SOLVONIS THERAPEUTICS PLC - COMPANY NUMBER 10776788

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

1              GENERAL INFORMATION

Solvonis Therapeutics Plc ("the Company" or "Solvonis") was incorporated in England and Wales as a limited company on 18 May 2017 as Graft Polymer (UK) Limited and was re-registered as a public limited company, Graft Polymer (UK) Plc, on 1 July 2021. On 6 January 2025 the company changed its name to Solvonis Therapeutics Plc. The Company is domiciled in England and Wales with its registered office at Eccleston Yards, 25 Eccleston Place, London, SW1W 9NF. The Company's registered number is 10776788.

The principal activities of the Company and all of its subsidiaries collectively referred to as "the Group" are the development of intellectual property related to the treatment of mental health and substance use disorders, and co-developing therapeutics for mental health disorders.

The consolidated financial statements ("financial statements") were approved for issue by the Board of Directors on 15 April 2025.

2              ACCOUNTING POLICIES

IAS 8 requires that management shall use its judgement in developing and applying accounting policies that result in information which is relevant to the economic decision-making needs of users, that are reliable, free from bias, prudent, complete and represent faithfully the financial position, financial performance and cash flows of the entity.

2.1          Basis of preparation

The financial statements have been prepared in accordance with UK-adopted international accounting standards in conformity with the Companies Act 2006.

The financial statement have been prepared under the historical cost convention unless stated otherwise. The principal accounting policies are set out below and have, unless otherwise stated, been applied consistently for all periods presented in these financial statements. The financial statements have been prepared in £GBP and presented to the nearest £'000.

The functional currency for each entity in the Group is determined as the currency of the primary economic environment in which it operates.  The functional currency of the Company is Pounds Sterling (£) as this is the currency that finance was raised in.

The functional currency of the operating subsidiary in Slovenia was the Euro (€) and was the currency that mainly influences labour, material and other costs of providing services. The presentational currency of the Group is Pounds Sterling (£). Foreign operations were translated in accordance with the policies set out further below in the notes at note 2.4.

The Group presents its financial statements for the year ended 31 December 2024 and presents comparatives for the year ending 31 December 2023.

2.2          Going concern

The Directors, having made due and careful enquiry, are of the opinion that the Company and the Group will have access to adequate working capital to execute its operations over the next 12 months.

The Directors meet monthly to discuss all matters of the Group including the liquidity of the Group and its status as a going concern. The Directors review cashflow forecasts in conjunction with considering other key factors such as current cash resources, cash burn rate, access to capital and sensitivity of key inputs when assessing the financial health of the Group.

 

Post period end the Group announced that it had entered into an arrangement agreement with Awakn Life Sciences Corp. setting out the basis on which the parties will cooperate to execute a transaction whereby Solvonis will acquire all issued and outstanding common shares in the capital of Awakn, all outstanding restricted share units in the capital of Awakn and all outstanding deferred share units in the capital of Awakn by way of a Court approved plan of arrangement under the British Columbia Business Corporations Act. Although the transaction will not require a cash outlay from Solvonis the Directors plan to complete a fundraise alongside the acquisition to assist with the financing of various clinical trials the Group plans to complete.

 

Currently the Group has a relatively low cash burn rate and has direct oversight over all expenses. In its current form the Group has limited committed liabilities however should the acquisition of Awakn complete the Board are aware that they will require additional funding to complete the desired trials. As a result the auditors have included a material uncertainty relating to going concern within their audit report as is common amongst "pre-revenue" companies. Although the Board is advanced in talks with various brokers to facilitate funding they acknowledge that due to the uncertainty of timing and quantum that a material uncertainty is appropriate in this instance.

 

After due consideration of all the factors, the Directors consider that the Group will have adequate financial resources to continue in operational existence for the foreseeable future (being a period of at least 12 months from the date of this report) and, for this reason, the financial statements have been prepared on a going concern basis.

 

2.3          Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Per IFRS 10, control is achieved when the Company:

·    has the power over the investee;

·    is exposed, or has rights, to variable returns from its involvement with the investee; and

·    has the ability to use its power to affects its returns.

 

The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.  When the Company has less than a majority of the voting rights of an investee, it considers that it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company's voting rights in an investee are sufficient to give it power, including:

·   the size of the Company's holding of voting rights relative to the size and dispersion of holdings of the other vote holders;

·   potential voting rights held by the Company, other vote holders or other parties;

·   rights arising from other contractual arrangements; and

·   any additional facts and circumstances that indicate that the Company has, or does not have,     the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders' meetings.

 

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, the results of subsidiaries acquired or disposed of during the year are included in profit or loss from the date the Company gains control until the date when the Company ceases to control the subsidiary.  Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with the Group's accounting policies.

All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between the members of the Group are eliminated on consolidation.

2.4          Foreign currency translation

i.          Functional and presentation currency

Items included in the financial statements for 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 is presented in £ Sterling, which is the Company's presentation and functional currency. The individual financial statements of each of the Company's wholly owned subsidiaries are prepared in the currency of the primary economic environment in which it operates (its functional currency). IAS 21 The Effects of Changes in Foreign Exchange Rates requires that assets and liabilities be translated using the exchange rate at period end, and income, expenses and cash flow items are translated using the rate that approximates the exchange rates at the dates of the transactions (i.e. the average rate for the period). The foreign exchange differences on translation is recognised in other comprehensive income (loss).

ii.         Transactions and balances

Transactions denominated in a foreign currency are translated into the functional currency at the exchange rate at the date of the transaction. Assets and liabilities in foreign currencies are translated to the functional currency at rates of exchange ruling at balance date. Gains or losses arising from settlement of transactions and from translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement for the period.

iii.        Group companies

The results and financial position of all the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

-     assets and liabilities for each balance sheet presented are translated at the closing rate at the date of the balance sheet;

-     income and expenses for each income statement are translated at the average exchange rate; and all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to shareholders' equity. When a foreign operation is partially disposed or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.

