Financial instruments |
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| Financial instruments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Financial instruments | 24Financial instruments Financial assets at amortized cost
The fair value of financial assets is based on the expectation of recovery of balances. All balances are expected to be received in full. Trade and other receivables have been categorized in level 2 of the fair value hierarchy. All other balances have been recognized in level 1 of the fair value hierarchy. Financial liabilities at amortized cost:
All balances have been recognized in level 2 of the fair value hierarchy. Financial liabilities at fair value through profit or loss:
Warrants are quoted on the OTC Bulletin Board (an interdealer automated quotation system for equity securities that is not a national securities exchange) and are therefore categorized in level 2 of the fair value hierarchy (see note 20). The Convertible Senior Secured Notes (both host contract and embedded derivative) are categorized in level 3 of the fair value hierarchy (see note 23). Valuation methods and assumptions Financial liabilities at amortized cost The fair value of trade and other payables is estimated as the present value of future cash flows, discounted at the market rate of interest at the balance sheet date if the effect is material. Due to their short maturities, the fair value of the trade and other payables approximates their book value. The total interest expense for financial liabilities not held at fair value through profit or loss is £156 thousand (2023: £199 thousand). 24Financial instruments (continued) Financial liabilities at fair value through profit or loss The fair value of the Convertible Senior Secured Notes has been estimated using an option pricing model, in accordance with the International Valuation Standards definition of “market value”. The Convertible Senior Secured Notes, initially had a five-year term from the date of issuance on December 16, 2021 and a payment-in-kind interest rate of 9.0% (compounding semi-annually), or a cash interest rate of 7.0% (paid semi-annually). The holder of the Convertible Senior Secured Notes had an initial right to convert them into ordinary shares in the Company at any time at a conversion ratio of 90.9091 per $1,000 principal amount (with any payment-in-kind accrual converting at the same ratio). On December 23, 2024 the maturity date was extended to December 15, 2028 and the Conversion Rate was amended to 363.636 Ordinary Shares per $1,000 principal amount of notes in relation to the first $130,194,859 principal amount of the Convertible Senior Secured Notes, which was immediately converted by the noteholder into ordinary shares, and 285.714 Ordinary Shares per $1,000 principal amount of Convertible Senior Secured Notes for the remaining portion outstanding. Additionally, effective December 15, 2024, each Convertible Senior Secured Notes accrues interest at 10.0% per annum with respect to interest paid in cash and 12.0% per annum with respect to payment-in-kind interest. The outstanding principal immediately following partial conversion, and as at December 31, 2024, is $130,194,859. Option pricing has been utilized to calculate the probability that these options will be in the money at expiration and assign a dollar value to it. The underlying share price of the Company, exercise price, volatility, interest rate, and time to expiration have been used as inputs into the model to derive the option’s theoretical fair value. As of December 31, 2024 an estimated fair value of £524,242 thousand (2023: £109,291 thousand) was calculated for the Convertible Senior Secured Notes, based on the following valuation inputs:
As of December 23, 2024, immediately after substantial modification of the terms of the Convertible Senior Secured Notes, an estimated fair value of £574,476 thousand was calculated based upon a share price of $7.42. Company specific inputs include the expected probability and timing of future equity financing, in addition to the probability and timing of a future fundamental change. Credit spread is initially selected such that the fair value of the Convertible Senior Secured Notes reconciles to the total purchase price of $192.0 million based upon the arms’ length transaction closing as of December 15, 2021, subsequently adjusted for company-specific credit risk. Changes in Company-specific credit risk were made during the period, by way of a 11.0 percentage point increase in credit spread, resulting in downward adjustments to the resultant valuation of £22,293 thousand prior to extinguishment of the original liability. 24Financial instruments (continued) Risk-free rate is based on the interest rate on US government debt with a to five-year term. Volatility is based upon a reduction on the historical ordinary share volatility rate as operations develop and mature. Historical share price volatility of comparable companies with a three-month to four-year terms have also been considered. Had the stock price traded higher, or higher volatility been assumed then this would have resulted in a higher fair value being attributed to the instrument. An increase in the interest rate, risk - free rate or credit spread applied would result in a reduction in the fair value being attributed to the instrument.
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