-time academic career at Manchester University and has resigned as Chief Technology Officer ("CTO") of the company with immediate effect; the company has entered into a consultancy agreement on arm's length terms with Dr Almond to secure continued access to his expertise in the future. Dr Charles Blundell has taken on the role of CTO, and is succeeded as CSO by Dr Craig Fox, who joined the company in June 2015. C4XD believes it has the right balance of skills to progress the business.

Outlook

C4XD has made significant progress since IPO and the business is well positioned to deliver future value for shareholders. In particular, the progression of the Orexin-1 programme has shown that the Company is able to generate candidate drugs for important clinical targets more efficiently than conventional approaches, with savings of up to 90%; part of this cost saving derives from the faster progress which can reduce the time required by up to 50%. The Company is well on the way to replicating this success in its other programmes with exciting progress announced since the year end in IL-17 for inflammation and autoimmune diseases, GPR142 for diabetes, and NRF-2 for COPD. The Company believes that these programmes have the potential to deliver significant returns to investors.

Clive Dix Piers Morgan

Chairman Chief Executive Officer

FINANCIAL REVIEW

Results

Revenue for the twelve months ended 31 July 2015 amounted to £312,000 (2014: £619,000). These revenues are largely generated through collaborations with our partners. Grants secured are accounted for as a reduction in research and development ("R&D") expenses.

R&D expenses were £3,159,000 for the year ended 31 July 2015 (2014: £1,180,000), reflecting the increase in activity and headcount following the successful move to AIM and the positive progress being made, particularly with our Orexin programme.

Administrative expenses were £904,000 for the year ended 31 July 2015 (2014: £636,000) reflecting, amongst other things, additional operating costs incurred by C4XD as an AIM listed company. The cost of issuing new share capital on the move to AIM, which amounted to £877,000, has been charged against the share premium account.

The loss after tax for the year ended 31 July 2015 was £3,064,000 or 10.77 pence per share (2014: £1,118,000 or 5.60 pence per share).

The Company had net assets at 31 July 2015 of £7,968,000 (2014: net liabilities of £1,333,000) and cash, cash equivalents short term investments and deposits of £7,485,000 (2014: £673,000).

C4XD expects to continue to increase its expenditure on research and development as its programmes, including the Orexin-1 programme, progress through further pre-clinical development during the subsequent years. The Orexin-1 programme has entered into formal pre-clinical safety and toxicity testing which is significantly more expensive than early stage discovery. C4XD expects to file for approval to commence clinical studies by the end of 2016; these subsequent studies in man will be more costly than pre-clinical work.

Both cash and costs continue to be prudently and tightly managed.

Piers Morgan

Chief Executive Officer

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 July 2015

	Notes	2015	2014
		£000	£000
Revenue	4	312	619
Cost of sales		(112)	(23)
Gross profit		200	596
Research and development expenses		(3,159)	(1,180)
Administrative expenses		(904)	(636)
Operating loss		(3,863)	(1,220)
Finance income	7	49	1
Finance costs	7	-	(119)
Loss on ordinary activities before taxation		(3,814)	(1,338)
Taxation	8	750	220
Loss for the year and total comprehensive loss for the year		(3,064)	(1,118)
Loss per share
Basic and diluted loss for the year	9	(10.77)p	( 5.60)p

The loss for the year arises from the Group's continuing operations and is attributable to the equity holders of the parent.

There were no other items of comprehensive income for the year (2014: £nil) and therefore the loss for the year is also the total comprehensive loss for the year.

The basic and diluted loss per share are the same as the effect of share options is anti-dilutive.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 July 2015

			Share-
	Issued		based		Capital
	equity	Share	Payment	Merger	contribution	Revenue
	capital	premium	reserve	reserve	reserve	reserve	Total
	£000	£000	£000	£000	£000	£000	£000

At 1 August 2013	200	-	3	920	-	(1,364)	(241)
Loss for the year and total comprehensive loss for the year	-	-	-	-	-	(1,118)	(1,118)
Share-based payments	-	-	26	-	-	-	26
Transactions with owners	-	-	26	-	-	-	26
At 31 July 2014	200	-	29	920	-	(2,482)	(1,333)
Loss for the year and total comprehensive loss for the year	-	-	-	-	-	(3,064)	(3,064)
Issue of share capital	110	10,890	-	-	-	-	11,000
Expenses of placing	-	(877)	-	-	-	-	(877)
Loan notes converted to deferred shares	2,025	-	-	-	-	-	2,025
Waiver of loan note interest	-	-	-	-	195	-	195
Share-based payments	-	-	22	-	-	-	22
Transactions with owners	2,135	10,013	22	-	195	-	12,365
At 31 July 2015	2,335	10,013	51	920	195	(5,546)	7,968

In order to comply with IFRS 3, the Group has applied reverse acquisition accounting in the presentation of consolidated shareholders' equity for comparative periods. These comparative periods show the results of the accounting acquirer (C4X Discovery Limited) along with the share capital structure of the parent company as if it had been in existence from the start of the period (C4X Discovery Holdings plc). As a result, the consolidated share capital and share premium presented for comparative periods is that of the legal parent which was in existence immediately following the share for share exchange which occurred on 13 October 2014, and which is explained further in note 18 to the financial statements.

COMPANY STATEMENT OF CHANGES IN EQUITY

for the year ended 31 July 2015

			Share-
	Issued		Based
	equity	Share	payment
	capital	premium	reserve	Total
	£000	£000	£000	£000
At 1 August 2013	-	-	-	-
Loss for the year and total comprehensive loss for the year	-	-	-	-
Reallocation of reserves on reverse acquisition	-	-	-	-
Share-based payments	-	-	-	-
Transactions with owners	-	-	-	-
At 31 July 2014	-	-	-	-
Loss for the year and total comprehensive loss for the year	-	-	-	-
Acquisition of C4X Discovery Limited	200	-	-	200
Issue of share capital	110	10,890	-	11,000
Expenses of placing	-	(877)	-	(877)
Loan notes converted to deferred shares	2,025	-	-	2,025
Share-based payments	-	-	22	22
Transactions with owners	2,335	10,013	22	12,370
At 31 July 2015	2,335	10,013	22	12,370

