FEEDBACK Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 Contents 1 2 5 7 Company Information Chairman’s Statement Strategic Report Directors’ Report FEEDBACK 17 Consolidated Statement of Changes in Equity 18 Consolidated Balance Sheet 19 Company Balance Sheet 20 Consolidated Cash Flow Statement 11 Corporate Governance Statement 21 Company Cash Flow Statement 14 Independent Auditor’s Report 22 Notes to the Financial Statements 16 Statement of Comprehensive Income 42 Notice of Annual General Meeting Company Information For the year ended 31 December 2013 Directors Dr A J Riddell Dr B Ganeshan M P Hayball Dr A H Menys T N Irish Secretary Temple Secretaries Limited Registered Office Unit 5 Grange Park Broadway Bourn Cambridgeshire CB23 2TA Registered Number 00598696 Auditors Haysmacintyre 26 Red Lion Square London WC1R 4AG Nominated Adviser and Joint Broker Allenby Capital Limited 5 St Helen’s Place London EC3A 6AB Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 Joint Broker Northland Capital Partners Limited 60 Gresham St London EC2V 7BB Joint Broker Peterhouse Corporate Finance Limited 15 Eldon Street London EC2M 7LD Bankers NatWest Conqueror House Vision Park Cambridge CB24 9NL Registrars Share Registrars Limited The Courtyard 17 West Street Farnham Surrey GU9 7DR 1 FEEDBACK Chairman’s Statement Financial progress In the year ended 31 May 2017, the Group incurred a loss after tax of £266,003 (2016: loss £183,156) on revenue of £465,885 (2016: £431,454). The results show a continuation in revenue growth as more customers around the world adopt TexRAD® and Cadran products and associated support services. On 26 April 2017, we announced the completion of a placing of 27,272,727 new Ordinary Shares at a price of 2.75 pence per share to raise a total of £750,000 (before expenses). A proportion of the net proceeds from the share issue has been invested in product development, sales and marketing with the balance being utilised for general working capital purposes. This accelerated expenditure, including investing in the team and external activities, has contributed to the increase in the loss during the period, however the Directors expect that the benefits of this investment will be seen in the current financial year. Operational cash generation has been satisfactory and reflects customer payments for new purchases and contracts before the periods in which the revenue is recognised. The share issue, net of costs, has contributed to a healthy cash balance at the end of the year. Operational progress As previously announced, Feedback’s subsidiary company, Cambridge Computed Imaging Ltd (“CCI”) is working towards a CE marked release of “TexRAD® Lung” for the clinical application of TexRAD® in the diagnosis, prognosis and treatment of lung cancer. CE marking is a claim by a medical device manufacturer that a product meets the essential requirements of the Medical Device Directive, which outlines the safety and performance requirements for medical devices in the European Union. TexRAD® Lung will be a “software only” medical device providing additional information for the interpretation of computerised tomography (CT) and positron emission tomography (PET) scans. Feedback is committed to offering its customers the highest quality service across all areas of its business, and therefore compliance with international quality management standards is of paramount importance. CCI received certification for its compliance with the ISO 13485:2016 quality management standard in September 2017. In May 2017, Feedback announced that CCI had identified enhancements to improve the performance of TexRAD® which will further support the wider clinical application of the TexRAD® technology. Since then, CCI has successfully prepared a “release candidate” version of TexRAD® Lung, incorporating over 60 risk control measures to address the 50 potential clinical risk scenarios identified within the product. This in now in the final stages of testing, with an anticipated CE marked release by the end of November 2017. On 30 March 2017, as part of the intended distribution arrangements, CCI signed a letter of intent with a leading global medical imaging company which would make TexRAD® Lung available for purchase on its diagnostic imaging solutions platform. This would, in due course, enable easy access to TexRAD® Lung for hundreds of potential users around the world on a subscription basis. We look forward to continuing our ongoing discussions with this company and other leading imaging companies to broaden the range of potential routes to market for clinical versions of TexRAD®. Post-period end, CCI signed exclusive distributor agreements with Korea Computer Motion ISG (“Korea ISG”) in June 2017 and Boya Digital Technology (Beijing) Co. Ltd. (“Boya”) in July 2017 for sales and distribution of TexRAD® in South Korea and the People’s Republic of China, respectively. These agreements represent a significant step in expanding TexRAD® sales to meet the fast-growing demand in Asian markets. By successfully identifying and engaging with distributors who are experts in the local market, we can leverage the TexRAD® brand to help build a regional sales pipeline. Over the first few months of these agreements, joint marketing and promotional activities have been well-received, we have seen an increase in purchase orders for TexRAD® from leading medical institutions in South Korea and we are receiving significant interest in China. 2 Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 FEEDBACK Chairman’s Statement CONTINUED In September 2016, we announced that we have developed a technical solution with Alliance Medical Group (“Alliance”) that would allow the integration of TexRAD® into Alliance’s network of PET/CT scanners in UK hospitals. A prototype version has been demonstrated to potential users and an abstract was presented at the Radiological Society of North America (RSNA) annual conference in November 2016. The poster, entitled “PET/CT in Lung Cancer: An Automated Imaging Tool for Decision Support”, highlighted results from a preliminary study which suggests that an automated PET/CT lung cancer tool may standardise clinical performance whilst allowing access to quantitative texture analysis to improve prognostication and fit within clinical workflow. We continue to work closely with Alliance on the future integration of TexRAD® Lung. In March 2017, the Company announced that CCI was finalising arrangements for the secure transfer of patient data from Papworth Hospital NHS Foundation Trust to the new Cambridge Biomedical Campus which was expected to open in April 2018. Papworth Hospital has since extended the timeframe to September 2018 and therefore preparation for the transfer of the extensive archive of medical images is ongoing. Research and development progress In July 2016, we announced a large-scale collaboration with Future Processing Sp. z o.o. (“Future Processing”), a software development service provider based in Gliwice, Poland to develop medical imaging software. The collaboration will entail a substantially increased development team working on new products and the sharing of intellectual property and future revenues. We believe that by CCI working jointly with the Future Processing healthcare team, CCI’s existing product portfolio can be improved and new products developed more rapidly including further applications for TexRAD®. The collaboration is fully underway and both teams are working towards agreeing formal licences for new software products to be brought to market in 2018. We continue to receive significant TexRAD® research interest from prestigious institutions worldwide which has resulted in multiple articles in leading publications. In September 2016, University College London (“UCL”) published a retrospective study of 67 prostate cancer patients which demonstrated that TexRAD® analysis of multi-parametric MRI images may be able to identify the presence of clinically significant prostate cancers in the transition zone and therefore could potentially assist in optimising prostate radiologists’ workflow. In November 2016, we attended the 102nd Scientific Assembly and Annual Meeting of the Radiological Society of North America (RSNA 2016); the premier global event for radiologists. We had a strong presence at RSNA 2016, with 19 scientific paper presentations featuring TexRAD® analysis, further emphasising the significance of our technology across the healthcare industry. Further information on the papers presented at RSNA 2016 can be found at https://rsna2016.rsna.org/program/. Post-period end in October 2017, our customer at the International University of Health and Welfare Hospital in Tochigi, Japan published article featuring TexRAD® analysis in liver cancer. The paper, entitled “Impact of hepatocellular carcinoma heterogeneity on computed tomography as a prognostic indicator” was published in the Nature affiliated journal; Scientific Reports. We also sponsored the American British Course in Neuroradiology in Mumbai, India in October 2017, which included a lunch-time symposium presentation on brain texture analysis using TexRAD® technology. These research activities continue to support the potential future clinical application of TexRAD® in these other disease indications. In 2015, we announced the incorporation of a 50:50 joint venture company, Prostate Checker Ltd, with QUIBIM S.L. (“QUIBIM”). The Board has concluded that a joint venture vehicle is no longer required for the collaboration. The Company continues to work closely with QUIBIM to develop a specific application of TexRAD® texture analysis for the computer assisted detection and diagnosis of prostate cancer. Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 3 FEEDBACK Chairman’s Statement CONTINUED Board and organisation Tom Charlton stepped down as a director on 30 May 2017 in order to devote more time to his other investment activities. Post-period end, on 8 June 2017, we announced that Trevor Brown resigned as a non-executive Director in order to allow the Company to move rapidly to the next stage in its development. On behalf of the Board, I thank both Tom and Trevor for their invaluable support of the Company following its readmission in 2014 which has enabled it to achieve considerable progress to date. To further support the Company’s growth strategy, Tim Irish joined the Board on 8 June 2017 as Non-Executive Director. Tim is a Professor of Practice at Kings College London as well as a board member of Bournemouth University. He joined the board of the National Institute for Health and Care Excellence (NICE) in April 2015 and became its Senior Independent Director in May 2017. Tim has worked in the life sciences industry for 30 years. His career has spanned global health technology companies across Europe and North America, including GSK, GE and Philips the latter two in senior positions responsible for medical imaging. Tim also currently holds a number of non- executive positions in health and technology related entities. I would also like to recognise and thank the Group’s employees for the outstanding contribution they have made. Having completed the placing in April 2017, we are in strong position to continue to build and invest in a leading team to deliver our objectives. Strategy and outlook Upon delivery of the first CE marked release of TexRAD® by the end of November 2017, our ambition is to leverage our leading research, image processing and analysis expertise to position TexRAD® technology for routine clinical use to drive future revenue growth. We look forward to continuing our ongoing discussions with leading imaging companies to broaden the range of potential routes to market for clinical versions of TexRAD®. Our existing and future distributor agreements will continue to support the Company’s international expansion, ensuring that our technology continues to be used by the world’s leading institutions to expedite research in this important field. With pioneering technology platforms and strong industry trends, we