2.5          Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision makers. The chief operating decision maker, who are responsible for allocating resources and assessing performance of the operating segments, has been identified as the executive Board of Directors. As the Group disposed of its Slovenian subsidiary during the year the Directors have concluded that the Group now operates solely in the singular jurisdiction of the United Kingdom. As a result the Company has removed the segment reporting presented in previous financial statements.

2.6          Impairment of non-financial assets

Non-financial assets and intangible assets not subject to amortisation are tested annually for impairment at each reporting date and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment review is based on forecasted future cash flows. If the expected discounted future cash flow from the use of the assets and their eventual disposal is less than the carrying amount of the assets, an impairment loss is recognised in profit or loss and not subsequently reversed.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash flows (cash generating units or 'CGUs').

2.7          Inventory

Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on a first-in-first out basis. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

2.8          Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand, and demand deposits with banks and other financial institutions and bank overdrafts.

2.9          Financial instruments

IFRS 9 requires an entity to address the classification, measurement and recognition of financial assets and liabilities.

a)  Classification

The Group classifies its financial assets in the following measurement categories:

·    those to be measured at amortised cost; and

 

·    those to be measured subsequently at fair value through profit or loss.

 

The classification depends on the Group's business model for managing the financial assets and the contractual terms of the cash flows.

The Group classifies financial assets as at amortised 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 payment of principal and interest.

b)  Recognition

Purchases and sales of financial assets are recognised on trade date (that is, the date on which the Group commits to purchase or sell the asset). Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

c)  Measurement

At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset.

Transaction costs of financial assets carried at FVPL are expensed in profit or loss.

Debt instruments

Amortised cost: Assets that are held for collection of contractual cash flows, where those cash flows represent solely payments of principal and interest, are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses)  together with foreign exchange gains and losses. Impairment losses are presented as a separate line item in the statement of profit or loss.

d)  Impairment

The Group assesses, on a forward looking basis, the expected credit losses associated with any debt instruments carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables.

2.10        Leases

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Company, the lessee's incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. In all instances the leases were discounted using the incremental borrowing rate.

Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period. Right-of-use assets are measured at cost which comprises the following:

-    The amount of the initial measurement of the lease liability;

-    Any lease payments made at or before the commencement date less any lease incentives received;

-    Any initial direct costs; and

-    Restoration costs.

Right-of-use assets are depreciated over the shorter of the asset's useful life and the lease term on a straight line basis. If the Company is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset's useful life.

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

Payments associated with short-term leases (term less than 12 months) and all leases of low-value assets (generally less than £5k) are recognised on a straight-line basis as an expense in profit or loss.

2.11        Equity

Share capital is determined using the nominal value of shares that have been issued.

Share capital to be issued relates to salaries foregone by Directors and other consultants. Upon the issue publication of a prospectus shares will be issued to compensate the necessary parties and will be allocated amongst the share capital and share premium accounts.

The Share premium account includes any premiums received on the initial issuing of the share capital. Any transaction costs associated with the issuing of shares are deducted from the Share premium account, net of any related income tax benefits.

For the purposes of presenting consolidated financial statements, the assets and liabilities of group's foreign operations are translated at the exchange rates prevailing at the balance sheet date and items of income and expenditure are translated at the average exchange rate for the period. Exchange differences arising are recognised in other comprehensive income and accumulated in the Foreign Currency Reserve within equity.

Equity-settled share-based payments are credited to a share-based payment reserve as a component of equity until related options or warrants are exercised or lapse.

The foreign exchange reserve policy is set out in note 2.4.

Capital reduction reserve represents funds sent from the parent company to subsidiary that on the approval of Directors was reclassified from a loan in the subsidiary to an investment.

Retained losses includes all current and prior period results as disclosed in the income statement.

2.12        Share based payments

The Group has made awards of warrants and options on its unissued share capital to certain parties in return for services provided to the Group. The valuation of these warrants involved making a number of critical estimates relating to price volatility, future dividend yields, expected life of the options and interest rates. These assumptions have been integrated into the Black Scholes Option Pricing model and the Monte Carlo valuation model to derive a value for any share-based payments. These assumptions are described in more detail in note 22.  

2.13        Earnings per share

The Group presents basic and diluted earnings per share data for its Ordinary Shares.

Basic earnings per Ordinary Share is calculated by dividing the profit or loss attributable to Shareholders by the weighted average number of Ordinary Shares outstanding during the period.

Diluted earnings per Ordinary Share is calculated by adjusting the earnings and number of Ordinary Shares for the effects of dilutive potential Ordinary Shares.

2.14        Revenue

Under IFRS 15, Revenue from Contracts with Customers, five key points to recognise revenue have been assessed:

Step 1: Identity the contract(s) with a customer;

Step 2: Identity the performance obligations in the contract;

Step 3: Determine the transaction price;

Step 4: Allocate the transaction price to the performance obligations in the contract; and

Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation.

The Group recognises revenue when the amount of revenue can be reliably measured and it is probable that future economic benefits will flow to the entity. Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods provided in the normal course of business, net of discounts, VAT and other sales related taxes.

Revenue is reduced for estimated customer returns, rebates and other similar allowances. Sales of goods are recognised when the control of the goods is transferred to the buyer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods. Control is considered to have transferred generally on despatch as most items are sold on a cost includes freight basis; or on delivery where Delivered Duty Paid ("DDP") Incoterms are used. The normal credit terms are 30 to 60 days upon delivery. Invoices that are issued before the transfer of control has occurred are allocated as deferred income and then recognised as revenue when the performance obligation has been satisfied.

