Xeros Tech Regulatory News (XSG)

18 April 2023

Xeros Technology Group plc

('Xeros' or the 'Company' or the 'Group')

2022 Preliminary Results

Xeros Technology Group plc (AIM: XSG), the creator of technologies that reduce the impact of clothing on the planet, today publishes its audited results for the 12 months ended 31 December 2022.

Operational highlights

· Two further licences won for XFilter technology to increase market access.

· Major European retailer endorsed trial underway in denim manufacturer for Finish technology.

· Xeros Care technology now available for use by consumers in homes following the launch of the 11kg semi-professional machine.

· 90kg Xeros enabled commercial Care machine trial with Indian railways underway.

· Neil Austin joined the Company as Chief Executive Officer in August 2022.

Filtration

· Post-period end, licensing agreements were signed in March 2023 with two major European component manufacturers.

· Global legislative agenda moving forward positively, with France mandating in-machine filtration from 2025.

Finish

· In 2023, brand endorsed trials began for a major European retailer with a Xeros enabled machine installed at a manufacturing partner for their denim production.

· In 2022, first revenues from Qualus using Xeros leather processing technology were received.

Care

· In December 2022 Xeros launched its commercial/consumer cross-over machines in India.

· In December 2022 trials began with Indian Railways on a 90kg platform machine.

Financial summary

· Revenue of £0.2m (2021: £0.5m).

· Adjusted EBITDA1 loss of £7.4m (2021: loss £6.3m).

· Administrative expenses of £7.5m (2021: £7.2m).

· Net cash outflow from operations increased by 19.7% to £7.0m (2021: £5.8m). Cash at 31 March 2023 £4.5m.

· Delays in domestic Care launch affect forward looking revenue mix across 2023 and 2024, with revenue lower than previously forecast.

Neil Austin, Chief Executive Officer of Xeros, said:

"I am pleased to report the solid progress made by Xeros during 2022 across all key areas of the business; Filtration, Finish and Care. The further agreements won throughout the financial year clearly demonstrate that our technology is widely regarded globally.

"The Board remains confident in the Group's strategy and its growth prospects, especially given the global legislative agenda moving forward so positively and we look forward to updating shareholders on our progress in due course."

1 Adjusted EBITDA is defined as loss on ordinary activities before interest, tax, share-based payment expense, depreciation and amortisation

Enquiries:

Notes to Editors

POWERED BY SCIENCE, XEROS CREATE TECHNOLOGIES ENGINEERED FOR THE FUTURE

Born out of textile research and advancing new standards of performance and responsibility, Xeros' technologies revolutionise the way we make and clean our clothes, conserving water and preventing waste. Designed to impact industries and people on a global scale, Xeros transforms the performance, impact and economics of the fashion and washing machine industry.

Xeros enables the scaling of its innovations and impact by licencing its intellectual property to partners across the globe. Their work has, to date, created 38 patent families.

Xeros' technologies are already in use in major global industries, including commercial and home laundry and garment manufacture. So far, these technologies have saved millions of litres of water and could prevent billions of microfibres from ending in our oceans.

TO THE POWER OF CHANGE 

xerostech.com

Chairman's Statement

At the time of writing this annual statement I find myself in Paris, where the restoration of the Notre Dame is in full swing. It is very gratifying to think that the workwear used by the Paris Fire Brigade, who's heroic efforts saved much of the majestic building, is cleaned and cared for by our long-standing laundry partner Georges, with Xeros enabled machines supplied by IFB. Overcoming adversity, with the optimism of what tomorrow may bring, must be our theme for 2023.

Challenges come in many forms and looking back at 2022, it was a challenging year for Xeros. We did not yet manage to deliver tangible evidence of market adoption at scale. Consequently, we had to complete a further £6.3 million equity fundraise, during the turmoil of the disastrous UK mini-budget.

2022 was also a year of transition in the leadership team. We saw the departures of Mark Nichols, Chief Executive Officer, and Paul Denney, Chief Financial Officer. I would like to thank Mark and Paul for their stewardship of the business and for laying the solid foundation necessary for the next exciting chapter for the Company. We are very pleased that the Company managed to attract Neil Austin to succeed Mark in August, ahead of our September financing. David Baynes, Non-Executive Director, also departed in December with a replacement expected to be announced in the course of this year. Under Neil's leadership, a further reorganisation took place in December, making Xeros now a leaner, more focused business ready to drive forwards.

Despite this challenging year for Xeros, the Company has continued to make solid progress in all major business areas, and the long-term trends, about which I have written before and will not repeat this time, remain very favourable.

· In Filtration, the Company has signed up two further licensing agreements for its domestic XFilter.

· In Care, licensing partner IFB has launched a first high-end 11kg machine into the market, and further technical progression continues on the mass-market 9kg product.

· In Finish, the Company has progressed a brand-endorsed trial with a major European fashion retailer. A Xeros-enabled machine has been installed in one of the retailers preferred denim suppliers, with the initial results showing significant water and energy savings. Commercial conversations have begun.

· In commercial Care, our licensing partner IFB has adopted the Xeros technology across four different machine sizes, and is gradually rolling out machines, as evidenced by my opening comment. We are in continuous dialogue with IFB to explore how we can support them in accelerating the commercial roll-out and adoption.

· And finally, in Finish, licensing partner Qualus (a Xeros spin-out), has started to pay first royalties for its leather finishing technology.

