Renalytix Reports Full Year Fiscal 2022 Results
LONDON and SALT LAKE CITY, Oct. 31, 2022 (GLOBE NEWSWIRE) -- Renalytix plc (NASDAQ: RNLX), (LSE: RENX) an artificial intelligence-enabled in vitro diagnostics company, focused on optimizing clinical management of kidney disease to drive improved patient outcomes and advance value-based care, announces its full year results for the twelve months ended 30 June 2022.*Highlights (includes post-period events): *
*Regulatory & Reimbursement*
· New commercial coverage in fiscal year 2022; 28 private insurance and network provider contracts now executed to date including:
· Largest private payer in Illinois with 8.1 million members
· Largest independent provider network in the tristate North Carolina, South Carolina and Virginia area, with over 100,000 health care providers in-network
· Achieved Medicare payment for KidneyIntelX through the individual claims review (ICR) process based on our Medicare clinical lab fee schedule (CLFS) pricing of $950 per test
· 33 state Medicaid programs contracted to date
· Continued data generation and analysis reinforcing the benefits of KidneyIntelX as part of collaborative De Novo process with the FDA, with anticipation that the agency's review is nearing completion. Data supports significant breakthrough in risk stratification for patients with diabetic kidney disease
*Commercial & Partnerships*
· Sales and medical affairs support buildout across core, strategically-focused market channels:
· Deployed sales directors and representatives targeting large hospital systems, provider networks and independent primary care physicians, and veterans’ hospitals
· Added VP of Medical Affairs to support KidneyIntelX physician onboarding, education, and test ordering
· Deployed market access and health systems partnership personnel to drive expansion
· Developed comprehensive physician and patient marketing and education material
· Launch of myIntelX provider access portal for simplified, decentralized on-line ordering of KidneyIntelX
· Partnered with Singing River Health System to deploy KidneyIntelX informed care management to improve kidney health in individuals across the Mississippi Gulf Coast with type 2 diabetes and early-stage chronic kidney disease
· Partnered with St. Joseph's Health, based in Syracuse, NY and part of the Trinity Health System, for KidneyIntelX deployment and to advance value-based care
· Progressed through layers of vendor approval at several VA hospitals as part of nationwide 10-year payment contract from the U.S. General Services Administration (GSA), with initial test orders and pre-payments received
· Joint program with American Diabetes Association® to improve overall kidney health in patients with type 2 diabetes in the United States
· Kidney disease education programs in partnership with the National Kidney Foundation
· Continued KidneyIntelX testing volume growth
· Growth in number of active physicians ordering KidneyIntelX*Clinical & Validation*
· Published data in the American Journal of Nephrology in which KidneyIntelX successfully monitored patient response to new drug therapy in 1,325 multinational clinical trial cohort patients
· KidneyIntelX showed ability to assess risk of heart failure hospitalization and death in large international diabetic kidney disease patient cohort (published in Kidney360)
· Peer-reviewed publication in Journal of Medical Economics supporting payer coverage for early-stage risk assessment and care management in the primary care office; projecting significant five-year savings from KidneyIntelX testing at primary care level
· Data results published in American Journal of Managed Care supporting adoption and clinical utility of KidneyIntelX; 98% of 401 primary care physicians surveyed confirmed KidneyIntelX has value as a risk decision tool
· Multiple data presentations at the American Diabetes Association (ADA) 82nd Scientific Sessions® meeting, including one showing KidneyIntelX testing in 1,112 adult diabetic kidney disease (DKD) patients at Mount Sinai Health System showed utility in driving guideline appropriate use of therapies, including SGLT-2 inhibitors and RAAS inhibitor use, and timely consultation to specialists in high-risk patients
· World Congress of Nephrology data showing KidneyIntelX predicted the future rate of decline in kidney function compared with current standard diagnostics in patients with early-stage chronic kidney disease and type 2 diabetes
· Ongoing clinical studies at Wake Forest / Atrium Health and Mount Sinai Health System substantiating clinical utility of KidneyIntelX*Finance & Operations*
· Commercial development progress with annual revenue growth
· Completion of $30.0 million equity and convertible note financing package ($26.8 million gross proceeds)
· Cost rationalization enacted at end of period reducing annualized spend by over $12 million with review of other cost-savings opportunities ongoing
· Salt Lake and New York laboratories operating to most rigorous audited standards; CLIA, CAP, ISO, and U.S. Food and Drug Administration audit compliant
· The Group had cash on hand of $41.3m (FY21: $65.2m).*Current Quarter*
· Operational progress continued into the first quarter of fiscal 2023 with over a record 1,200 tests performed
· More than 80% of these were billable, yielding approximately $1.0 million revenue for the quarter
Investors are advised to read the results for the 12 months ended 30 June 2022, which have been filed with the U.S. Securities and Exchange Commission under Form 20-F concurrently with this results announcement.
*Analyst Conference Call*
The Company will hold an analyst conference call at 8:30 a.m. (ET) / 1:30 p.m. (BST) on Monday 31 October 2022. James McCullough, CEO and O. James Sterling, CFO will discuss the financial results and key topics including business strategy, partnerships and regulatory and reimbursement processes.
*Conference Call Details:*
To participate in the live conference call via telephone, please register here. Upon registering, a dial-in number and unique PIN will be provided in order for interested parties to join the conference call.
*Webcast Registration link: *https://edge.media-server.com/mmc/p/y9qtsbmx
*For further information, please contact:*
*Renalytix plc * www.renalytix.com
James McCullough, CEO *Via Walbrook PR *
*Stifel (Nominated Adviser, Joint Broker)* *Tel: 020 7710 7600*
Alex Price / Nicholas Moore
*Investec Bank plc (Joint Broker)* *Tel: 020 7597 4000*
Gary Clarence / Daniel Adams
*Walbrook PR Limited* *Tel: 020 7933 8780 *or renalytix@walbrookpr.com
Paul McManus / Lianne Applegarth Mob: 07980 541 893 / 07584 391 303
*CapComm Partners* *Tel: 415-389-6400* or investors@renalytix.com
Peter DeNardo
*About KidneyIntelX *
KidneyIntelX, is a first-of-kind solution that enables early-stage DKD progression risk assessment by combining diverse data inputs, including validated blood-based biomarkers, inherited genetics, and personalized patient data from electronic health record, or EHR, systems, and employs a proprietary algorithm to generate a unique patient risk score. This patient risk score enables prediction of progressive kidney function decline in CKD, allowing physicians and healthcare systems to optimize the allocation of treatments and clinical resources to patients at highest risk.