STATEMENTS OF FINANCIAL POSITION

at 31 July 2015

		31 July	31 July	31 July	31 July
		2015	2015	2014	2014
		Group	Company	Group	Company
	Notes	£000	£000	£000	£000
Assets
Non-current assets
Property, plant and equipment	10	85	-	21	-
Intangible assets	11	59	-	56	-
Investment in subsidiaries	12	-	222	-	-
		144	222	77	-
Current assets
Trade and other receivables	13	388	12,147	157	-
Income tax asset	14	700	-	250	-
Short-term investments and cash on deposit	15	4,000	-	-	-
Cash and cash equivalents	15	3,485	1	673	-
		8,573	12,148	1,080	-
Total assets		8,717	12,370	1,157	-
Liabilities
Current liabilities
Trade and other payables	16	749	-	227	-
Financial liabilities	17	-	-	43	-
		749	-	270	-
Non-current liabilities
Financial liabilities	17	-	-	2,220	-
		-	-	2,220	-
Total liabilities		749	-	2,490	-
Net assets		7,968	12,370	(1,333)	-
Capital and reserves
Issued equity capital	18	2,335	2,335	200	-
Share premium	18	10,013	10,013	-	-
Share-based payment reserve	19	51	22	29	-
Merger reserve	20	920	-	920	-
Capital contribution reserve	21	195	-	-	-
Revenue reserve	22	(5,546)	-	(2,482)	-
Total equity		7,968	12,370	(1,333)	-

CASH FLOW STATEMENTS

for the year ended 31 July 2015

			31 July	31 July	31 July	31 July
			2015	2015	2014	2014
			Group	Company	Group	Company
	Notes		£000	£000	£000	£000
Loss after interest and tax		(3,064)		-	(1,118)	-
Adjustments for:
Depreciation of tangible fixed assets	10	21		-	9	-
Amortisation of intangible assets	11	5		-	4	-
Share-based payments	19	22		-	26	-
Finance expense		-		-	119	-
Taxation		(750)		-	(220)	-
Changes in working capital:
Increase in trade and other receivables		(231)		-	(28)	-
Increase in trade and other payables		510		-	56	-
Increase in deferred revenue		12		-	44	-
Cash outflow from operating activities		(3,475)		-	(1,108)	-
Research and development tax credit received		300		-	274	-
Net cash outflow from operating activities		(3,175)		-	(834)	-
Cash flows from investing activities
Purchases of tangible fixed assets	10	(85)		-	(7)	-
Purchases of intangible fixed assets	11	(8)		-	-	-
Cash advance to subsidiary		-		(10,122)	-	-
Increase in cash placed on deposit	15	(4,000)		-	-	-
Net cash outflow from investing activities		(4,093)		(10,122)	(7)	-
Cash flows from financing activities
Proceeds from issues of ordinary share capital		11,000		11,000	-	-
Expenses share capital issue	18	(877)		(877)	-	-
Repayment of preference shares		(30)		-	-	-
Interest paid		(13)		-	-	-
Net cash inflow from financing activities		10,080		10,123	-	-
Increase/(decrease) in cash and cash equivalents		2,812		1	(841)	-
Cash and cash equivalents at the start of the year		673		-	1,514	-
Cash and cash equivalents at the end of the year		3,485		1	673	-
Monies placed on deposit at the end of the year		4,000		-	-	-
Cash, cash equivalents and deposits at the end of the year	15	7,485		1	673	-

NOTES TO THE PRELIMINARY RESULTS

For the year ended 31 July 2015

1. Reporting entity

C4X Discovery Holdings plc ("the Company") is an AIM listed company incorporated and domiciled in the UK.

These preliminary results consolidate those of the Company and its subsidiaries (together referred to as the 'Group' and individually as 'Group entities') for the year ended 31 July 2015.

The preliminary results of the Company and the Group for the year ended 31 July 2015 were authorised for issue by the board of directors on 28 October 2015 and the Statement of financial position was signed on the Board's behalf by Piers Morgan.

The preliminary results do not constitute statutory financial statements for the year ended 31 July 2015 but are derived from those financial statements. A copy of the statutory financial statements for the year ended 31 July 2015 will be delivered to the Registrar of Companies in due course. The Auditors' opinion on those financial statements was unqualified, did not draw attention to any matters by way of an emphasis of matters paragraph, and it contained no statement under section 498(2) or section 498(3) of the Companies Act 2006.

The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent company's statement of comprehensive income. The parent company's result for the period ended 31 July 2015 was £nil (2014: £nil).

2. Basis of preparation

(a) Statement of compliance

The Group's and Parent Company's financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS") and International Financial Reporting Committee ("IFRIC") interpretations as they apply to the financial statements of the Group for the period ended 31 July 2015.

(b) Basis of measurement

The Company and Group financial statements have been prepared on the historical cost basis.

The methods used to measure fair values of assets and liabilities are discussed in the respective notes in note 3 below.

The Chairman's and Chief Executive Officer's review outlines the business activities of the Group along with the factors which may affect its future development and performance. The Group's financial position is discussed in the Financial review along with details of its cash flow and liquidity. Note 24 to the financial statements sets out the Group's financial risks and the management of those risks.

Having prepared management forecasts and made appropriate enquiries, the Directors are satisfied that the Group has adequate resources for the foreseeable future. Accordingly they have continued to adopt the going concern basis in preparing the Group and Company financial statements. However, given the nature of the group's biotechnology-based business and need for ongoing investment in its drug development activities, the group will be looking to raise additional funds in the future to allow continued development.

(d) Functional and presentational currency

These financial statements are presented in pounds sterling, which is the Company's functional currency. All financial information presented has been rounded to the nearest thousand.

(e) Use of estimates and judgements

The preparation of financial statements requires management to make estimates and judgements that affect the amounts reported for assets and liabilities as at the reporting date and the amounts reported for revenues and expenses during the year. The nature of estimation means that actual amounts could differ from those estimates. Estimates and judgements used in the preparation of the financial statements are continually reviewed and revised as necessary.

While every effort is made to ensure that such estimates and judgements are reasonable, by their nature they are uncertain and, as such, changes in estimates and judgements may have a material impact on the financial statements.

The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the carrying amount of assets and liabilities within the next financial year are discussed below.

· Equity-settled share-based payments

The determination of share-based payment costs requires: the selection of an appropriate valuation method; consideration as to the inputs necessary for the valuation model chosen; judgement regarding when and if performance conditions will be met; and the estimation of the number of awards that will ultimately vest. Inputs required for this arise from judgements relating to the future volatility of the share price of C4XD and comparable companies, the Company's expected dividend yields, risk free interest rates and expected lives of the options. The Directors draw on a variety of sources to aid in the determination of the appropriate data to use in such calculations. The share-based payment expense is most sensitive to vesting assumptions and to the future volatility of the future share price factor. Further information is included in note 3.

· Taxation

Management judgement is required to determine the amount of tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with an assessment of the effect of future tax planning strategies. The carrying value of the unrecognised tax losses at 31 July 2015 was £416,000 (2014: £101,000). The value of the net deferred tax liability not recognised at the year-end is £8,000 (2014: net deferred tax liability of £5,000). Further information is included in note 8.

· Research and development

Careful judgement by the Directors is applied when deciding whether the recognition requirements for development costs have been met. This is necessary as the economic success of any product development is uncertain until such time as technical viability has been proven and commercial supply agreements are likely to be achieved. Judgements are based on the information available at each reporting date which includes the progress with testing and certification and progress on, for example, establishment of commercial arrangements with third parties. In addition, all internal activities related to research and development of new products are monitored by the Directors. Further information is included in note 3.