Thank you to everyone (shareholders, management, staff, and partners) who stayed with us or joined us during this year of transition. Over the course of this year, we will endeavour to provide sufficient evidence of commercial traction to encourage many of our warrant holders to exercise the warrants they obtained as part of the September equity raise. We truly believe Xeros has much to offer.

Klaas de Boer

Chairman

Chief Executive's Statement

As the world finally seemed ready to fully emerge from lockdown, we have collectively been faced once again with challenges due to the appalling invasion of Ukraine. Economic hardship generated by those events has been felt across the world as rising fuel prices and shortage of goods impacted the economy and people's lives. In these times of economic downturn, does the world still feel as strongly about making the changes necessary so that we can consider how our behaviour is impacting the planet? The answer seems to be a resounding 'yes'. We receive ever more encouraging signs that when it comes to their commitment to ESG issues, people have not been deterred by the economic squeeze. A recent report drawing on research from McKinsey and Nielsen IQ into FMCG purchases indicated that "Over the past five years, products making ESG-related claims accounted for 56 per cent of all growth1". Indeed, The Economist suggests that rather than impeding the transition to energy efficiency and renewables deployments "the war in Ukraine may, in fact, have fast-tracked the transition by an astonishing five to ten years2".

This past year has been one of change for Xeros not least with my arrival in August and a change of leadership. As well as change though has come progression. The Xeros mission to bring real environmental transformation to two of the world's largest industries is on the cusp of something significant.

This sense of purpose has been captured and expressed with the impactful messaging and visuals introduced in May last year which have clearly signalled that at our core, Xeros is a collective of innovators bringing visibility to the issues that matter the most.

That the Company has a clear identity was important to me when I was first approached about joining Xeros. As Henry Kissinger said, "If you don't know where you are going, every road will get you nowhere".

As well as 'direction and identity' there were four other reasons that made the decision to join Xeros an easy one.

Firstly, the maturity of the technology. On our three core propositions of Care, Finish and Filtration we have either existing technology at work, whether that be processing denim in Bangladesh, laundering Air France uniforms in Paris, or prototypes that are proven to offer market-leading solutions, as evidenced by the Hohenstein Institute on XFilter.

The second area of appeal is market readiness. As confirmed by the McKinsey report above, consumer sentiment and demand for products that are as efficient and considerate to the environment has never been stronger: "The overall trend … was clear … products that made ESG-related claims grew faster than those that didn't." In the apparel and appliances industry, we see regular reports and initiatives introduced to answer this growing requirement such as the Apparel Impact Institute's $250m Fashion Climate Fund, designed to unlock a total of $2B in blended capital towards verified impact solutions in order to remove up to 150 million tonnes of CO2 from the apparel supply chain.

The third area of strength relates to business readiness. The licensing partnerships we have in place with the likes of IFB on Care, Hanning on Filtration and Ramsons on denim Finish mean Xeros is well positioned for market adoption. The business processes, particularly on 'technology transfer', have been honed by several years of working with these industry leaders and are now lean, efficient, and scalable. Equally as important, the people within Xeros are some of the brightest and most capable technical and scientific minds that I have ever encountered. In short, our setup and partnerships mean we are now in position to maximise the implementation of our innovative solutions to those receptive apparel and appliance markets.

Finally, and perhaps most importantly, the question I had was, how could I add value. The implementation of the 'IP rich / Asset light' business model over the last few years has laid the foundations. The need now is for focus and commercial execution. After 20 years of leading sales, marketing, and strategy initiatives, with some of the world's largest consumer electronics and major domestic appliance brands, I feel well placed to put to use my commercial know-how, contacts and industry understanding to help guide Xeros through this crucial commercialisation stage.

To elaborate upon some of the progression we have made in my short term with the Company, strides have been taken in all three of our core technology propositions.

FINISH - In our denim processing business we have progressed a brand-endorsed trial with a major European fashion retailer through a partnership between the brand and their supply chain. A Xeros enabled machine has been installed in one of the retailers preferred denim suppliers at their request, and has demonstrated very positive initial results showing significant water and energy savings.

This brings us closer to our aim of having retail brands specifying the use of Xeros finishing technology in their supply chain.

The Company's attendance in June 2023 at ITMA in Milan, the world's most influential textile and garment technology exhibition, will see us further amplify the Xeros story to the apparel processing machinery manufacturer, garment manufacturer and fashion brand community.

Qualus, a leather processing spin-out which uses Xeros proprietary technology, has continued to make good progress with further factory installations in Mexico, Brazil, India, and South-East Asia for the processing of leather hides. Although not materially relevant from a revenue perspective, in this 'start-up' phase this further highlights the receptivity of the apparel and accessory industry adoption for core Xeros technology.

FILTRATION - Further validation of the strength of our XFilter proposition came with the signing in March 2023 of two commercial development agreements with two of Europe's largest, most reputable and established component suppliers to the major domestic appliance industry. Alongside the partnership with Hanning, Xeros is now perfectly placed to service OEM brand requirements for filtration.

Last year Xeros co-created a letter sent to the UK Environment Secretary demanding legislation for filtration in washing machines. This led to a direct discussion with the Minister and the Department of Environment, Food and Rural Affairs and Xeros continues to support a UK private members' bill on this very topic. This year we are readying facts and evidence to coincide with the EU's recommendations, currently scheduled to be published in May 2023, on 'Measures to Reduce the Impact of Microplastic Pollution on the Environment'. This evidence will also be used to support a new bill in California to mandate microfibre filtration in washing machines that was introduced in February of this year and has passed the first committee hearing. Xeros are working closely with the NGO 5 Gyres, who co-authored the bill, to support the filtration effectiveness and standards. Xeros continue to be recognised for leading these standards as highlighted by a Washington Post article earlier this year that referenced the University of Plymouth study concluding that XFilter is the most effective microfibre capture system for the laundry industry.