believe the Group is ideally placed to deliver continued growth. Dr A J Riddell Chairman 6 November 2017 4 Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 FEEDBACK Strategic Report The Directors present their Strategic Report and the audited financial statements for the year ended 31 May 2017. Principal activities of the Group The Company has two subsidiaries in the medical imaging sector, Cambridge Computed Imaging Limited (“CCI”) and TexRAD Limited. During the year, CCI acted as sales distributor for TexRAD to reduce operating costs. Review of the business The Chairman’s Statement on pages 2 to 4 includes a general review of the Group’s business for the year. Future developments in the business The Group will continue to invest in the development of its products. In addition, the Group’s future strategy may involve the formation of collaborations where Feedback’s valuable intellectual property can be combined with the specialist skills and intellectual property of other companies and research institutions. By adopting this approach, the Group is expected to generate licensing and royalty revenue streams and residual equity participation in these joint ventures. Group results and dividends The Group loss for the year after taxation amounted to £266,003 (2016: Loss £183,156). On 26 April 2017, the Company raised £750,000 by the issue of 27,272,727 new ordinary shares at a price of 2.75 pence per share. On 23 November 2016, the Company exercised its discretionary right to issue 15,120,000 new ordinary shares of 0.25 pence each at a deemed price of 1.25 pence per share to Tom Charlton in full settlement of his outstanding loan to the Company of £189,000. The Company now has 246,066,584 ordinary shares in issue. No dividends are payable for the year under review. Principal risks and uncertainties Economic and market risks The subsidiary companies are both in the medical imaging market. The market is fragmented and the future success of the business is dependent on the ability of the companies to secure new and renew current contracts. These contracts are often with Government supported organisations and the timing of these can be dependent on market conditions. The Group’s dependence on the award or renewal of contracts means that its revenue stream is not constant and has the potential to be particularly irregular. Regulatory approval The development, evaluation and marketing of the Group’s products and ongoing research and development activities are subject to regulation by governments and regulatory agencies in all territories within which the Group intends to market its products (whether itself or through a partner) and there can be no assurance that any of the Group’s products will successfully complete the trial process or that regulatory approvals to market these products will ultimately be obtained. Failure to obtain regulatory approvals for its products could threaten the Group’s ability to trade in the long term. Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 5 FEEDBACK Strategic Report CONTINUED The time taken to obtain regulatory approval varies between territories and there can be no assurance that any of the Group’s products will be approved in any territory within the timescale envisaged by the Board, or at all, and this may result in a delay, or make impossible, the commercial exploitation of the Group’s products. Furthermore, each regulatory authority may impose its own requirements and may refuse to grant, or may require additional data before granting an approval, even though the relevant product may have been approved by another country’s authority. If regulatory approval is obtained, products will be subject to continual review and there can be no assurance that such approvals will not be withdrawn or restricted. Changes in applicable legislation or regulatory policies, or discovery of problems with products may result in the imposition of restrictions on sale, including withdrawal of the product from the market, or may otherwise have an adverse effect on the Group’s business and/or revenue streams. Product development risk The products in development may cost more and/or take longer to develop than the current estimates. It is possible that commercially successful products may not be developed. The Board monitors progress on the product on a regular basis and discusses with potential customers their requirements to mitigate this risk. Liquidity Management of liquidity risk concentrated on the maintenance of appropriate credit lines and funding sources to ensure adequate cash resources for the Group’s operations. The Board regularly monitors the cash position of the Group and ongoing cash requirements. The Board believes the Group is likely to have access to adequate cash resources from a combination of operational cash generation and by obtaining equity finance from the financial markets to support its corporate strategy. Credit risk The Company’s credit risk is primarily attributable to its cash and cash equivalents and trade receivables. The credit risk on other classes of financial assets is considered insignificant. Other risks There is a risk that existing and new customer relationships will not lead to the income currently forecast (especially, as noted above, from new products currently in development). As with other technology businesses, the Company is reliant on a small number of highly skilled staff. Post balance sheet events On 8 June 2017 the Company subsidiary, Cambridge Computed Imaging Ltd (“CCI”) signed an exclusive distributor arrangement with Korea Computer Motion ISG based in Seoul, South Korea, for sales and distribution of its TexRAD® texture analysis research software. On 28 July 2017, CCI signed an exclusive distributor agreement with Boya Digital Technology (Beijing) Co. Ltd., based in Beijing, China, for sales and distribution of its TexRAD® texture analysis research software in the People’s Republic of China. Key performance indicators During the year the Group maintained its cash position as the key performance indicator. The cash balance at 31 May 2017 was £696,811 (2016 £105,673). By Order of the Board on 6 November 2017. Dr A J Riddell Director 6 Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 FEEDBACK Directors’ Report The Directors present their report and the Financial Statements for the year ended 31 May 2017. Future developments The future developments for the Group are discussed in the Chairman’s Statement and the Strategic Report. Directors The Directors of the Company during the year were: T E Brown T W G Charlton Dr B Ganeshan M P Hayball Dr A H Menys Dr AJ Riddell (Resigned 8 June 2017) (Resigned 30 May 2017) (Appointed 1 June 2016) Directors’ shareholdings The shareholdings in the Company of the Directors as at 31 May 2017 were: T E Brown Dr B Ganeshan M P Hayball Dr A H Menys Dr A J Riddell Significant shareholders No. of Shares 55,089,111 2,860,000 5,670,600 Nil 5,000,000 Shareholders who have notified the Company of shareholdings in excess of 3% as at 31 May 2017 are: T E Brown T W G Charlton W R Ruffler University of Sussex No. of Shares 55,089,111 59,637,408 12,597,893 9,400,000 Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 % 22.39 1.16 2.30 – 2.03 % 22.39 24.24 5.12 3.82 7 FEEDBACK Directors’ Report CONTINUED Directors’ biographies Dr Alastair Riddell, Non-Executive Chairman (appointed 1 June 2016) Alastair has over 30 years’ experience in the pharmaceutical, life science and biotech industries, with 18 years as a main board director. After 10 years directing phases 1-4 clinical trials of antibiotics, oncology and intensive care products for companies including Lederle (now Pfizer) and Centocor (now J&J), he spent five years managing sales and marketing for oncology and imaging products for Amersham International (now GE Healthcare). This led to 12 years as CEO for three UK biotech companies, Pharmagene, Paradigm Therapeutics and Stem Cell Sciences; in these roles he was the principal involved in an IPO on UK’s main list, trade sales to international companies in Japan and the USA and significant fund raising rounds. He has been Chairman of Silence Therapeutics (AIM listed) and Chairman of Definigen Ltd, a private Cambridge University spinout. He is currently on the Board of three biotechnology companies; AzurRx Biotherapeutics, a NASDAQ listed drug development company based in New York; Cristal Therapeutics, a Netherlands based company specialising in nanoparticle medicines; and Nemesis Biosciences a private Cambridge based company developing products to combat antibiotic resistances. He is also Chairman of the SWAHSN (South West Academic Health Science Network), which seeks to improve and sustain the healthcare provision in the south-west of England by linking innovation from industry, academia and the NHS. Alastair is on the Remuneration Committee. Dr Balaji Ganeshan, Executive Director (appointed 5 November 2015) Balaji is a Senior Imaging Scientist at the Institute of Nuclear Medicine, University College London and an Honorary Visiting Research Fellow at the Brighton & Sussex Medical School, University of Sussex. He was instrumental in the original development of the TexRAD® texture analysis technology which resulted from his PhD in Biomedical Engineering. Balaji is responsible for developing new business opportunities for TexRAD® and is Director of New Business at Feedback plc. Mike Hayball, Executive Director (appointed 5 November 2015) Mike started his career as a medical physicist at Addenbrooke’s Hospital in Cambridge where he took his MSc in Radiation Physics. From there he worked on cardiac imaging at Papworth Hospital before forming Cambridge Computed Imaging Limited in 2001 where he is Managing Director. Mike is Technical Director for the Feedback Group. Tim Irish, Non-Executive Director (appointed 8 June 2017) Tim is a Professor of Practice at Kings College London as well as a board member of Bournemouth University. Tim joined the board of the National Institute for Health and Care Excellence (NICE) in April 2015 and became the Senior Independent Director in May 2017. Tim has worked in the life sciences industry for thirty years. His career has spanned global health technology companies across Europe and North America, including GSK, GE and Philips the latter two in senior positions responsible for medical imaging. Tim also currently holds a number of non- executive positions in health and technology related entities. Dr Alex Menys, Non-Executive Director (appointed 5 November 2015) Alex obtained his PhD at University College London focusing on imaging of the gastrointestinal tract with MRI. He is the founder and chief executive of Motilent Ltd, a developer of advanced medical imaging software aimed at maximising the effectiveness of radiology in the evaluation of gastrointestinal function. Alex is on the Remuneration Committee. Employment policies The Group is committed to employee involvement in the business and there are consultative procedures available for management and other employees to discuss matters of mutual interest. 