· Revenue recognition

Judgements are required as to whether and when contractual milestones have been achieved and in turn the period over which development revenue should be recognised. Management judgements are similarly required to determine whether services or rights under licence agreements have been delivered so as to enable licence revenue to be recognised. Further information is included in note 3.

3. Significant accounting policies

The accounting policies set out below are consistent with those of the previous financial year and are applied consistently by Group entities.

The Group financial statements are presented in sterling and all values are rounded to the nearest thousand pounds except where otherwise indicated.

(a) Basis of consolidation

The Group financial statements consolidate the financial statements of C4X Discovery Holdings plc and the entities it controls (its subsidiaries) drawn up to 31 July each year.

Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies. All C4X Discovery Holdings plc's subsidiaries are 100% owned. Subsidiaries are fully consolidated from the date control passes.

The consolidated financial information of the group has been presented as continuation of C4X Discovery Limited by applying the principles for reverse acquisition accounting, in accordance with IFRS3 Business Combinations, as a common control transaction, based on the book value of assets and liabilities in the legal entities. As explained further below, and as permitted by IFRS3, the Directors have chosen to present comparative information of the consolidated Group based on the assets, liabilities, income and expenses of those legal entities.

In applying the principles of reverse acquisition accounting, the Group's financial information includes the following:

Year ended 31 July 2014 - The consolidated financial information of C4X Discovery Limited and C4X Drug Discovery Limited along with the share capital structure of the legal parent company (C4X Discovery Holdings plc). As a result, the consolidated share capital and share premium presented for comparative periods is that of the legal parent company which was in existence immediately following the share for share exchange which occurred on 13 October 2014, and which is explained further in note 18 to the financial statements.

Year ended 31 July 2015 - The consolidated financial information of the Company for the period from incorporation (16 July 2014) to 31 July 2015 and of C4X Discovery Limited and C4X Drug Discovery Limited for the year ended 31 July 2015.

All intra-group transactions, balances and unrealised gains on transactions between Group companies are eliminated on consolidation. Subsidiaries' accounting policies are amended where necessary to ensure consistency with the policies adopted by the Group.

(b) Foreign currency transactions

The Company had no foreign currency transactions during the year.

An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. As at the reporting date the Company operated with only a single segment.

(d) Revenue recognition

Revenue is recognised to the extent that it is probable that economic benefits will flow to the group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable for the sale of goods or services, excluding discounts, rebates, VAT and other sales taxes or duties.

The group's revenues to date comprise amounts earned under joint development agreements and individual project development programmes in respect of novel small molecule therapies.

Revenues received from development programmes, are recognised on a straight line basis over the period that the development work is being performed as measured by contractual milestones. Revenue is not recognised where there is uncertainty regarding the achievement of such milestones and where, either revenue has not been paid, or where the customer has the right to recoup advance payments.

Contractual payments received from licence agreements are recognised as revenue when goods, services or rights and entitlements are supplied or when contractual rights for the customer to recoup such payments have lapsed.

(e) Government grants

Government grants are recognised when it is reasonable to expect that the grants will be received and that all related conditions are met, usually on submission of a valid claim for payment.

Government grants of a revenue nature are deducted from administrative expenses in the Consolidated statement of comprehensive income in line with the terms of the underlying grant agreement.

Government grants relating to capital expenditure are deducted in arriving at the carrying amount of the asset.

(f) Research and development

Research costs are charged in the Consolidated statement of comprehensive income as they are incurred. Development costs will be capitalised as intangible assets when it is probable that future economic benefits will flow to the Company. Such intangible assets will be amortised on a straight-line basis from the point at which the assets are ready for use over the period of the expected benefit, and will be reviewed for impairment at each reporting date based on the circumstances at the reporting date.

The criteria for recognising expenditure as an asset are:

· it is technically feasible to complete the product;

· management intends to complete the product and use or sell it;

· there is an ability to use or sell the product;

· it can be demonstrated how the product will generate probable future economic benefits;

· adequate technical, financial and other resources are available to complete the development, use and sale of the product; and

· expenditure attributable to the product can be reliably measured.

Development costs are currently charged against income as incurred since the criteria for their recognition as an asset are not met.

(g) Lease payments

Rentals payable under operating leases, which are leases where the lessor retains a significant proportion of the risks and rewards of the underlying asset, are charged in the Consolidated statement of comprehensive income on a straight-line basis over the expected lease term.

Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.

(h) Finance income and expense

Finance income comprises interest income on funds invested and changes in the fair value of financial assets at fair value through the Consolidated statement of comprehensive income. Interest income is recognised as interest accrues using the effective interest rate method.

Finance expense comprises interest expense on borrowings, changes in the fair value of financial assets at fair value through the Consolidated statement of comprehensive income, impairment losses recognised on financial assets and losses on hedging instruments that are recognised in the Consolidated statement of comprehensive income. All borrowing costs are recognised using the effective interest method.

(i) Income tax

Income tax expense comprises current and deferred tax. Income tax expense is recognised in the Consolidated statement of comprehensive income except to the extent that it relates to items recognised directly in equity or in other comprehensive income.

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to, the tax authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.

Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements with the following exceptions:

· where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination, that at the time of the transaction affects neither accounting nor taxable profit nor loss; and

· in respect of taxable temporary differences associated with investments in subsidiaries where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are measured on an undiscounted basis using the tax rates and tax laws that have been enacted or substantially enacted by the date and which are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profits will be available against which differences can be utilised. An asset is not recognised to the extent that the transfer or economic benefits in the future is uncertain.

(j) Tangible fixed assets

Property, plant and equipment assets are recognised initially at cost. After initial recognition, these assets are carried at cost less any accumulated depreciation and any accumulated impairment losses. Cost comprises the aggregate amount paid and the fair value of any other consideration given to acquire the asset and includes costs directly attributable to making the asset capable of operating as intended.

Depreciation is computed by allocating the depreciable amount of an asset on a systematic basis over its useful life and is applied separately to each identifiable component.

The following bases and rates are used to depreciate classes of assets:

Building improvements - straight line over remainder of lease period

Office equipment - straight line over three years

The carrying values of property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate that the carrying value may not be recoverable, and are written down immediately to their recoverable amount. Useful lives and residual values are reviewed annually and where adjustments are required these are made prospectively.

A property, plant and equipment item is de-recognised on disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the de-recognition of the asset is included in the Consolidated statement of comprehensive income in the period of de-recognition.

(k) Intangible assets

Intangible assets acquired either as part of a business combination or from contractual or other legal rights are recognised separately from goodwill provided they are separable and their fair value can be measured reliably. This includes the costs associated with acquiring and registering patents in respect of intellectual property rights.