With France having established a precedent by mandating a deadline of 1 January 2025 for a microfibre capture requirement in all washing machines, the rest of the EU, the UK and California are expected to follow suit. The Xeros view is that with XFilter partnerships in place, we are well positioned to respond to an imminent need for five of the leading global washing machine markets.

CARE - In the Commercial laundry business unit, we announced in December last year that IFB have commenced a trial of the XDrum and XOrb technology with Indian Railways in a 90kg capacity machine. This trial is taking learnings from the successful model used by our partner Georges in France with SNCF. The ultimate aim is for Indian Railways to use the technology to drive energy and cost efficiencies to launder the linens used on sleeper trains across India. Indian Railways is one of the largest organisations in India and is an established customer of IFB.

The Georges business continues to thrive with six new Xeros-enabled machines installed in line with Georges tripling their production capacity in 2022. This demonstrates that Europe's leading businesses, such as SNCF and Air France, are prepared to commercially back companies like Georges that use the Xeros technology as part of their proposition.

In Asia, our licensing partner Jiangsu SeaLion Technology Developments Company ("SeaLion"), the largest commercial laundry manufacturer in China, is cautiously optimistic about a revival of the Chinese hospitality industry following China's exit from a prolonged Covid-related lockdown in January. They remain a well-placed partner for that region in the long term.

Our IFB partnership facilitated a significant milestone in December with the launch of a commercial / consumer cross-over semi-professional 11kg machine. Fulfilling a long-held aspiration, the Xeros Care technology is now available for use by consumers in India in their homes.

At the time of writing IFB continue to make technical progression in order to facilitate a mass market launch to the 280m+ households in India.

OUTLOOK

The £6.3m funds raised in a placing and open offer in October 2022 will be applied to three main areas: supporting the technical requirements of our existing partners, seeking out partnerships in new geographies, and crucially raising awareness and adoption of the solutions our technology offers to all stakeholders in our target industries.

As a technology licensing business, we have the benefits of low overheads and an ability to scale up significantly at a high gross margin with minimal cost increase. The other side of the coin, however, is that we are unable to directly influence timings and the 'Go to Market' decisions. Indeed, as we are offering innovation to the market this is further heightened.

The recent signing of two further commercial development agreements for XFilter has been highly significant and, when combined with the existing partnership with Hanning, suggests that XFilter represents a very real opportunity for the Group. Should the global legislative landscape continue to compel industry adoption of microfibre filtration the company believes this is becoming an ever more tangible route to yield revenue and contribution. This positive development offsets the fact that trials with IFB for a mass market product still remain ongoing, as referenced above.

Whilst we still remain of the view that Xeros will be capable of achieving month on month EBITDA and cashflow breakeven during 2024, as we said at the time of last year's fundraising (with the caveat at that time that more clarity would be provided over the course of coming year), we expect that this will likely occur during the latter part of the year, with XFilter royalties (at near 100% gross margin, but a lower per unit value than domestic unit sales) likely to contribute more to the overall product mix. Whilst all of this means that near term expectations are lower than previously envisaged, we would contend they are on a sounder footing and we remain firmly of the view that there remains a clear path for our early adopter licensing brands to achieve wider market implementation globally.

Neil Austin

Chief Executive Officer

Financial review

Group revenue was generated as follows:

The financial results in 2022 reflect a year of transition as the Group supported early-stage licencing contracts, and the transition of more established partnerships to new relationships in line with the Group's overall strategy.

Future revenue growth is dependent on the pace of commercial adoption of products incorporating the Group's technology platforms in their respective markets. The Group's licensing business model does not require administrative expenses to increase in line with revenue growth, thereby creating future operating leverage to drive the business to profitability as revenue increases in future years.

Further information on these financial results is provided below.

Group revenue fell by 65.4% to £0.2m in the year ended 31 December 2022 (2021: £0.5m). With the implementation of the Group's licensing model, the revenue mix is changing with revenue now derived from three principal sources:

Service revenue: reflecting the servicing of existing estate, based principally in Europe.

Licensing revenue: reflecting royalty payments from licence partners and up-front fees for access to Group intellectual property.

Sale of goods: reflecting sales of XOrbs to licence partners and sales of machines in Europe on behalf of license partners.

The Group continues to receive service revenue related to the retained estate of commercial laundry machines in the UK and Europe. As the licensing model grows, this service revenue is expected to become a smaller part of the overall revenue mix.

Licensing revenue in the period was £0.1m (2021: £0.1m), a reduction of 48.4%; revenue from sale of goods was £0.0m in the period (2021: £0.2m), a decrease of 88.4%. Service revenue in the period was £0.1m (2021: £0.2m), a reduction of 56.8%.

The timing of third-party sales and contractual customer milestones drove a decrease in gross profit in the period to £0.1m (2021: £0.3m), resulting in a gross margin of 51.2% (2021: 59.3%).

The Group increased its adjusted EBITDA loss by 17.3% to £7.4m (2021: loss £6.3m).

Gross profit/loss and adjusted EBITDA are considered the key financial performance measures of the Group as they reflect the true nature of our trading activities. Adjusted EBITDA is defined as the loss on ordinary activities before interest, tax, share-based payment and warrant expense, depreciation and amortisation.