*About Renalytix*
Renalytix (LSE: RENX) (NASDAQ: RNLX) is the global founder and leader in the new field of bioprognosis™ for kidney health. The company has engineered a new solution that enables early-stage chronic kidney disease progression risk assessment. The Company’s lead product, KidneyIntelX™, has been granted Breakthrough Designation by the U.S. Food and Drug Administration and is designed to help make significant improvements in kidney disease prognosis, transplant management, clinical care, patient stratification for drug clinical trials, and drug target discovery (visit www.kidneyintelx.com). For more information, visit www.renalytix.com.
*Forward Looking Statements*
Statements contained in this press release regarding matters that are not historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Examples of these forward-looking statements include statements concerning: the commercial prospects of KidneyIntelX, including whether KidneyIntelX will be successfully adopted by physicians and distributed and marketed, the rate of testing with KidneyIntelX in health care systems, expectations and timing of announcement of real-world testing evidence, the potential for KidneyIntelX to be approved for additional indications, our expectations regarding reimbursement decisions and the ability of KidneyIntelX to curtail costs of chronic and end-stage kidney disease, optimize care delivery and improve patient outcomes. Words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “seeks,” and similar expressions are intended to identify forward-looking statements. We may not actually achieve the plans and objectives disclosed in the forward-looking statements, and you should not place undue reliance on our forward-looking statements. Any forward-looking statements are based on management's current views and assumptions and involve risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. These risks and uncertainties include, among others: that KidneyIntelX is based on novel artificial intelligence technologies that are rapidly evolving and potential acceptance, utility and clinical practice remains uncertain; we have only recently commercially launched KidneyIntelX; and risks relating to the impact on our business of the COVID-19 pandemic or similar public health crises. These and other risks are described more fully in our filings with the Securities and Exchange Commission (SEC), including the “Risk Factors” section of our annual report on Form 20-F filed with the SEC on October 31, 2022, and other filings we make with the SEC from time to time. All information in this press release is as of the date of the release, and we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law.
*CHAIRMAN & CEO'S JOINT STATEMENT*
We are pleased to present our annual report for the twelve months ended 30 June 2022 for Renalytix plc.
Our path to success is focused on five major items:
1. Achieving “super-majority” insurance coverage in key regional markets including New York, Illinois and the Carolinas;
2. Continuing to publish on our growing real-world evidence of KidneyIntelX effectiveness;
3. FDA De Novo marketing authorization for KidneyIntelX;
4. Revenue growth from sequential onboarding of physicians, networks, and hospitals in new locations; and
5. Continuing to lower net expense to maintain cash availability into the first half of fiscal 2024We are making strong progress and expect to meet or exceed each of these items.
Achieving “super-majority” insurance coverage in key regional markets including New York, Illinois and the Carolinas
We expect to cross the threshold of “super-majority” coverage in different key markets over the next several months. We consider a super-majority as greater than 70% of patients with diabetes and kidney disease having insurance coverage for KidneyIntelX testing in a major population region, such as New York City or metropolitan Chicago. Establishing Medicare and Medicaid payment are two crucial pieces as collectively they provide insurance for an estimated 60-70 percent of the KidneyIntelX eligible patient population. We recently reported that we have secured payment for KidneyIntelX testing by Medicare through claims submitted to National Government Services (NGS), the Medicare Administrative Contractor covering our New York laboratory. This is in addition to KidneyIntelX claims now being paid by Medicare Advantage, Medicaid, Blue Cross Blue Shield and other commercial insurance providers.
The Blue Cross Blue Shield (BCBS) system, covering over 114 million members or 1 in 3 Americans, is also core to our 2023 growth strategy. To date, we are pleased to have KidneyIntelX coverage declared by BCBS Illinois (8.1 million members), and Wellmark BCBS (South Dakota and Iowa with two million members). We have always viewed insurance reimbursement as the most significant hurdle to KidneyIntelX adoption and consider our building success in securing Medicare, Medicaid and BCBS payment to be unusually rapid this early in a company’s commercial diagnostic lifecycle. Our expected KidneyIntelX contracted pricing remains at $950, in line with our distinct Medicare CLFS pricing.
Continuing to publish on our growing real-world evidence of KidneyIntelX effectiveness
Published utility study results showed that primary care physicians using KidneyIntelX are six times more likely to prescribe advanced medication to their high-risk patients in early-stage kidney disease where the opportunity to prevent significant kidney damage or kidney failure is greatest. In these studies, the same physician using KidneyIntelX was also three times more likely to make a timely referral to a specialist and three times more likely to initiate more aggressive anti-hypertensive (blood pressure control) strategies.
In other words, these real-world results support that KidneyIntelX is driving behavior change at primary care for high-risk patients – the key to altering the tide on kidney disease progression and reducing dialysis. We expect additional results from our multi-year real-world evidence programs will be in print during the 2nd quarter of fiscal 2023.
FDA De Novo marketing authorization for KidneyIntelX
We continue to work closely and constructively with the FDA on our De Novo Breakthrough Device authorization submission. Notably, we have provided additional comprehensive data which further confirms the performance of KidneyIntelX in risk discrimination for patients with diabetic kidney disease. We now believe we are approaching the completion of the De Novo regulatory process and while there is no guarantee of success until FDA has made its final determination, we are optimistic based on both the quality of analytic and clinical evidence provided and the high level of engagement we have had with the FDA. Our current expectations are for a decision to be made in calendar Q1 2023 but there can be no guarantee on this timescale.