Where intangible assets recognised have finite lives, after initial recognition their carrying value is amortised on a straight line basis over those lives. The nature of those intangibles recognised and their estimated useful lives are as follows:

Patents - straight line over twenty years

(l) Impairment of assets

At each reporting date the Group reviews the carrying value of its plant, equipment and intangible assets to determine whether there is an indication that these assets have suffered an impairment loss. If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an assessment of the asset's recoverable amount.

An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying value of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. 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. In determining fair value less costs of disposal, an appropriate valuation model is used, these calculations corroborated by valuation multiples, or other available fair value indicators. Impairment losses on continuing operations are recognised in the Consolidated statement of comprehensive income in those expense categories consistent with the function of the impaired asset.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the Consolidated statement of comprehensive income unless the asset is carried at re-valued amount, in which case the reversal is treated as a valuation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset's revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

The carrying values of plant, equipment and intangible assets as at the reporting date have not been subjected to impairment charges.

(m) Investments in subsidiaries

Investments in subsidiaries are stated in the Company statement of financial position at cost less provision for any impairment.

(n) Trade and other receivables

Trade receivables, which generally have 30 to 60 day terms, are recognised and carried at the lower of their original invoiced value and recoverable amount. The time value of money is not material.

Provision is made when there is objective evidence that the group will not be able to recover balances in full. Significant financial difficulties faced by the customer, probability that the customer will enter bankruptcy or financial reorganisation and default in payments are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying value of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the Consolidated statement of comprehensive income within administrative expenses.

When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables.

(o) Cash, cash equivalents and short-term investments and cash on deposit

Cash and cash equivalents comprise cash at hand and deposits with maturities of three months or less. Short-term investments and cash on deposit comprise deposits with maturities of more than three months, but no greater than twelve months.

(p) Trade and other payables

Trade and other payables are non-interest bearing and are initially recognised at fair value. They are subsequently measured at amortised cost using the effective interest rate method.

(q) Borrowings

Borrowings are recognised when the group becomes party to related contracts and are measured initially at fair value, net of directly attributable transaction costs incurred. After initial recognition, borrowings are stated at amortised cost.

Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least twelve months after the reporting date.

Costs of borrowing funds are expensed in the period in which they occur.

(r) Provisions

Provisions are recognised when the group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

The expense relating to any provision is presented in the Consolidated statement of comprehensive income, net of any expected reimbursement, but only where recoverability of such reimbursement is virtually certain.

Provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risk specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

There were no provisions at 31 July 2015 (2014: Nil).

(s) Financial assets and liabilities

Financial assets and liabilities are recognised when the group becomes party to the contracts that give rise to them and are classified as financial assets and liabilities at fair value through the Consolidated statement of comprehensive income. The group determines the classification of its financial assets and liabilities at initial recognition and re-evaluates this designation at each financial year end.

A financial asset or liability is generally de-recognised when the contract that gives rise to it is settled, sold, cancelled or expires.

At the year end, the Group had no financial assets or liabilities designated at fair value through the Consolidated statement of comprehensive income (2014: £nil).

(t) Share capital

Proceeds on issue of shares are included in shareholders' equity, net of transaction costs. The carrying amount is not re-measured in subsequent years.

(u) Share-based payments

Equity settled share-based payment transactions are measured with reference to the fair value at the date of grant, recognised on a straight line basis over the vesting period, based on the Company's estimate of shares that will eventually vest. Fair value is measured using a suitable option pricing model.

At each reporting date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management's best estimate of the achievement or otherwise of non-market conditions and the number of equity instruments that will ultimately vest. The movement in cumulative expense since the previous reporting date is recognised in the Consolidated statement of comprehensive income, with a corresponding entry in equity.

Where the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognised over the original vesting period. In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair value of any modification, based on the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the modification. No reduction is recognised if this difference is negative.

Where awards are granted to the employees of the subsidiary company, the fair value of the awards at grant date is recorded in the Company's financial statements as an increase in the value of the investment with a corresponding increase in equity via the share-based payment reserve.

(v) Defined contribution pension scheme

The group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Company in an independently administered fund. The amounts charged against profits represent the contributions payable to the scheme in respect of the accounting period.

(w) New accounting standards and interpretations

The following new and amended IFRS, IAS and IFRIC interpretations were mandatory for accounting periods ending 31 July 2015 and thereafter, but have no material effect on the group's financial statements.

· IFRS 10 Consolidated Financial Statements, IAS 27 Separate Financial Statements

· IFRS 11 Joint Arrangements, IAS 28 Investments in Associates and Joint Ventures

· IFRS 12 Disclosure of Interests in Other Entities

· IFRS 10, IFRS 12 and IAS 27 Investment Entities - Amendments to IFRS 10, IFRS 12 and

IAS 27

· IAS 32 Offsetting Financial Assets and Financial Liabilities (Amendments)

· IAS 36 Recoverable Amount Disclosures for Non-Financial Assets (Amendments)

· IAS 39 Novation of Derivatives and Continuation of Hedge Accounting (Amendments)

· Annual Improvements to IFRSs 2010 to 2012 Cycle (endorsed for use in the EU on 17 and

18 December 2014)

· Annual Improvements to IFRSs 2011 to 2013 Cycle (endorsed for use in the EU on 17 and

18 December 2014)

A number of new standards, amendments to standards and interpretations are effective for annual periods ending 31 July 2016 or thereafter and have not been applied in preparing these consolidated financial statements and those that are relevant to the group are summarised below. None of these are expected to have a significant effect on the consolidated financial statements of the group in the period of initial application.

The following standards and interpretations have an effective date after the date of these financial statements.

			Effective date
IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture - Amendments to IFRS 10 and IAS 28			1 January 2016
IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception - Amendments to IFRS 10, IFRS 12 and IAS 28			1 January 2016
IFRS 11 Accounting for Acquisitions of Interests in Joint Operations			1 January 2016
IAS 1 Disclosure Initiative - Amendments to IAS 1			1 January 2016
IAS 16 and IAS 38 - Clarification of Acceptable Methods of Depreciation and Amortisation - Amendments to IAS 16 and IAS 38			1 January 2016
IAS 27 Equity Method in Separate Financial Statements - Amendments to IAS 27			1 January 2016
IFRS 15 Revenue from Contracts with Customers			1 January 2018
IFRS 9 Financial Instruments (issued in 2013)			1 January 2018
Annual Improvements to IFRSs 2012 to 2014 Cycle			1 January 2016

4. Segmental information

Operating segments

At 31 July 2015 the group operated as one segment, being the provision of new technologies to improve the drug discovery process for novel small molecule therapies. This is the level at which operating results are reviewed by the chief operating decision maker (i.e. the CEO) to make decisions about resources, and for which financial information is available. All revenues have been generated from continuing operations and are from external customers.