8 Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 FEEDBACK Directors’ Report CONTINUED The Group has a policy of non-discrimination in respect of sex, colour, religion, race, nationality or ethnic origin and the recruitment of disabled persons is only subject to any overriding consideration of access and safety. Creditor payment policies The Group’s policy for all suppliers is to fix terms of payment when agreeing the terms of each business transaction, to ensure the supplier is aware of those terms and to abide by the agreed terms of payment. Payment terms for the year ended 31 May 2017 averaged 30 days (2016: 30 days). Treasury policy The Group has adopted formal treasury policies to control its financial instruments. It is a Group Treasury policy not to undertake transactions of a speculative nature. Group cash flows are managed centrally and surplus cash is invested in short-term financial instruments. The Group does not undertake hedging transactions in foreign currencies. Foreign currencies are generally converted automatically into sterling on receipt. Compliance with these policies is monitored by the Board. Other than for currency disclosures, the Group has taken advantage of the exemption permitting it not to treat short-term debtors and creditors as financial instruments. Strategic report Information regarding the Group’s principal risks, results, future developments, dividends and key performance indicators is provided in the Strategic Report. Statement of directors’ responsibilities The Directors are responsible for preparing the Group and parent Company financial statements in accordance with applicable laws and regulations. Company law requires the Directors to prepare Group and parent Company financial statements for each financial year. Under that law the Directors are required to prepare the Group and parent Company financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU. The financial statements are required by law to give a true and fair view of the state of affairs of the Group and parent Company and of the profit and loss of the Group for that period. In preparing each of the Group and parent Company financial statements the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • • state whether they have been prepared in accordance with IFRSs as adopted by the EU subject to any material departures disclosed and explained in the parent Company financial statements; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the parent Company will continue in business. The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and parent Company and to enable them to ensure that the financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They have general responsibility for taking such steps as are reasonably open to safeguard the assets of the Group and parent Company and to prevent and detect fraud and other irregularities. Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 9 FEEDBACK Directors’ Report CONTINUED Under applicable law and regulations the Directors are also responsible for preparing a Strategic Report and a Directors’ Report to comply with that law and those regulations. In determining how amounts are presented within terms in the income statement and balance sheet the Directors have had regard to the substance of the reported transaction or arrangement in accordance with generally accepted accounting principles or practice. The directors are also responsible for the maintenance and integrity of the corporate and financial information included on the company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Audit information The Directors who were in office on the date of approval of these financial statements have confirmed, as far as they are aware, there is no relevant audit information of which the auditors are unaware. Each of the Directors have confirmed that they have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Company’s auditors are aware of that information. A resolution to reappoint haysmacintyre as auditors to the Company will be proposed at the Annual General Meeting. By order of the Board on 6 November 2017. Dr A J Riddell Director 10 Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 FEEDBACK Corporate Governance Statement Under the AIM Rules for Companies, the Group is not obliged to implement the provisions of the UK Corporate Governance Code (‘the Code’). However, the Group is committed to applying the principles of good governance contained in the Code as appropriate to a group of this size. In common with other organisations of a similar size, the Executive Directors are heavily involved in the day-to-day running of the business. The Board of Directors meets regularly and is responsible for formulating strategy, and for the trading subsidiaries, monitoring financial performance and approving major items of capital expenditure. During the year the Board comprised two Executive Directors and four Non-Executive Directors. In view of the size and management structure of Feedback Plc, the Company has not complied with certain aspects of the Combined Code as discussed below. Board of Directors The Board included up to four Non-Executive Directors which was considered appropriate. The Board has scheduled monthly meetings and others as required. The Board retains full responsibility for the direction and control of the Group. No strategic powers have been delegated and for these reasons the Board did not have, during the year, a formal schedule of matters specifically reserved to it (Paragraph A1 of the Code). There is currently no formal agreed procedure for Directors in the furtherance of their duties to take independent professional advice as necessary at the Company’s expense (paragraph B5 of the Code). Non-executive Directors The appointment of Non-Executive Directors is a matter for the Board as a whole. Although recommended by the Code, there is currently no formal selection process. The Non-Executive Directors have contracts for services for an unspecified period. (Paragraph B2 of the Code). Non-Executive Directors are subject to re-election every three years. Terms and conditions of appointment of the Non-Executive Directors are available for inspection. Executive Directors Directors are appointed by the Board of Directors but stand for election by the shareholders at the Annual General Meeting. The Executive Directors are subject to re-election every three years. Board committees A Remuneration Committee was in place comprising the four Non-Executive Directors. The Remuneration Committee has two scheduled meetings in the year. All serving members attended both meetings held in the year. An Audit Committee was in place comprising four Non-Executive Directors. The Company’s approach to internal control is described below. The Audit Committee has two scheduled meetings in the year. All serving members attended both meetings held in the year. There is no Nomination Committee. Given the size of the Group, the Board do not consider a Nomination Committee appropriate (paragraph B2 of the Code). Performance evaluation There is currently no formal performance evaluation of the board, its committees and its individual directors (paragraph A6.1 of the Code). Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 11 FEEDBACK Corporate Governance Statement CONTINUED Communication with shareholders The Directors are available to shareholders at any time to discuss strategy and governance matters. In addition, all Company announcements are published on the Company’s website, together with financial results. All shareholders have the opportunity to ask questions and express their views at the Company’s Annual General Meeting, at which all Directors are available to take questions. Audit and internal control The primary role of the Audit Committee was to keep under review the Group’s financial systems and controls and its financial reporting procedures. In fulfilling this role, the Committee received and reviewed work carried out by the external auditors and their findings. The Board had overall responsibility for operating and monitoring the system of internal control within the Group and for monitoring its effectiveness. The system includes an on-going process for identifying, evaluating and managing significant business risks. Although no system of internal control can provide absolute assurance against material misstatement or loss, the Group’s system was designed to provide the directors with reasonable assurance that any material problems were identified on a timely basis and dealt with appropriately. Guidance to Directors of UK Companies on internal control procedures and good practice on risk management is provided by the Financial Reporting Council. The Audit Committee reviewed the effectiveness of the internal controls on an annual basis on behalf of the Board and considered that they have complied throughout the year ended 31 May 2017 with those provisions of the Code which they consider to be practicable and appropriate for a relatively small public company. The key elements of the system, which had been designed to meet the specific needs and business risks of the Group, include: • • • • • clearly defined organisation structures with segregation of duties wherever practicable; agreement of Group short term financial objectives and business plans; regular review by the Board of Group Financial Statements and monitoring of results against budgets; Board control over treasury, taxation, legal, insurance and personnel issues; Board control over appraisal, review and authorisation of capital expenditure. In common with organisations of similar size the Executive Directors and the Non-Executive Directors are heavily involved in the day-to-day running of the business. The directors believe that although the Group’s controls may be slightly less formal than those of larger groups and companies, the continued close involvement of the Non- Executive Directors more than compensated for this. The Board believes that it is not currently appropriate for the Group to maintain an internal audit function because of the small size of the Group. 12 Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 FEEDBACK Corporate Governance Statement CONTINUED The Audit Committee considered the independence and objectivity of the external auditors on an annual basis, with particular regard to non-audit services. The split between audit and non-audit fees for the year and information on the nature of the non-audit fees appear in note 6 to the financial statements. The non-audit fees are considered by the Committee not to affect the independence or objectivity of the auditors. The Audit Committee monitors such costs in the context of the audit fee for the year, ensuring that the value of non-audit services does not increase to a level where it could affect the auditors’ objectivity and independence. With the exception of the matters referred to above the Group has complied throughout the financial year with provisions of The UK Corporate Governance Code (September 2014 edition). Going concern On 26 April 2017 the Company raised a total of £750,000 (before expenses) through a placing to both invest further in the product development and sales and marketing of TexRAD, Feedback’s patented quantitative imaging software, and also for general working capital purposes. Having updated the Group’s formal business plan the Directors consider that the Group and the Company are likely to have access to adequate cash resources for at least the next twelve months, from both existing cash balances and by obtaining further equity finance from the financial markets, or alternative funding, if required to enable continued product development and international expansion. Although this further finance has not yet been obtained, the Directors are confident that adequate additional finance will be forthcoming should it be required. Accordingly, the Directors believe that the Group and Company are a going concern and have therefore prepared the financial statements on a going concern basis. Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 13 FEEDBACK Independent Auditors’ Report We have audited the financial statements of Feedback Plc for the year ended 31 May 2017 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated and Company Changes in Equity, the Consolidated and Company Balance Sheets, the Consolidated and Company Cash Flow Statements and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an Auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As explained more fully in the Directors’ Responsibilities Statement set out on pages 9 and 10, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate. Opinion on financial statements In our opinion: • • • • the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 May 2017 and of the group’s loss for the year then ended; the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the group financial statements, Article 4 of the IAS Regulation. Emphasis of matter – going concern In forming our opinion, which is not modified, we have considered the adequacy of the disclosures made in Note 3c of the accounting policies regarding the group and parent company’s ability to continue as a going concern. The group incurred a loss of £266,003 in the year and may need to obtain further finance during the next twelve months which has not yet been obtained. These factors, along with the matters explained in note 3c of the accounting policies indicate the existence of a material uncertainty which may cast a significant doubt about the group and the company’s ability to continue as a going concern. The financial statements do not include the adjustments that would result if the group and company were unable to operate as a going concern. 