Revenue growth from sequential onboarding of physicians and hospitals in new locations
We expect revenue test volume will continue to increase through the balance of fiscal year 2023 with increased contribution from different market channels. At Mount Sinai Health System alone, we have now generated nearly 5,000 KidneyIntelX patient results including 835 in the quarter ended June 2022 (Q4 of FY22), and another 974 in the most recent post-period quarter ended September 2022 (Q1 of FY23).
We issued over 1,200 patient KidneyIntelX test reports in the first quarter of fiscal 2023 (ended September 30), which is double the testing rate from a year earlier. With expanded insurance coverage, a growing number of these tests are now billable and revenue recognizable within 30 days.
Continuing to lower net expense
We have continued to reduce Company overhead with a keen eye toward advancing our best commercial opportunities – primarily regions with super-majority insurance coverage in the short term. As stated in August, we have taken action to lower annual expenditures by over $12 million through program, vendor and employee reductions, with additional opportunities to reduce expenditures under review.
In fiscal 2023, the fundamental goals are clear;
· building on diversified testing volume
· securing broad insurance coverage;
· continued evidence of real-world benefit of KidneyIntelX use in the clinic; and
· FDA authorization.
The early-stage kidney health market remains wide open, and we believe Renalytix is in a position to alter the cost landscape and maintain better health for some 15 million Americans with diabetes and kidney disease.
*About Renalytix*
At Renalytix, we are introducing more accurate prognosis and effective care management for the estimated 850 million people worldwide with chronic kidney disease. In the United States alone, chronic kidney disease affects about 37 million people and is responsible for one of the largest cost drivers in the national medical system. Early identification, prognosis and treatment beginning with primary care is essential if we are to stem the growing social cost and suffering associated with kidney disease.
With our lead product, KidneyIntelX, the goal is to drive the focus from kidney disease treatment to kidney health management through a more accurate understanding of a patient’s risk for kidney failure before it happens. KidneyIntelX leads development in the new field of bioprognosis, a biology driven approach to risk assessment that integrates information from a simple blood draw and a patient’s health record to produce an accurate picture of kidney health. A doctor can use KidneyIntelX results to act on patients at high risk of kidney disease progression or failure at an early stage where active management and therapeutics have the best opportunity to impact outcomes and cost before it is too late.
*KidneyIntelX™*
Our novel platform, KidneyIntelX, uses a machine-learning enabled algorithm to process predictive blood biomarkers with key features from a patient’s health record to generate an early and accurate kidney health risk score. The score identifies those patients at the most risk for kidney disease progression and/or failure and further guides ongoing clinical decisions.
KidneyIntelX is initially indicated for use with adults who have diagnosed kidney disease and type 2 diabetes – diabetic kidney disease or DKD. Future KidneyIntelX products in development intend to expand the indicated uses to include broader chronic kidney disease, health equity strategies and kidney health monitoring through treatment. Diabetes is the leading cause of chronic kidney disease, representing nearly 40% of its cases, and DKD patients are the highest contributors to emergency room dialysis starts. Unfortunately, many DKD patients are unaware that their kidney disease has been progressing, often uncontrolled, for many years and now find themselves making difficult decisions about late-stage treatments.
KidneyIntelX was designed as an expandable platform able to add indicated uses and a monitoring capability, all within CLIA and FDA regulated insurance reimbursable framework.
*Operational Progress*
In the year ended 30 June 2022 (“FY22”) and the immediate post-period, the Company saw KidneyIntelX expand within the Mount Sinai Health System and launch at Wake Forest Baptist Health, CDPHP, VA medical centers and among independent primary care physicians.
A full electronic health record (EHR) integrated deployment of KidneyIntelX with population health support in the Mount Sinai Health System has now yielded actionable reports on nearly 5,000 patients and growing. Utility results from our first real-world deployment at scale is yielding key evidence of the benefits of KidneyIntelX, particularly at the all-important primary care level. Patients and doctors are now clearly seeing benefits in the short-term from advanced risk assessment and follow-on action early in the disease cycle. Our experience with our physician-led health insurance partner, Capital District Physicians’ Health Plan (CDPHP), in upstate New York has been equally robust.
Implementing with the veterans’ affairs (VA) medical system has been slower than planned due to the complexities in introducing a new test and integrating its use into the VA system. However, we have now begun to overcome implementation hurdles and are beginning to see an increasing number of orders and corresponding testing volumes. We remain convinced that KidneyIntelX will play an important role nationally in the VA system which serves an estimated one million veterans with diabetes and kidney disease. Again, insurance coverage remains in place with a nationwide 10-year government insurance contract for KidneyIntelX payment throughout the VA system.
Expert experience is reflected in the design of the KidneyIntelX test report and the newly launched product website: www.kidneyintelx.com. We believe our education and support program will be an important resource to help inform and improve care for early-stage DKD patients and support future hospital system deployments of KidneyIntelX in the United States and abroad, which we believe could be achieved more rapidly as a result of the knowledge we have derived from our hospital system implementations to date.
*Financing*
In July 2019, we raised gross proceeds of $17.3 million in a follow-on financing on the AIM market, and in July 2020, we raised an additional $85.1 million in gross proceeds through an offering and concurrent dual-listing on the Nasdaq Global Market in the U.S.
In March 2022, we announced the completion of a financing package yielding $26.8 million in gross proceeds for the Company. The financing included an $8.8 million equity subscription plus $21.2 million principal amount of convertible bonds (net cash proceeds of $18 million). We are pleased to have achieved the financing in an extremely challenging capital market environment, which we believe illustrates the strength of our kidney disease testing, monitoring and informed care advantages.