	31 July 2015	31 July 2014
	£000	£000
Analysis of revenue
Amounts earned under joint development agreements	312	619
	312	619

Included within amounts earned under joint development agreements is revenue from one material customer amounting to £152,000 (2014: one material customer amounting to £206,000).

The group operates in one main geographic area, in the UK. The group's revenue per geographical segment based on the customer's location is as follows:

	31 July 2015	31 July 2014
	£000	£000
Revenue
UK	312	619
	312	619

All the group's assets are held in the UK and all of its capital expenditure arises in the UK.

5. Operating loss

	31 July 2015	31 July 2014
The Group	£000	£000
Operating loss is stated after charging /(crediting):
Depreciation of property, plant and equipment (see note 10)	21	9
Amortisation of intangible assets (see note 11)	5	4

Research and development expense**	3,159	1,180
Cost of inventories recognised as an expense (included in cost of sales)	112	23
Operating lease rentals (see note 23):
Land and buildings	34	26

Auditor's remuneration: Audit services:
- Fees payable to Company auditor for the audit of the parent and the consolidated accounts	25	13
Fees payable to Company auditor for other services:
- Auditing the accounts of subsidiaries pursuant to legislation	-	-
- Other services	103	15
Total auditor's remuneration	128	28

** Included within research and development expense are staff costs totalling £937,000 (2014: £670,000) also included in note 6.

6. Staff costs

	31 July 2015	31 July 2014
	£000	£000
Wages and salaries	1,177	706
Social security costs	140	78
Share-based payments	22	26
	1,339	810

Directors' remuneration (including benefits-in-kind) included in the aggregate remuneration above comprised:
Emoluments for qualifying services	354	100

Directors' emoluments (excluding social security costs, but including benefits in kind) disclosed above include £284,000 paid to the highest paid director (2014: £33,000). An analysis of the highest paid director's remuneration is included in the Directors' remuneration report.

Retirement benefits are accruing to 1 (2014:0) director

The average number of employees during the year (including directors), was as follows:

	31 July 2015	31 July 2014
The Group	Number	Number
Directors	5	6
Laboratory and administrative staff	14	12
	19	18

7. Finance income and expense

	31 July 2015	31 July 2014
The group	£000	£000
Finance income:
Bank interest receivable	49	1
Finance costs:
Preference share interest payable	-	(2)
Loan interest payable	-	(117)
	49	(118)

Bank interest receivable includes £49,000 (2014: £nil) which is receivable after the year end.

8. Income tax

The tax credit is made up as follows:

	31 July 2015	31 July 2014
The Group	£000	£000
Current income tax:
UK corporation tax losses in the year	-	-
Research and development income tax credit receivable	(700)	(250)
Adjustment in respect of prior years	(50)	30
Total current income tax	(750)	(220)
The tax assessed for the year varies from the standard rate of corporation tax as explained below:	31 July 2015	31 July 2014
The Group	£000	£000
Loss on ordinary activities before taxation	(3,814)	(1,338)
Tax at standard rate of 20.67% (2014: 22.33%)	(788)	(299)
Effects of:
Expenses not deductible for tax purposes	8	33
Movement in un-provided deferred tax	(6)	-
Additional reduction for research and development expenditure	-	-
Surrender of research and development relief for repayable tax credit	447	217
Research and development tax credit receivable	(700)	(250)
Share options exercised (CTA 2009 Pt 12 deduction)	-	-
Overseas corporation tax paid	-	-
Tax losses carried forward	339	49
Adjustment in respect of prior years	(50)	30
Tax credit in income statement	(750)	(220)

Reductions of the main rate of corporation tax from 23% to 21% from 1 April 2014 and to 20% from 1 April 2015 were substantively enacted on 2 July 2013. The changes in tax rate are not considered to have had a material impact.

The Group has accumulated losses available to carry forward against future trading profits. The estimated value of the deferred tax asset, measured at a standard rate of 20% (2014: 20%) is £416,000 (2014: £101,000), of which £nil (2014: £nil) has been recognised. Remaining tax losses have not been recognised as an asset as it is not probable that future taxable profits will be available against which the unused tax losses can be utilised.

The Group also has a deferred tax liability being accelerated capital allowances, for which the tax, measured at a standard rate of 20% (2014: 20%) of £18,000 (2014: £11,000)

The Group has a deferred tax asset for share-based payments, for which the tax, measure at a standard rate of 20% (2014; 21%) is £10,000 (2014: £6,000).

The net deferred tax liability of £8,000 (2014: £5,000) has not been recognised as it is covered by accumulated tax losses (2014: £nil).

9. Earnings per share

31 July

2015

31 July

2014

The Group

£000

Loss for the financial year attributable to equity shareholders	(3,064)	(1,118)
Weighted average number of shares:
Ordinary shares in issue	28,457,043		19,988,550
Basic loss per share (pence)	(10.77)		(5.60)

Diluted loss per share has not been presented above as the effect of share options issued is anti-dilutive.

10. Property, plant and equipment

	Office equipment, fixtures and fittings	Building improvements	Total
The Group	£000	£000	£000
Cost:
At 31 July 2013	37	-	37
Additions	7	-	7
At 31 July 2014	44	-	44
Additions	47	38	85
At 31 July 2015	91	38	129
Depreciation:
At 31 July 2013	14	-	14
Provided during the year	9	-	9
At 31 July 2014	23	-	23
Provided during the year	18	3	21
At 31 July 2015	41	3	44
Net book value:
At 31 July 2015	50	35	85
At 31 July 2014	21	-	21

The Company has no property, plant and equipment

11. Intangible assets

	Patents
The Group	£000
Cost:
At 31 July 2013	79
Additions	-
At 31 July 2014	79
Additions	8
At 31 July 2015	87
Amortisation:
At 31 July 2013	19
Provided during the year	4
At 31 July 2014	23
Provided during the year	5
At 31 July 2015	28
Net book value:
At 31 July 2015	59
At 31 July 2014	56
Intangible assets are amortised on a straight line basis over twenty years. Amortisation provided during the period is recognised in administrative expenses. The group does not believe that any of its patents in isolation is material to the business. The Company has no intangible assets.

12. Investment in subsidiaries

	Shares	Total
The Company	£000	£000
At 31 July 2014	-	-
Acquisition of C4X Discovery Limited	200	200
Increase in respect of share-based payments	22	22
At 31 July 2015	222	222

By subsidiary

C4X Discovery Limited	222	222
C4X Drug Discovery Limited	-	-
At 31 July 2015	222	222


Subsidiary undertakings	Country of incorporation	Principal activity	31 July 2015
C4X Discovery Limited	England and Wales	Research and development	100%
C4X Drug Discovery Limited	England and Wales	Dormant company	100%

The Company has taken advantage of Companies Act 2006 s612 and s615 reliefs on the shares issued by C4X Discovery Holdings Limited such that the requirement to recognise in the cost of investment any excess over the nominal value of the shares issued to acquire the subsidiary is removed. Consequently, the cost of the investment in the subsidiary is recorded at the nominal value of the shares issued to acquire it, being £200,000.