Administrative expenses, increased by 4.1% to £7.5m (2021: £7.2m), following investments in the Group's marketing and communications, as well as a return of travel to pre-pandemic levels. Headcount was broadly static in the year, increasing by 2.5% during the year with the average number of operational staff in the year to 31 December 2022 rising to 41 (2021: 40).

The Group reported an operating loss of £7.4m (2021: loss £6.9m), an increase of 7.1%. The loss per share was 14.29p (2021: loss 28.11p).

Net cash outflow from operations increased to £7.0m (2021: £5.8m) from a combination of increased cash used in operations, £7.5m (2021: £6.3m), and the receipt of £0.5m R&D tax credits from HMRC relating to 2021. Cash utilisation was in line with the Board's expectations. Cash utilisation is expected to below £450,000 per month in 2023.

The Group agreed a new ten-year lease on its premises in Sheffield during the year, leading to the addition of right-of-use assets of £0.8m and right-of-use liabilities of £0.7m.

The Group had existing cash resources, including cash on deposit, as at 31 December 2022 of £6.5m (2021: £7.8m) and remains debt free. Group cash as at 31 March 2023 was £4.5m. The Going Concern statement on page 22 draws attention to the Directors' views on the Group's ongoing prospects and the key assumptions behind the preparation of these accounts on a going concern basis.

Alex Tristram

Director of Finance

Consolidated statement of profit or loss and other comprehensive income

For the year ended 31 December 2022

Consolidated statement of changes in equity

For the year ended 31 December 2022

Consolidated statement of financial position

As at 31 December 2022

Consolidated statement of cash flows

For the year ended 31 December 2022

Notes to the consolidated financial statements

For the year ended 31 December 2022

1) BASIS OF PREPARATION

The financial information has been prepared in accordance with the recognition and measurement principles of International Accounting Standards in conformity with the requirements of the Companies Act 2006 and in accordance with the AIM rules. The principal accounting policies of the Group have remained unchanged from those set out in the Group's 2021 annual report.

The financial information has been prepared under the historical cost convention and is presented in Sterling, rounded to the nearest thousand.

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined by section 434 of the Companies Act 2006. The financial information for the period ended 31 December 2022 was approved by the Board on 17 April 2023 and has been extracted from the Group's financial statements upon which the auditor's opinion is unmodified and does not include a statement under section 498(2) or (3) of the Companies Act 2006, but does include an emphasis of matter regarding the material uncertainty related to going concern described below.

The statutory accounts for the period ended 31 December 2022 will be posted to shareholders at least 21 days before the Annual General Meeting and made available on our website www.xerostech.com. In due course, they will be delivered to the Registrar of Companies. The statutory accounts for the period ended 31 December 2021 have been delivered to the Registrar of Companies.

The preparation of financial statements in conformity with UK-adopted International Accounting Standards requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income, and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

In preparing the financial information, management are required to make accounting assumptions and estimates. The assumptions and estimation methods are consistent with those applied to the annual report and financial statements for the year ended 31 December 2021. Additionally, the principal risks and uncertainties that may have a material impact on activities and results of the Group remain materially unchanged from those described in that annual report.

Business combinations and basis of consolidation

Subsidiaries are all entities (including structured entities) over which the Group has control. 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. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and are deconsolidated from the date control ceases.

Inter-company transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated.

Where the acquisition is treated as a business combination, the purchase method of accounting is used to account for the acquisition of subsidiaries by the Group.

The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Acquisition 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. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of the acquisition is less than the fair value of net assets of the subsidiary acquired, the difference is recognised directly in the income statement.

All intra-group balances and transactions, including unrealised profits arising from intra-group transactions, are eliminated fully on consolidation.

Going Concern

At 31 December 2022, the Group had £6.5m of cash and cash equivalents. At this stage in its development the Group incurs operating cash outflows and is reliant on existing cash resources. During October 2022, the Group completed an equity placing and open offer which provided £6.3m before fees, which also included the issue of warrants which, if exercised, would provide a further £6.3m. The Directors consider that the Group's existing cash resources provide the Group with sufficient cash to meet its obligations as they fall due for least twelve months following the date of this report, with some changes to discretionary expenditure, if necessary. The Directors also believe that these financial resources, alongside the Group's existing and anticipated customer contracts, provide the Group with a platform to reach cash breakeven in the latter part of 2024. While the Group actively manages key customer stakeholders where appropriate, the revenue generated by these contracts is reliant on the actions of third parties and there remains risk that progress is not forthcoming in the timeframes anticipated by the Directors. Should there be significant delays in the receipt of this revenue, the Group's existing cash balance may not be sufficient to support the Group's expenditure until the point the Group generates sufficient revenue to reach cash breakeven. The Directors expect that the Group will incur operating cash outflows during the 12 months following the signing of this report.

The Directors consider that they have options in place that may allow them to reach this breakeven point, including existing and potential commercial agreements and further restrictions on discretionary spending. Given the lack of certainty around these scenarios, the Directors consider the Group's current funding position constitutes a material uncertainty as to the going concern status of the Group, as, in the absence of significant customer revenue, the Group's cash resources will run out. The Directors also believe, however, that they have sufficient options in place in order to allow the Group to continue trading in the short and medium term. Therefore, after making enquiries and considering the uncertainties as described above, the Directors have a reasonable expectation that the Group has and will have adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going basis of accounting in preparing this financial information.