*Clinical Evidence*
Over the past few years, we have published and presented validation, utility and health economics data supporting KidneyIntelX adoption. Of particular note is the growing body of real-world utility evidence building on KidneyIntelX clinical reporting in different institutions through several thousand patients. Examples of published evidence includes:
*Initial Forum* *Cohort* *Findings* *Publication*
ADA 81^st Scientific Sessions
2020 Mount Sinai & UPenn
(n=1,146) KidneyIntelX more accurately predicted progressive kidney function decline and kidney failure than clinical metrics alone Diabetologia
2021;64, 1504–1515
NKF Spring Clinical Meeting 2020 Simulation in patients with DKD stages 1-3b
(n=100,000) Analyses supported payer coverage for early-stage risk assessment and care management in the primary care office; projects significant savings from KidneyIntelX testing at primary care Journal of Medical Economics
2021;24:972-982
ADA 82^nd Scientific Sessions 2021
CANVAS
(n=1,325) KidneyIntelX algorithm published in Diabetologia and currently deployed commercially accurately predicted progression of DKD in this multinational clinical trial cohort American Journal of Nephrology 2022;53:21–31
ISN World Congress of Nephrology 2021 CANVAS
(n=1,026) KidneyIntelX can be effective at monitoring therapeutic response and improvements in kidney health over time in adults with type 2 diabetes and DKD American Journal of Nephrology 2022;53:21–31
NKF Spring Clinical Meetings 2021 PCPs
(n=401) KidneyIntelX test had greater relative importance than albuminuria and eGFR to PCPs in making treatment decisions and was second only to eGFR for nephrologist referrals. American Journal of Managed Care 2022;28:In Press
ASN Kidney Week 2021 Mount Sinai RWE Cohort KidneyIntelX testing enhanced patient understanding about kidney disease and revealed
substantial motivation to take appropriate actions and receive further education for their
kidney health. Journal of the American Society of Nephrology
32: 2021
ISN World Congress of Nephrology
2022 Sinai/Penn
(n=1,146) KidneyIntelX provided robust prognostic information for future eGFR trajectories and adverse kidney outcomes beyond prior ascertainment of baseline kidney function, injury, or historical kidney function trajectories. Kidney International Reports
2022; 7, S1–S436
ADA 83^rd Scientific Sessions 2022 CANVAS
(n=1,325) KidneyIntelX provided risk stratification for a triple composite end point that included not only the kidney-specific outcome of progression, but also clinically relevant outcomes of hospitalizations for heart failure and all-cause mortality, even after adjusting for several other risk factors for these outcomes. Kidney360
2022, 3;1599-1602
ADA 83^rd Scientific Sessions 2022 Mount Sinai RWE Cohort
(n=1,112) KidneyIntelX showed utility in driving guideline appropriate use of therapies, including SGLT-2 inhibitors and RAAS inhibitor use, and timely consultation to specialists in high-risk patients. Pending
ASN Kidney Week 2022 Systematic Review and Meta-analysis
(n=129 studies) Systematic review and meta-analysis to summarize the prognostic value of preclinical plasma and urine biomarkers for CKD outcomes (incident CKD, CKD progression, or incident ESKD), including 129 studies in the meta-analysis. Pooled risk ratios (RRs) and 95% confidence intervals (Cis) among some of the most studied CKD biomarkers were 2.17 (1.91 to 2.47) for TNFR1 (31 studies); 2.07 (95% CI, 1.82 to 2.34) for TNFR2 (23 studies); 1.51 (95% CI, 1.38 to 1.66) for KIM-1 (18 studies). Journal of the American Society of Nephrology
2022, 33:1657-1672
ADA – American Diabetes Association; NKF – National Kidney Foundation; ASN – American Society of Nephrology; ISN – International Society of Nephrology; RWE – Real world evidence; DKD – diabetic kidney disease
*Intellectual Property*
The U.S. Patent and Trademark Office allowed claims extending the use of one of KidneyIntelX’s primary blood biomarkers, sTNFR1, to all patients with diabetes to determine an increased risk of developing progressive kidney disease or kidney failure. We have also completed rights to additional patent applications for use with KidneyIntelX. We continue to build out our intellectual property portfolio and are actively evaluating in-licensing opportunities that will enhance our competitive product positioning.
*Current Trading & Outlook*
Building KidneyIntelX into a standard of care in the United States and a global market with 850 million people with chronic kidney disease requires extensive data production, regulatory approvals, physician and patient education, and of course, comprehensive reimbursement. While it sometimes seems this set of milestones takes a long time to accomplish, we are reminded that Renalytix is still a young company that received its first funding less than four years ago. To have achieved real insurance coverage for KidneyIntelX testing in the complex U.S. market in such a short time we believe is extraordinary. We believe that since the data is comprehensive and showing clear benefit, acceleration of adoption is likely to continue to occur. The social need could not be higher to establish innovative preventative medicine strategies such as KidneyIntelX at the front-end of diabetes and kidney disease.
Operational progress continued into the first quarter of fiscal 2023 with over 1,200 tests performed. More than 80% of these were billable, yielding about $1.0 million revenue for the quarter. These are record amounts for us in quarterly testing volumes and revenue.
We greatly appreciate the patience and continued support of our shareholders through these unusual times.
*Financial Review*
The results presented cover FY22. The presentational currency for Renalytix plc and its subsidiaries (together, the “Group”) is the United States Dollar.
*Income Statement *
Revenue
The Group recognized a total of $2.9 million in revenue in the financial year ended 30 June 2022 (“FY22”) which was comprised of $2.7m in revenue related to testing services as well as $0.2 million related to pharmaceutical services revenue.
Cost of Sales
The cost of sales associated with the services performed and commercial testing revenue was $2.1 million for FY22.