13. Trade and other receivables

	31 July 2015	31 July 2015	31 July 2014	31 July 2014
	Group	Company	Group	Company
	£000	£000	£000	£000
Trade receivables	31	-	15	-
Prepayments	172	-	28	-
Inter-company short-term loan to subsidiary	-	12,147	-	-
Other receivables	185	-	114	-
	388	12,147	157	-

The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.

All trade receivables are denominated in Sterling.

There are no formal terms for the repayment of inter-company loans, none of which bear interest.

Other receivables includes £nil in respect of unpaid ordinary shares (2014: £50,000 in respect of 1,069,625 unpaid ordinary shares) and £174,000 VAT receivable (2014: £61,000).

14. Income tax asset

	31 July 2015		31 July 2015	31 July 2014	31 July 2014
		Group	Company	Group	Company
	£000		£000	£000	£000
Research and development income tax credit receivable	700		-	250	-
	700		-	250	-

15. Cash, cash equivalents and deposits

	31 July 2015			31 July 2015	31 July 2014	31 July 2014
		Group		Company	Group	Company
	£000			£000	£000	£000
Short-term investments and cash on deposit			4,000	-	-	-
Cash and cash equivalents	3,485			1	673	-
	7,485			1	673	-

Under IAS 7, cash held on deposits (being deposits with maturity of greater than three months and no more than twelve months) that cannot readily be converted into cash has been classified as a short-term investment. The maturity on this investment was less than twelve months at the reporting date.

Cash and cash equivalents at 31 July 2015 include deposits with original maturity of three months or less of £485,000 (2014: £673,000).

An analysis of cash, cash equivalents and deposits by denominated currency is given in note 24.

16. Trade and other payables

	31 July 2015	31 July 2015	31 July 2014	31 July 2014
	Group	Company	Group	Company
	£000	£000	£000	£000

Current payables	448	-	107	-
Other payables	112	-	32	-
Deferred revenue	56	-	44	-
Accruals	133	-	44	-
	749	-	227	-

17. Financial liabilities

	31 July 2015	31 July 2015	31 July 2014	31 July 2014
	Group	Company	Group	Company
	£000	£000	£000	£000

Other loan:
Current	-	-	43	-
Non–current	-	-	2,220	-
	-	-	2,263	-

18. Issued equity capital

	Deferred shares	Ordinary shares	A Ordinary shares	Share capital	Deferred shares	Share premium	Total
The Company	Number	Number	Number	£000	£000	£000	£000
Allotted, called up and fully paid ordinary shares of 1p:
As at start of period	-	-		-	-	-	-
Shares issued on incorporation on 16 July 2014	-	2	-	-	-	-	-
Share subdivision on 3 September 2014	-	198	-	-	-	-	-
Shares issued on the acquisition of C4X Discovery Limited on 13 October 2014	2,025,000	15,553,975	4,434,375	200	2,025	-	2,225
Re-designation on 17 October 2014	-	4,434,375	(4,434,375)	-	-	-	-
Issued of share capital	-	11,000,000	-	110	-	10,890	11,000
Expenses of placing	-	-	-	-	-	(877)	(877)
Ordinary and deferred shares as at 31 July 2015	2,025,000	30,998,550	-	310	2,025	10,013	12,348

	Share capital	Deferred shares	Share premium	Total
The Group	£000	£000	£000	£000
Allotted, called up and fully paid ordinary shares of 1p:
As at 31 July 2013	200	-	-	200
Shares issued on incorporation on 16 July 2014	-	-	-	-
Reallocation of reserves on reverse acquisition	200	-	-	200
As at 31 July 2014	200	-	-	200
Share subdivision on 3 September 2014	-	-	-	-
Shares issued on the acquisition of C4X Discovery Limited on 13 October 2014	-	2,025	-	2,025
Issued of share capital	110	-	10,890	11,000
Expenses of placing	-	-	(877)	(877)
Ordinary and deferred shares as at 31 July 2015	310	2,025	10,013	12,348

On 16 July 2014, being the date of incorporation of C4X Discovery Holdings plc, 2 ordinary shares of £1 were subscribed for fully paid; and on 3 September 2014 such shares were each sub-divided into 100 ordinary shares of £0.01 each.

On 13 October 2014 the Company issued 15,553,975 ordinary shares of £0.01 each and 4,434,375 ordinary shares of £0.01 each to the shareholders of C4X Discovery Limited in consideration for the transfer of the entire share capital of C4X Discovery Limited to the Company pursuant to a share exchange agreement. In accordance with the reverse acquisition requirements of IFRS3, this transaction is recorded in the Group accounts as if this share capital had always been in existence, therefore it is reflected in the comparative periods for the Group accounts. The Company balance sheet however reflects the legal transactions that have occurred during the period and therefore this share for share exchange is recorded in the current period in the Company balance sheet. This gives rise to the difference between the Group and Company share capital in the comparative period.

On 13 October 2014 the Company executed an instrument constituting £2,025,000 unsecured loan notes, with a view to issuing them as consideration for the acquisition of the £2,025,000 unsecured loan notes of C4X Discovery Limited pursuant to a share exchange agreement. The Company's loan notes converted, at nominal value, into deferred shares of £1 in the Company having no rights to any vote or dividends as set out in the articles.

By a resolution dated 17 October 2014 each of the issued A ordinary shares of £0.01 each was converted into and re-designated as an ordinary share of £0.01 each ranking equally with the existing ordinary shares of £0.01 each in the Company.

On 23 October 2014 11,000,000 shares were issued in a placing at a price of £1 resulting in share proceeds of £11,000,000. Share issue costs of £877,000 were incurred and have been deducted from share premium.

19. Share-based payment reserve

The Group	£000
At 31 July 2013	3
Share-based payments	26
At 31 July 2014	29
Share-based payments	22
At 31 July 2015	51
The Company	£000
At the start of the period	-
Share-based payments	22
At 31 July 2015	22

The share-based payment reserve accumulates the corresponding credit entry in respect of share-based payment charges. Movements in the reserve are disclosed in the Consolidated statement of changes in equity.

A charge of £22,000 has been recognised in the Statement of comprehensive income for the year (2014: £26,000).

Share option schemes

The Group operates the following share option schemes all of which are operated as Enterprise Management Incentive ("EMI") schemes in so far as the share options being issued meet the EMI criteria as defined by HM Revenue & Customs. Share options issued that do not meet EMI criteria are issued as unapproved share options, but are subject to the same exercise performance conditions.