The Group is subject to a number of risks. These risks include the global macro-economic conditions, particularly in the global markets in which the Group and its partners operate. The going concern assessment as carried out by the Directors has taken the impact of these into account as far as possible. While this inclusion does not change the assessment of the Directors in respect of going concern, the Group remains reliant on the progress of international licence partners in order for it to execute the commercialisation strategy.

When making their going concern assessment the Directors assess available and committed funds against all non-discretionary expenditure, and related cash flows, as forecast for the period ended 31 March 2024. These forecasts indicate that the Group is able to settle its liabilities as they fall due in the forecast period. In these forecasts the Directors have considered appropriate sensitivities, including the progress of the Group's commercial contracts. Accordingly, the Directors continue to believe that the going concern assumption is appropriate for the Group and this financial information been prepared on that basis.

2) SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied are set out below.

REVENUE RECOGNITION

Licence revenue

When the Group receives payments in the form of upfront payments or technology fees, the Group assesses those payments against the contacts in accordance with the provisions of IFRS 15, and allocates the revenue against the performance obligations accordingly.

Where licence revenue is based on sales of equipment by the licensee, the Group recognises revenue at the time of that sale.

Sale of goods

Where the Group sells either equipment or consumables to a customer directly, revenue is recognised when the product in question is delivered to the customer, and, if required, any installation or setup of the equipment has been performed.

Service contracts

Where the Group has a service contract in place, revenue is recognised in line with the profile of the delivery of the service to the customer on an outputs basis.

Linked contracts

When the Group sells equipment, services and consumables in a package under a single contract, the Group assess the contract against the five steps of IFRS 15. This process includes the assessment of the performance obligations within the contract and the allocation of contract revenue across these performance obligations once identified. Revenue is allocated according to the value of consideration expected to be received for the transfer of the relevant goods or services to the customer. This consideration is calculated on an inputs basis using cost data and an appropriate margin.

Revenue is shown net of Value Added Tax or Sales Tax as appropriate.

The difference between the amount of income recognised and the amount invoiced on a particular contract is included in the statement of financial position as deferred income. Amounts included in deferred income due within one year are expected to be recognised within one year and are included within current liabilities.

FOREIGN CURRENCIES

The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purposes of the consolidated financial statements, the results and the financial position of each group entity are expressed in pounds sterling, which is the functional currency of the Company and the presentational currency for the consolidated financial statements.

In preparing the financial statements of the individual entities, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined.

Non-monetary items that are measured in terms of historical cost in foreign currency are not retranslated.

The assets and liabilities of foreign operations are translated using exchange rates at the balance sheet date. The components of shareholders' equity are started at historical value. An average exchange rate for the period is used to translate the results and cash flows of foreign operations.

Exchange differences arising on translating the results and net assets of foreign operations are taken to the translation reserve in equity until the disposal of the investment. The gain or loss in the statement of profit or loss and other comprehensive income on the disposal of foreign operations includes the release of the translation reserve relating to the operation that is being sold.

EXCEPTIONAL ITEMS

One-off items with a material effect on results are disclosed separately on the face of the Consolidated Statement of Profit and Loss and Other Comprehensive Income. The Directors apply judgement in assessing the particular items which, by virtue of their scale and nature, should be classified as exceptional items. The Directors consider that separate disclosure of these items is relevant to an understanding of the Group's financial performance.

RESEARCH AND DEVELOPMENT

Expenditure on research activities is recognised as an expense in the period in which it is incurred. Development costs are only capitalised when the related products meet the recognition criteria of an internally generated intangible asset, the key criteria being as follows:

· it is probable that the future economic benefits that are attributable to the asset will flow to the Group;

· the project is technically and commercially feasible;

· the Group intends to and has sufficient resources to complete the project;

· the Group has the ability to use or sell the asset; and

· the cost of the asset can be measured reliably.

Such intangible assets are 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 are reviewed for an indication of impairment at each reporting date. Other development costs are charged against profit or loss as incurred since the criteria for their recognition as an asset are not met.

The costs of an internally generated intangible asset comprise all directly attributable costs necessary to create, produce and prepare the asset to be capable of operating in the manner intended by management. Directly attributable costs include employee costs incurred on technical development, testing and certification, materials consumed and any relevant third-party cost. The costs of internally generated developments are recognised as intangible assets and are subsequently measured in the same way as externally acquired intangible assets. However, until completion of the development project, the assets are subject to impairment testing only.

No development costs to date have been capitalised as intangible assets as it was deemed that the probability of future economic benefit was uncertain at the time the costs were incurred.

LEASES

As a lessee

Where the Group enters a new contract, the Group considers whether this contract is, or contains, a lease. A lease is defined as "a contract, or part of a contract, that conveys the right to use an asset for a period of time in exchange for consideration". To apply this definition, the Group assesses whether the contract meets three key evaluations, which are whether:

· the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Group;

· the Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract; and

· the Group has the right to direct the use of the identified asset throughout the period of use.

Measurement and recognition of leases as a lessee

At the lease commencement date, the Group recognises a right-of-use asset and a lease liability in the statement of financial position. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received).

The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such indicators exist.

At the lease commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available, of the Group's incremental borrowing rate.

Lease payments included in the measurement of the lease liability are made up of fixed payments, variable payments based on an index or rate, amounts expected to be payable under a residual guarantee and payments arising from options reasonably certain to be exercised.

Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments.

When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero.

The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term.