The Group also derives revenue from the rendering of services, whereby revenue from a contract to provide services is recognised in the period in which the services are provided in accordance with the stage of completion of the contract when all of the following conditions are satisfied:

-    the amount of revenue can be measured reliably;

-    it is probable that the Company will receive the consideration due under the contract;

-    the stage of completion of the contract at the end of the reporting period can be measured reliably; and

-    the costs incurred and the costs to complete the contract can be measured reliably.

In arrangements where fees are invoiced ahead of revenue being recognized, deferred income is recorded.

2.15        Taxation

Tax currently payable is based on taxable profit for the period. Taxable profit differs from profit as reported in the income statement because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is proved in full on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statement. Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised of the deferred tax liability is settled.

2.16        Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.

When the Company acquires any plant and equipment it is stated in the accounts at its cost of acquisition less a provision.

Depreciation is charged to write off the costs less estimated residual value of plant and equipment on a straight basis over their estimated useful lives being:

-        Plant and equipment:    5 - 7 years

-        Buildings and leasehold improvements: 20 years

Estimated useful lives and residual values are reviewed each year and amended as required.

2.17        Intangible assets

Intangible assets acquired are initially recognised at cost.  Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. The gains and losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. 

Intangible asset impairment reviews are undertaken annually, or more frequently if events or changes in circumstances indicate a potential impairment. The method and useful lives of finite life intangible assets are reviewed annually.  Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period.

2.18        Investments in Subsidiaries

Investments in Group undertakings are stated at cost.

2.19        Provisions

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

 

The provision is measured at the best estimate of the expenditure required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where the effect of the time value of money is material, the provision is discounted using a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

 

Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.

 

2.20        Financial liabilities

Other financial liabilities are initially recognised at fair values less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortised cost using the effective interest method.

2.21        Critical judgements and key sources of estimation uncertainty

The preparation of the consolidated financial statements requires management to make estimates and judgements and form assumptions that affects the reported amounts of the assets, liabilities, revenue and costs during the periods presented therein, and the disclosure of contingent liabilities at the date of the financial information. Estimates and judgements are continually evaluated and based on management's historical experience and other factors, including future expectations and events that are believed to be reasonable.

Patents and related knowledge as an intangible asset (note 10)

The estimates and assumptions in relation to the carrying value of the know-how intangible assets are considered to have the most significant effect on the carrying amounts of the financial statements.

Management have prepared a 5 year financial forecast ending at December 2028 which looks at the revenue generating ability of these intangible assets. They have confidence in various networks and contracts that the know-how will allow the Group to generate royalty and licensing revenue with relatively low associated costs. The Directors have a high level of confidence that these contracts will ultimately prove to be highly lucrative for the Group and support the current carrying value of the intangible assets.

The Directors do recognise that the success of the underlying product ranges related to the royalty agreements is uncertain and hence will continue to monitor the progress of these product lines.

However as there are no current indicators the intangible assets were assessed and concluded that no impairment charge was required.

Share based payments (Note 22)

The Group issues options and warrants to its employees, directors, investors and advisors.  These are valued in accordance with IFRS 2 "Share-based payments".  In calculating the related charge on issuing shares and warrants the Group will use a variety of estimates and judgements in respect of inputs used including share price volatility, risk free rate, and expected life.  Changes to these inputs may impact the related charge. In the period the Group did not perform any new valuations but released expenses to the statement of other comprehensive income from valuations in prior periods.

 

2.22        New standards and interpretations not yet adopted

At the date of approval of these financial statements, the following standards and interpretations which have not been applied in these financial statements were in issue but not yet effective (and in some cases have not yet been adopted by the UK):

Standard	Impact on initial application	Effective date
Amendments to IAS 21 - Lack of Exchangeability	The amendments have been made to clarify: When a currency is exchangeable into another currency; and How a company estimates a spot rate when a currency lacks exchangeability.	1 January 2025 (early adoption permitted)
Amendment to IFRS 9 and IFRS 7 - Classification and Measurement of Financial Instruments	These amendments: Clarify the requirements for the timing of recognition and derecognition of some financial assets and liabilities, with a new exception for some financial liabilities settled through an electronic cash transfer system; Clarify and add further guidance for assessing whether a financial asset meets the solely payments of principal and interest (SPPI) criterion; Add new disclosures for certain instruments with contractual terms that can change cash flows (such as some instruments with features linked to the achievement of environment, social and governance (ESG) targets); and Make updates to the disclosures for equity instruments designated at Fair Value through Other Comprehensive Income (FVOCI).	1 January 2026 (early adoption permitted)
IFRS 18 Presentation and Disclosure in Financial Statements	This is the new standard on presentation and disclosure in financial statements, with a focus on updates to the statement of profit or loss. The key new concepts introduced in IFRS 18 relate to: The structure of the statement of profit or loss; Required disclosures in the financial statements for certain profit or loss performance measures that are reported outside an entity's financial statements (that is, management-defined performance measures); and Enhanced principles on aggregation and disaggregation which apply to the primary financial statements and notes in general.	1 January 2027 (early adoption permitted)
IFRS 19 Subsidiaries without Public Accountability: Disclosures	This new standard works alongside other IFRS Accounting Standards. An eligible subsidiary applies the requirements in other IFRS Accounting Standards except for the disclosure requirements and instead applies the reduced disclosure requirements in IFRS 19. IFRS 19's reduced disclosure requirements balance the information needs of the users of eligible subsidiaries' financial statements with cost savings for preparers. IFRS 19 is a voluntary standard for eligible subsidiaries. A subsidiary is eligible if: it does not have public accountability; and it has an ultimate or intermediate parent that produces consolidated financial statements available for public use that comply with IFRS Accounting Standards.	1 January 2027 (early adoption permitted)

 

2.23        New standards and interpretations adopted

The standards and interpretations that are relevant to the Group, effective in this financial year are listed below. There has been no impact on the financial statements from the adoption of these standards.