Administrative Costs
During FY22, administrative expenses totaled $58.3 million (financial year ended 30 June 2021 (“FY21”): $33.3 million). The major items of expenditure were general and administrative costs of which included $27.6 million in employee- related costs (FY21: $13.8 million), $12.9 million in subcontractors, legal, accounting, and other professional fees (FY21: $9.1 million), $6.4 million in external R&D Services, lab supplies and lab services(FY21: $1.4 million), $4.6 million in insurance (FY21: $4.6 million), $2.1 million in depreciation and amortization (FY21: $2.1 million), $1.9 million in marketing and public relations (FY21: $0.9 million), $1.7 in IT related costs (FY21: $0.6 million), $0.5 million in office related expenses including rent(FY21: $0.3 million), $0.3 million in stock exchange listing and filing fees (FY21: $0.2 million) and $0.3 million in other expenses (FY21: $0.3 million.
Gain (loss) on financial assets at fair value through profit or loss
The Company accounts for the investment in Verici Dx equity securities at fair value, with changes in fair value recognized in the income statement. During the year ended 30 June 2022, we recorded a loss of $5.9 million to adjust the Verici Dx investment to fair value. During the year ended 30 June 2021, we recorded a gain of $6.5 million to adjust the Verici Dx investment to fair value.
Fair value adjustment of convertible debt
We elected to account for the convertible notes at fair value with qualifying changes in fair value recognized through the statements of operations until the notes are settled. This excludes fair value adjustments related to instrument-specific credit risk, which are recognized in OCI. For the year ended 30 June 2022, we recorded a gain of $4.0 million to adjust the convertible notes to fair value. There was no fair value adjustment for the year ended 30 June 2021 as we had not issued convertible debt at that time.
Finance Income (Expense)
Finance income (expense) consists of foreign exchange gains or losses. During the year ended 30 June 2022, we recognized a foreign currency gain of $9.6 million due to exchange rate fluctuations on transactions denominated in a currency other than our functional currency. During the year ended 30 June 2021, we recognized foreign currency losses of $8.8 million.
*Balance Sheet*
Inventory
Inventory consists of consumable materials used by the labs to carry out KidneyIntelX tests. During FY22, inventory levels increased due to purchases as the Company prepares for increased KidneyIntelX testing volumes. Inventory on hand at 30 June 2022 totaled $1.2 million (FY21: $0.4 million).
Fixed Assets
Property, plant, and equipment consists of laboratory equipment being used to support testing and product development activities. At 30 June 2022, the Company held $1.3 million in net property, plant, and equipment (FY21: $1.1 million).
Intangible Assets
The Group held $14.0 million net book value of intangible assets held at 30 June 2022 (FY20: $18.0 million) includes payments made primarily to Mount Sinai for license and patent costs for the intellectual property underlying KidneyIntelX, as well as amounts capitalized as development costs. Intangible assets also include the value of the biomarker business purchased (in exchange for ordinary shares in the Company) from EKF. Intangible assets increased period over period due to capitalized software and the impact of foreign exchange translation at period end.
Investment in Verici
At the end of FY22 the Group held 9,831,681 shares in Verici Dx, the fair value of the investment in Verici Dx was $2.7 million at 30 June 2021 (FY20: $9.3 million)
Convertible Note
In April 2022, the Company issued amortizing senior convertible bonds with a principal amount $21.2 million due in April 2027 (the "Bonds"). The Bonds were issued at 85% par value with total net proceeds of $18.0 million. The Company elected to account for the Bonds at fair value. At 30 June 2022, the Bonds had a fair value of $12.3 million.
Cash
The Group had cash on hand of $41.3m (FY21: $65.2m). Cash and equivalents are held in several deposit accounts in the US ($12.7m), UK ($28.3m) and IRE ($0.3m). Our expenditure plans remain sufficiently adaptable to align with available resources.
*
*
*CONSOLIDATED INCOME STATEMENT
**FOR THE YEAR ENDED 30 JUNE 2022*
*Note * *Year to June 30 *
*2022* *Year to June 30*
*2021* *$’000* *$’000*
*Continuing operations*
Revenue 8 2,970 1,491
Cost of Sales (2,052 ) (804 )
*Gross Profit* *918* *687*
Administrative expenses 9 (58,290 ) (33,298 )
*Operating loss* *(57,372* *)* *(32,611* *)*
Share of Net loss in Associate accounted for using the equity method 9 (199 )
Impairment of Investment of associate 37 - (1,913 )
Gain (loss) on financial assets at fair value through profit or loss 24 (5,900 ) 6,483
Gain on distribution of assets classified as held for sale 36 - 402
Fair value adjustment of convertible debt 3,998 -
Finance (costs) income - net 14 9,637 (7,950 )
*Loss before tax* *(49,628* *)* *(35,788* *)*
Taxation 15 (7,104 ) 4,778
*Loss for the period* *(56,732* *)* *(31,010* *)*
*Earnings per Ordinary share from continuing operations*
Basic and diluted 16 $ (0.78 ) $ (0.43 )
*
*
*CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME *
*FOR THE YEAR ENDED 30 JUNE 2022*
*Year to 30 June 2022* *Year to 30 June 2021* *$’000* *$’000*
Loss for the period – continuing operations (56,732 ) (31,010 )
*Other comprehensive income:*
*Items that may be subsequently reclassified to profit or loss*
Currency translation differences (11,206 ) 11,616
*Other comprehensive loss for the period* *(67,938* *)* *(19,394* *)*
*Total comprehensive loss for the period* *(67,938* *)* *(19,394* *)*
*
*
*CONSOLIDATED STATEMENT OF FINANCIAL POSITION*