On the statement of financial position, right-of-use assets are shown separately and are included in property, plant and equipment notes for disclosure purposes. Lease liabilities are shown separately.

As a lessor

If the Group transfers substantially all the risks and benefits of ownership of the asset, a receivable is recognised for the initial direct costs of the lease and the present value of the minimum lease payments. As payments fall due, finance income is recognised in the income statement so as to achieve a constant rate of return on the remaining net investment in the lease.

INTANGIBLE ASSETS AND GOODWILL

Recognition and measurement

Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated impairment losses.

Other intangible assets, including customer relationships and brands, that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortisation and any accumulated impairment losses.

Amortisation

Amortisation is calculated to write off the cost of intangible assets less their estimated residual values using the straight-line method over their estimated useful lives and is generally recognised in profit or loss. Goodwill is not amortised. The estimated useful lives for current and comparative periods are as follows:

· Customer lists - 5 years

· Brands - 5 years

· Software - 3 years

Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. Assets considered to have indefinite useful economic lives, such as goodwill, are tested annually for impairment.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is stated at cost less accumulated depreciation and any impairment losses. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is charged so as to write off the costs of assets over their estimated useful lives, on the following basis:

Leasehold improvements - over the term of the lease on a straight-line basis

Plant and machinery - 20% on cost on a straight-line basis

Fixtures and fittings - 20% on cost on a straight-line basis

Computer equipment - 33% on cost on a straight-line basis

Vehicles - 20% on cost on a straight-line basis

The gain or loss arising from the disposal of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset, and is recognised in the statement of profit or loss and other comprehensive income.

IMPAIRMENT OF NON-CURRENT ASSETS

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level at which management monitors goodwill. Cash-generating units to which goodwill has been allocated are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the assets or cash-generating unit's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation.

INVENTORIES

Inventories are valued at the lower of cost and net realisable value. Cost incurred in bringing each product to its present location and condition is accounted for as follows:

Raw materials, work in progress and finished goods - Purchase cost on a first-in, first-out basis.

Net realisable value is the estimated selling price in the ordinary course of business.

CASH ON DEPOSIT

Bank deposits where maturity is greater than three months from the date of investment, the Group cannot access the funds prior to the maturity date and the Group is not relying on the funds to meet its short-term operating requirements are disclosed as cash on deposit.

SHARE BASED PAYMENTS

Certain employees and consultants (including Directors and senior executives) of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services as consideration for equity instruments ("equity-settled transactions"). This policy applies to all schemes, including the Deferred Annual Bonus scheme open to certain management personnel.

The cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which they are granted. The fair value is determined by using an appropriate pricing model. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award ("the vesting date"). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The profit or loss charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance and/or service conditions are satisfied. Where the terms of an equity-settled award are modified, the minimum expense recognised is the expense as if the terms had not been modified. An additional expense is recognised for any modification, which increases the total fair value of the share-based payment arrangement or is otherwise beneficial to the employee as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph. The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share.

WARRANTS

The cost of equity-settled transactions with shareholders, in the form of warrants, is measured by reference to the fair value on the date on which they are granted. The fair value is determined by using an appropriate pricing model. The warrant charge is recognised over the vesting period of the warrants, if appropriate. Where warrants are issued to shareholders in their capacity as such, the warrant charge is recognised directly in equity.

FURLOUGH CREDITS

Where the Group has claimed a credit in respect of employees furloughed in accordance with the relevant government support schemes, the credit is recognised in the statement of profit or loss and other comprehensive income in the period to which the credit relates and is netted off against staff costs.

FINANCIAL ASSETS AND LIABILITIES

Financial assets and financial liabilities are recognised in the consolidated statement of financial position when the Group becomes party to the contractual provisions of the instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire or when the contractual rights to those assets are transferred. Financial liabilities are derecognised when the obligation specified in the contract is discharged, cancelled or expired.

Financial assets, other than those designated and effective as hedging instruments, are classified into the following categories:

· amortised cost

· fair value through profit or loss (FVTPL)

· fair value through other comprehensive income (FVOCI).

In the periods presented, the Group does not have any financial assets categorised as FVTPL or FVOCI.

After initial recognition, these are measured at amortised cost using the effective interest rate method. Discounting is omitted where the effect is immaterial. All of the Group's financial assets and financial liabilities fall into this category.

Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost less expected credit losses. Appropriate provisions for estimated irrecoverable amounts are recognised in the statement of profit or loss and other comprehensive income when there is objective evidence that the assets are impaired.

Cash and cash equivalents

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

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

Trade and other payables

Trade payables are initially measured at their fair value and are subsequently measured at their amortised cost using the effective interest rate method; this method allocates interest expense over the relevant period by applying the "effective interest rate" to the carrying amount of the liability.

Impairment of financial assets

The Group accounts for impairment of financial assets using the expected credit loss model as required by IFRS 9. The Group considers a broad range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument.

TAXATION

The tax expense/(credit) represents the sum of the tax currently payable or recoverable and the movement in deferred tax assets and liabilities.

Current tax is based upon taxable profit/(loss) for the year. Taxable profit/(loss) differs from net profit/(loss) as reported in the statement of profit or loss and other comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.

The Group's liability for current tax is calculated by using tax rates that have been enacted or substantively enacted by the reporting date.