Standard	Impact on initial application	Effective date
Amendments to IAS 1 -Classification of Liabilities as current or non- current	Clarifies that the classification of liabilities as current or noncurrent should be based on rights that exist at the end of the reporting period.	Annual periods beginning on or after 1 January 2024
Amendments to IAS 1 - Noncurrent Liabilities with Covenants	Clarifies that only those covenants with which an entity must comply on or before the end of the reporting period affect the classification of a liability as current or non-current.	Annual periods beginning on or after 1 January 2024
Amendments to IFRS 16 - Lease Liability in a Sale and Leaseback 4	Specifies requirements relating to measuring the lease liability in a sale and leaseback transaction after the date of the transaction.	Annual periods beginning on or after 1 January 2024
Amendments to IAS 7 and IFRS 7 -Supplier Finance Arrangements 4 5	Requires an entity to provide additional disclosures about its supplier finance arrangements.	Annual periods beginning on or after 1 January 2024

 

3.            SEGMENT REPORTING

The Chief Operating Decision Makers are the Board of Directors. The Board reviews the Group's internal reporting in order to assess the performance of the Group. Management has determined the operating segments based on the reports reviewed by the Board and post the disposal of the Slovenian subsidiary have determined that the Group now operates solely in the United Kingdom and henceforth have not presented geographical segmental reporting.

Due to the disposal of the Slovenian operations on 2 May 2024, the contributions from the Slovenian operating segment are not reported in the loss from continuing operations in the statement of comprehensive income. For details of the contribution of the Slovenian operations during the period up until the point of disposal, refer to Note 23.

4.            REVENUE

		Year ended 31 Dec 2024 £'000	Year ended 31 Dec 2023 £'000
Product Sales Revenue
Slovenia		-	5
Europe		-	355
Rest of the world		-	66
		-	426
Services Sales Revenue
Slovenia		-	161
		-	161
Total Sales Revenue		-	587

For details of the revenue from the Slovenian operations during the period up until the point of disposal, refer to Note 23.

 

5.            OPERATING COSTS AND ADMINISTRATIVE EXPENDITURE

		Year ended 31 Dec 2024 £'000	Year ended 31 Dec 2023 £'000
Operating costs
Depreciation		-	(179)
Operational costs		(41)	(213)
		(41)	(392)
Administrative costs
Directors remuneration		(354)	(754)
Salary and wages		-	(276)
Professional and consulting fees		(704)	(389)
Travel expenses		(12)	(21)
Foreign exchange		-	(69)
Other expenses		(80)	(267)
Share based payments		(317)	(369)
		(1,467)	(2,145)

 

A reconciliation of the amounts from the statement of profit or loss to the amounts reported in the Directors' Remuneration Report are detailed below:

 

Director	Total Directors Remuneration Report £'000	Fees accrued in prior period settled in shares £'000	31 Dec 2024 Statement of Profit or Loss £'000
Anthony Tennyson	54	-	54
Nicholas Nelson	29	-	29
Dennis Purcell	13	-	12
Roby Zomer	67	(36)	31
Victor Bolduev	144	(50)	94
Pavel Kobzev	66	(30)	36
Alex Brooks	17	(9)	8
Yifat Steuer	128	(39)	89
	518	(164)	354

 

On average, excluding directors, the Group employed 3 persons in the 2024 year (31 December 2023: 7)

The highest paid director received remuneration of approximately £144,000 (31 December 2023: £224,000).

 

6.            AUDITORS REMUNERATION

	Year ended 31 Dec 2024 £'000	Year ended 31 Dec 2023 £'000
Fees payable to the Group's auditor for the audit of parent company and consolidated financial statements	(35)	(50)
	(35)	(50)

 

7.            FINANCE COSTS

	Year ended 31 Dec 2024 £'000	Year ended 31  Dec 2023 £'000
Finance charge on leased assets	-	(3)
Interest on convertible loan	(64)	-
Finance costs	(64)	(3)

 

8.            TAXATION

No liability to income taxes arise in the period.

The current tax for the year differs from the loss before tax at a standard rate of corporation tax in the UK. A reconciliation of the tax charge is detailed below:

		Year ended 31 Dec 2024 £'000	Year ended 31 Dec 2023 £'000
The charge for year is made up as follows:
Corporation tax on the results for the year		-	-
A reconciliation of the tax charge appearing in the income statement to the tax that would result from applying the standard rate of tax to the results for the year is:
Loss per the financial statements		(1,447)	(3,120)
Tax credit at the weighted average of the standard rate of corporation tax in UK of 25% - (31 Dec 2023: 25%) Non-deductible expenses		(362)   79	(592)   234
Current year losses for which no deferred tax asset is recognised		(283)	(358)
Income tax charge for the year		-	-

Deferred tax assets carried forward have not been recognised in the accounts because there is currently insufficient evidence of the timing of suitable future taxable profits against which they can be recovered. The accumulated tax losses are estimated to amount to approximately £3.086m (31 Dec 2023: £1.958m) and the carried forward deferred tax asset is estimated to amount to approximately £0.770m.

No deferred tax assets in respect of tax losses have not been recognised in the accounts because there is currently insufficient evidence of the timing of suitable future taxable profits against which they can be recovered.