*AS AT 30 JUNE 2022*
*Note* *Group *
*As at 30 June 2022* *Group*
*As at 30 June 2021* *Company*
*As at 30 June 2022* *Company*
*As at 30 June 2021* *$’000* *$’000* *$’000* *$’000*
*Assets*
*Non-current assets*
Property, plant and equipment 18 1,368 1,081 - -
Right of use asset 19 355 297 - -
Intangible assets 20 14,020 18,021 13,605 17,524
Investment in subsidiaries 21 - - 89,112 4,588
Investments accounted for using the equity method 9 - - -
Note receivable 22 75 75 - -
Deferred tax assets 15 - 7,097 - -
*Total non-current assets* *15,827* *26,571* *102,717* *22,112*
*Current Assets*
Inventory 23 1,160 353 - -
Security deposits 24 141 86 - -
Assets classified as held for sale 36 - - - -
Financial asset at fair value through profit or loss 24 2,744 9,295 2,744 9,295
Trade and other receivables 25 901 594 234 84,686
Prepaid and other current assets 26 1,152 520 299 271
Cash and cash equivalents 27 41,333 65,159 28,313 15,063
*Total current assets* *47,431* *76,007* *31,590* *109,315*
*Total assets* *63,258* *102,578* *134,307* *131,427*
*Equity attributable to owners*
*of the parent*
Share capital 28 241 233 241 233
Share premium 29 85,444 76,457 85,444 76,457
Share-based payment reserve 30 11,954 4,940 11,840 4,940
Foreign currency translation reserve (1,509 ) 9,701 (5,119 ) 9,687
Retained earnings/(deficit) (52,961 ) 3,771 23,763 38,917
*Total equity* *43,169* *95,102* *116,169* *130,234*
*Liabilities*
*Current liabilities*
Trade and other payables 31 7,281 6,652 5,796 1,193
Deferred Revenue 8 46 122 - -
Current lease liabilities 19 163 86 - -
Current liabilities - 53 - -
Note payable current 32 4,660 - 4,660 -
Current due to affiliated company 33 55 350 - -
*Total current liabilities* *12,205* *7,263* *10,456* *1,193*
*Non-current liabilities*
Note payable non-current 7,682 - 7,682 -
Non-current lease liabilities 19 202 213 - -
Non-current due to affiliated company - - - -
*Total non-current liabilities* *7,884* *213* *7,682* *-*
*Total liabilities* *20,089* *7,476* *18,138* *1,193*
*Total equity and liabilities* *63,258* *102,578* *134,307* *131,427*
*
*
*CONSOLIDATED STATEMENT OF CASH FLOWS
**FOR THE YEAR ENDED 30 JUNE 2022*
*Note* *Group*
*As at 30 June 2022* *Group*
*As at 30 June 2021* *Company*
*As at 30 June 2022* *Company*
*As at 30 June 2021* *$’000* *$’000* *$’000* *$’000*
*Cash flow from operating activities*
Loss before income tax (49,628 ) (35,788 ) (15,154 ) (7,718 )
Adjustments for
Depreciation 304 138 - -
Amortization and impairment charges 2,309 1,958 2,100 1,806
Share-based payments 7,010 2,180 63 75
Share of net loss of associate (9 ) 2,112 - -
Reversal of Kantaro Liability (295 ) (495 ) - -
Gain on Sale of assets - (449 ) - -
Forgiveness of PPP Loan - (255 ) - -
Unrealized loss (Gain) on financial asset at fair value through profit or loss 5,900 (6,483 ) 5,900 (6,483 )
Fair value adjustment of convertible debt (3,998 ) - (3,998 ) -
Foreign Exchange Loss (Gain) (7,354 ) 8,832 - 2,939
Impairment of Investment in Subsidiary - - - 517
Changes in working capital
Trade and other receivables (307 ) (576 ) - (60,624 )
Prepaid assets and other current assets (698 ) 1,981 253 2,137
Assets classified as available for sale - - - -
Inventory (807 ) (27 ) - -
Security Deposits - (15 ) - -
Trade and other payables 1,904 3,753 1,417 943
Deferred Revenue (76 ) 122 - -
Payable to affiliated company - (1,623 ) - -
*Cash used in operations* *(45,745* *)* *(24,635* *)* *(9,419* *)* *(66,408* *)*
Interest paid - 3 - 2
*Net cash used in operating activities* *(45,745* *)* *(24,632* *)* *(9,419* *)* *(66,406* *)*
*Cash flow from investing activities*
Purchase of property, plant and equipment (PPE) (591 ) (783 ) - -
Lease Payments - (93 ) - -
Purchase of intangibles (103 ) (847 ) (103 ) (358 )
Proceeds (purchase) of financial assets - 982 - -
*Net cash generated by/(used in) investing activities* *(694* *)* *(741* *)* *(103* *)* *(358* *)*
*Cash flow from financing activities*
Proceeds from convertible notes 18,020 - 18,020 -
Payment of debt issuance costs (1,382 ) (1,382 )
Payments of issuance costs for the Securities Purchase Agreement (218 ) - (218 ) -
Issue of shares (net of issue costs) 8,804 76,876 8,804 79,023
Proceeds from the issuance of ordinary shares under employee share purchase plan
211
111
211
111
Proceeds from exercise of stock options 198 252 198 252
Lease payments (118 ) - -
*Net cash generated from financing activities* *25,515* *77,239* *25,633* *79,386*
Effect of exchange rate changes on cash (2,902 ) - (2,861 ) -
*Net increase/(decrease) in cash and cash equivalents* *(23,826* *)* *51,866* *13,250* *12,622*
Cash and cash equivalents at beginning of period 65,159 13,293 15,063 2,441
*Cash and cash equivalents at end of period* 22 *41,333* *65,159* *28,313* *15,063*
*
*
*COMPANY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY *
*FOR THE YEAR ENDED 30 JUNE 2022*
*Share Capital* *Share Premium* *Share-based payment reserve* *Foreign Currency Reserve* *Retained earnings* *Total equity* *$’000* *$’000* *$’000* *$’000* *$’000* *$’000*
At 30 June and 1 July 2020 192 - 2,833 (1,915 ) 34,852 35,962
Comprehensive income
Loss for the period - - - - (31,010 ) (31,010 )
Other comprehensive income
Currency translation differences - - - 11,612 4 11,616
*Total comprehensive income* *-* *-* *-* *11,612* *(31,006* *)* *(19,394* *)*
*Transactions with owners*
Issuance of Ordinary Shares in US IPO 40 85,101 - - - 85,141
Less issue costs - (9,007 ) - - - (9,007 )
Share-based payments - - 2,107 - - 2,107
Shares issued under the ESPP - 111 - - - 111
Exercise of Stock Options 1 252 - - - 253
Verici Ordinary Share Repurchase - - - - (75 ) (75 )
*Total transactions with owners of the parent, recognized directly in equity* *41* *76,457* *2,107* *-* *(75* *)* *78,530*