C4X Discovery Holdings plc Long Term Incentive Plan ("LTIP")

- Grant in September 2009

Share options were granted to a staff member on 29 September 2009. The options granted are exercisable in the event of the listing of the Company, its acquisition or at the absolute discretion of the board. The exercise price was set at 2.05 pence (the original exercise price of £22.00 was adjusted for a subdivision of 1,075 share options in C4X Holdings plc for each share option originally held in C4X Discovery Limited), being the estimated fair value of the shares on the day preceding the issue of the share options. The fair value benefit is measured using a Black Scholes model, taking into account the terms and conditions upon which the share options were issued.

- Grant in August 2012

Share options were granted to staff on 28 August 2012. The options granted are exercisable in the event of the listing of the Company, its acquisition or at the absolute discretion of the board. The exercise price was set at 5.58 pence (the original exercise price of £60.00 was adjusted for a subdivision of 1,075 share options in C4X Holdings plc for each share option originally held in C4X Discovery Limited), being the estimated fair value of the shares on the day preceding the issue of the share options. The fair value benefit is measured using a Black Scholes model, taking into account the terms and conditions upon which the share options were issued.

- Grant in July 2013

Share options were granted to staff on 4 July 2013. The options granted are exercisable in the event of the listing of the Company, its acquisition or at the absolute discretion of the board. The exercise price was set at 5.58 pence (the original exercise price of £60.00 was adjusted for a subdivision of 1,075 share options in C4X Holdings plc for each share option originally held in C4X Discovery Limited), being the estimated fair value of the shares on the day preceding the issue of the share options. The fair value benefit is measured using a Black Scholes model, taking into account the terms and conditions upon which the share options were issued.

- Grant in May 2014

Share options were granted to staff on 27 May 2014. The options granted are exercisable in the event of the listing of the Company, its acquisition or at the absolute discretion of the board. The exercise price was set at 5.58 pence (the original exercise price of £60.00 was adjusted for a subdivision of 1,075 share options in C4X Holdings plc for each share option originally held in C4X Discovery Limited), being the estimated fair value of the shares on the day preceding the issue of the share options. The fair value benefit is measured using a Black Scholes model, taking into account the terms and conditions upon which the share options were issued.

- Grant in June 2015

Share options were granted to staff on 8 June 2015. The options granted are exercisable in the event of the listing of the Company, its acquisition or at the absolute discretion of the board. The exercise price was set at 100.0 pence, being the price at which shares were placed in the IPO in October 2014. The fair value benefit is measured using a Black Scholes model, taking into account the terms and conditions upon which the share options were issued.

Share options are awarded to management and key staff as a mechanism for attracting and retaining key members of staff. The options are granted at no lower than either: (i) market price on the day preceding grant; or (ii) in the event of abnormal price movements at an average market price for the week preceding grant date. Options may be granted at prices higher than the market price on the day preceding grant where the Board believes it is appropriate to do so. These options vest over a three year period from the date of grant and are exercisable until the tenth anniversary of the award. Exercise of the award is subject to the employee remaining a full time member of staff at the point of exercise. The fair value benefit is measured using a binomial valuation model, taking into account the terms and conditions upon which the share options were issued. The following tables illustrate the number and weighted average exercise prices of, and movements in, share options during the year.

	2015	2014
The Group and Company	Number	Number
Outstanding at 1 August	1,699,575	828,825
Granted during the year	477,750	924,500
Lapsed/cancelled	-	(53,750)
Outstanding at 31 July	2,177,325	1,699,575
Exercisable at 31 July	-	-

During the year ended 31 July 2015, no options were exercised (2014: nil).

The comparative figures have been adjusted for a subdivision of 1,075 share options in C4X Holdings plc for each share option originally held in C4X Discovery Limited

Weighted average exercise price of options

	2015	2014
The Group and Company	Pence	Pence
Outstanding at 1 August	5.41	5.24
Granted during the year	83.50	5.58
Forfeited/cancelled	-	5.58
Outstanding at 31 July	22.55	5.41

The weighted average fair value of options granted during the year to 31 July 2015 was 83.5 pence (2014: 5.58 pence). The range of exercise prices for options outstanding at the end of the year was 2.05 pence - 83.5 pence, (2014: 2.05 pence - 5.58 pence).

For the share options outstanding as at 31 July 2015, the weighted average remaining contractual life is 8.4 years (2014: 9.0 years).

No share options were exercised during the year (2014: none).

The following table lists the inputs to the models used for the years ended 31 July 2015 and 31 July 2014.


The Group and Company
	2015	2014
Expected volatility (%)	52.5%	52.5%
Risk-free interest rate (%)	1.34%-2.00%	1.34%-2.00%
Expected life of options (year's average)	4 years	5 years
Weighted average exercise price (pence)	83.50	5.58
Weighted average share price at date of grant (pence)	22.55	5.41

The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome.

No other features of options granted were incorporated into the measurement of fair value.

20. Merger reserve

The Group	£000
As at 31 July 2013, 31 July 2014 and 31 July 2015	920

The merger reserve arises as a result of the reverse acquisition requirements of IFRS3 meaning the consolidated accounts are presented as a continuation of the C4X Discovery Limited accounts along with the share capital structure of the legal parent company (C4X Discovery Holdings plc). As a result, the consolidated share capital and share premium presented for comparative periods is that of the legal parent company which was in existence immediately following the share for share exchange which occurred on 13 October 2014. The resulting difference between the net asset value of the legal subsidiary and the share capital structure of the legal parent is recorded as a merger reserve.

21. Capital contribution reserve

The Group	£000
At 31 July 2013	-
Waiver of loan interest payable	-
At 31 July 2014	-
Waiver of loan interest payable	195
At 31 July 2015	195

22. Revenue reserve

The Group	£000
At 31 July 2013	(1,364)
Loss for the year	(1,118)
At 31 July 2014	(2,482)
Loss for the year	(3,064)
At 31 July 2015	(5,546)

23. Commitments

Operating lease commitments

The Group leases premises under non-cancellable operating lease agreements. The future aggregate minimum lease and service charge payments under non-cancellable operating leases are as follows:

	31 July 2015	31 July 2014
	Group	Group
	£000	£000
Land and buildings:
Not later than one year	95	2
After one year but not more than five years	228	-
After five years	-	-
	398	2

24. Financial risk management

Overview

This note presents information about the Group's exposure to various kinds of financial risks, the Group's objectives, policies and processes for measuring and managing risk, and the Group's management of capital.

The Board has overall responsibility for the establishment and oversight of the Group's risk management framework. The executive directors report regularly to the board on Group risk management.

Capital risk management

The Group reviews its forecast capital requirements on a half-yearly basis to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders.