9.            EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share is calculated by dividing the profit or loss for the year by the weighted average number of ordinary shares in issue during the period.

	Year ended 31 Dec 2024	Year ended 31 Dec 2023
Loss for the year/period from continuing operations - £'000	(1,447)	(3,120)
Weighted number of ordinary shares in issue	1,156,732,090	104,057,299
Basic earnings per share from continuing operations - pence	(0.125)	(3.00)

There is no difference between the diluted loss per share and the basic loss per share presented. Share options and warrants could potentially dilute basic earnings per share in the future but were not included in the calculation of diluted earnings per share as they are anti-dilutive for the year presented.

10.          INTANGIBLE ASSETS

Group and Company

	£'000
Cost and carrying value - 1 January 2023	2,068
Additions		-
Impairment		-
At 31 December 2023	2,068
Additions	20
Impairment	-
At 31 December 2024	2,088

In 2018, 22,500,000 shares were issued to founding director Victor Bolduev as consideration for the ownership rights of multiple patents that were transferred to the Group. Since the acquisition of the patents in 2018 the Group has taken strides towards realising their commercial potential particularly by implementing commercial royalty agreements.

 

The Group has continued to apply for patents in the 2024 year and has also added key human resources to aid the monetisation of the patents in the Group.

 

The Directors believe that the combined knowledge embedded in the business surrounding drug delivery systems and small molecule therapeutics for substance use and mental health disorders between the Company and Awakn (Note 11) will enable the development of innovative therapeutics for the large addressable market for trauma related mental health disorders in the US and key international markets.

In line with International Accounting Standard 36 (IAS 36), the Directors have undertaken a formal assessment of these intangible assets to discern whether they are impaired.

 

The Directors have given due consideration to both financial and non-financial indicators and believe that the overall intellectual property of the Group is in a strong position. As a result they do not believe that any indicators of impairment exist and hence have not processed any impairment in the accounts.

 

11.          OTHER NON-CURRENT ASSESTS

Group and Company

	Group £'000	Company £'000
Cost and carrying value - 1 January 2023	13	-
Additions		-
Impairment		-
At 31 December 2023	13	-
Additions	300	300
Impairment	(13)	-
At 31 December 2024	300	300

 

In July 2024, the Company entered into partnership with Awakn Life Sciences ("Awakn"), a Canadian clinical stage biotechnology company developing therapeutics for addiction and mental health, to co-develop a new generation of therapeutics for the treatment of trauma related mental health disorders such as Post-Traumatic Stress Disorder ("PTSD"), moving the Company into field of biotechnology research and development of therapeutics for the treatment of mental health conditions. The agreement included a £300,000 payment to Awakn to assist with the continuation of various clinical trials.

 

12.          LEASES

Group

		31 Dec 2024 £'000	31 Dec 2023 £'000
Right-of-use assets
Motor vehicles		-	39
		-	39
Lease liabilities
Current		-	12
Non-current		-	22
		-	34

Right of use assets

A reconciliation of the carrying amount of the right-of-use asset is as follows:

		31 Dec 2024 £'000	31 Dec 2023 £'000
Motor vehicles
Opening balance		39	27
Additions		-	24
Amortisation		-	(12)
Disposal of subsidiary		(39)	-
		-	39

Lease liabilities

A reconciliation of the carrying amount of the lease liabilities is as follows:

		31 Dec 2024 £'000	31 Dec 2023 £'000
Opening balance		34	22
Additions		-	25
Finance charge		-	3
Repayments		-	(16)
Disposal of subsidiary		(34)	-
		-	34

 

13.          PROPERTY, PLANT AND EQUIPMENT

Group

					Leasehold improvements £'000		Plant & Equipment £'000				Total £'000
Cost
At 1 January 2023					89		937				1,026
Additions					15		201				216
Disposals					-		(27)				(27)
Impairment					(107)		(1,117)				(1,224)
Exchange impact					3		6				9
At 31 December 2023					-		-				-
Additions					-		-				-
Disposals					-		-				-
Impairment					-		-				-
Exchange impact					-		-				-
At 31 December 2024					-		-				-
Depreciation
At 1 January 2023				(29)		(323)				(352)
Charge for the period				(11)		(143)				(154)
Disposals				-		6				6
Impairment				40		463				503
Exchange impact				-		(3)				(3)
At 31 December 2023				-		-				-
Charge for the year				-		-				-
Disposals				-		-				-
Impairment				-		-				-
Exchange impact				-		-				-
At 31 December 2024				-		-				-
Net book value at 31 December 2023				-		-				-
Net book value at 31 December 2024				-		-				-

 

 

14.          INVENTORY

Group		31 Dec 2024 £'000	31 Dec 2023 £'000
Raw materials		-	51
Finished goods		-	-
		-	51

 

15.          INVESTMENTS

Company

	£'000
Cost and carrying value - 1 January 2023	1,304
Additions		-
Impairment		(1,304)
At 31 December 2023	-
At 31 December 2024	-

*Immaterial investment in Graft Polymer IP Limited & GraftBio Limited of £1 each

Investments in subsidiary with a cost value of £1.304m (2023: £1.304m) and accrued impairments of £1.304m (2023: £1.304m) related to the investment in Graft Polymer D.o.o which was a wholly owned subsidiary operating out of Slovenia. On 2 May 2024, the company disposed of this subsidiary for £1.