Credit is taken in the accounting period for research and development tax credits, which have been claimed from HM Revenue and Customs, in respect of qualifying research and development costs incurred. Research and development tax credits are recognised on an accruals basis with reference to the level of certainty regarding acceptance of the claims by HMRC. The Group accounts for R&D tax credits as an investment tax credit accounted for on a flow through basis - R&D tax credits, while investment tax credits, are not considered to be substantially different from other tax credits and they are recognised when the conditions required to receive the credit are met and they are claimed on the Group's tax return.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled based upon tax rates that have been enacted or substantively enacted by the reporting date. Deferred tax is charged or credited in the statement of profit or loss and other comprehensive income, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available, against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the profit nor the accounting period.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

DISPOSAL GROUPS AND DISCONTINUED OPERATIONS

Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets and investment property that are carried at fair value and contractual rights under insurance contracts, which are specifically exempt from this requirement.

An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognition.

Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised.

Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the balance sheet. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the balance sheet.

A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the statement of profit or loss.

CRITICAL ACCOUNTING ESTIMATES AND AREAS OF JUDGEMENT

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and assumptions that have the most significant effects on the carrying amounts of the assets and liabilities in the financial information are discussed below. The point listed below is considered to be an area of judgement.

Research and development costs

Careful judgement by the Directors is applied when deciding whether the recognition requirements for capitalising development costs have been met. This is necessary as the economic success of any product development is uncertain and may be subject to future technical problems. 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. Specifically, the Directors consider production scale evidence of commercial operation of the Group's technology. In addition, all internal activities related to research and development of new products are continuously monitored by the Directors. To date, no development costs have been capitalised.

Recognition of revenue from and the loan issued to ESTR Ltd

The Directors apply judgement in respect of the relationship that the Group holds with ESTR Ltd. The Group has an outstanding loan owed by ESTR Ltd, against which the Group recorded an expected credit loss in accordance with IFRS 9 in a prior period. The Directors review this loan on at least an annual basis and apply judgement as to the recoverability or otherwise of the loan. At the date of this report, the Directors believe there remains significant doubt regarding the recoverability of this loan and therefore the expected credit loss remains in place.

In addition, the Group has a technology licence with the same entity. The Directors consider the revenue recognition with respect to this licence against the criteria of IFRS 15 and assess at which point the revenue receivable under this licence is to be recognised. The licence contains minimum annual royalty payments for the duration of the licence, and under IFRS 15, given the Group's performance obligations under the contract, these minimum royalty payments could meet the criteria for recognition. However, given the commercial circumstances, the Directors consider that payment of these minimum royalties is not probable and future contractual revenue is not recognised.

ACCOUNTING STANDARDS AND INTERPRETATIONS NOT APPLIED

At the date of authorisation of these financial statements, the following IFRSs, IASs and Interpretations were in issue but not yet effective. Their adoption is not expected to have a material effect on the financial statements unless otherwise indicated:

3) SEGMENTAL REPORTING

The financial information by segment detailed below is frequently reviewed by the Chief Executive Officer, who has been identified as the Chief Operating Decision Maker ("CODM"). The Group's transition to a licensing organisation has led to a change to how the results of the Group are reviewed internally. The results are no longer split by segment but are reviewed in terms of the type of revenue. As such, the analysis below does not split the Group's results into separate operating segments and instead reports results as one single segment.

An analysis of revenues by type is set out below:

The Group's largest customer was responsible for 31% of Group revenue in the year to 31 December 2022.

During the year ended 31 December 2021 the Group's largest customer was responsible for 19% of Group revenue.

An analysis of revenues by geographic location of customers is set out below:

An analysis of non-current assets by location is set out below:

4) LOSS FROM OPERATIONS

5) EXPENSES BY NATURE

The administrative expenses charge by nature is as follows:

6) TAXATION

Tax on loss on ordinary activities

The credit for the year/period can be reconciled to the loss before tax per the statement of profit or loss and other comprehensive income as follows:

Factors affecting the current tax charges

The tax assessed for the year varies from the main company rate of corporation tax as explained below:

The Group accounts for Research and Development tax credits where there is certainty regarding HMRC approval. The Group has received a tax credit in respect of the year ended 31 December 2021. There is no certainty regarding the claim for the year ended 31 December 2022 and as such no relevant credit or asset is recognised.

7) LOSS PER SHARE (BASIC AND DILUTED)

Basic loss per share is calculated by dividing the loss attributable to equity holders of the parent by the weighted average number of ordinary shares in issue during the year. Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares in issue during the period to assume conversion of all dilutive potential ordinary shares.

The weighted average number of shares in issue throughout the period is as follows.

The Company has issued employee options over 10,852,514 (31 December 2021: 2,087,895) ordinary shares which are potentially dilutive. There is, however, no dilutive effect of these issued options as there is a loss for each of the periods concerned.

The share options in issue were amended in the year following the Group's share capital reorganisation. Options over ordinary shares of 15p were amended to be options over ordinary shares of 0.1p and over deferred shares of 14.9p. There was no impact on the share option numbers or charge as a result of this change.

8) SHARE CAPITAL AND WARRANTS

The Group undertook a share capital reorganisation exercise during the year ended 31 December 2022, splitting the ordinary shares with a nominal value of 15p into ordinary shares of 0.1p and deferred shares of 14.9p. The new deferred shares have no significant rights attached to them and carry no right to vote or participate in distribution of surplus assets and have not been admitted to trading on the AIM market of the London Stock Exchange plc, nor will they in the future. Accordingly, deferred shares are excluded from the calculation of earnings per share in note 7.

As permitted by the provisions of the Companies Act 2006, the Company does not have an upper limit to its authorised share capital.