The capital structure of the Group consists of equity attributable to equity holders of the parent, comprising issued share capital, reserves and retained earnings as disclosed in notes 18, 19, 20 21 and 22 and in the group Statement of changes in equity. Total equity was £7,968,000 at 31 July 2015 ((£1,333,000) at 31 July 2014).

The Company is not subject to externally imposed capital requirements.

Liquidity risk

The Group's approach to managing liquidity is to ensure that, as far as possible, it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the group's reputation.

The Group manages all of its external bank relationships centrally in accordance with defined treasury policies. The policies include the minimum acceptable credit rating of relationship banks and financial transaction authority limits. Any material change to the Group's principal banking facility requires board approval. The Group seeks to mitigate the risk of bank failure by ensuring that it maintains relationships with a number of investment grade banks.

At the reporting date the Group was cash positive with no outstanding borrowings.

Categorisation of financial instruments

	Loans and receivables	Financial liabilities at amortised cost	Group	Company
Financial assets/(liabilities)	£000	£000	£000	£000
31 July 2015
Trade receivables	388	-	388	-
Inter-company short-term loan to subsidiary	-	-	-	12,147
Cash, cash equivalents and deposits	7,485	-	7,485	-
Trade and other payables *	-	(616)	(616)	-
	7,873	(616)	7,257	12,147

	Loans and receivables	Financial liabilities	Group	Company
Financial assets/(liabilities)	£000	£000	£000	£000
31 July 2014
Trade receivables	157	-	157	-
Cash, cash equivalents and deposits	673	-	673	-
Trade and other payables *	-	(183)	(183)	-
Inter-company short-term loan to subsidiary	-	-	-	-
Financial liabilities	-	(2,263)	-	-
	830	(2,446)	(1,616)	-

*Excluding accruals.

The values disclosed in the above table are carrying values. The Board considers that the carrying amount of financial assets and liabilities approximates to their fair value.

The main risks arising from the Group's financial instruments are credit risk and foreign currency risk. The board of directors reviews and agrees policies for managing each of these risks which are summarised below.

Credit risk

The Group's principal financial assets are cash, cash equivalents and deposits. The Group seeks to limit the level of credit risk on the cash balances by only depositing surplus liquid funds with multiple counterparty banks that have investment grade credit ratings.

The Group trades only with recognised, creditworthy third parties. Receivable balances are monitored on an on-going basis with the result that the Group's exposure to bad debts is not significant. The Group's maximum exposure is the carrying amount as disclosed in note 13, which was neither past due nor impaired. All trade receivables are ultimately overseen by the Chief Executive Officer and are managed on a day-to-day basis by the Finance team. Credit limits are set as deemed appropriate for the customer.

The maximum exposure to credit risk in relation to cash, cash equivalents and deposits is the carrying value at the balance sheet date.

Foreign currency risk

The Group is exposed to currency risk on sales and purchases that are denominated in a currency other than the respective functional currency of the Company. These are primarily US Dollars (USD) and Euros. Transactions outside of these currencies are limited.

The Group may use forward exchange contracts as an economic hedge against currency risk, where cash flow can be judged with reasonable certainty. Foreign exchange swaps and options may be used to hedge foreign currency receipts in the event that the timing of the receipt is less certain. There were no open forward contracts as at 31 July 2015 or at 31 July 2014 and the Group did not enter into any such contracts during 2015 nor 2014.

The split of Group assets between Sterling and other currencies at the year-end is analysed as follows:


	GBP	USD	EUR	2015 Total	GBP	2014 Total
The group	£000	£000	£000	£000	£000	£000
Cash, cash equivalents and deposits	7,485	-	-	7,485	673	673
Trade receivables	31	-	-	31	15	15
Trade payables	(445)	(1)	(2)	(448)	(107)	(107)
	7,071	(1)	(2)	7,068	581	581

Sensitivity analysis to movement in exchange rates

Given the immaterial net payable balances in foreign currency, the exposure to a change in exchange rate is negligible.

Interest rate risk

As the group has no borrowings the risk is limited to the reduction of interest received on cash surpluses held at bank which receive a floating rate of interest. The principal impact to the group is the result of interest-bearing cash and cash equivalent balances held as set out below:

	31 July 2015			31 July 2014
	Fixed rate	Floating rate	Total	Fixed rate	Floating rate	Total
The Group	£000	£000	£000	£000	£000	£000
Cash, cash equivalents and deposits	7,000	485	7,485	-	673	673
The Company
Cash, cash equivalents and deposits	-	1	1	-	-	-

As the majority of cash and cash equivalents are held on fixed deposit the exposure to interest rate movements is immaterial.

Maturity profile

Set out below is the maturity profile of the group's financial liabilities at 31 July 2015 based on contractual undiscounted payments including contractual interest.

	Less than 1 year	1 to 5 years	Total
2015	£000	£000	£000
Financial liabilities
Trade and other payables *	616	-	616
	616	-	616
	Less than 1 year	1 to 5 years	Total
2014	£000	£000	£000
Financial liabilities
Trade and other payables *	183	-	183
Preference shares classed as liabilities and accruing interest	43	-	43
Loan notes and accruing interest	-	2,220	2,220
	226	2,220	2,446

*Excluding accruals. Trade and other payables are due within three months.

The Directors consider that the carrying amount of the financial liabilities approximates to their fair value.

As all financial assets are expected to mature within the next twelve months an aged analysis of financial assets has not been presented.

25. Related party transactions

During the year, shareholder Aquarius Equity Partners Limited, charged the Company £20,000 (2014: £40,000) for monitoring fees and were owed £1,545 at 31 July 2015 (2014: £nil).

During the year, The Aquarius IV Fund LLP, a fund managed by shareholder Aquarius Equity Partners Limited, waived £195,000 loan-note interest (charged 2014: £117,000 and 2013: £78,000) and held 2,025,000 deferred shares of £1 each (2014: were owed loan notes plus accumulated interest totalling £2,220,000).

During the year, shareholder University of Manchester charged the Company £94,410 (including £44,770 for the services of Dr A Almond which are disclosed as compensation for key management personnel) (2014: £91,006 (including £44,698 for the services of Dr A Almond which are disclosed as compensation of key management personnel)) for services provided and were owed £9,054 at 31 July 2015 (2014: £9,036).

The Group:

There were no sales to, purchases from, or at the year-end, balances with any related party.

The Company:

The following table summarises inter-company balances at the year-end between C4X Discovery Holdings plc and subsidiary entities:

	Notes	31 July 2015	31 July 2014
		£000	£000
Short term loans owed to C4X Discovery Holdings plc by:
C4X Discovery Limited	13	12,147	-
C4X Drug Discovery Limited		-	-
		12,147	-

There are no formal terms of repayment in place for these loans and it has been confirmed by the Directors that the long-term loans will not be recalled within the next twelve months.

None of the loans is interest bearing.

26. Compensation of key management personnel (including directors)