*At 30 June and 1 July **2021* *233* *76,457* *4,940* *9,697* *3,771* *95,098*
*Comprehensive income*
Loss for the period - - - - (56,732 ) (56,732 )
Other comprehensive income
Currency translation differences - - 4 (11,206 ) (11,202 )
*Total comprehensive income* *-* *-* *4* *(11,206* *)* *(56,732* *)* *(67,934* *)*
*Transactions with owners*
Issuance of Ordinary Shares in US IPO 8 8,796 - - - 8,804
Less issue costs - (218 ) - - - (218 )
Share-based payments - - 7,010 - - 7,010
Shares issued under the ESPP - 211 - - - 211
Exercise of Stock Options - 198 - - - 198
*Total transactions with owners of the parent, recognized directly in equity* *8* *8,987* *7,010* *-* *-* *16,005*
*At 30 June 2022* *241* *85,444* *11,954* *(1,509* *)* *(52,961* *)* *43,169*
*
*
*COMPANY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
**FOR THE YEAR ENDED 30 JUNE 2022*
*Share Capital*
*Share Premium* *Share-based payment reserve* *Foreign Currency Reserve*
*Retained earnings*
*Total equity* *$’000* *$’000* *$’000* *$’000* *$’000* *$’000*
At 30 June and 1 July 2020 192 - 2,833 (1,970 ) 46,710 47,765
Comprehensive income
Loss for the period - - - - (7,718 ) (7,718 )
Other comprehensive income
Currency translation differences - - - 11,657 11,657
*Total comprehensive income* *-* *-* *-* *11,657* *(7,718* *)* *3,939*
*Transactions with owners*
Issuance of Ordinary Shares in US IPO 40 85,101 - - - 85,141
Less issue costs - (9,007 ) - - - (9,007 )
Share-based payments - - 2,107 - - 2,107
Shares issued under the ESPP - 111 - - - 111
Exercise of Stock Options 1 252 - - - 253
Verici Ordinary Share Repurchase - - - (75 ) (75 )
*Total transactions with owners of the parent, recognized directly in equity* *41* *76,457* *2,107* *-* *(75* *)* *78,530*
*At 30 June 2021* *233* *76,457* *4,940* *9,687* *38,917* *130,234*
*Comprehensive income*
Loss for the period - - - - (15,154 ) (15,154 )
Other comprehensive income
Currency translation differences - - - (14,806 ) (14,806 )
*Total comprehensive income* *-* *-* *-* *(14,806* *)* *(15,154* *)* *(29,960* *)*
*Transactions with owners*
Issuance of Ordinary Shares in US IPO 8 8,796 - - - 8,804
Less issue costs - (218 ) - - - (218 )
Share-based payments - - 6,900 - - 6,900
Shares issued under the ESPP - 211 - - - 211
Exercise of Stock Options - 198 - - - 198
*Total transactions with owners of the parent, recognized directly in equity* *8* *8,987* *6,900* *-* *-* *15,895*
*At 30 June 2022* *241* *85,444* *11,840* *(5,119* *)* *23,763* *116,169*
*
*
*NOTES FORMING PART OF THE FINANCIAL STATEMENTS*
*1.* *General information and basis of presentation*
Renalytix Plc (the “Company”) is a company incorporated in the United Kingdom. The Company is a public limited company, which is listed on the AIM market of the London Stock Exchange and Nasdaq global market. The address of the registered office is Finsgate, 5-7 Cranwood Street, London, United Kingdom, EC1V 9EE. The Company was incorporated on 15 March 2018 and its registered number is 11257655.
The principal activity of the Company and its subsidiaries (together “the Group”) is as a developer of artificial intelligence- enabled diagnostics for kidney disease.
The financial statements are presented in United States Dollars (“USD”) because that is the currency of the primary economic environment in which the Group operates.
*2. * *Basis of presentation*
The Group and Company’s financial statements have been prepared in accordance with UK-adopted International Accounting Standards in conformity with the requirements of the Companies Act 2006.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies.
*New Standards, amendments, and interpretations not adopted by the group*
The group did not adopt any new standards, amendments or interpretations in year as they did not have a material impact on the financial statements.
*New standards, amendments, and interpretations issued but not effective for the period ended 30 June 2022, and not early adopted*
A number of new standards and amendments to standards and interpretations are effective for annual periods beginning on or after 1 January 2022 and have not been applied in preparing these financial statements. None of these is expected to have a significant effect on the financial statements of the Group or Parent Company.
· Amendments to IFRS 1, IAS 3, IFRS 17*3.* *Significant accounting policies*
The principal accounting policies applied in the preparation of these financial statements are set out below.
*Going concern*
The Group and Company meet their day-to-day working capital requirements through the use of cash reserves.
The Directors have considered the applicability of the going concern basis in the preparation of these financial statements. This included the review of internal budgets and financial results which show, taking into account reasonably probable changes in financial performance, that the Group and Company should be able to operate within the level of its current funding arrangements.
We have not yet seen any material disruption to our business as a result of the COVID-19 pandemic and current trading suggests that our base case forecasts are still applicable.
The Directors believe that the Group and the Company have adequate resources to continue in operation for the foreseeable future. For this reason, they have adopted the going concern basis in the preparation of the financial statements.
*Basis of consolidation*
The consolidated financial statements incorporate the financial statements of the Company and its subsidiary undertakings. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.
The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration agreement. Acquisition related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.