14 Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 FEEDBACK Independent Auditors’ Report CONTINUED Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Strategic Report and Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements and such reports have been prepared in accordance with applicable legal requirements. In the light of our knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report and the Director’s Report. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • • • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. George Crowther (Senior statutory auditor) for and on behalf of haysmacintyre, Statutory Auditor 6 November 2017 26 Red Lion Square London WC1R 4AG Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 15 FEEDBACK Statement of Comprehensive Income FOR THE YEAR ENDED 31 MAY 2017 Revenue Cost of sales Gross profit Other income Other operating expenses Operating loss Net finance income Loss on ordinary activities before taxation Tax credit Loss on ordinary activities after tax Profit on disposal of investment Loss for the year attributable to the equity shareholders of the Company Other comprehensive income Translation differences on overseas operations Total comprehensive expense for the year Loss per share (pence) Basic and diluted Note 2017 £ 2016 £ 4 5 6 7 9 465,885 (11,007) 431,454 (7,438) 454,878 150 (755,960) 424,016 – (676,596) (300,932) 5 (252,580) 1,361 (300,927) 34,924 (251,219) 23,063 (266,003) (228,156) 12 – 45,000 (266,003) (183,156) – (266,003) – (183,156) 11 (0.11) (0.09) The notes on pages 22 to 41 form part of these financial statements. 16 Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 FEEDBACK Consolidated Statement of Changes in Equity FOR THE YEAR ENDED 31 MAY 2017 Group At 1 June 2015 New shares issued Costs associated with the raising of funds Share option and warrant costs Total comprehensive expense for the year Share Capital £ Share Premium £ Capital Reserve £ Retained Earnings £ Convertible Translation Debt Option Reserve £ Reserve £ 476,867 1,409,334 190,382 32,318 299,900 (2,076,483) (209,996) 189,000 Total £ 88,622 222,700 (6,580) – – – – – – 8,163 (183,156) – – (6,580) 8,163 (183,156) – – At 31 May 2016 509,185 1,593,136 299,900 (2,251,476) (209,996) 189,000 129,749 New Shares issued Costs associated with the raising of funds Share option and warrant costs Total comprehensive expense for the year 105,982 833,018 – – – (50,121) – – – – – – – – 5,726 (266,003) – – – – At 31 May 2017 615,167 2,376,033 299,900 (2,511,753) (209,996) (189,000) 750,000 – – – – (50,121) 5,726 (266,003) 569,351 Company At 1 June 2015 New shares issued Costs associated with the raising of funds Share option and warrant costs Total comprehensive expense for the year Share Capital £ Share Premium £ Convertible Retained Debt Option Reserve Earnings £ £ 32,318 476,867 1,409,334 (2,046,753) 190,382 (6,580) – – 8,163 (224,563) – – 189,000 – – Total £ 28,448 222,700 (6,580) 8,163 (224,563) At 31 May 2016 509,185 1,593,136 (2,263,153) 189,000 28,168 New shares issued Costs associated with the raising of funds Share option and warrant costs Total comprehensive expense for the year 105,982 – – – 833,018 (50,121) – – – – 5,726 (123,357) (189,000) – – – 750,000 (50,121) 5,726 (123,357) At 31 May 2017 615,167 2,376,033 (2,380,784) – 610,416 The notes on pages 22 to 41 form part of these financial statements. Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 17 FEEDBACK Consolidated Balance Sheet AT 31 MAY 2017 Assets Non-current assets Property, plant and equipment Intangible assets Investments Current assets Trade receivables Other receivables Cash and cash equivalents Total assets Equity Capital and reserves attributable to the Company’s equity shareholders Called up share capital Share premium account Capital reserve Translation reserve Retained earnings Convertible debt option reserve Total equity Liabilities Deferred tax liabilities Current liabilities Trade payables Other payables Total liabilities Total equity and liabilities Notes 2017 £ 2016 £ 13 14 12 15 18 19 9 16 4,109 80,235 – 3,639 110,747 1,000 84,344 115,386 49,982 62,328 696,811 40,894 63,910 105,673 809,121 210,477 893,465 325,863 615,167 2,376,033 299,900 (209,996) (2,511,753) 509,185 1,593,136 299,900 (209,996) (2,251,476) 569,351 – (59,251) 189,000 569,351 129,749 4,250 4,250 19,378 19,378 68,948 250,916 21,546 155,190 319,864 176,736 324,114 196,114 893,465 325,863 The financial statements were approved and authorised for issue by the Board of Directors on 6 November 2017 and were signed below on its behalf by: Dr A J Riddell Chairman 18 The notes on pages 22 to 41 form part of these financial statements. Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 Company Balance Sheet AT 31 MAY 2017 Company Number 00598696 Assets Non-current assets Investments Current assets Other receivables Cash and cash equivalents Total assets Equity Capital and reserves attributable to the Company’s equity shareholders Called up share capital Share premium account Retained earnings Convertible debt option reserve Total equity Current liabilities Trade payables Other payables Total current liabilities Total Equity and Liabilities FEEDBACK Notes 2017 £ 2016 £ 12 15 18 19 16 – – 1,000 1,000 39,733 654,413 16,661 60,492 694,146 77,153 694,146 78,153 615,167 2,376,033 (2,380,784) 509,185 1,593,136 (2,263,153) 610,416 – (160,832) 189,000 610,416 28,168 49,508 34,222 16,901 33,084 83,730 49,985 694,146 78,153 The company loss for the year was £123,357 (2016: £224,563). The financial statements were approved and authorised for issue by the Board of Directors on 6 November 2017 and were signed below on its behalf by: Dr A J Riddell Chairman The notes on pages 22 to 41 form part of these financial statements. Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 19 FEEDBACK Consolidated Cash Flow Statement FOR THE YEAR ENDED 31 MAY 2017 Cash flows from operating activities Loss before tax Adjustments for: Share option costs Net finance income Depreciation and amortisation Impairment of investment (Increase)/decrease in trade receivables (Increase)/decrease in other receivables Decrease/(increase) in trade payables (Increase)/decrease in other payables Corporation tax received Net cash used in operating activities Cash flows from investing activities Purchase of tangible fixed assets Purchase of intangible assets Net finance income received Proceeds from sale of joint venture Purchase of shares in joint ventures Net cash (used by)/generated from investing activities Cash flows from financing activities Net proceeds of share issue Net cash generated from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 2017 £ 2016 £ (300,927) (251,219) 5,726 (5) 48,182 1,000 (9,087) (36,246) 47,400 95,728 57,624 8,163 (1,361) 46,052 – 69,976 42,402 (18,852) (109,772) 9,506 210,322 46,114 (90,605) (205,105) (2,941) (15,200) 5 – – (104) (13,860) 1,361 46,000 (2,000) (18,136) 31,397 699,879 216,120 699,879 216,120 591,138 105,673 42,412 63,261 696,811 105,673 The notes on pages 22 to 41 form part of these financial statements. 20 Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 Company Cash Flow Statement FOR THE YEAR ENDED 31 MAY 2017 Cash flows from operating activities Loss before tax Adjustments for: Share options costs Profit on sale of investments Net finance income (Release of) provision against intercompany receivable Decrease/(increase) in other receivables Decrease/(increase) in trade payables Increase/(decrease) in other payables Net cash used in operating activities Cash flows from investing activities Net finance income Impairment of investment Purchase of joint ventures Proceeds on sale of joint venture Net cash generated from investing activities Cash flows from financing activities Net proceeds of share issue Net cash generated from/(used in) financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year FEEDBACK 2017 £ 2016 £ (123,357) (224,563) 5,726 – (5) (100,886) 77,814 32,607 1,138 8,163 (45,000) (1,356) 49,880 (13,548) (16,822) (1,374) 16,395 (20,057) (106,963) (244,620) 5 1,000 – – 1,005 1,356 – (2,000) 46,000 45,356 699,879 216,120 699,879 216,120 593,921 60,492 16,856 43,636 654,413 60,492 The notes on pages 22 to 41 form part of these financial statements. Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 21 FEEDBACK Notes to the Financial Statements 1. General information The Company is a public limited company domiciled in the United Kingdom and incorporated under registered number 00598696 in England and Wales. The Company’s registered office is Unit 5, Grange Park, Broadway, Bourn, Cambridgeshire, CB23 2TA. The Company is listed on AIM of the London Stock Exchange. These Financial Statements were authorised for issue by the Board of Directors on the 6 November 2017. 2. Adoption of new and revised International Financial Reporting Standards No new International Financial Reporting Standards (“IFRS”), amendments or interpretations became effective in the year ended 31 May 2017 which had a material effect on this financial information. At the date of approval of this financial information, the following IFRS Standards and Interpretations, which have not been applied in these Financial Statements, were in issue but not yet effective. These new Standards, Amendments and Interpretations are those in issue but not yet effective which are expected to apply to the Group and are effective for accounting periods beginning on or after the dates shown below: IFRS Standards and Interpretations issued (and EU adopted) but not yet effective: Mandatory for accounting periods commencing on or after 1 January 2017: • • • Amendments to IAS 12 – Recognition of Deferred Tax Assets for Unrealised Losses Amendments to IAS 7 – Disclosure Initiative Annual improvements to IFRS Standards 2014-2016 Cycle Mandatory for accounting periods commencing on or after 1 January 2018: • • • IFRS 9 – Financial Instruments IFRS 15 – Revenue from Contracts with Customers IFRIC Interpretation 22 – Foreign Currency Transactions and Advance Consideration Mandatory for accounting periods commencing on or after 1 January 2019: • IFRS 16 – Leases Date of implementation in the European Union not yet known: • IFRS 14 – Regulatory Deferral Accounts The Group has not early adopted these amended standards and interpretations. The Directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the reported results. 3. Significant accounting policies (a) Basis of preparation These financial statements have been prepared in accordance with those IFRS standards and IFRIC interpretations issued and effective or issued and early adopted as at the time of preparing these statements. The policies set out below have been consistently applied to all the years presented. No separate income statement is presented for the parent Company as provided by Section 408, Companies Act 2006. 22 Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 FEEDBACK Notes to the Financial Statements CONTINUED 3. Significant accounting policies (continued) (b) Basis of consolidation The Group financial statements consolidate the financial statements of Feedback plc and its subsidiaries (the “Group”) for the years ended 31 May 2017 and 2016 using the acquisition method. The financial statements of subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies. All inter-company balances and transactions, including unrealised profits arising from them, are eliminated. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. (c) Going Concern On 26 April 2017 the Company raised a total of £750,000 (before expenses) through a placing to both invest further in the product development and sales and marketing of TexRAD, Feedback’s patented quantitative imaging software, and also for general working capital purposes. Having updated the Group’s formal business plan the Directors consider that the Group and the Company are likely to have access to adequate cash resources for at least the next twelve months, from both existing cash balances and by obtaining further equity finance from the financial markets, or alternative funding, if required to enable continued product development and international expansion. Although this further finance has not yet been obtained, the Directors are confident that adequate additional finance will be forthcoming should it be required. Accordingly, the Directors believe that the Group and Company are a going concern and have therefore prepared the financial statements on a going concern basis. (d) Intangible assets Intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses. An intangible asset acquired as part of a business combination is recognised outside goodwill if the asset is separable or arises from contractual or other legal rights and its fair value can be reliably measured. The significant intangible asset cost related to software development of products which are integral to the trade of the Group’s medical imaging products. Amortisation is recognised in other operating expenses in the income and expenditure account. The carrying value of intangible assets is reviewed for impairment whenever events or changes in circumstance indicate that the carrying value may not be recoverable. Impairment losses are recognised in other operating expenses in the income and expenditure account. Impairment reviews are carried out annually. Research expenditure is recognised as an expense as incurred. Costs incurred on development projects (relating to the design and testing of new or improved products) are recognised as intangible assets when it is probable that the project will be a success, considering its commercial and technological feasibility, and costs can be measured reliably. Other development expenditure is recognised as an expense as incurred. Development costs that have a finite useful life and that have been capitalised were amortised from the commencement of the commercial production of the product on a straight line basis as follows: Intangible asset Patents Customer relationships Useful economic life Over the life of the patent 4 years (e) Valuation of Investments Investments held as non-current assets are stated at cost less provision for impairment. Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 23 FEEDBACK Notes to the Financial Statements CONTINUED 3. Significant accounting policies (continued) (f) Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. When used, bank overdrafts are shown within borrowings in current liabilities on the balance sheet. (g) Goodwill Business combinations on or after 1 April 2006 are accounted for under IFRS 3 using the acquisition method. Any excess of the cost of business combinations over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities is recognised in the balance sheet as goodwill and is not amortised. After initial recognition, goodwill is not amortised but is stated at cost less accumulated impairment loss, with the carrying value being reviewed for impairment, at least annually and whenever events or changes in circumstance indicate that the carrying value may be impaired. For the purposes of impairment testing, goodwill is allocated to the related cash generating units monitored by management. Where the recoverable amount of the cash generating unit is less than its carrying amount, including goodwill, an impairment loss is recognised in the income statement. (h) Property, plant and equipment All property, plant and equipment is stated at historical cost less depreciation. Depreciation on other assets is provided on cost or valuation less estimated residual value in equal annual instalments over the estimated lives of the assets. The rates of depreciation are as follows: Plant and equipment Motor vehicles 10 – 50% p.a. 25 – 33% p.a. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the income statement. (i) Leases Rental costs under operating leases are charged to the income statement in equal annual amounts over the period of the lease. (j) Foreign currency Transactions denominated in foreign currencies are translated into sterling at the rates ruling at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the rates ruling at that date. These translation differences are dealt with in the income statement. (k) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in the normal course of business, net of VAT. The company recognises revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the company’s activities, as described below. Revenue relating to software development that is contracted on a time and materials basis is recognised as the services are performed. Revenue relating to the sale of software licences is recognised over the period to which the licence relates. 24 Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 FEEDBACK Notes to the Financial Statements CONTINUED 3. Significant accounting policies (continued) Revenue from services provided is determined by management’s assessment of the percentage completed of each contract. Management determine the percentage of completion by considering the work performed to date based upon internal reports and agreed project milestones. (l) Pension Costs The Group operated a defined contribution pension scheme during the year. The pension charge represents the amounts payable by the Group to the scheme in respect of that year. (m) Taxation The tax credit represents the sum of the current tax credit and deferred tax credit. The tax currently payable is based on taxable profit for the period. Taxable profit differs from net profit as reported in the income statement 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 balance sheet date. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount 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 balance sheet liability method. Deferred tax liabilities are 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 the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction which affects neither the tax profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. 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 balance sheet date. Deferred tax is charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. (n) Financial instruments In relation to the disclosures made in note 17: • • short term debtors and creditors are not treated as financial assets or financial liabilities except for the currency disclosures. the Group does not hold or issue derivative financial instruments for trading purposes. (o) Employee share options and warrants The Group has applied the requirements of IFRS 2 Share-based Payment. The Group issues equity-settled share-based payment transactions to certain employees and has issued warrants to the vendors of the acquired subsidiary, TexRAD Limited. Equity-settled share-based payment transactions are measured at fair value at the date of grant. The fair value determined at the grant date of equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest. Fair value is measured by use of the Black Scholes option pricing model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effect of non-transferability, exercise restrictions, and behavioural considerations. Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 25 FEEDBACK Notes to the Financial Statements CONTINUED 3. Significant accounting policies (continued) (p) Key sources of estimating uncertainty The preparation of financial statements requires the Board of Directors to make estimates and judgments that affect reported amounts of assets, liabilities, revenues and expenses. These estimates are based on historical experience and various other assumptions that management and the Board of Directors believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. • • Intangible assets – Patents are included at cost less amortisation and impairment. Customer lists are included at cost less amortisation. Other intangible assets are recognised only when it is probable that a project will be a success. There is a risk therefore that a project previously assessed as likely to be successful fails to reach the desired level of commercial or technological feasibility. Where there is no probable income to be generated from these assets an estimation of the carrying value and the impairment of the intangible assets, including goodwill, has been made. Fair value measurement – a number of assets included in the Group’s and Company’s financial statements require measurement at fair value. The following items are carried in the financial statements at fair value: o o The fair value of the intercompany receivables less the estimate of any provision in respect of the recoverability of those receivables. The fair value of the share options and warrants issued. 4. Segmental reporting The Directors have determined that the operating segments based on the management reports which are used to make strategic decisions are medical imaging and head office. Year ended 31 May 2017 Revenue External Expenditure Executive directors remuneration Loss before tax Balance sheet External Assets External Liabilities Capital expenditure Medical Imaging £ Head Office £ Total £ 465,885 123,724 – – 465,885 123,724 (177,569) (123,358) (300,927) 199,319 (240,384) 694,146 (83,730) 893,465 (324,113) (41,065) 610,416 569,354 18,141 – 18,141 26 Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 Notes to the Financial Statements CONTINUED 4. Segmental reporting (continued) Year ended 31 May 2016 Revenue External Expenditure Executive directors remuneration Loss before tax Balance sheet External Assets External Liabilities Capital expenditure FEEDBACK Medical Imaging £ Head Office £ Total £ 431,454 122,970 – – 431,454 122,970 (26,657) (224,562) (251,219) 247,710 (146,129) 78,153 (49,985) 325,863 (196,114) 101,581 28,168 129,749 13,964 – 13,964 Reported segments’ assets are reconciled to total assets as follows: United Kingdom Europe Rest of the world Total External revenue by location of customer Total assets by location of assets Capital expenditure by location of assets 2017 £ 2016 £ 2017 £ 2016 £ 250,582 96,672 118,631 287,369 69,412 74,673 893,465 – – 325,863 – – 2017 £ 18,141 – – 2016 £ 13,964 – – 465,885 431,454 893,465 325,863 18,141 13,964 5. Other operating expenses Administrative costs: Other Amortisation and depreciation costs 2017 £ 2016 £ 707,777 48,183 630,544 46,051 755,960 676,595 Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 27 FEEDBACK Notes to the Financial Statements CONTINUED 6. Operating loss This is stated after charging Depreciation and amortisation Owned assets Amortisation of intangible assets Development Expenditure Auditors’ remuneration Audit of parent company and group financial statements Audit of subsidiaries Tax and other services Operating lease rentals Land and buildings 7. Net finance income Interest received 8. Directors and employees Number of employees Selling and distribution Administration Research and development Staff costs Wages and salaries Social security costs Payments to defined contribution pension scheme 2017 £ 2016 £ 2,471 45,712 35,897 10,500 9,000 4,000 3,380 42,671 53,540 10,500 9,000 4,000 8,643 8,643 2017 £ 5 5 2016 £ 1,361 1,361 2017 2016 Average Year end Average Year end 5 2 1 8 5 2 1 8 4 3 2 9 4 3 2 9 2017 £ 2016 £ 263,326 24,650 30,238 251,461 23,731 25,291 318,214 300,483 28 Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 FEEDBACK Notes to the Financial Statements CONTINUED 8. Directors and employees (continued) The value of all elements of remuneration received by each Director in the year was as follows: Termination payments £ Fees £ Total £ Year ended 31 May 2017 Executive Directors M P Hayball B Ganeshan Non-executive Directors T E Brown A H Menys T W G Charlton A Riddell* Total Year ended 31 May 2016 Executive Directors M P Hayball B Ganeshan Non-executive Directors S G Barrell T E Brown A H Menys T W G Charlton Total Salary £ 51,724 72,000 – 18,000 – – – – 18,000 – 48,750 141,724 66,750 36,729 35,000 – – 10,286 – – – 17,100 15,500 – – 82,015 32,600 – – – – – – – – – – – – – 51,724 72,000 18,000 18,000 – 48,750 208,474 36,729 35,000 17,100 15,500 10,286 – 114,615 During the year, retirement benefits under money purchase pension schemes were accruing to 2 directors (2016: 2). * A Riddell was paid consultancy fees through an agreement with AJR & Associates. M P Hayball holds interests in share options over 5,200,000 ordinary shares (2016: 5,200,000). Dr B Ganeshan holds interests in 3,575,000 warrants exercisable into ordinary shares (2016: 3,575,000). Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 29 FEEDBACK Notes to the Financial Statements CONTINUED 9. Taxation on loss on ordinary activities (a) The tax credit for the year: UK Corporation tax Current tax credit Under provision in prior year Deferred tax charge (b) Tax reconciliation Loss on ordinary activities before tax Loss on ordinary activities at the standard rate of corporation tax in the UK of 20.00% (2016 – 20.00 %) Effects of: Expenses non-deductible for tax purposes Additional deduction for R&D expenditure Surrender of tax losses for R & D tax credit refund Income not taxable Adjustments to tax charge in respect of previous periods Deferred tax not recognised Gain on disposal of investments Other timing differences and goodwill amortisation Tax charge for the year 2017 £ 2016 £ (34,924) (23,063) (16,319) (3,477) (15,128) (5,046) (9,484) (8,533) (34,924) (23,063) (300,926) (251,219) (59,684) (249,215) 7,506 (14,908) 6,000 (29) (3,477) 44,796 – (15,128) 10,593 (7,134) – – – – 9,000 14,722 (34,924) (23,063) (c) Factors which may affect future tax charges In view of the tax losses carried forward there is a deferred tax amount of approximately £321,189 (2016: £295,000) which has not been recognised in these Financial Statements. This contingent asset will be realised when the Group makes sufficient taxable profits in the relevant company. (d) Deferred tax – group The deferred tax included in the balance sheet is as follows: Deferred tax liability Deferred tax on development expenditure As at 1 June 2016 Charge in the year As at 31 May 2017 (e) Deferred tax – company 2017 £ 2016 £ 19,378 (15,128) 27,911 (8,533) 4,250 19,378 In view of the tax losses carried forward there is a deferred tax amount of approximately £280,486 (2016: £249,000) which has not been recognised in these Financial Statements. This contingent asset will be realised when the Company makes sufficient taxable profits. 30 Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 FEEDBACK Notes to the Financial Statements CONTINUED 10. Results of feedback plc As permitted by Section 408 of the Companies Act 2006, the income and expenditure account of the parent company is not presented as part of these financial statements. The Company’s loss for the financial year is £117,631 (2016: £224,563 loss). 11. Loss per share Basic earnings per share is calculated by reference to the loss on ordinary activities after taxation of £266,003 (2016: £183,156) and on the weighted average of 232,879,771 (2016: 203,514,709) shares in issue. Net loss attributable to ordinary equity holders Weighted average number of ordinary shares for basic earnings per share Effect of dilution: Share Options Warrants Weighted average number of ordinary shares adjusted for the effect of dilution Loss per share (pence) Basic Diluted As at 31 May 2017 £ As at 31 May 2016 £ (266,003) (183,156) As at 31 May 2017 As at 31 May 2016 232,879,771 203,514,709 – – – – 232,879,771 203,514,709 (0.11) (0.11) (0.09) (0.09) There is no dilutive effect of the share options and warrants as the dilution would be negative. Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 31 FEEDBACK Notes to the Financial Statements CONTINUED 12. Investments Company Cost At 1 June 2015 Additions Disposals At 31 May 2016 As at 31 May 2017 Provisions At 1 June 2014 Provided in the year At 31 May 2015 Provided in the year At 31 May 2016 Provided in the year At 31 May 2017 Net Book Value At 31 May 2017 At 31 May 2016 At 31 May 2015 Share in group undertakings £ Shares in joint venture £ Total £ 2,334,455 – 2,334,455 – – 2,000 (1,000) 2,000 (1,000) 2,334,455 1,000 2,335,455 2,334,455 1,000 2,335,455 1,867,000 467,455 2,334,455 – 2,334,455 – 2,334,455 – – – – – 1,867,000 467,455 2,334,455 – 2,334,455 1,000 1,000 – 2,335,455 – – – – – 1,000 1,000 – – All of the above investments are unlisted. Following the prudent write down of the intangible assets under the requirements of IFRS in the subsidiaries, the subsidiaries’ financial statements show that they have net liabilities. The directors have made full provision against the cost of investment in the subsidiaries due to the net liabilities shown in the subsidiary financial statements. 32 Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 FEEDBACK Notes to the Financial Statements CONTINUED 12. Investments (continued) Particulars of principal subsidiary and joint venture companies during the year, all the shares of which being beneficially held by Feedback PLC, were as follows: Company Activity Feedback Black Box Company Limited Non trading Brickshield Limited Non trading Cambridge Computed Imaging Limited Medical Imaging TexRAD Limited Prostate Checker Ltd Medical Imaging Non trading Country of and incorporation operation England England England England England Proportion of Shares held 100% Ordinary £1 100% Ordinary £1 100% A Ordinary £1 100% B Ordinary 1p 100% Ordinary 1p 50% Ordinary £1 TexRAD Limited is owned 100% by virtue of a direct holding by Feedback plc of 91% and an indirect holding via Cambridge Computed Imaging Limited of 9%. All the subsidiary companies have been included in these consolidated financial statements. Feedback Plc has a 50% stake in Prostate Checker Ltd with a cost of £1,000, effective 26 August 2015 (date of incorporation) with QUIBIM S.L holding the remaining 50%. This company assists the detection and diagnosis of prostate cancer. The company has not traded during the year, and Feedback’s investment in the company has been provided against. During 2016, Feedback plc disposed of its 50% interest in Stone Checker Software Ltd for £46,000. The registered office of each subsidiary is Unit 5, Grange Park, Broadway, Bourn, Cambridge CB23 2TA. Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 33 FEEDBACK Notes to the Financial Statements CONTINUED 13. Property, plant and equipment Group Cost of valuation At 31 May 2015 Additions At 31 May 2016 Additions As 31 May 2017 Depreciation At 31 May 2015 Charge for the year At 31 May 2016 Charge for the year At 31 May 2017 Net Book Value At 31 May 2017 At 31 May 2016 At 31 May 2015 Plant and Equipment £ Total £ 10,773 104 10,877 2,941 10,773 104 10,877 2,941 13,818 13,818 3,858 3,380 7,238 2,471 9,709 4,109 3,639 6,915 3,858 3,380 7,238 2,471 9,709 4,109 3,639 6,915 34 Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 Notes to the Financial Statements CONTINUED 14. Intangible assets FEEDBACK Group Cost At 31 May 2015 Additions At 31 May 2016 Additions At 31 May 2017 Amortisation At 31 May 2015 Charge for the year At 31 May 2016 Charge for the year At 31 May 2017 Net Book Value At 31 May 2017 At 31 May 2016 At 31 May 2015 Customer Software relationships £ £ Patents £ Goodwill £ Total £ 563,099 – 563,099 – 100,000 – 100,000 – 74,498 13,860 88,358 15,200 271,415 – 1,009,012 13,860 271,415 – 1,022,872 15,200 563,099 100,000 103,558 271,415 1,038,072 563,099 – 563,099 – 25,000 25,000 50,000 25,000 9,940 17,671 27,611 20,712 271,415 – 271,415 – 869,454 42,671 912,125 45,712 563,099 75,000 48,323 271,415 957,837 – – – 25,000 55,235 50,000 60,747 75,000 64,558 – – – 80,235 110,747 139,558 In accordance with the accounting policies and IFRS the Directors have assessed the carrying value of the intangible assets. In the year ended 31 May 2015, the Directors took the prudent decision to write down the carrying value of the software development costs in the balance sheet in order to meet the requirements of IFRS. During the years ended 31 May 2017 and 2016 all similar development costs have been expensed as the provisions of IFRS have not been met. However the Directors believe the Group’s technology has great potential and this write down does not reflect their commercial assessment of the value of the Group’s intellectual property. Expenditure on software development is being written off as incurred until the provisions of IFRS are met. The customer lists and patents are deemed to have ongoing value to the Group. Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 35 FEEDBACK Notes to the Financial Statements CONTINUED 15 Other receivables Amounts falling due within one year Amounts owing by subsidiary undertakings Other receivables Corporation tax recoverable Prepayments 16. Other payables Amounts falling due within one year Other payables Other taxes and social security Accruals Deferred income Group Company 2017 £ 2016 £ 2017 £ 2016 £ – 18,396 16,318 27,614 – 8,684 37,828 17,398 – 14,878 – 24,855 – 5,168 – 11,493 62,328 63,910 39,733 16,661 Group Company 2017 £ 2016 £ 2017 £ 2016 £ 5,534 7,033 69,827 168,522 4,885 15,386 31,750 103,169 – 292 33,930 – 1,042 292 31,750 – 250,916 155,190 34,222 33,084 17. Financial instruments The Group’s overall risk management programme seeks to minimise potential adverse effects on the Group’s financial performance. The Group’s financial instruments comprise cash and cash equivalents and various items such as trade payables and receivables that arise directly from its operations. The Group is exposed through its operations to the following financial risks: • • • • Credit risk Foreign currency risk Liquidity risk Cash flow interest rate risk Fair value Hierarchy The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: — Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities — Level 2: other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly — Level 3: techniques that use inputs that have a significant effect on the recorded fair value that are not based on observable market data 36 Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 FEEDBACK Notes to the Financial Statements CONTINUED 17. Financial instruments (continued) The share options and warrants issued by the group during the year are valued under level three above as noted in note 18 below. In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note describes the Group’s objectives, policies and processes for managing those risks. Further quantitative information in respect of these risks is presented throughout these financial statements. There have been no substantive changes in the Group’s exposure to financial instrument risks and consequently the objectives, policies and processes are unchanged from the previous period. The Board has overall responsibility for the determination of the Group’s risk management policies. The objective of the Board is to set policies that seek to reduce the risk as far as possible without unduly affecting the Group’s competitiveness and effectiveness. Further details of these policies are set out below: Credit risk The Group is exposed to credit risk primarily on its trade receivables, which are spread over a range of countries, a factor that helps to dilute the concentration of the risk. Group policy, implemented locally, is to assess the credit risk of each new customer before entering into binding contracts. Each customer account is then reviewed on an ongoing basis (at least once a year) based on available information and payment history. The maximum exposure to credit risk is represented by the carrying value in the balance sheet. The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date is: Current financial assets Trade and other receivables Cash and cash equivalents Analysis of trade receivables 2017 2016 Cash, loans and receivables 2017 £ 2016 £ 112,310 696,811 104,804 105,673 809,121 210,477 Total Current 30 days past due 60 days past due 90 days past due 49,982 16,908 33,074 40,894 37,052 3,842 – – – – The Group policy is to make provisions against those debts that are overdue, unless there are grounds for believing that all or some of the debts would be collected. During the year the value of provisions made in respect of bad and doubtful debts was £Nil (2016: £5,882). The expense is included within the management and administration costs in the Consolidated Income Statement. Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 37 FEEDBACK Notes to the Financial Statements CONTINUED 17. Financial instruments (continued) Foreign currency risk Foreign exchange transaction risk arises when the Group enters into transactions denominated in a currency other than the functional currency. Foreign currency amounts generated from trading are converted back to sterling and required foreign currency amounts for suppliers will be converted from sterling and the use of forward currency contracts is considered. The Group’s main foreign currency risk is the short-term risk associated with accounts receivable and payable denominated in currencies that are not the subsidiaries’ functional currency. The risk arises on the difference in the exchange rate between the time invoices were raised/received and the time invoices were settled/paid. The following table shows the net assets, stated in pounds sterling, exposed to exchange rate risk that the Group has at 31 May 2017: Trade receivables Cash and cash equivalents 2017 £ 44,524 – 2016 £ 16,351 – 44,524 16,351 The Group is exposed to currency risk because of the subsidiaries undertaking trading transactions in US dollars and Euros. The Directors do not generally consider it necessary to enter into derivative financial instruments to manage the exchange risk arising from its operations, but from time to time where the Directors consider foreign currencies are weak and it is known that there would be a requirement to purchase those currencies, forward arrangements may be entered into. There were no outstanding forward arrangements as at 31 May 2017 or at 31 May 2016. Liquidity risk Cash flow forecasting is performed in the operating entities of the Group. Rolling forecasts of the Group’s liquidity requirements are monitored to ensure it has sufficient cash to meet operational needs. Current financial liabilities Trade and other payables Financial liabilities measured at amortised cost 2017 £ 2016 £ 82,393 58,181 The following are maturities of financial liabilities, including estimated contracted interest payments. 2017 Trade and other payables 2016 Trade and other payables 38 Carrying amount Contractual cash flow 6 months or less 6-12 months 1 or more years 144,309 144,309 144,309 58,181 58,181 58,181 – – – – Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 FEEDBACK Notes to the Financial Statements CONTINUED 17. Financial instruments (continued) Cash flow interest rate risk The Group presently has no substantial interest rate risk exposure. Capital under management The Group considers its capital to comprise its ordinary share capital, share premium, capital reserve, convertible debt option reserve and accumulated retained earnings. The group’s objectives when managing the capital are: • • To safeguard the group’s ability to remain a going concern. To maximise returns for shareholders in order to meet capital requirements and appropriately adjust the capital structure, the group may issue new shares, dispose of assets to pay down debt, return capital to shareholders and vary dividend payments. There have been no changes to the group’s capital management objectives in the year. 18. Share capital and reserves Authorised and issued share capital Ordinary shares of 0.25 pence each Allotted, called up and fully paid share capital: As at 1 June 2016 Issued As at 31 May 2017 Share Options 2017 £ 2016 £ 615,167 509,185 Number Number 203,673,857 42,392,727 190,746,746 12,927,111 246,066,584 203,673,857 Share options are granted to directors and employees. Options are conditional on the employee completing a specific length of service (the vesting period). The options are exercisable from the end of the vesting period and lapse after ten years after the grant date. The Group has no legal or constructive obligation to repurchase or settle the options in cash. Share options are valued using the Black-Scholes option pricing model and no performance conditions are included in the fair value calculations. The risk free rate was 1.64%. The expected volatility is based on historical volatility over the last two years and is estimated to be 25%. The average share price during the year was 1.85 pence. During the year the Company had the following share options in issue: Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 39 FEEDBACK Notes to the Financial Statements CONTINUED 18. Share capital and reserves (continued) Number of options At 1 June 2016 2,400,000 4,000,000 4,000,000 10,400,000 Lapsed Exercised At 31 May 2017 Exercise price (pence) Exercise date – – – – – – – – 2,400,000 4,000,000 4,000,000 10,400,000 1.25 3.00 5.00 21/05/14 to19/05/24 21/05/15 to19/05/24 21/05/15 to19/05/24 All share options vest one year after the grant date. Each option can only be exercised from one year after the grant date to ten years after the date of grant. Warrants Warrants were issued to the vendors of TexRAD Limited at the time of acquisition. The warrants are exercisable from the end of the vesting period and lapse ten years after the grant date. The Group has no legal or constructive obligation to repurchase or settle the warrants in cash. Warrants are valued using the Black-Scholes pricing model and no performance conditions are included in the fair value calculations. The risk free rate was 1.64%. The expected volatility is based on historical volatility over the last two years and is estimated to be 25%. The average share price during the year was 1.85 pence. During the year the Company had in existence the following warrants: Number of warrants At 1 June 2016 4,550,000 18,200,000 22,750,000 Reserves Granted Cancelled At 31 May 2017 Exercise price (pence) Exercise date – – – – – – 4,550,000 18,200,000 22,750,000 1.25 3.00 19/05/16 to 19/05/24 19/05/17 to 19/05/24 The nature and purpose of each reserve within equity is as follows: Share premium Capital reserve Amount subscribed for share capital in excess of nominal value. Reserve on consolidation of subsidiaries. Translation reserve Gains and losses on the translation of overseas operations into GBP. Retained earnings All other net gains and losses and transactions with owners not recognised elsewhere. Convertible debt option reserve Amount of proceeds on issue of convertible debt relating to the equity component of the debt. 40 Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 FEEDBACK Notes to the Financial Statements CONTINUED 19. Convertible debt option reserve Convertible loan Group Company 2017 £ 2016 £ 2017 £ 2016 £ – 189,000 – 189,000 The loan was from T Charlton a former Director and shareholder of the company and was repayable on the earlier of (i) 1 December 2016 or (ii) such date that certain conditions were satisfied relating to the dilution of Mr Charlton’s shareholding in the Company to less than 10 per cent. of the ordinary shares then in issue. Feedback plc also has the right after 1 June 2016, at its sole discretion, to issue up to 15.12 million new ordinary shares at a deemed issue price of £0.0125 per ordinary share in satisfaction of the loan. No interest accrued on the Shareholder Loan. On 23 November 2016 it was announced that Feedback Plc had exercised its discretionary right to issue 15,120,000 new ordinary shares of 0.25 pence each at a deemed price of 1.25p to Tom Charlton in full satisfaction of his outstanding loan to the company. 20. Financial commitments The Group has no financial commitments as 31 May 2017. 21. Pensions The Company operated a defined contribution scheme during the year and the assets of the scheme are held separately from those of the Group in an independently administered fund. The pension cost represents contributions payable and amounted to £30,238 (2016: £25,291). There were no outstanding or prepaid contributions at the year end. 22. Related party transactions T E Brown is a director and shareholder in Peterhouse Corporate Finance Limited who were appointed as joint brokers to the Company on 6 March 2014 at a fee of £18,000 (2016: £12,000). A fee of £18,000 has been charged to the statement of comprehensive income for the year 31 May 2017 and £Nil was outstanding at the year end. Key management personnel Refer to note 8 for detail on directors’ remuneration. The Directors interests in shares of the Company are contained in the Directors’ Report. 23. Post balance sheet events On 8 June 2017 the Company subsidiary, Cambridge Computed Imaging Ltd had signed an exclusive distributor arrangement with Korea Computer Motion ISG based in Seoul, South Korea, for sales and distribution of its TexRAD® texture analysis research software. 24. Ultimate controlling party There is no ultimate controlling party. Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 41 FEEDBACK Notice of Annual General Meeting Notice is hereby given that the annual general meeting (“Meeting”) of Feedback plc (the “Company”) is to be held at the offices of Mills & Reeve LLP at 4th Floor, 24 Monument St, London EC3R 8AJ at 3.00 p.m. on 30 November 2017. You will be asked to consider and vote on the resolutions below. Resolutions 1, 2, 3, 4 and 5 will be proposed as ordinary resolutions and resolution 6 will be proposed as a special resolution. Ordinary resolutions 1. 2. 3. 4. 5. To receive and adopt the Company’s annual accounts for the Financial year ended 31 May 2017 together with the Directors’ report and the auditors’ report on those accounts. To re-elect T N Irish, who retires pursuant to the articles of association of the Company and who, being eligible, offers himself for re-election as a Director. To re-elect M Hayball, who retires pursuant to the articles of association of the Company and who, being eligible, offers himself for re-election as a Director. To re-appoint haysmacintyre as auditors of the Company to hold office until the conclusion of the next annual general meeting and to authorise the Directors to fix their remuneration. THAT the Directors be generally and unconditionally authorised and empowered pursuant to and in accordance with section 551 of the Companies Act 2006 (the ”Act”) to exercise all the powers of the Company to allot shares and/or grant rights to subscribe for or to convert any security into shares (“Rights”): a. b. up to an aggregate nominal value of £205,347 (being the nominal value of approximately one third of the issued share capital of the Company); and up to an aggregate nominal value of £410,694 (being the nominal value of approximately two thirds of the issued share capital of the Company) (such amount to be reduced by the nominal amount of any shares allotted or Rights granted under paragraph a) in connection with an offer by way of a rights issue or other pre-emptive offer to: i. ii. the holders of Ordinary Shares in proportion (as nearly as may be practicable) to the respective numbers of Ordinary Shares held by them; and holders of other equity securities, as required by the rights of those securities or, subject to such rights, as the directors otherwise consider necessary, such authorities to expire on the earlier of the next annual general meeting of the Company held after the date on which this resolution is passed and the date 15 months after the passing of this resolution, save