Company subsidiary undertakings

At year end the Group owned interests in the following subsidiary undertakings, which are included in the consolidated financial statements:

Name	Business Activity	Country of Incorporation	Registered Address	Percentage Holding
Graft Polymer IP Limited	Intellectual property	England and Wales	Eccleston Yards, 25 Eccleston Place, London, SW1W 9NF	100%
GRAFTBIO Limited	Bio-Polymer development and production	England and Wales	Eccleston Yards, 25 Eccleston Place, London, SW1W 9NF	100%

 

16.          TRADE AND OTHER RECEIVABLES

GROUP		31 Dec 2024 £'000	31 Dec 2023 £'000
Trade receivables		-	65
Other taxes and social security		30	16
Prepayments		22	21
Other receivables		6	6
		58	108

The carrying amounts of the Group's trade and other receivables are denominated in the following currencies:

		31 Dec 2024 £'000	31 Dec 2023 £'000
UK Pounds		57	30
Euros		-	78
		57	108

The Expected Credit Loss Model under IFRS 9 has not been applied to receivables due to this being inappropriate for the above receivables.

 

COMPANY		31 Dec 2024 £'000	31 Dec 2023 £'000
Other taxes and social security		30	4
Prepayments		22	21
Other receivables		5	6
		57	31

 

As at 31 December 2024 all trade and other receivables were fully performing and hence no provision has been processed. Trade receivables have the following aging:

				31 Dec 2024 £'000		31 Dec 2023 £'000
Current			58		31
1 - 3 months			-		-
3 - 6 months			-		-
			58		31

The Expected Credit Loss Model under IFRS 9 has not been applied to receivables due to this being inappropriate for the above receivables.

17.          CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash on hand and short term deposits held with banks with a A-1+ rating. The carrying value of these approximates to their fair value. Cash and cash equivalents included in the cash flow statement comprise the following balance sheet amounts.

 

GROUP		31 Dec 2024 £'000	31 Dec 2023 £'000
Cash and cash equivalents		757	155
		757	155

 

COMPANY		31 Dec 2024 £'000	31 Dec 2023 £'000
Cash and cash equivalents		757	12
		757	12

 

18.          TRADE AND OTHER PAYABLES

GROUP		31 Dec 2024 £'000	31 Dec 2023 £'000
Trade payables		83	159
Accruals		36	68
VAT payable		-	22
		119	249

 

 

COMPANY		31 Dec 2024 £'000	31 Dec 2023 £'000
Trade payables		83	66
Accruals		36	51
		119	117

 

19.          LOAN NOTE

		31 Dec 2024 £'000	31 Dec 2023 £'000
Opening balance		-	-
Principal drawn down		200	-
Interest charged		64	-
Principal repaid		(264)	-
		-	-

 

On 15 March 2024, the Company entered into a £100,000 working capital loan facility, which was subsequently increased by a further £100,000 in April 2024. The facility has been drawn down in full and attracts an interest rate of 10% per month. The loan was repayable on demand, together with accumulated interest which was settled in July 2024.

 

20.          PROVISIONS

 

GROUP		31 Dec 2024 £'000	31 Dec 2023 £'000
HMRC obligations		-	32
		-	32

In the 2023 reporting year Directors and other senior management waived fees owed to them with the intention of having shares issued at a later date. Transactions such as these have the potential to attract payroll and other taxes depending on the specific circumstances of the individual to which they apply. Due to the timing and uncertainty the Company provided for them in the 2023 year and have been settled during the current year.

21.          SHARE CAPITAL

Change in issued Share Capital and Share Premium:

		Number of shares	Share     capital	Share premium	Total
Ordinary shares			£'000	£'000	£'000
Balance at 1 January 2023		104,097,299	41	7,001	7,042
		-	-	-	-
Balance at 31 December 2023		104,097,299	41	7,001	7,042
Share issue at placing price of 0.6 pence		20,666,667	21	103	124
Share issue at placing price of 0.1 pence		1,800,000,000	1,800	-	1,800
Share issue on conversion of loan 1		264,000,000	264	-	264
Share issue to settle outstanding fees 2		59,666,667	60	299	359
Share issue to settle outstanding fees 3		47,500,000	47	-	47
Share issue costs		-	-	(41)	(41)
Balance at 31 December 2024		2,295,930,633	2,233	7,362	9,595

¹ Shares issued as full repayment of working capital loan and accrued interest (refer Note 19).

² Shares issued in satisfaction of fees owed to Directors as at 31 March 24 in connection to the July 2024 transaction.

³ Shares issued to various directors and advisors in lieu of fees owed

The share premium represents the difference between the nominal value of the shares issued and the actual amount subscribed less; the cost of issue of the shares, the value of the bonus share issue, or any bonus warrant issue.

 

22.          SHARE BASED PAYMENTS RESERVE

		Company £'000			Group £'000
At 31 December 2022			858		858
Employee options 1			369		369
At 31 December 2023			1,227		1,227
LTIP options 2, 3			22		22
Director warrants issued			295		295
At 31 December 2024			1,544		1,544

 

¹ On 6 January 2022, 11,173,611 employee options were granted to a number of employees within the Group. These options have different vesting conditions based on performance milestones. The charge that relates to the 2023 year has been brought to account above.

² On 30 July 2024, 10,000,000 LTIP options were granted to Directors. One third of these options vest every year, beginning with one third vesting at grant date.  

³ On 26 September 2024, 45,000,000 LTIP options were granted to Directors. One third of these options vest every year, beginning with one third vesting at grant date.

Warrants

	As at 31 December 2024
	Weighted average exercise price	Number of warrants
Brought forward at 1 January 2024	22p	2,031,008
Granted in period	1p	10,333,333
Granted in period	0.6p	1,500,000
Granted in period	0.1p	294,500,000
Expired during period	22p	(775,194)
Outstanding at 31 December 2024	0.2p	307,589,147
Exercisable at 31 December 2024	0.2p	307,589,147

The weighted average time to expiry of the warrants as at 31 December 2024 is 574 days.