The following is a summary of the changes in the issued share capital of the Company during the period ended 31 December 2022:

(a) The Group underwent a share capital reorganisation during the period, with the Group's ordinary shares of 15p being split into two classes of shares, ordinary shares of 0.1p and deferred shares of 14.9p.

(b) 127,195,640 ordinary shares of 0.1p per share were allotted at a price of 5p per share, for total cash consideration of £6,360,000 upon the placing and open offer of the Company's shares in October 2022.

At 31 December 2022, the Company had two classes of share, being ordinary shares of 0.1p each and deferred shares of 14.9p each.

The Group's Share Capital reserve represents the nominal value of the ordinary shares in issue. The Group's Share Premium Reserve represents the premium the Group received on issue if its shares. The Group's Deferred Share Capital reserve represents the nominal value of the deferred shares in issue. The Merger Reserve arose on the combination of companies within the Group prior to the flotation on AIM.

As part of the placing completed in October 2022 the Group issued warrants to purchase ordinary shares of 0.1p for a fixed fee of 5p per share.

9) LEASES

The Group has leases for office buildings and associated warehousing and operational space. With the exception of short-term leases and leases of low-value underlying assets, each lease is reflected on the balance sheet as a right-of-use asset and a lease liability. The Group classifies its right-of-use assets in a consistent manner to its property, plant and equipment.

Leases of buildings end within ten years. Lease payments are generally fixed.

Each lease generally imposes a restriction that, unless there is a contractual right for the Group to sublet the asset to another party, the right-of-use asset can only be used by the Group. Leases are either non-cancellable or may only be cancelled by incurring a substantive termination fee. Some leases contain an option to extend the lease for a further term. The Group is prohibited from selling or pledging the underlying leased assets as security. For leases over office buildings and factory premises, the Group must keep those properties in a good state of repair and return the properties in their original condition at the end of the lease. Further, the Group must insure items of property, plant and equipment and incur maintenance fees on such items in accordance with the lease contracts.

The table below describes the nature of the Group's leasing activities by type of right-of-use asset recognised on the balance sheet:

Right-of-use assets

Additional information on the right-of-use assets by class is as follows:

Lease liabilities

Lease liabilities are presented in the statement of financial position as follows:

There is one lease with a termination option and no leases with extension options.

The lease liabilities are secured by the related underlying assets. The undiscounted maturity analysis of the lease liabilities at 31 December 2022 is as follows:

Lease payments not recognised as a liability

The Group has elected not to recognise a liability for short-term leases (12 months or less) or for leases of low-value assets. Payments made under such leases are expensed on a straight-line basis.

The expense relating to payments not included in the measurement of the lease liability is as follows:

At 31 December 2022 the Group was committed to short-term leases and the total commitment at that date was £9,000 (2021: £21,000).

10) RELATED PARTY TRANSACTIONS

During the year, the Group entered into transactions, in the ordinary course of business, with other related parties. Those transactions with directors are disclosed below. Transactions entered into, along with trading balances outstanding at each period end with other related parties, are as follows:

Note: IP Group plc provide the services of David Baynes, who was a director of the Company until 31 December 2022, and invoice the Group for related fees. David Baynes was a Director of both the Company and of IP Group plc.

Terms and conditions of transactions with related parties

Purchases between related parties are made on an arm's length basis. Outstanding balances are unsecured, interest free and cash settlement is expected within 60 days of invoice. 

Transactions with Key Management Personnel

The Company's key management personnel comprise only the Directors of the Company. During the period, the Company entered into the following transactions in which the Directors had an interest:

Directors' remuneration:

Remuneration received by the Directors from the Company is set out below. Further detail is provided within the Directors' Remuneration Report:

*In addition, certain directors hold share options in the Company for which a fair value share based charge of £93,000 has been recognised in the consolidated statement of profit or loss and other comprehensive income (year ended 31 December 2021: £153,000).

On 18 March 2022 it was announced that Mark Nichols would step down from his role as CEO. He subsequently resigned from the Board, with effect from 1 August 2022. Remuneration for Mark includes £71,000 in respect of payment in lieu of contractual notice and £71,000 as a severance payment.

The highest paid Director in the year received a total remuneration of £405,000 (year ended 31 December 2021: £335,000). During the year ended 31 December 2022, the Company entered into numerous transactions with its subsidiary companies which net off on consolidation - these have not been shown above.

Forward-looking statements

This announcement may include certain forward-looking statements, beliefs or opinions, including statements with respect to Xeros' business, financial condition and results of operations. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "anticipates", "targets", "aims", "continues", "expects", "intends", "hopes", "may", "will", "would", "could" or "should" or, in each case, their negative or other various or comparable terminology. These statements are made by the Xeros Directors in good faith based on the information available to them at the date of this announcement and reflect the Xeros Directors' beliefs and expectations. By their nature these statements involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future. A number of factors could cause actual results and developments to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, developments in the global economy, changes in government policies, spending and procurement methodologies, and failure in health, safety or environmental policies.

No representation or warranty is made that any of these statements or forecasts will come to pass or that any forecast results will be achieved. Forward-looking statements speak only as at the date of this announcement and Xeros and its advisers expressly disclaim any obligations or undertaking to release any update of, or revisions to, any forward-looking statements in this announcement. No statement in the announcement is intended to be, or intended to be construed as, a profit forecast or to be interpreted to mean that earnings per Xeros share for the current or future financial years will necessarily match or exceed the historical earnings. As a result, you are cautioned not to place any undue reliance on such forward-looking statements.