that the Company may at any time before such expiry make any offer(s) or enter into any agreement(s) which would or might require shares to be allotted or Rights to be granted after such expiry and the Directors may allot shares or grant Rights in pursuance of any such offer(s) or agreement(s) as if the authority conferred hereby had not expired. This resolution revokes and replaces all unexercised authorities previously granted to the Directors to allot shares or grant Rights but without prejudice to any allotment of shares or grant of Rights already made, offered or agreed to be made pursuant to such authorities. Special resolution 6. THAT subject to and conditional upon the passing of resolution number 5 above, the Directors be generally authorised in accordance with section 570 of the Act to allot equity securities (as defined in Section 560 of the Act) of the Company for cash as if section 561(1) of the Act did not apply to any such allotment, provided that this authority shall be limited to: 42 Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 FEEDBACK Notice of Annual General Meeting CONTINUED a. b. the allotment of equity securities in connection with an offer by way of rights in favour of the holders of equity securities in proportion (as nearly as may be possible) to the respective number of Ordinary Shares held by them, but subject to such exclusions or other arrangements as the Directors may deem necessary or expedient to deal with fractional entitlements or legal or practical problems in respect of overseas holders or otherwise; the allotment of equity securities (otherwise than pursuant to sub-paragraph (a) above) up to a maximum aggregate nominal value of £123,208 (being the nominal value of approximately 20 per cent. of the issued share capital of the Company), and this authority shall expire on the earlier of the conclusion of the next annual general meeting of the Company held after the date on which this resolution becomes unconditional and the date 15 months after the passing of this resolution save that the Company may make any offer(s) or enter into any agreement(s) before such expiry which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities pursuant to any such offer(s) or agreement(s) as if the authority conferred hereby had not expired. This resolution revokes and replaces all unexercised authorities previously granted to the Directors to allot equity securities but without prejudice to any allotment of equity securities already made, offered or agreed to be made pursuant to such authorities. Dated 6 November 2017 By Order of the Board Alastair Riddell Director Feedback plc Grange Park Broadway Bourn Cambridgeshire CB23 2TA Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 43 FEEDBACK Notice of Annual General Meeting CONTINUED Explanatory Notes to the Notice of Annual General Meeting The notes on the following pages give an explanation of the proposed resolutions. Resolutions 1 to 5 are proposed as ordinary resolutions. This means that for each of those resolutions to be passed, more than half of the votes cast must be in favour of the resolution. Resolution 6 is proposed as a special resolution. This means that for the resolution to be passed, at least three-quarters of the votes cast must be in favour of the resolution. Resolution 1: Approval of the annual report and accounts The Company is required to present its report and accounts to shareholders at its AGM. This provides an opportunity to discuss the performance of the Company during the year, its management and prospects for the future. Resolutions 2-3: Re-election of directors As is required by the Company’s articles of association, Timothy Irish is retiring at the first AGM since his appointment and the Board proposes him for election as a Director of the Company. In addition, the Company’s articles of association also require one-third of the Board (excluding for this purpose any directors seeking re-appointment at the first AGM since their appointment) to retire and seek re-election at the AGM. If the number of Directors who are required to be considered is not three or a multiple of three, the number of Directors that is as close to one-third as possible but not exceeding one-third, must retire and seek re-election. As there are four Directors (other than Timothy Irish), one further Director is required to retire and seek re-appointment at the AGM. Accordingly, Mike Hayball will also retire and seek re-election and, being eligible, the Board proposes his re- election as a Director of the Company. Resolution 4: Auditors reappointment and remuneration It is a requirement that the Company’s auditor must be reappointed at each general meeting at which financial statements are laid, in effect, at each AGM. After considering relevant information, the Audit Committee recommended to the Board the reappointment of haysmacintyre. The resolution proposes haysmacintyre’s reappointment and to authorise the Directors to determine their remuneration. Resolution 5: Directors’ power to allot relevant securities Under section 551 of the Act, relevant securities may only be issued with the consent of the shareholders, unless the shareholders pass a resolution generally authorising the Directors to issue shares without further reference to the shareholders. This resolution authorises the general issue of shares up to an aggregate nominal value of £410,694 which is equal to two thirds of the nominal value of the current share capital of the Company. Such authority will expire at the conclusion of the next AGM of the Company or six months after the Company’s accounting reference date (whichever is the earlier). Resolution 6: Disapplication of pre-emption rights on equity issues for cash Section 561 of the Act requires that a company issuing shares for cash must first offer them to existing shareholders following a statutory procedure which, in the case of a rights issue, may prove to be both costly and cumbersome. This special resolution excludes that statutory procedure as far as rights issues are concerned. It also enables the Directors to allot shares up to an aggregate nominal value of £123,208, which is equal to approximately 20% of the nominal value of the current share capital of the Company, assuming resolution 5 being passed. The Directors believe that the powers provided by this resolution will maintain a desirable degree of flexibility. Unless previously revoked or varied, the disapplication will expire on the conclusion of the next AGM of the Company or six months after the Company’s accounting reference date (whichever is the earlier). 44 Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 FEEDBACK Notice of Annual General Meeting CONTINUED Notes 1. 2. 3. 4. 5. 6. 7. 8. 9. A member of the Company entitled to attend and vote at the meeting convened by this notice is entitled to appoint one or more proxies to exercise any of his rights to attend, speak and vote at that meeting on his behalf. A proxy need not be a member of the Company but must attend the meeting to represent you. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares. You may not appoint more than one proxy to exercise rights attached to any one share. To appoint more than one proxy please contact Share Registrars on 01252 821390, overseas callers should call +44 1252 821390. A Form of Proxy is enclosed. To be effective, the Form of Proxy together with any power of attorney or other written authority under which it is signed, or a notarially certified copy or a certified copy in accordance with the Powers of Attorney Act 1971 of such power or written authority must be completed signed and to be valid the proxy must be duly executed and deposited with the Company at the offices of the Company’s registrars, Share Registrars Limited, The Courtyard, 17 West Street, Farnham, Surrey GU9 7DR or by scan and email to Share Registrars at proxies@shareregistrars.uk.com, not later than 3 p.m. on 28 November 2017. Completion and return of a Form of Proxy will not prevent a member from attending and voting in person if he or she so wishes. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, only those shareholders entered in the register of members of the Company at the close of business on 28 November 2017 (or in the event of any adjournment, on the day which is two days before the day of the adjourned meeting) shall be entitled to attend and vote at the AGM in respect of the shares registered in their name at that time. Changes to entries in the register of members after that time shall be disregarded in determining the rights of any person to attend or vote at the AGM. In the case of joint holders, the vote of the senior who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the votes of any other joint holders. For these purposes, seniority shall be determined by the order in which the names stand in the register of members in respect of the joint holding. In the case of a corporation, the Form of Proxy must be executed under its common seal or signed on its behalf by a duly authorised attorney or duly authorised officer of the corporation. A vote withheld option is provided on the Form of Proxy to enable you to instruct your proxy not to vote on any particular resolution. However, it should be noted that a vote withheld in this way is not a “vote’ in law and will not be counted in the calculation of the proportion of votes “For” and “Against” a resolution. To change your proxy instructions simply submit a new proxy appointment using the methods set out above. Note that the cut-off time for receipt of proxy appointments (see above) also apply in relation to amended instructions; any amended proxy appointment received after the relevant cut-off time will be disregarded. Where you have appointed a proxy and would like to change the instructions using another hard copy Form of Proxy, please contact Share Registrars. If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt of proxies will take precedence. 10. In order to revoke a proxy instruction, you will need to inform the Company using one of the following methods: By sending a signed hard copy notice clearly stating your intention to revoke your proxy appointment to Share Registrars Ltd, The Courtyard, 17 West Street, Farnham, Surrey, GU9 7DR. In the case of a member which is a company, the revocation notice must be executed under its common seal or signed on its behalf by an officer of the company or an attorney for the company. Any power of attorney or any other authority under which the revocation notice is signed (or a duly certified copy of such power or authority) must be included with the revocation notice. In either case, the revocation notice must be received by Share Registrars no later than 3 p.m. on 28 November 2017. If you attempt to revoke your proxy appointment but the revocation is received after the time specified then, subject to the paragraph directly below, your proxy appointment will remain valid. Appointment of a proxy does not preclude you from attending the meeting and voting in person. If you have appointed a proxy and attend the meeting in person, your proxy appointment will automatically be terminated. 11. As at 5.00 p.m. on the date immediately prior to this notice the Company’s issued share capital comprised 246,416,584 ordinary shares of 0.25 pence each (“Ordinary Shares”). Each Ordinary Share carries the right to one vote at a general meeting of the Company and therefore the total number of voting rights in the Company as at 5.00 p.m. on the date immediately prior to this Notice is 246,416,584. Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 45 FEEDBACK For your notes 46 Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 For your notes FEEDBACK Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 47 FEEDBACK For your notes Printed by Michael Searle & Son Limited 48 Feedback plc Report of the Directors and Consolidated Financial Statements For the year ended 31 May 2017 Feedback plc Grange Park, Broadway, Bourn, Cambridgeshire, CB23 2TA www.fbk.com