The following table lists the Black Scholes inputs to the model used for valuation of the warrants:

	0.1p warrants	1p warrants	0.6p warrants
Dividend yield (%)	0%	0%	0%
Expected volatility (%)	100.6 - 142.1%	92.4%	92.4%
Risk-free interest rate (%)	4.17%	3.6%	3.6%
Time to maturity	2 - 3 years	2 years	2 years
Exercise price (£)	0.001	0.01	0.006
Share price at grant date (£)	0.001	0.006	0.006

Options

	As at 31 December 2024
	Weighted average exercise price	Number of options
Brought forward at 1 January 2024	0.1p	11,000,000
Granted in period	0.1p	55,000,000
Expired in period	0.1p	(11,000,000)
Outstanding at 31 December 2024	0.1p	55,000,000
Exercisable at 31 December 2024	0.1p	18,333,333

The weighted average time to expiry of the warrants as at 31 December 2024 is 987 days.

The following table lists the Black Scholes inputs to the model used for valuation of the options:

		0.1p options
Dividend yield (%)		0%
Expected volatility (%)		100.6%
Risk-free interest rate (%)		4.17%
Time to maturity		2 years
Exercise price (£)		0.001
Share price at grant date (£)		0.0022

 

23.          BUSINESS COMBINATIONS

Discontinued operations

A discontinued operation is a component of the Group that has been disposed of or classified as held for sale and that represents a separate major line of business or geographical area of operation, 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 on the face of the Statement of Comprehensive Income.

The Board recently undertook a review of its business and operations, pursuant to which it was decided that the Slovenian operation, Graft Polymer D.O.O (principally, an industrial polymer products manufacturer), was considered no longer commercially viable due to forecasted negative cashflow as a result of falling sales and rising costs, with no immediate prospect of becoming profitable in the short to medium term. The Group disposed of Graft Polymer D.O.O on 2 May 2024. A gain on deconsolidation as at date of disposal of £125,000 was recognised and taken to the Statement of Comprehensive Income.

Gain on deconsolidation of Graft Polymer D.O.O
	2 May 2024 £'000
Consideration received
Cash	-
Carrying amount of net liabilities sold	16
	16
Reclassification of foreign exchange reserve	109
Gain on deconsolidation	125

 

 

Financial Performance for Graft Polymer D.O.O
	Four months to 2 May 2024 £'000	31 December 2023 £'000
Revenue	221	587
Cost of sales	(148)	(329)
Gross profit	73	258
Operational costs	(17)	(66)
Depreciation	(58)	(179)
Administrative expenses	(140)	(518)
Asset write down	-	(838)
Operating loss	(142)	(1,343)
Finance costs	(1)	(3)
Loss before taxation	(143)	(1,346)
Income tax	-	-
Loss for the period from discontinuing operations	(143)	(1,346)
Assets and liabilities of Graft Polymer D.O.O
	2 May 2024 £'000	31 December 2023 £'000
Non-current assets
Right of use assets	38	39
Other non-current assets	13	13
Total non-current assets	51	52
Current assets
Cash and cash equivalents	13	143
Trade and other receivables	44	78
Inventory	11	50
Total current assets	68	271
TOTAL ASSETS	119	323
Non-current liabilities
Lease liability	-	22
Total non-current liabilities	-	22
Current liabilities
Trade and other payables	71	132
Deferred income	36	93
Lease liability	28	12
Total current liabilities	135	237
Total liabilities	135	259
NET ASSETS	(16)	64

 

Cashflow of Graft Polymer D.O.O
	2 May 2024 £'000	31 December 2023 £'000
Cash flow from operating activities
Loss before tax	(143)	(1,346)
Adjustments for:
Depreciation	58	165
Finance expenses	-	3
Amortisation of right of use assets	-	12
Fixed asset write off	(58)	736
Inventory write off	-	117
Changes in working capital:
Decrease/(Increase) in trade and other receivables	33	(26)
(Decrease)/Increase is trade and other payables	(54)	234
Movements in inventory	39	14
Net cash outflow from operating activities	(125)	(91)
Cash flow from investing activities
Purchase of property, plant and equipment	-	(216)
Repayment on right of use assets	(4)	(16)
Loans to subsidiary	-	393
Net cash flow from investing activities	(4)	161
Net increase in cash and cash equivalents	(129)	70
Cash and cash equivalents at beginning of period	142	89
Foreign exchange effect on cash balance	-	(26)
Cash and cash equivalents at end of period	13	133

 

24.          FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Capital Risk Management

The Company manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders. The overall strategy of the Company and the Group is to minimise costs and liquidity risk while still executing on the Group's overall business strategy.

The capital structure of the Group consists of equity attributable to equity holders of the parent, comprising issued share capital, foreign exchange reserves and retained earnings as disclosed in the Consolidated Statement of Changes of Equity.

The Group is exposed to risk through its normal operations, the most significant of which are foreign exchange and liquidity risks. Sensitivity analysis has not been performed because the potential impact is not considered material. The management of these risks is vested to the Board of Directors.

Currency Risk

The Group operates in a global market with cost possibly arising in a number of currencies and is exposed to foreign currency risk arising from commercial transactions, translation of assets and liabilities and net investment in foreign subsidiaries. Exposure to commercial transactions arise from sales or purchases by operating companies in currencies other than the Companies' functional currency. Currency exposures are reviewed regularly.

The Group has exposure to foreign exchange risk through research and development expenditure that is incurred in international markets as well as their foreign currency denominated cash balances.

Accordingly, movements in the Sterling exchange rate against these currencies could have a detrimental effect on the Group's results and financial condition. Such changes are not considered likely to have a material effect on the Group's financial position at 31 December 2024. Funds of the parent company are held with HSBC which has the following credit ratings (Fitch: A+, Stable, Moody's A3, Stable, S&P A-, stable)

The table below shows the currency profiles of cash and cash equivalents:

		31 Dec 2024 £'000	31 Dec 2023 £'000
Cash and cash equivalents
Sterling		757	12
Euro		-	143
		757	155

 

The table below shows an analysis of the currency of the monetary asset and liabilities in Sterling being the functional currency of the Group:

		31 Dec 2024 £'000	31 Dec 2023 £'000
Balance denominated in
Sterling		-	(27)
Euro		-	50
		-	23

Liquidity Risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group's approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the group's reputation.

The Group seeks to manage liquidity risk by regularly reviewing cash flow budgets and forecasts to ensure that sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably. The Group deems there is sufficient liquidity for the foreseeable future.

The Group had cash and cash equivalents at period end as below:

		31 Dec 2024 £'000	31 Dec 2023 £'000
Cash and cash equivalents		757	155
		757	155

The table below sets out the maturity profile of the financial liabilities at 31 December:

		31 Dec 2024 £'000	31 Dec 2023 £'000
Due in less than one month		(50)	(34)
Due between one and three months		(9)	(93)
Due between three months and one year		(24)	(32)
		(83)	(159)

 

25.          FINANCIAL ASSETS AND FINANCIAL LIABILITIES

 

GROUP 31 Dec 2024			Financial assets at amortised cost	Financial liabilities at amortised cost	Total
Financial assets / (liabilities)			£'000	£'000	£'000
Trade and other receivables1			36	-	36
Cash and cash equivalents			757	-	757
Trade and other payables2			-	(119)	(119)
			792	(119)	674

¹ Trade and other receivables excludes prepayments

² Trade and other payables excludes accruals, taxes and social security

 

GROUP 31 Dec 2023			Financial assets at amortised cost	Financial liabilities at amortised cost	Total
Financial assets / (liabilities)			£'000	£'000	£'000
Trade and other receivables1			87	-	87
Cash and cash equivalents			155	-	155
Trade and other payables2			-	(181)	(181)
			242	(181)	61

¹ Trade and other receivables excludes prepayments

² Trade and other payables excludes accruals, taxes and social security

COMPANY 31 Dec 2024			Financial assets at amortised cost	Financial liabilities at amortised cost	Total
Financial assets / (liabilities)			£'000	£'000	£'000
Trade and other receivables1			36	-	36
Cash and cash equivalents			757	-	757
Trade and other payables2			-	(119)	(119)
			792	(119)	674

¹ Trade and other receivables excludes prepayments

² Trade and other payables excludes accruals, taxes and social security

 

COMPANY 31 Dec 2023			Financial assets at amortised cost	Financial liabilities at amortised cost	Total
Financial assets / (liabilities)			£'000	£'000	£'000
Trade and other receivables1			10	-	10
Cash and cash equivalents			12	-	12
Trade and other payables2			-	(66)	(66)
			22	(66)	(44)

¹ Trade and other receivables excludes prepayments

² Trade and other payables excludes accruals, taxes and social security

26.          CAPITAL COMMITMENTS

There were no capital commitments at 31 December 2024.

 

27.          CONTINGENT LIABILITIES

Other than above, there were no further contingent liabilities at 31 December 2024.

 

28.          COMMITMENTS UNDER OPERATING LEASES

There were no commitments under operating leases at 31 December 2024.

 

29.          RELATED PARTY TRANSACTIONS

Royalty Agreement with Argent Biopharma

Graft Polymer IP Limited has a royalty agreement in place with Argent Biopharma Ltd (formerly MGC Pharmaceuticals D.o.o) to pay 1 Euro per unit sold of their CimetrA & CannEpil-IL products. Mr Roby Zomer who resigned as a Director from the Company in the year is also a Director of Argent Biopharma Ltd.

Payments to Chitta Lu Limited

Post resignation, the Company engaged the consultancy services of Chitta Lu Limited of which former Director, Roby Zomer is a Director in relation to business development for the Group. During the period from his resignation on 15 March 2024 to year end, Mr Zomer accrued £59,000 of fees of £20,000 which were outstanding at year end.

Collaboration agreement with Awakn Life Sciences Corp.

On 18 July 2024, the Company announced that it had entered into a collaboration agreement with Awakn Life Sciences Corp ("Awakn"). The Company's CEO, Mr. Anthony Tennyson, also serves as CEO of Awakn. To mitigate any potential conflict of interest, Mr. Tennyson recused himself from the Company's final selection process and negotiation of the Collaboration Agreement, which was led by Nicholas Nelson.

Details of directors' emoluments are set out in the Directors Remuneration Report

30.          EVENTS SUBSEQUENT TO PERIOD END

General meeting and change of name

On 6 January 2025, the Company held a general meeting where it proposed and subsequently approved a change of name from Graft Polymer (UK) Plc to Solvonis Therapeutics Plc.

Entry into Arrangement Agreement

On 24 February 2025, entered into an arrangement agreement with Awakn Life Sciences Corp. setting out the basis on which the parties will cooperate to execute a transaction whereby Solvonis will acquire all issued and outstanding common shares in the capital of Awakn all outstanding restricted share units in the capital of Awakn and all outstanding deferred share units in the capital of Awakn by way of a Court approved plan of arrangement under the British Columbia Business Corporations Act.

Appointment of Non-Executive Director

On 11 March 2025, the Company appointed Dr Renata Crome to the Board of Directors.

 

31.          CONTROL

In the opinion of the Directors as at the year end and the date of these financial statements there is no single ultimate controlling party.