On 23 October 2018 as part of a pre-admission reorganization, the Company acquired the entire share capital of Renalytix AI, Inc., then a subsidiary of EKF. Given common ownership of the Company and the subsidiary from incorporation up to the date of legal ownership, the transaction has been treated as a group reorganization with no fair value adjustments to assets or liabilities. The subsidiary has been consolidated within the results of the Group from the date of incorporation.
Inter-company transactions, balances and unrealized gains on transactions between Group companies are eliminated. Unrealized losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Associates are entities over which the Group has significant influence but not control over the financial and operating policies. Investments in associates are accounted for using the equity method of accounting and are initially recognized at cost. The Group’s share of its associates’ post-acquisition profits or losses is recognized in profit or loss, and its share of post-acquisition movements in reserves is recognized in other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment.
*Foreign currency translation*
(a) Functional and presentational currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in United States Dollars, which is the Group’s presentational currency. The functional currency of the Parent Company is GB Pounds.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement within ‘administrative expenses’.
(c) Group companies
The results and financial position of all the Group entities that have a functional currency different from the presentational currency are translated into the presentational currency as follows:
· assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
· income and expenses for each income statement are translated at average exchange rates; and
· all resulting exchange differences are recognized in other comprehensive income.On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to other comprehensive income. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognized in the income statement as part of the gain or loss on sale.
*Segmental reporting*
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision- maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Executive Directors who make strategic decisions. At present the Directors consider the business to operate in a single segment.
*Property, plant and equipment*
Property, plant and equipment are stated at historical cost less accumulated depreciation and any provision for impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the asset and bringing the asset to its working condition for its intended use.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only where it is probable that future economic benefits associated with the asset will flow to the Group and the cost of the asset can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.
Depreciation on assets is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:
· Fixtures and fittings 20%The assets’ residual values and useful economic lives are reviewed regularly, and adjusted if appropriate, at the end of each reporting period.
An asset’s carrying value is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.
Gains and losses on the disposal of assets are determined by comparing the proceeds with the carrying amount and are recognized in administration expenses in the income statement.
*Intangible assets*
(a) Trademarks, trade names and licences
Separately acquired trademarks and licenses are shown at historical cost. Trademarks and licenses acquired in a business combination are recognized at fair value at the acquisition date. Trademarks and licenses have a finite useful life and are carried at cost less accumulated amortization. Amortization is calculated using the straight-line method to allocate the cost of trademarks and licenses over the contractual license period of 10 to 15 years and is charged to administrative expenses in the income statement.
(b) Development costs and trade secrets
Development costs have a finite useful life and are carried at cost less accumulated amortization.
Expenditure incurred on the development of new or substantially improved products or processes is capitalized, provided that the related project satisfies the criteria for capitalisation, including the project’s technical feasibility and likely commercial benefit. All other research and development costs are expensed to profit or loss as incurred.
Development costs are amortized over the estimated useful life of the products with which they are associated. Amortization commences when a new product is in commercial production. The amortization is charged to administrative expenses in the income statement. The estimated remaining useful lives of development costs are reviewed at least on an annual basis.
The carrying value of capitalized development costs is reviewed for potential impairment at least annually and if a product becomes unviable and an impairment is identified the deferred development costs are immediately charged to the income statement. Amortization has not yet commenced.
Trade secrets, including technical know-how, operating procedures, methods and processes, are recognized at fair value at the acquisition date. Trade secrets have a finite useful life and are carried at cost less accumulated amortization. Amortization has not yet commenced.
*Impairment of non-financial assets*
Assets that have an indefinite life or where amortization has not yet commenced are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. Impairment losses recognized for cash-generating units, to which goodwill has been allocated, are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (cash-generating unit) in the prior period. A reversal of an impairment loss is recognized in the income statement immediately. If goodwill is impaired however, no reversal of the impairment is recognized in the financial statements.
*Financial assets *
Classification
The Company classifies its financial assets in the following categories: loans and receivables at amortized cost and financial assets at fair value through profit or loss. The classification depends on the purpose for which the financial assets were acquired and management determines the classification of its financial assets at initial recognition.
(a) Loans and receivables
Financial assets are classified as at amortized cost only if both of the following criteria are met: the asset is held within a business model whose objective is to collect contractual cash flows, and the contractual terms give rise to cash flows that are solely payments of principal and interest. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted on an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. The Company’s loans and receivables comprise ‘trade and other receivables’ and cash and cash equivalents in the balance sheet.
(b) Financial assets at fair value through profit or loss
The Group classifies the following financial assets at fair value through profit or loss (“FVPL”):
· equity investments that are held for trading, and
· equity investments for which the entity has not elected to recognise fair value gains and losses through Other Comprehensive Income.
(c) Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income comprise equity securities that are not held for trading and which the Group has irrevocably elected at initial recognition to recognize in this category. The Group considers this category to be more relevant for assets of this type.
(d) Financial liabilities at fair value through profit or loss
The Group classifies the following financial assets at fair value through profit or loss (“FVPL”):
· Convertible debt recorded at fair value through profit or loss.*Cash and cash equivalents*
Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short- term deposits with an original maturity of three months or less.
For the purposes of the cash flow statements, cash and cash equivalents consist of cash and short-term deposits as defined above.
*Share capital and premium*
Ordinary Shares are classified as equity. Proceeds in excess of the nominal value of shares issued are allocated to the share premium account and are also classified as equity. Incremental costs directly attributable to the issue of new Ordinary Shares or options are deducted from the share premium account.
*Other reserves - equity*
The share-based payment reserve is used to recognize the fair value of equity settled share-based payment transactions.
Foreign currency reserve is used to record the exchange differences on translation of entities in the Group which have a functional currency different to the presentation currency.
Retained earnings includes all current and prior period results as disclosed in the income statement.
*Trade and other payables*
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.
*Current and deferred income tax*
Income tax comprises current and deferred tax. Tax is recognized in the income statement, except to the extent that it relates to items recognized in other comprehensive income where the associated tax is also recognized in other comprehensive income.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiary operate and generate taxable income. Management evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred tax is recognized, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial