ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 30 NOVEMBER 2017
Contents
Company Information
Chairman’s and Chief Executive’s
Statement
Strategic Report
Directors’ Report
Report of the Independent Auditors
Consolidated Statement of
Comprehensive Income
Consolidated Statement of
Financial Position
Consolidated Statement of
Changes in Equity
Consolidated Statement of
Cash Flows
Notes to the Consolidated
Statements of Cash Flows
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6
13
16
18
23
24
25
26
27
Company Statement of
Financial Position
Company Statement of
Changes in Equity
Company Statement of Cash Flows
Notes to the Company
Statements of Cash Flows
Notes to the Financial Statements
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OptiBiotix Health Plc
Company Information
Directors: S P O’Hara
G Barker
P Wennström
P Rehne
C Wood
R Davidson
Secretary: International Registrars Limited
Registered number: 05880755 (England & Wales)
Registered office: Innovation Centre
Innovation Way
York
YO10 5DG
Auditors: Jeffreys Henry LLP
Finsgate
5-7 Cranwood Street
London
EC1V 9EE
Nominated adviser: Cairn Financial Advisers LLP
Cheyne House
Crown Court
62-63 Cheapside
London
EC2V 6AX
Brokers: finnCap
60 New Broad street
London
EC2M 1JJ
Website Address: www.optibiotix.com
Annual Report and Accounts 2017 2
Market Context
The human microbiome are collectively the trillions of microorganisms which lives
in and on our bodies and which play a vital part in our health. The awareness and
scientific evidence of the microbiome and its relationship to human health and
disease has grown in the last few years and now attracts much interest from global
pharmaceutical and biotechnology industries. Strong evidence of the growing
interest is the rapidly growing number of scientific publications in the field from 247
papers in 2005 to over 5,000 papers in 2015, and almost 400 clinical studies in the
USA.
Life sciences companies are showing growing interest in the microbiome to harness
the power of developing non-pharmaceutical solutions for health problems. It is
estimated that by 2025Microbiome development opportunities will be worth close
to a trillion dollars with estimated growth (2022-2025) of 22.3% CAGR (Source: Market
& Markets January 2016).
Europe is expected to account for the largest total share mainly through its
significant presence in the probiotics and prebiotics fields and the acceptance of
these products by the consumer. For probiotics the global retail value was USD
40billion in 2016. For probiotic supplements the retail value was USD 4.3 Billion in
2016 with a 38% growth prediction to 2021, whilst the US market retail value of
probiotic supplements is expected to grow by 55% (2016-2021) to USD 3.3 Billion.
(Source: Euromonitor International June 2017).
The OptiBiotix Difference
• Pioneers in microbiome modulation
• Utilises validated technology platforms
which reduce the risk of developing
products which modify the microbiome
and improve health
• Holds a comprehensive IP portfolio of
patents and trademarks to protect our
inventions and commercial interests
• At the forefront in the development of
microbiome products which enable next
generation health solutions
• Enables current brands to renovate
products and price levels and new brands
to
in new differentiating
solutions
innovate
According to the “Global Nutrition report 2017” more the 2 billion adults (age 18+) in the world are overweight or considered obese. It is today one
of the world’s biggest public health problems increasing the risk of chronic diseases including diabetes, cardiovascular diseases, fatty liver, some
cancers and immune-related diseases with an estimated cost to the global economy of USD1.2 trillion annual by 2025.In the UK, the bill is set to
rise from USD19bn to USD31bn per year in 2025. (Source: The Guardian, October 2017).
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OptiBiotix Health PLC is a leading company in the field of microbiome product research and development. We are developing the next generation
of microbial strains (LPLDL®), targeted prebiotics (LPGOS), sweet functional fibres (SweetBiotix®), compounds and formulations (SlimBiome®) which
modulate the human microbiome and impact on lipid and cholesterol management, energy harvest and appetite suppression, fuelled by our
proprietary development and technology platforms to bring potential health benefits.
3
OptiBiotix Health Plc
Overview of OptiBiotix
Key highlight of the year
December – Joint Development Agreement with Tata
Chemicals (>$100bn revenues) for weight management
products containing SlimBiome® technology for the Asian
Market.
Successful publication in the peer reviewed journal PLOS ONE
of the results from Human Studies on OptiBiotix’s Lactobacillus
plantarium LDL® strain in the reduction of both cholesterol and
blood pressure.
March – European manufacturing, supply and profit share
agreement with Sacco S.r.l. for OptiBiotix’s cholesterol
reducing LPLDL® strain.
May – European non-exclusive license agreement with
Nutrilinea for the production and commercialisation of
products containing OptiBiotix’s LPLDL® strain.
OptiBiotix launches SlimBiome® and LPLDL® at VitaFoods
tradeshow in Geneva.
June – Supply agreement for LPLDL® capsules with HLH Bio
pharma GmbH in Germany OptiBiotix’s cholesterol reducing
LPLDL® strain.
July – LPLDL® supply agreement for New Zealand & Australia
with Pharmabiota Ltd.
August – Global manufacturing, supply and profit share
agreement with Sacco S.r.l.. for OptiBiotix’s cholesterol reducing
LPLDL® strain.
September – Scale up and Manufacturing Agreement with
Tata Chemicals for LPGOS prebiotic produced by OptiBiotix’s
LPLDL® strain.
Strategic partnership with Bened Biomedical for LPLDL® strain
and PS128.
US product launch of SlimBiome® and LPLDL® strain at Supply
Side West trade show in Las Vegas.
October – Supply agreement with Galenicum to
commercialise products containing LPLDL® OptiBiotix invited to
present its research and commercial developments at
Expoquimia in Barcelona.
November – Manufacturing, supply and profit sharing
agreement with Knighton Foods for OptiBiotix’s SlimBiome®
weight management technology in the United Kingdom.
Presenting research data on its microbiome modulators at
MicroBiome R&D and Business Collaboration (USA. SlimBiome®
wins award for “Best Functional Ingredient for Health &
Wellbeing” at Foods Matters Live in London.
Annual Report and Accounts 2017 4
Over the last year OptiBiotix has moved its Probiotic and OptiBiome divisions
forward to commercialise their products i.e. Cholesterol and blood pressure
reducing LPLDL® strain and its weight management ingredient SlimBiome® which
were both launched at the VitaFoods tradeshow in Geneva may 2017. As part of the
commercialisation process OptiBiotix has been focusing on getting the right
partners in place for the manufacturing of the active ingredients and partners for
the final product applications to be able to supply into distribution partners.
OptiBiotix has over the last year achieved tremendous media and industry attention
which has strengthened the commercial development of its products leading to a
significant number of commercial agreements.
Brief outlook on 2018:
The focus in 2018 will be further development of
revenue generating agreements for SlimBiome® and
LPLDL® and extending the commercial reach into the US
and Asia with a larger number of agreements expected
to come through during 2018. With the fast maturing
Probiotics division we see a large potential in developing
the manufacturing of the LPLDL® strain suitable for
the pharmaceutical area.
SweetBiotix® is progressing really well scientifically and is looking to offer a number of technology platforms that could develop into a wider
range of opportunities with large corporates both on manufacturing and application development.
As part of industry recognition of our hard work and achievements since the official launch May 2017, at Vitafoods in Geneva, we have been
shortlisted in two categories at the NutraIngredients Awards 2018.
“Rewarding true innovation and cutting edge research in healthy foods, supplements and nutrition”
5
OptiBiotix Health Plc
Chairman’s and Chief Executive’s Statement
We are pleased to present OptiBiotix
Health plc’s (“Optibiotix”) annual report
and accounts for the year ended 30
November 2017.
its position
industry,
in
OptiBiotix has made strong progress
during this period in its strategy of
developing compounds which modify
the human microbiome, developing
and
partnerships with
the
broadening
microbiome space. This period reflects the transition of OptiBiotix from
a research and development company into a commercial business, with
the appointment of a Commercial Director, Per Rehne, and Sales &
Marketing Director, Christina Wood, who both joined us in March 2017.
Since joining Per and Christina have led product launches of SlimBiome®
and LPLDL® and concluded a total of ten commercial agreements with
manufacturing, application and distribution partners. This period has
also seen additions to OptiBiotix’s intellectual property portfolio, FDA
registration for the LPLDL® and SlimBiome® product ranges allowing
access to the US market, expansion of products into new territories, and
a pipeline of commercial agreements which will provide future revenue
streams. As the promise of the microbiome materialises into products
across an increasing number of OptiBiotix’s platforms, and industry
interest translates into multiple revenue streams from royalties and
supply agreements, there is potential for a significant enhancement in
the value of the Company.
Key Achievements
During the period to date we have achieved a number of key objectives
which continue to build shareholder value. These include:
• Two agreements with Tata Chemicals, one of India’s leading suppliers
of food ingredients, to develop weight management products
containing SlimBiome® for the Indian market and the second to scale
up and manufacture the companies cholesterol reducing
prebiotic LPGOS
• The appointment of Per Rehne as Commercial Director, and Christina
the
Wood as Sales & Marketing Director,
commercialisation and global expansion of OptiBiotix products
to support
• A global profit sharing agreement with Sacco S.r.l., one of Europe’s
leading probiotic manufacturers, to manufacture and supply
OptiBiotix’s cholesterol reducing strain, LPLDL®
• Launch of OptiBiotix’s SlimBiome® and LPLDL® products at the
Vitafoods Europe tradeshow in Geneva in May 2017
• The signing of eleven commercial agreements:
• Three for the manufacture, supply and distribution of SlimBiome®
• Seven for the manufacture, supply, and distribution of LPLDL®
• One for the manufacture and supply of LPGOS
• Presentation of OptiBiotix’s science at international conferences
including: the European MicroBiome Summit (November 2016);
ProBiota (February 2017); the MicroBiome R&D and Business
Collaboration: Asia (March 2017); International Scientific Conference
on Probiotics and Prebiotics in Budapest (June 2017), and
MicroBiome R&D and Business Collaboration (USA)
• FDA registration for LP-LDL® and SlimBiome® product ranges
allowing access to the US market.
• The admission of OptiBiotix’s majority owned skincare subsidiary,
SkinBiotherapeutics Plc (“SkinBiotherapeutics”) (formerly SkinBiotix),
to AIM with an associated £4.5m institutional and private client
fundraise
• A profit after tax of £1.9m reflecting an adjustment of £4.1m for the
change in value of the investment in SkinBiotherapeutics following
the listing on AIM in April 2017
Subsequent to the year end a number of further key agreements were
reached which continue to build shareholder value: These include:
• A US manufacturing, supply and profit sharing agreement with
Cereal Ingredients, Inc for SlimBiome®
• An exclusive royalty bearing agreement with Fine Foods and
Pharmaceuticals for the production and supply of five formulations
containing OptiBiotix's LPLDL® strain in Europe
• A five year distribution agreement with Trigen Pharma International
(Pvt) Ltd to exclusively distribute and commercialise OptiBiotix’s own
label CholBiome® products in Pakistan
• A non-exclusive distribution agreement with Cambridge
Commodities Ltd to distribute SlimBiome® weight management
technology in the United Kingdom
• A five year agreement with Akums Drugs and Pharmaceuticals Ltd
to exclusively manufacture and supply supplements and
biotherapeutic products containing LP-LDL® in India
Research And Development (R&D)
Strategy
To exploit the diversity of opportunities, the Company has developed a
number of pharmaceutical level technology platforms using different
approaches to modulate the microbiome. These technology platforms
have now moved through the development process of laboratory
studies, independent human studies with world-renowned key opinion
leaders and manufacturing scale up. These platforms provide a proven
systematic approach to the development of products with the science
winning awards at major international scientific conferences and the
Annual Report and Accounts 2017 6
products they produce awarded industry prizes for innovation. The
validation of these technology platforms has substantially reduced
investor technical and clinical risk and created industry leading
capability for the development of further products by OptiBiotix and its
partners both.
OptiBiotix’s R&D strategy has been designed to create technology
platforms and intellectual property which provide multiple product and
partnering opportunities both within each platform, and by combining
platforms. For example, by combining our cholesterol reducing strain,
LPLDL®, with galacto-oligosaccharides (LPGOS) produced from it, we can
selectively enhance its growth and increase cholesterol reduction
threefold. This means that for a limited amount of extra investment, we
have the potential to create large amounts of additional value and
expand the market opportunities. Whilst this approach has complexity,
it has been designed to mitigate development risk in the evolving
microbiome field and provide a cost-effective way to build overlapping
intellectual property (“IP”) and exploit the many opportunities offered
by the microbiome.
The other advantage of this approach is that as these platforms are
structured under separate divisions, each containing its own technology
platform, IP portfolio and partner agreements, they could in due course
become separate legal entities with the potential for investment or a
public listing. This strategy allows investors in OptiBiotix to build up a
broad-based investment portfolio across a number of areas in the
microbiome space which diversifies risk, whilst offering shareholders
multiple opportunities in the microbiome space. Whilst each division
has a different technological base they are united by a common theme
of:
• Understanding the underlying science and mechanism of action in
laboratory studies. This allows us to optimise our products and
identify multiple application opportunities
• Proving our products are safe and that they work in humans by
carrying out independent clinical studies and publishing them in
leading peer reviewed journals authored by leading academics well
known to industry
• Working with world renowned key opinion leaders who support the
science behind our products
OptiBiotix’s technology platforms have now moved through the
development process of laboratory studies, human studies and
manufacturing scale up and this has substantially reduced technical
and clinical risk. This changes the risk reward ratio leading to both an
increase in value and greater interest from corporate partners in the
Company’s technology, products and assets. Our deals with Tata
Chemicals (December 2016 and July 2017) and Galenicum (October
2017) reflect this progression of our technology. These platforms have
been designed around pharmaceutical drug discovery approaches
creating the potential to extend existing products beyond functional
ingredients into biopharmaceuticals and into the drug market.
OptiBiotix is rapidly transitioning from a product development company
to the commercial stage of the Company’s development. This started
with the European launch of SlimBiome® at Vitafoods in May 2017 and
continued with the USA launch in late September 2017 at Supply Side
West. Since then, the Company has been developing a deal pipeline
which we believe will build into significant revenues over time.
The key to establishing the scientific maturity and credibility of our
technology is the reporting and peer review of our data in scientific
journals and at international conferences by independent key opinion
leaders. The last twelve months has seen an increase in the number of
these presentations and publications reflecting the maturity of our
science. One of the most significant of these was the publication of our
human studies on LPLDL®, in the peer reviewed scientific journal
PLOS-One by Professor Glen Gibson, one of the world’s leading
authorities in this field. Another significant presentation was give by
Professor Bob Rastall, an international key opinion leader and expert on
prebiotics at the MicroBiome R&D and Business Collaboration (USA) in
San Diego in November 2017. Professor Rastall presented the
Company’s research programme on its OptiBiotics® concept: a
combination of a probiotic and a targeted prebiotic specifically
designed to selectively enhance the growth rate and health benefits of
probiotic products.
Following on from winning the best scientific abstract at ProBiota 2017
we were pleased to win the best scientific abstract at ProBiota 2018 for
the identification and development of a prebiotic which selectively
enhances the growth of Lactobacillus rhamnosus GG (“LGG®”) in the gut.
LGG® is contained within DSM’s Culturelle® probiotic range which is the
best-selling probiotic supplement brand in the world. These
presentations and publications raise OptiBiotix’s profile and reputation,
attract commercial interest in our technology and products and provide
the scientific evidence for sales and marketing literature in support of
product commercialisation.
As the Company transitions from a technology company to a product
company, it will continue to present its science at international
conferences and in leading peer reviewed journals around the world.
Optibiome® (Slimbiome®, Cardiobiome,
Immunobiome, Wellbiome® And
Psychobiome)
OptiBiome® is a range of products developed as functional ingredients
to help prevent and manage many of today’s chronic lifestyle diseases.
SlimBiome®, the first product in the range, is a patented weight
management formulation scientifically formulated by experts in weight
management to reduce hunger, leading to less snacking and easier
weight loss. This is a new approach to weight loss and contrasts with
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OptiBiotix Health Plc
existing ‘diet’ products which typically rely on customers’ self-control to
restrict calories and as a consequence have a high failure rate.
health (ImmunoBiome®), cognitive health (PsychoBiome), and general
health (WellBiome®).
The ingredients in SlimBiome® are backed up by over one thousand
publications and developed such that each of the ingredients work
synergistically, in that they act at different parts of the gut in three
different ways. These being:
i. They make you feel full, and hence less likely to eat as much food, or
to snack between meals.
ii. They control blood sugar peaks and troughs reducing sugar cravings.
iii. They increase the diversity of microbes (microbiome) in the gut
which helps people loose weight more quickly and most importantly
sustain this weight loss.
SlimBiome® is sold as an ingredient, in white label products, and in
OptiBiotix’s own brand of GoFigure® range of shakes and bars. We are
pleased that Tata Chemicals, one of India’s leading suppliers of food
ingredients, signed an agreement in December 2016 to develop weight
management products containing SlimBiome® for the Indian market.
With India ranked second in the world with 30m overweight people and
Tata’s local knowledge, reputation and sales & distribution capability, this
has the potential to develop into a healthy future revenue stream as Tata
commercialises OptiBiotix’s and its own label products across it
developing B2C network in India.
Christina Wood is leading the commercialisation of SlimBiome® and has
made strong progress since commencing her role as Sales and
Marketing Director in March 2017. Christina has been working with
manufacturers, application developers and retailers to expand the range
of application opportunities. This has led to a profit sharing agreement
with Knighton Foods (November 2017) a wholly owned subsidiary of
Premier Foods plc, and Cereal Ingredients (December 2017), a speciality
ingredients manufacturer based in the USA. Further developments are
on-going with other partners to develop applications for breaded
products, biscuits, dairy, gummies (children’s products), muesli pots,
porridge pots, healthy snacks, and a range of cereals in puff, flakes and
crisp format. This creates the opportunity for multiple revenue streams
from sales of ingredients to food manufacturers, white label products
to large retailers, and branded products in multiple presentations to
meet the needs of a diverse range of national and international markets.
This is all part of a series of ongoing developments with a number of
international partners and large retailers to extend SlimBiome®
application into a broader range of ‘Health & Wellbeing’ food and
beverage products. This is to coincide with increased consumer
awareness of using functional natural ingredients as part of a healthy
lifestyle to manage and reduce the risks of illness and disease.
In addition to the commercialisation of SlimBiome the Company is
extending
its OptiBiome® range beyond weight management
(SlimBiome®) to include cardiovascular health (CardioBiome®), immune
Optiscreen, Cholesterol Reduction And
LPLDL®
OptiBiotix’s first product developed using its OptiScreen® platform is a
bacterial strain targeting cholesterol and blood pressure reduction. The
strain, registered under international treaty’s as Lactobacillus plantarum
ECGC 13110402 and branded LPLDL®, was selected by OptiBiotix’s
proprietary OptiScreen® technology platform from over 4,000 candidate
strains. The product has successfully undergone independent human
studies showing high levels of efficacy for both cholesterol and blood
pressure reduction. The reduction of both cholesterol and blood
pressure is a significant advantage over existing cholesterol products as
the ability to reduce both LDL cholesterol and blood pressure has a
multiplicative effect in reducing cardiovascular risk.
Per Rehne is leading the commercialisation of LPLDL® and has made
strong progress since commencing his role as Commercial Director.
Since Per’s appointment, LPLDL® has undergone rapid commercial
development with the announcement of seven manufacturing,
application and distribution agreements since its launch at VitaFoods in
May 2017. Per has been working with partners to develop around
30 formulations containing LPLDL® which have the science, cost structure
and synergistic mode of action to create a broad product range to meet
the needs of international markets. This approach allows OptiBiotix to
present product solutions to consumer health, pharmaceutical and retail
companies to generate multiple revenue streams from ingredient sales,
white label and own branded products. This is all part of a process of
building multiple revenue streams using LPLDL® as the ‘Intel inside’
different presentations and formulations developed with industry
partners to access consumer and pharmaceutical markets around the
world.
We are pleased that Sacco S.r.l. (“Sacco”), one of Europe’s leading
probiotic manufacturers, signed a global profit sharing agreement with
us to manufacture and supply OptiBiotix’s cholesterol reducing strain,
LPLDL®. We chose Sacco from a number of interested manufacturers due
to their industry reputation, extensive global network of distributors and
track record in building sales for what have become some of the world’s
best selling probiotic strains. The ability to supply competitively priced
ingredients from a single manufacturer across world markets simplifies
the supply chain and contract negotiations with corporate partners. Our
agreement with Sacco extends LPLDL® into dairy applications leveraging
Sacco’s network to access the global $35.5 billion probiotic dairy market.
Our agreement, an extension of an existing European agreement, was
a strategic step to access the US probiotic supplement market, and to
extend the opportunities offered by LPLDL® into dairy applications, with
one of the largest and internationally respected supplier of probiotic
ingredients.
Annual Report and Accounts 2017 8
Sacco produce LPLDL® as an ingredient which can be sold directly to
companies or as the functional active within different formulations and
presentations of both white label and branded products. One example
of this is the non-exclusive agreement with Nutrilinea – one of Europe’s
fastest growing providers of food supplements- for the production and
commercialisation of products containing OptiBiotix’s LPLDL® strain in
Europe. Under the terms of the agreement, Nutrilinea will produce,
promote, market and commercialise OptiBiotix’s CholBiome® and
CardioBiome® products to their European network with the aim of
maximizing the financial return for both parties. Similarly, Galenicum,
one of Spain’s leading pharmaceutical groups with an annual turnover
of over €100 million and a year-on-year double-digit growth, have a
non-exclusive license to commercialise Cardiocare™, a nutritional
supplement containing OptiBiotix’s LPLDL® strain in Spain, Chile, Peru and
the Middle East. Galenicum has an international reputation for high
quality innovative products and was awarded the prestigious European
Business Award of “Business of the Year” in 2013/2014.
We believe that working with industry leading partners like Sacco,
Nutrilinea and Galenicum provides the best opportunity of rapidly
building LPLDL® into a leading global brand. We see LPLDL®, as the ‘Intel’
inside a range of products for cardiovascular health across both
consumer and pharmaceutical markets. The overall aim is to achieve a
multiple deal structure where we get revenues from manufacturers who
produce LPLDL®, and application and formulation partners who formulate
and package the product, as well as distributors who distribute the
product. This creates the opportunity for multiple revenue streams from
sales of the strain and white label and branded products to consumer
and pharmaceutical companies around the world.
This division has a broad deal pipeline and we would anticipate further
agreements with product formulation groups and distributors both
within Europe and other territories in the forthcoming months.
Microbiome Modulators, Optibiotics®
And Sweetbiotics®
The Company has made significant progress in its scientific programmes
to develop compounds which modify the human microbiome to
prevent, manage and treat disease and create natural high intensity
sweeteners and sweet healthy fibres (SweetBiotix®).
These now cover three areas with each developing into a substantive
opportunity in its own right:
Microbiome modulators: OptiBiotix R&D teams have used gut
models to demonstrate the ability to increase the growth rate, biological
activity and health effect of specific microbial species in the human
microbiome and in doing so, manipulate both the microbiome’s
composition and its function. This has now been demonstrated in
multiple species, including OptiBiotix’s cholesterol reducing LPLDL® strain
and partner strains such as DSMs Lactobacillus rhamnosus GG (LGG®),
contained within its Culturelle® range. The results of this study were
reported with DSM as co-authors at ProBiota 2018 where it was awarded
the prize for best scientific abstract. We believe this is the first reported
publication of an optimised prebiotic for LGG®.
OptiBiotix reached an agreement with Tata Chemicals in September
2017 to scale up and exclusively manufacture galacto-oligosaccharide
produced by OptiBiotix’s LPLDL® strain (LPGOS) for the use in food and
‘over the counter’ (OTC) products. The agreement brought together
Tata’s expertise in the manufacture of galacto-oligosaccharides (GOS)
with OptiBiotix’s microbiome modulation expertise. LPGOS is heat
resistant and stable during processing and has been shown to reduce
cholesterol by up to 22% in gut models. OptiBiotix believes this creates
opportunities to use LPGOS in a wide range of food products to help
reduce cardiovascular risk factors and improve health.
The ability to develop designer prebiotics, which can modify both the
microbiome’s composition and its function, creates the potential for
designer ingredients or supplements which can modify an individual’s
current microbiome to improve health and the potential for precision
microbiome medicine. This is an area of growing scientific and
commercial interest with increasing evidence that the microbiome plays
an important role in how the body metabolises pharmaceutical
products, influencing their effectiveness and the potential for adverse
reactions. The ability to create designer ingredients which can modify
an individual’s microbiome to improve health places OptiBiotix at the
forefront of global microbiome research and product development and
has the potential to substantially increase the company’s value.
OptiBiotics®: OptiBiotix’s R&D teams have demonstrated that by
combining our cholesterol reducing strain LPLDL®, with galacto-
oligosaccharides produced from it, we can selectively enhance its
growth and increase cholesterol reduction threefold. Work in the last
12 months has led to the development of new high throughput
carbohydrate screening platforms which have allowed the extension of
these concepts to other probiotic genera and species. To the best of our
knowledge, our presentations at international conferences and partner
discussion lead us to believe we are one of the world’s leaders in this
field. We see the development of species or genera specific prebiotics
which can selectively enhance the growth and health benefits of
existing probiotic products as a growing area of interest to the probiotic
industry, a market expected to be worth more than $46.5bn by 2020
(Markets and Markets).
SweetBiotix®: SweetBiotix® are an innovative concept with the
potential to address a global requirement, addressing international
concerns over the impact of sugar on obesity, with the prospect of
replacing ‘unhealthy’ sugars in existing products with non-digestible,
low calorie, healthy SweetBiotix®. These sweet natural healthy sugars are
not digested in the human gut and hence calorie free. In the last
12 months, we have accelerated our development programmes in this
area and carried out five successful independent human studies in
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OptiBiotix Health Plc
which OptiBiotix’s products and commercially available comparator
samples were tested by an expert panel of 11 panellists who rated
11 products attributes (e.g. sweetness, aftertaste, off- flavour, bitterness
etc) compared to sucrose as a benchmark. OptiBiotix’s products were
created by two development programmes which showed:
i. Natural high intensity sweeteners with improved flavour profile and
microbiome modulating functionality. Independent human studies
have demonstrated these have a good flavour profile and sweetness
of between 140x and 223x of sucrose at equivalent concentrations.
ii. Sweet natural healthy fibres being developed as potential bulk sugar
replacements which are not digested in the human gut, and hence
calorie free. Human studies have demonstrated these sweet fibres
had the highest sweetness and lowest off-flavours when compared
to a wide range of existing sugars and fibres and sucrose.
With growing concerns over traditional sugars and artificial sweeteners
these results create the prospect of SweetBiotix® replacing ‘unhealthy’
sugars in existing products with non-digestible, low calorie, healthy
SweetBiotix®. Given that the global sweetener market, currently
dominated by sugar, is forecast to reach $112bn by 2022 (Mordor
Intelligence, 2017), the Company believes these developments have the
potential to greatly enhance shareholder value. Publication of the results
on our human studies and accompanying media report in national
newspapers such as The Times has stimulated high industry interest and
we anticipate further developments and announcements in this area in
the future.
SkinBiotherapeutics PLC
In April 2017, OptiBiotix’s majority owned skincare subsidiary,
SkinBiotherapeutics (formerly SkinBiotix), was admitted to AIM with an
associated £4.5m fundraise, supported by institutional investors. This is
part of OptiBiotix’s strategy of building value in each of its divisions with
some of this value, when realised, being returned to shareholders and
reinvesting some of the gains to develop other divisions so they, in due
course, can become separate legal entities with the potential for a
separate public listing.
The admission to AIM of SkinBiotherapeutics plc attributes value to a
part of the business in which a 52% stake was acquired for £250K in
March 2016 and 12 months later listed at a valuation of £11m, with
OptiBiotix® owning a 41.9% shareholding. OptiBiotix believes that there
is potential
in
SkinBiotherapeutics using the £4.1m raised at listing allowing it to fully
exploit the potential of this exciting technology.
future value enhancement
for substantive
As SkinBiotherapeutics plc grows in value, OptiBiotix shareholders will
benefit from the appreciation of this asset. This is an innovative business
model which over time looks to give OptiBiotix shareholders a position
in multiple companies, and with it the prospect of multiple returns.
SkinBiotherapeutics plc is at an early stage in its development, similar
to the beginnings of OptiBiotix in August 2014, and continues to make
solid progress building relationships with potential commercial partners
and progressing towards the start of human studies, which if successful,
should provide a substantive uplift in valuation. The Board remain
optimistic on the future of SkinBiotherapeutics plc as it has good
technology and is targeting multi-billion dollar global markets, where
there is a real need for new science.
Results
OptiBiotix results for the 12 months ended 30 November 2017 are set
out in the Consolidated Statement of Comprehensive Income.
Administrative expenses were £2,244,169 (2016: £1,765,736) including
a number of non-recurring costs associated with
listing
SkinBiotherapeutics in April 2017.
The accounts show a profit after tax of £1.9m following the successful
listing of SkinBiotherapeutics. The income statement includes an
adjustment of £4.1m for the change in value of the investment in
SkinBiotherapeutics immediately following the listing. This is an
accounting adjustment and as an unrealised profit on the investment
is not taxable. Since that time the value of SBTX shares and thereby
OptiBiotix’s holding in SBTX has increased representing a valuable
current and future asset.
After accounting for the adjustment, operating loss for the period is
£2.13m (2016: £1.52m). Following the listing of SkinBiotherapeutics and
the diluting of Optibiotix plc’s shareholding, the company now has to
account for its share (41.9%) of future profits and losses. As this is an
accounting adjustment, there is no impact on the Groups cash balance.
Cashflows remain tightly controlled, with a focus on building
shareholder value through investment in R& D, IP and in-licensing
opportunities. The Group’s cash position remains strong at £1.25m at
the year end.
Board and Management
We continue to evolve the Board in line with the Company’s
development. The last 12 months has seen a number of Board additions
to reflect the increased commercial focus.
We were pleased to announce the appointment of Per Rehne as
Commercial Director and Christina Wood as Sales and Marketing
Director, who joined us in March 2017. Both come with a wide network
of contacts in the food industry and a track record of working with
manufacturers, distributors and retailers to rapidly grow sales revenues
in international markets. Per has taken responsibility for leading the
commercialisation of LPLDL®, and Christina responsibility for SlimBiome®.
Their addition to the Board increases the company’s capacity and
capability to better exploit the opportunities created by our growing
Annual Report and Accounts 2017 10
pipeline of products in international markets. We anticipate seeing the
benefit of these appointments in the next six to 12 months.
and if successful, has the potential to cumulatively generate substantive
revenues and profitability in the forthcoming years.
We believe with the addition of Per and Christina, we have a
well-balanced Board with scientific and commercial expertise in the
founder and Chief Executive Stephen O’Hara and market expertise in
Non-Executive Director Dr Gareth Barker and Peter Wennström, one of
the world’s leading experts in functional food innovation and marketing.
Dr Sofia Kolida as Director of Research and Development brings
specialised expertise in prebiotics. They are complemented by our CFO
Mark Collingbourne and Adam Reynolds as our interim Chairman.
At the end of the accounting period we announced Adam Reynolds
would step down as Non-Executive Chairman on 31 December 2017
and be replaced by Neil Davidson. This was part of a strategy to
supplement the existing Board with sector specific commercial
leadership. Neil brings a network of industry contacts and over 30 years
of operational and Board experience as Chairman and Chief Executive
of FTSE 100, AIM and private companies in both an executive and non-
executive capacity.
We anticipate further additions and changes to the management team
and the Board as we extend the global reach of our products and in-line
with the continued growth and expansion of the Company.
Outlook
OptiBiotix is continuing its strategy of developing microbiome
modulators for large markets (>£100m) where there are high growth
opportunities (CAGR >10%), and a large unmet need.
The last 12 months has seen the transition of OptiBiotix® from a research
and development Company to a commercial business, with the
appointment of a commercial team, product launches of SlimBiome®
and LPLDL® at Vitafoods and Supply Side West, followed by the signing
of eleven commercial agreements. This is all part of a commercial
strategy based on closing out deals across multiple levels of the value
chain, starting from manufacturing agreements such as the profit
sharing agreement signed with Sacco for the production of LPLDL® and
Knighton Foods for the production of SlimBiome. This is complemented
by royalty bearing license deals with formulation partners for the supply
of white label and branded products to food producers and consumer
health companies, and distribution agreements directly with retailers.
Whilst this strategy takes longer to develop than single license deals,
this multi-channel approach enables OptiBiotix to maximize the income
potential of each product, whilst limiting the risk related to any individual
deal. This approach also allows OptiBiotix to operate on a very asset-light
infrastructure. Product manufacturing, regulatory approvals, and costly
sales and marketing infrastructure are funded by OptiBiotix’s partners
meaning that license and royalty fees are largely cost free and enter the
bottom line. This is a low risk, low cost approach to accessing multiple
consumer healthcare and pharmaceutical markets around the world,
Key to this commercial strategy is the appointment of industry leading
partners like DSM, Tata, Sacco, Nutrilinea and Galenicum who provide
the best opportunity of rapidly building our products into global brands.
We were pleased at the high level of interest in both LPLDL® and
SlimBiome® at Vitafoods and Supply Side West and hope the rich deal
pipeline we have created will translate into material revenue growth in
the next financial year against a continued lean cost base.
As we extend our reach into new application areas and new territories,
the scale of the opportunity enlarges. The US is one of the largest and
fastest growing probiotic markets in the world, with supplements alone
accounting for US$2.06bn sales, and a projected 55% growth to
US$3.3bn by 2021. The extension of our products into other application
areas reflects a growing confidence in our products and the scale of the
opportunity. We would hope to see the expansion of territories and
application areas leading to announcements of deals with a number of
national and international partners in the forthcoming months.
Whilst initial products are targeted at the ingredient and supplement
markets, the gaps between neutraceuticals and pharmaceutical is
narrowing. Given OptiBiotix’s products have been developed using
pharmaceutical platforms and our clinical studies have been designed
to be consistent with phase 1 and phase 2 pharmaceutical studies,
OptiBiotix has received partner interest to license LPLDL® to extend our
products into biotherapeutics. This is a path OptiBiotix has explored
provided the substantive investment in the development of a
biopharmaceutical was supported by a suitable pharmaceutical partner.
If this is achieved this has the potential to create significant value uplift
given the high value deal structure typical in drug development and
pharmaceutical industries. The deal announced with Akums in May 2018
is an early example of such a deal whereby the partner provides all
funding for drug registration, phase 3 and 4 clinical studies, in return for
exclusivity and royalty payments based on future product sales. We
anticipate future high value deals for use of LPLDL® as a biotherapeutic
in other territories in the month and years ahead.
As the Company enters the next stage of its development, we will need
to evolve the structure to fully exploit the expanding range of
opportunities and maximise revenue. Currently the Company is
structured around technology platforms, such as Optiscreen® and
OptiBiotics®, which creates a scientific focus. The transition from a
technology to product company requires a different focus and skill set
and restructuring of our website. The appointment of Per Rehne
(Commercial Director), and Christina Wood (Sales Director), who were
appointed in January 2017 and joined us in March 2017, was the start
of this process and has delivered an increase number of quality in deal
flow. OptiBiotix’s technology platforms are being developed into
self-sustaining business units with a commercial focus lead by directors
who have the business development, sales skills and experience to fully
11
OptiBiotix Health Plc
exploit the revenue potential of the products. As these develop, we will
separate them into wholly owned separate legal entities with the
potential for an independent exit by a trade sale or listing separately or
collectively in UK or the US, depending on market conditions. The
benchmark for this is seen with the transition of SkinBiotix Limited as a
technology platform within OptiBiotix to a high value public company
with £4.1m cash allowing it to fully exploit the potential of this exciting
technology. This allows OptiBiotix shareholders to benefit from the
appreciation of this asset plus any dividends which may be returned in
recognition of this value uplift. This is consistent with our strategy of
providing investors a broad based investment portfolio across a number
of areas in the microbiome space which diversifies risk, whilst offering
shareholders multiple opportunities in this exciting space.
The Board believes OptiBiotix is at the leading edge of one of the hottest
areas of healthcare innovation which is forecast to become one of the
world’s fastest growth areas. Over the last 12 months, we have continued
our progress of building a broad based microbiome business with a
strategy which best maximizes the value in each division and a diversity
of IP and commercial relationships which provides shareholders with
multiple opportunities. The next stage of the process involves the
continued development of new application areas and extending our
products
into new territories and application areas, such a
biotherapeutics, with suitable partners. We believe the Company has
now significantly de-risked scientific, clinical and manufacturing risk
across its platforms. This changes the risk reward ratio leading to an
increase in value and the Company and its assets becoming an attractive
proposition for corporate partners. This has led to a number of
approaches from potential acquirers interested in assets in specific
divisions.
The Board anticipates further scientific and commercial interest in the
Company’s technology and products and a future where microbiome
products will make a significant contribution to the prevention,
management and treatment of disease. We are pleased that our strategy
of developing microbiome products with a strong scientific and clinical
evidence base with key opinion leader support has provided clear
product differentiation and stimulated high commercial interest. We
look forward to converting this interest into a growing number of
revenue generating deals, of increasing value and in a wider range of
territories.
The last twelve months have seen a growing number of awards for our
science, industry awards for our products, and increased deal flow. We
anticipate both the rate and value of deal flow increasing as we develop
new applications, take existing products into new territories, and
leverage our technology platforms to develop new product
opportunities.
OptiBiotix has made strong progress in the last twelve months and now
looks to build on its scientific innovation, product success, and
commercial interest to build a diverse microbiome business with
significant value for shareholders.
On behalf of everyone at OptiBiotix Health, we would like to thank our
investors for their continued support and look forward to an exciting
future in this exciting area of science which has the potential to
revolutionise the future of health care.
N Davidson and S OHara
22 May 2018
Annual Report and Accounts 2017 12
Strategic Report
Review Of Business
Financial And Capital Risk Management
The directors constantly monitor the financial risks and uncertainties
facing the group with particular reference to the exposure of credit risk
and liquidity risk. They are confident that suitable policies are in place
and that all material financial risks have been considered. The financial
risk management objectives and policies can be found within note 24
of the financial statements.
The Board’s objective is to maintain a balance sheet that is both efficient
and delivers long term shareholder value. The Group had cash balances
of £1,247,431 as at 30 November 2017 and had no short-term
borrowings. The Board continues to monitor the balance sheet to ensure
it has an adequate capital structure.
A review of the business of the Group,
together with comments on future
developments is given in the Chairman’s
and Chief Executive’s Statement on
pages 6 to 12.
Principal Risks And
Uncertainties Facing
The Group
Technology and products
The Group is involved in microbiome modulation products discovery
and development. The development and commercialisation of its
intellectual property and future products will require human nutritional
studies and there is a risk that products may not perform as expected.
This risk is common to all new products developed for human
consumption.
Technologies used within the food, beverage and healthcare market
place are constantly evolving and improving. There is a risk that the
Group’s products may become outdated or their commercial value
decrease as improvements in technology are made and competitors
launch competing products. To mitigate this risk the Group is working
with industry key opinion leaders, will attend international conferences
and intends to develop a research and development department which
will keep up with the latest developments in the industry.
Intellectual Property
The Group is focused on protecting its IP and seeking to avoid infringing
on third parties’ IP. To protect its products, the Group is building and
securing patents to protect its key products. However, there remains the
risk that the Group may face opposition from third parties to patents
that it seeks to have granted and that the outstanding patent
applications are not granted. The Group engages legal advisers to
mitigate the risk of patent infringement and to assist with the protection
of the Group’s IP.
13
OptiBiotix Health Plc
Principal Risks And Uncertainties
Market Risks
Impact
Mitigation
Brexit
Technology
New regulations could add complexity and delays
to operations.
Currency fluctuations could increase costs and
affect profitability.
Our regulatory department keeps up to date on all changes.
The current consensus is that Brexit will not affect the
regulations that are relevant to our business.
Currency fluctuations will impact both sales and costs. Our
initial product offering is not price-sensitive. Substantial cost
increases will be passed on.
The Group’s platform is currently unique. Rapid
technological advances could see competitor
products being launched.
The Group has product development plans in place for
improved technology as well as for a wider product portfolio
that includes additional innovative solutions for the targeted
consumer groups.
Operational Risks
Impact
Mitigation
Technology
Commercialisation
Financial Risks
Future funding
requirements
Legal Risks
Intellectual
Property
litigation
The Group is launching products that is not
already available in the consumer market.
The Group has responded to consumer demand.
The Group is making the transition from a
research-based organisation to a full commercial
organisation. Manufacturing set-up and learning
curve could delay sales or could impact our rate
of growth.
The Group recruited experienced management and
consultants to manage the process and negotiate contracts.
Impact
Mitigation
Our current funding covers current requirements.
Potential as yet unidentified opportunities may
not be pursued with the existing funding.
Management will analyse major opportunities
and present them in additional business cases
when warranted.
Impact
Mitigation
Any claim brought against us would detract the
Company from its business.
The Group engages with IP specialists to ensure
we have a strong position.
To our knowledge we do not infringe on any
patents.
Annual Report and Accounts 2017 14
Key Performance Indicators
Non-financial
Financial
Year to
30 November
2017
£’000
Year to
30 November
2016
£’000
Revenue
Profit/(loss) for the period
Cash as at 30 November 2017
191
1,917
1,247
288
1,341
3,115
During the year to 30 November 2017 the company has achieved a
number of key objectives which continue to build shareholder value.
These include:
• Ten commercial agreements with manufacturing, application and
distribution partners;
• The admission of OptiBiotix’s majority owned skincare subsidiary,
SkinBiotherapeutics (formerly SkinBiotix), to AIM with an associated
£4.5m institutional and private client fundraise
• Presentation of OptiBiotix’s science at international conferences
including: the European MicroBiome Summit (November 2016);
ProBiota (February 2017); the MicroBiome R&D and Business
Collaboration: Asia (March 2017); International Scientific Conference
on Probiotics and Prebiotics in Budapest (June 2017), and
MicroBiome R&D and Business Collaboration (USA).
• FDA registration for LP-LDL® and SlimBiome® product ranges
allowing access to the US market
The board recognises the importance of KPIs in driving appropriate
behaviour and enabling of Group performance. For the year to
30 November 2017 the primary KPI’s were the completion of
commercial agreements and the expansion of the Optibiotic® platform.
The group intends to review the following non-financial KPIs going
forward:
1. Customer relationships
2.
IP and trademark registrations
3. Service quality and brand awareness
4. Attraction, motivation and retention of employees
Dividends
No dividends can be distributed for the year ended 30 November 2017.
Future Developments
The Chairman’s and Chief Executive Statement on pages 6 – 12 gives
information on the future outlook of the Group.
On Behalf Of The Board
S P O’Hara
22 May 2018
15
OptiBiotix Health Plc
Directors’ Report
The Directors present their report and the audited financial statements
of the group for the year to 30 November 2017.
Principal Activity
The principal activity of the group is that of research and development
into microbiome modulators.
Directors
The directors who served the company during the year and up to the
date of this report were as follows:
Non-executive Directors
A Reynolds (resigned 31 December 2017)
G Barker
P Wennstrom
Directors’ Remuneration
The directors are entitled to receive relevant fees, as detailed in the
directors’ remuneration in Note 4.
Directors and their interests
The directors of the group held the following beneficial interests in the
shares and share options of Optibiotix at the date of this report:
Executive Directors
S P O’Hara
C Wood (appointed 6 March 2017)
P Rehne (appointed 6 March 2017)
R Davidson (appointed 1 January 2018)
R J T Laird (resigned 5 January 2017)
Issued Share Capital
Share Warrants
Share Options
Ordinary
shares of
£0.02 each
10,103,031
–
–
–
–
Percentage
Held
Ordinary
shares of
£0.02 each
Warrant
exercise
price
Ordinary
shares of
£0.02 each
12.9%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6,099,135
–
358,772
500,000
500,000
Option
exercise
price
£0.08
–
£0.20
£0.695
£0.695
S P O’Hara
P Wennström
G Barker
C Wood
R Rehne
The share options held by S P O’Hara were granted on 17 September 2016 and are exercisable at £0.08 at any time up 16 September 2024, subject
to vesting conditions.
The share options held by G Barker were granted on 10 March 2016 and are exercisable at £0.20 at any time up 10 March 2025, subject to vesting
conditions.
The share options held by C Wood and P Rehne were granted on 29 June 2017 and are exercisable at 69.5p at any time up to 29 June 2027, subject
to vesting conditions.
Substantial Shareholdings
Research And Development
Substantial shareholdings include directors as at 22 January 2018 were
as follows:
The Chairman’s and Chief Executive Statement on page 2-11 gives
information on the Group’s research and development activities.
Stephen O’Hara
Finance Yorkshire Seedcorn LP
% of shares issued
12.74
11.74
Political And Charitable Contributions
The group made no charitable or political contributions during the
period.
The share price per share at 30/11/2017 was £0.69 (30/11/2016:
£0.65)
Financial Instruments
The group’s exposure to financial risk is set out in note 24 to the financial
statements.
Events After The Reporting Period
Refer to note 25 to the financial statements for further details.
Annual Report and Accounts 2017 16
The directors confirm that the financial statements comply with the
above requirements.
The directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the company’s transactions and
disclose with reasonable accuracy at any time the financial position of
the company and enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also responsible for
safeguarding the assets of the company and hence for taking
reasonable steps for the prevention and detection of fraud and other
irregularities.
Statement As To Disclosure Of
Information To Auditors
So far as the directors are aware, there is no relevant audit information
(as defined by Section 418 of the Companies Act 2006) of which the
company’s auditor is unaware, and each director has taken all the steps
that he ought to have taken as a director in order to make himself aware
of any relevant audit information and to establish that the group’s
auditor is aware of the information.
Auditor
Jeffreys Henry LLP will be proposed for re-appointment as auditors at
the forthcoming Annual General Meeting.
Strategic Report
In accordance with section 414C(11) of the Companies Act 2006 the
Group chooses to report the review of the business, the future outlook
and the risks and uncertainties faced by the Group in the Strategic
Report on page 6.
On Behalf Of The Board
S P O’Hara
22 May 2018
Publication Of Accounts On Group
Website
Financial statements are published on the group’s website. The
maintenance and integrity of the website is the responsibility of the
directors. The directors’ responsibilities also extend to the financial
statements contained therein.
Going Concern
The financial statements have been prepared on the assumption that
the group is a going concern. When assessing the foreseeable future,
the directors have looked at the budget for the next 12 months from
the date of this report, the cash at bank available as at the date of
approval of this report and are satisfied that the group should be able
to cover its quoted maintenance cost, other administrative expenses, as
well as its ongoing research and development expenditure.
After making enquiries, the directors have a reasonable expectation that
the group has adequate resources to continue in operational existence
for the foreseeable future. Accordingly, they continue to adopt a going
concern basis in preparing the annual report and financial statements.
Statement Of Directors’ Responsibilities
The directors are responsible for preparing the Directors’ Report and the
financial statements in accordance with applicable laws and regulations.
Company law requires the directors to prepare financial statements for
each financial period. Under that law the directors have, as required by
the AIM Rules for Companies of the London Stock Exchange, elected to
prepare financial statements in accordance with International Financial
Reporting Standards (IFRS) as adopted for use in the European Union.
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair view
of the state of affairs of the company and of the profit or loss of the
company for that period. In preparing these financial statements, the
directors are required to:
•
select suitable accounting policies and then apply them
consistently;
• make judgements and estimates that are reasonable and prudent;
•
state whether the company financial statements have been
prepared in accordance with IFRS as adopted by the European
Union, subject to any material departures disclosed and explained
in the financial statements; and
• prepare the financial statements on the going concern basis, unless
it is inappropriate to presume that the company will continue in
business.
17
OptiBiotix Health Plc
Independent Auditor’s Report to the Members of
Optibiotix Health Plc
Opinion
Basis For Opinion
We have audited the financial statements of Optibiotix Health Plc (the
‘parent company’) and its subsidiaries (the ‘group’) for the year ended
30 November 2017 which comprise the consolidated statement of
comprehensive income, the consolidated and company statements of
financial position, the consolidated and company statements of cash
flows, the consolidated and company statements of changes in equity
and notes to the financial statements, including a summary of significant
accounting policies.
The financial reporting framework that has been applied in the
preparation of the financial statements 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.
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 30 November 2017
and of the group’s profit 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.
We conducted our audit in accordance with International Standards on
Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for
the audit of the financial statements section of our report. We are
independent of the company in accordance with the ethical
requirements that are relevant to our audit of the financial statements
in the UK, including the FRC’s Ethical Standard as applied to listed
entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Conclusions Relating To Going Concern
We have nothing to report in respect of the following matters in relation
to which the ISAs (UK) require us to report to you where:
•
•
the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is not appropriate; or
the directors have not disclosed in the financial statements any
identified material uncertainties that may cast significant doubt
about the group’s or the parent company’s ability to continue to
adopt the going concern basis of accounting for a period of at least
twelve months from the date when the financial statements are
authorised for issue.
Annual Report and Accounts 2017 18
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including
those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement
team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit.
Key audit matter
How our audit addressed the key audit matter
Accounting for Business Disposals
During the year SkinBiotherapeutics plc listed on the AIM market,
resulting in a reduction in Optibiotix Health plc’s holding from 52% to
42%.
At the date of listing, SkinBiotherapeutics plc ceased to be a subsidiary,
Optibiotix fair valued its remaining 42% holding by reference to the
share price at that date and subsequently accounted for the associate
under equity accounting.
Carrying Value of Investments,
Intangible Assets and Goodwill
At the year end the group had intangible assets of £1.93m comprised
of the fair value of patents acquired on acquisition of Optibiotix
Limited and investments of £4.19m made up of the investment in
SkinBiotherapeutics plc.
The directors have assessed whether intangible assets require
impairment and have concluded that they do not. The patents are
amortised in a straight line over 20 years, the period in which the
directors believe the assets will generate revenue.
The directors have assessed whether
in
SkinBiotherapeutics plc requires impairment and have concluded that
it does not, by reference to the company’s share price.
investment
the
We understood and assessed the methodology utilised to calculate
the gain on disposal to ensure that it was compliant with IFRS 5. This
was based on the market value at acquisition date per the admission
document which we consider reasonable.
The consolidation was reviewed to establish the treatment of
SkinBiotherapeutics up to the date of disposal and subsequent to that
date. Prior to the disposal the results were consolidated, whilst
subsequently equity accounting has been applied.
Intangible assets in the accounts have been allocated useful lives and
therefore an annual impairment test is not required. However, as
Optibioitx Limited is loss making we considered if there were
indicators of impairment and reviewed the discounted cash flow
forecasts.
investment
We reviewed the
in SkinBiotherapeutics plc for
impairment ,with particular consideration given to the fact that the
market value of Optibiotix Health Plc’s holding at the year end was
greater than the carrying value of the investment.
19
OptiBiotix Health Plc
Our Application Of Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with
qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial
statements as a whole.
Based on our professional judgment, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Company financial statements
Overall materiality
£94,000 (2016: £87,000).
£52,000 (2016: £55,000).
How we determined it
3% of revenue.
3% of revenue.
10% of profit/loss before tax.
10% of profit/loss before tax.
1% of gross assets.
1% of gross assets.
Rationale for
benchmark applied
We believe that profit or loss before tax is a
primary measure used by shareholders
in
assessing the performance of the Group whilst
gross asset values and
revenue are a
representation of the size of the group; both are
generally accepted auditing benchmarks.
We believe that profit or loss before tax is a
primary measure used by shareholders
in
assessing the performance of the Group whilst
gross asset values and
revenue are a
representation of the size of the group; both are
generally accepted auditing benchmarks.
For each component in the scope of our Group audit, we allocated a
materiality that is less than our overall Group materiality. The range of
materiality allocated across components was between £41,000 and
£52,000.
We agreed with the Audit Committee that we would report to them
misstatements identified during our audit above £4,700 for the Group
(2016: £4,400) and £2,600 for the Parent as well as misstatements below
those amounts that, in our view, warranted reporting for qualitative
reasons.
An Overview Of The Scope Of Our Audit
As part of designing our audit, we determined materiality and assessed
the risks of material misstatement in the financial statements. In
particular, we looked at where the directors made subjective judgments,
for example in respect of significant accounting estimates that involved
making assumptions and considering future events that are inherently
uncertain. As in all of our audits we also addressed the risk of
management override of internal controls, including evaluating whether
there was evidence of bias by the directors that represented a risk of
material misstatement due to fraud.
How We Tailored The Audit Scope
We tailored the scope of our audit to ensure that we performed enough
work to be able to give an opinion on the financial statements as a
whole, taking into account the structure of the Group and the Company,
the accounting processes and controls, and the industry in which they
operate.
The Group financial statements are a consolidation of 3 reporting units,
comprising the Group’s operating businesses and holding companies.
We performed audits of the complete financial information of Optibiotix
Health plc, Optibiotix Limited and The Healthy Weight Loss Company
Limited reporting units, which were individually financially significant
and accounted for 100% of the Group’s revenue and 100% of the Group’s
absolute profit before tax (i.e. the sum of the numerical values without
regard to whether they were profits or losses for the relevant reporting
units). The Group engagement team performed all audit procedures.
Annual Report and Accounts 2017 20
Other Information
The directors are responsible for the other information. The other
information comprises the information included in the annual report,
other than the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to
determine whether there is a material misstatement in the financial
statements or a material misstatement of the other information. If, based
on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that
fact. We have nothing to report in this regard.
Opinions On Other Matters Prescribed
By The Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and the directors’ report
for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in
accordance with applicable legal requirements.
Matters On Which We Are Required To
Report By Exception
In the light of the knowledge and understanding of the group and
parent company and its environment obtained in the course of the
audit, we have not identified material misstatements in the strategic
report or the directors’ report.
We have nothing to report in respect of the following matters in relation
to which 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 and the part of the
directors’ remuneration report to be audited 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.
Responsibilities Of Directors
As explained more fully in the directors’ responsibilities statement set
out on pages 16-17, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and
fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the group’s and parent company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the parent company or
to cease operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities For The Audit
Of The Financial Statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these
financial statements.
As part of an audit in accordance with ISAs (UK), we exercise professional
judgment and maintain professional scepticism throughout the audit.
We also:
•
Identify and assess the risks of material misstatement of the financial
statements, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence that
is sufficient and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
• Obtain an understanding of internal control relevant to the audit in
order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the group’s internal control.
21
OptiBiotix Health Plc
•
Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures
made by the directors.
• Conclude on the appropriateness of the directors’ use of the going
concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the group’s or the
parent company’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to modify
our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future
events or conditions may cause the group or the parent company
to cease to continue as a going concern.
•
Evaluate the overall presentation, structure and content of the
financial statements, including the disclosures, and whether the
financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business activities within the group to
express an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the
group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement that
we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance,
we determine those matters that were of most significance in the audit
of the consolidated financial statements of the current period and are
therefore the key audit matters. We describe these matters in our
auditor’s report unless law or regulation precludes public disclosure
about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be
interest benefits of such
expected to outweigh the public
communication.
Use Of This Report
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.
Other Matters Which We Are Required
To Address
We were appointed as auditors by the company at the Annual General
Meeting on 15 June 2017 to audit the financial statements for the period
ending 30 November 2017. Our total uninterrupted period of
engagement is 4 years, covering the periods ending 30 November 2014
to 30 November 2017.
The non-audit services prohibited by the FRC’s Ethical Standard were
not provided to the group or the parent company and we remain
independent of the group and the parent company in conducting our
audit.
In addition to the audit, the firm provides tax compliance services to
Optibiotix Health Plc and its subsidiaries.
Our audit opinion is consistent with the additional report to the audit
committee.
Sanjay Parmar
(Senior Statutory Auditor)
For and on behalf of
Jeffreys Henry LLP, Statutory Auditor
Finsgate
5-7 Cranwood Street
London
EC1V 9EE
22 May 2018
Annual Report and Accounts 2017 22
Consolidated Statement of Comprehensive Income
Revenue
Cost of sales
Gross Profit
Administrative expenses
Operating (loss)
Finance cost
Finance income
Share of loss from associate
Profit on disposal of subsidiary
Profit/(loss) before Income tax
Income tax
Profit/(loss) for the period
Other comprehensive income
Total comprehensive income for the period
Total comprehensive income attributable to:
Owners of the company
Non-controlling interests
Profit/(loss) per share
Basic profit/(loss) per share – pence
Diluted profit/(loss) per share – pence
The notes on pages 32 to 51 form part of these financial statements
Notes
Year ended
30 November 2017
£
Year ended
30 November 2016
£
191,073
(73,706)
117,367
(2,244,169)
(2,126,802)
(6,154)
142
(6,012)
(294,278)
4,116,286
1,689,194
228,447
1,917,641
–
1,917,641
1,907,441
10,200
1,917,641
2.43p
2.17p
288,119
(38,214)
249,905
(1,765,736)
(1,515,831)
–
165
165
–
–
(1,515,666)
174,544
(1,341,122)
–
(1,341,122)
(1,297,871)
(43,251)
(1,341,122)
(1.67)p
6
5
5
12
7
8
232323
OptiBiotix Health Plc
Consolidated Statement of Financial Position
ASSETS
Non-current assets
Intangibles
Property, plant & equipment
Investments
CURRENT ASSETS
Inventories
Trade and other receivables
Current tax asset
Cash and cash equivalents
TOTAL ASSETS
EQUITY
Shareholders’ Equity
Called up share capital
Share premium
Share based payment reserve
Merger relief reserve
Accumulated deficit
Non-controlling interest
Total Equity
LIABILITIES
Current liabilities
Trade and other payables
Non-current liabilities
Deferred tax liability
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
Notes
Year ended
30 November 2017
£
Year ended
30 November 2016
£
10
11
12
13
14
7
15
16
18
19
1,927,226
6,561
4,189,022
6,122,809
8,890
106,122
183,951
1,247,431
1,546,394
7,669,203
1,586,628
6,279,718
474,517
1,500,000
(2,795,147)
–
7,045,716
239,395
239,395
384,092
384,092
623,487
7,669,203
2,195,646
11,755
–
2,207,401
26,625
194,230
120,000
3,115,366
3,456,221
5,663,622
7,196,010
6,144,357
417,585
1,500,000
(10,345,513)
90,692
5,003,131
253,805
253,805
406,686
406,686
660,491
5,663,622
These financial statements were approved and authorised for issue by the Board of Directors on 22 May 2018 and were signed on
its behalf by:
S P O’Hara
Director
Company Registration no. 05880755
The notes on pages 32 to 51 form part of these financial statements
Annual Report and Accounts 2017 24
Consolidated Statement of Changes in Equity
Called up
Share capital
£
Retained
Earnings
£
Non
Share Controlling
interest
£
Premium
£
Merger
Relief
Reserve
£
Share-
based
Payment
reserve
£
Total
equity
£
Balance at 30 November 2015
7,117,315
(9,047,642)
3,863,687
Loss for the year
–
(1,297,871)
–
Issues of shares during the year
78,695
Share options and warrants
Non controlling Interest
–
–
–
–
–
2,280,670
–
–
–
–
–
–
90,692
1,500,000
383,435 3,816,795
–
–
–
–
– (1,297,871)
– 2,359,365
34,150
–
34,150
90,692
Balance at 30 November 2016
7,196,010 (10,345,513)
6,144,357
90,692
1,500,000
417,585 5,003,131
Profit for the year
–
1,917,641
–
Issues of shares during the year
23,343
Share options and warrants
Non controlling Interest
Cancellation of shares
during the year
–
–
–
–
–
135,361
–
–
–
(5,632,725)
5,632,725
Balance at 30 November 2017
1,586,628
(2,795,147)
6,279,718
–
–
–
(90,692)
–
–
–
–
–
–
–
– 1,917,641
–
158,704
56,932
56,932
–
–
(90,692)
–
1,500,000
474,517 7,045,716
Share capital is the amount subscribed for shares at nominal value. Share premium represents amounts subscribed for share capital
in excess of nominal value, net of expenses.
Merger relief reserve arises from the 100% acquisition of OptiBiotix Limited on 5 August 2014 whereby the excess of the fair value
of the issued ordinary share capital issued over the nominal value of these shares is transferred to this reserve in accordance with
section 612 of the Companies Act 2006.
Retained earnings represents the cumulative profits and losses of the group attributable to the owners of the company.
Share based payment reserve represents the cumulative amounts charged in respect of unsettled warrants and options issued.
The notes on pages 32 to 51 form part of these financial statements
25
OptiBiotix Health Plc
Consolidated Statement of Cash Flows
Notes
1
Cash flows from operating activities
Cash utilised by operations
Interest received
Taxation
Net cash outflow from operating activities
Cash flows from investing activities
Purchases of property, plant and equipment
Purchase of intangible assets
Investment in subsidiaries
Disposal of subsidiary net of cash balances
Net cash outflow from investing activities
Cash flows from financing activities
Share issues
Net cash inflow from financing activities
Increase/(decrease) in cash and equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
2
The notes on pages 32 to 51 form part of these financial statements
Year ended
30 November 2017
£
Year ended
30 November 2016
£
(1,895,285)
142
141,902
(1,753,241)
(1,804)
(43,381)
–
(228,212)
(273,397)
158,703
158,703
(1,867,935)
3,115,366
1,247,431
(1,398,181)
165
151,950
(1,246,066)
(10,551)
(162,213)
133,943
–
(38,821)
2,359,365
2,359,365
1,074,478
2,040,888
3,115,366
Annual Report and Accounts 2017 26
Notes to the Consolidated Statement of Cash Flows
1. Reconciliation of loss before income tax to cash outflow from operations
Operating profit/(loss)
Decrease in inventories
Decrease in trade and other receivables
(Decrease) in trade and other payables
Depreciation charge
Share Option expense
Amortisation of patents
Net cash outflow from operations
2. Cash and Cash Equivalents
Cash and cash equivalents
3. Disposal of subsidiary
Year ended
30 November
2017
£
Year ended
30 November
2016
£
(2,126,802)
17,735
(172,336)
209,220
6,998
56,932
112,968
(1,895,285)
(1,515,831)
(26,625)
(131,633)
127,982
808
34,150
112,968
(1,398,181)
Year ended
30 November
2017
£
Year ended
30 November
2016
£
1,247,431
3,115,366
The subsidiary (SkinBiotherapeutics) was disposed of by way of a share dilution on the admission of the company’s shares to AIM. The
cash flows associate with SkinBiotherapeutics are
Cash held by SkinBiotherapeutics on disposal
Cash outflows from investing activities
Net cash outflow from operations
The notes on pages 32 to 51 form part of these financial statements
Year ended
30 November
2017
£
(228,212)
43,381
(398,286)
27
OptiBiotix Health Plc
Company Statement of Financial Position
ASSETS
Non-current assets
Investments
CURRENT ASSETS
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
EQUITY
Shareholders’ Equity
Called up share capital
Share premium
Merger relief reserve
Share based payment reserve
Accumulated profit/(deficit)
Total Equity
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
As at
30 November 2017
£
As at
30 November 2016
£
Notes
12
14
15
16
18
6,633,299
6,633,299
2,726,860
1,007,769
3,734,629
10,367,928
1,586,628
6,279,718
1,500,000
474,517
470,658
10,311,521
2,735,205
2,735,205
1,888,076
2,187,451
4,075,527
6,810,732
7,196,010
6,144,357
1,500,00
417,585
(8,522,570)
6,735,382
56,407
56,407
75,350
75,350
10,367,928
6,810,732
These financial statements were approved and authorised for issue by the Board of Directors on 22 May 2018 and were signed on
its behalf by:
S P O’Hara
Director
Company Registration no. 05880755
The notes on pages 32 to 51 form part of these financial statements
Annual Report and Accounts 2017 28
Company Statement of Changes in Equity
Called up
Share
capital
£
Retained
Earnings
£
Share
Premium
£
Merger Share-based
Payment
reserve
£
Relief
Reserve
£
Total
equity
£
Balance at 30 November 2015
7,117,315
(8,135,494)
3,863,687
1,500,000
383,435
4,728,943
Loss for the period
Issue of shares during the year
Share options and warrants
–
(387,076)
–
78,695
–
–
–
2,280,670
–
–
–
–
–
–
(387,076)
2,359,365
34,150
34,150
Balance at 30 November 2016
7,196,010
(8,522,570)
6,144,357
1,500,000
417,585
6,735,382
Profit for the period
Issues of shares during the year
Share options and warrants
–
3,360,503
23,343
–
–
–
Cancellation of shares during the period
(5,632,725)
5,632,725
–
135,361
–
–
–
–
–
–
–
–
3,360,503
158,704
56,932
56,932
–
–
Balance at 30 November 2017
1,586,628
470,658
6,279,718
1,500,000
474,517 10,311,521
Share capital is the amount subscribed for shares at nominal value. Share premium represents amounts subscribed for share capital
in excess of nominal value, net of expenses.
Merger relief reserve arises from the 100% acquisition of OptiBiotix Limited on 5 August 2014 whereby the excess of the fair value
of the issued ordinary share capital issued over the nominal value of these shares is transferred to this reserve in accordance with
section 612 of the Companies Act 2006.
Retained earnings represents the cumulative profits and losses of the company attributable to the owners of the company.
Share based payment reserve represents the cumulative amounts charged in respect of unsettled warrants and options issued.
The notes on pages 32 to 51 form part of these financial statements
29
OptiBiotix Health Plc
Company Statement of Cash Flows
Notes
1
Cash flows from operating activities
Cash utilised by operations
Interest received
Net cash outflow from operating activities
Cash flows from investing activities
Investment in subsidiaries
Net cash outflow from investing activities
Cash flows from financing activities
Share issues
Net cash inflow from financing activities
Increase/(decrease) in cash and equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
14
The notes on pages 32 to 51 form part of these financial statements
30 November 2017
Year ended
£
30 November 2016
Year ended
£
(1,263,554)
64
(1,263,490)
(74,895)
(74,895)
158,703
158,703
(1,179,682)
2,187,451
1,007,769
(1,385,556)
100
(1,385,456)
(735,105)
(735,105)
2,359,365
2,359,365
238,804
1,948,647
2,187,451
Annual Report and Accounts 2017 30
Notes to the Company Statement of Cash Flows
1. Reconciliation of loss before income tax to cash generated from operations
Operating loss
(Increase)/decrease in trade and other receivables
(Decrease)/increase in trade and other payables
Share Option expense
Interest received
Net cash outflow from operations
2. Cash and Cash Equivalents
Cash and cash equivalents
The notes on pages 32 to 51 form part of these financial statements
Year ended
30 November
2017
£
Year ended
30 November
2016
£
(462,696) (387,076)
(838,784) (1,046,046)
(18,943)
56,932
64
13,516
34,150
100
(1,263,554)
(1,385,556)
As at
30 November
2017
£
As at
30 November
2016
£
1,007,769
2,187,451
31
OptiBiotix Health Plc
Notes to the Financial Statements
1. General Information
Optibiotix Health Plc is a company incorporated and domiciled in England and Wales. Details of the registered office, the officers
and advisers to the company are presented on the company information page at the start of this report. The company's offices are
in York. The company is listed on the AIM market of the London Stock Exchange (ticker: OPTI).
The principal activity of the group was that of research and development into microbiome modulators.
2. Accounting Policies
Statement of compliance
The consolidated financial statements of Optibiotix Health Plc have been prepared in accordance with International Financial
Reporting Standards (IFRSs), International Accounting Standards (IASs) and International Financial Reporting Interpretations
Committee (IFRIC) interpretations (collectively ‘IFRSs’) as adopted for use in the European Union and as issued by the International
Accounting Standards Board and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
Basis of preparation
The financial statements have been prepared under the historical cost convention.
The principal accounting policies are summarised below. They have all been applied consistently throughout the period under
review.
Going concern
The financial statements have been prepared on the assumption that the company is a going concern. When assessing the
foreseeable future, the directors have looked at the budget for the next 12 months from the date of this report, the cash at bank
available as at the date of approval of this report and are satisfied that the group should be able to cover its quoted maintenance
costs, other administrative expenses and its ongoing research and development expenditure.
After making enquiries, the directors have a reasonable expectation that the group has adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to adopt a going concern basis in preparing the annual report and
financial statements
New and amended standards adopted by the group
There are no IFRSs or IFRIC interpretations that are effective for the first time in this financial period that would be expected to have
a material impact on the group.
The following new standards, amendments to standards, and interpretations have been issued, but are not effective for the financial
period beginning 1 December 2016 and have not been early adopted:
New Standards, amendments and interpretations issued but not effective
Application date of Application date of
Reference Title Summary standard Company
IFRS 2 Share Amendments to classification and Periods commencing on 1 December 2018
based payments measurement of share-based or after 1 January 2018
payment transactions
IFRS 4 Insurance Amendments regarding Periods commencing on 1 December 2018
contracts implementation of IFRS 9 or after 1 January 2018
IFRS 9 Financial Revised standard for accounting for Periods commencing on
Instruments financial instruments or after 1 January 2018 1 December 2018
Annual Report and Accounts 2017 32
2. Accounting Policies (continued)
Application date of Application date of
Reference Title Summary standard Company
IFRS 10 Consolidated Amended by Investment Entities: Periods commencing on 1 December 2017
financial Applying the Consolidation or after 1 January 2017
statement Exception
IFRS 11 Joint Amended by Accounting for Periods commencing on 1 December 2017
Arrangements Acquisitions of Interests in Joint or after 1 January 2017
Operations
IFRS 12 Disclosure of Amended by Investment Entities: Periods commencing on 1 December 2017
Interests in Applying the Consolidation or after 1 January 2017
Other Entities Exception
IFRS 14 Regulatory Aims to enhance the comparability Periods commencing on 1 December 2017
deferral of financial reporting by entities or after 1 January 2017
accounts subject to rate-regulations
IFRS 15 Revenue from Specifies how and when to recognise Periods commencing on 1 December 2018
contracts with revenue from contracts as well as or after 1 January 2018
customers requiring more informative and
relevant disclosures
IFRS 16 Lease IFRS 16 Leases published Periods commencing on 1 December 2019
or after 1 January 2019
IAS 7 Statement of Amendment regarding the Periods commencing on 1 December 2017
Cash flows disclosure initiative or after 1 January 2017
IAS 12 Income Taxes Amendment regarding recognition Periods commencing on 1 December 2017
of deferred tax assets for or after 1 January 2017
unrealised losses
IAS 16 Property, Plant Amended standard for accounting Periods commencing on 1 December 2017
and Equipment treatment for property, plant and or after 1 January 2017
equipment
IAS 27 Separate Amended by Equity Method in Periods commencing on 1 December 2017
financial Separate Financial Statements or after 1 January 2017
statement (Amendments to IAS 27)
IAS 28 Investments in Amended by Investment Entities: Periods commencing on 1 December 2017
Associates and Applying the Consolidation or after 1 January 2017
Joint Ventures Exception
IAS 40 Investment Amendment regarding the transfer Periods commencing on 1 December 2018
property of property or after 1 January 2018
New Standards, amendments and interpretations issued but not effective
The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on
the financial statements of the group.
33
OptiBiotix Health Plc
2. Accounting Policies (continued)
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the company and entities controlled by the company
(its subsidiaries) made up to 30th November each year. Control is achieved where the Company has the power to govern the financial
and operating policies of an investee entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive
income from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with
those used by other members of the group.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Changes in the group’s ownership interests in subsidiaries that do not result in the group losing control over the subsidiaries are
accounted for as equity transactions. The carrying amounts of the group’s interests and the non-controlling interests are adjusted
to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling
interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners
of the company.
When the group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate
of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the
assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. Where certain assets of the subsidiary
are measured at revalued amounts or fair values and the related cumulative gain or loss has been recognised in other comprehensive
income and accumulated in equity, the amounts previously recognised in other comprehensive income and accumulated in equity
are accounted for as if the company had directly disposed of the related assets (i.e. reclassified to profit or loss or transferred directly
to retained earnings).
The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on
initial recognition for subsequent accounting under IAS 39 “Financial Instruments: Recognition and Measurement” or, when applicable,
the cost on initial recognition of an investment in an associate or a jointly controlled entity.
Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination
is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the group,
liabilities incurred by the group to the former owners of the acquiree and the equity interests issued by the group in exchange for
control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the acquisition
date, except that:
–
–
–
deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured
in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively;
liabilities or equity instruments related to share-based payment transactions of the acquiree or the replacement of an
acquiree's share-based payment transactions with share-based payment transactions of the group are measured in
accordance with IFRS 2 Share-based Payment at the acquisition date; and
assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations are measured in accordance with that standard.
Annual Report and Accounts 2017 34
2. Accounting Policies (continued)
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the
acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-
date amounts of the identifiable assets acquired and the liabilities assumed. If, after assessment, the net of the acquisition-date
amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of
any non-controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the
excess is recognised immediately in profit or loss as a bargain purchase gain.
Investments in associates
Associates are those entities in which the Group has significant influence, but not control or joint control over the financial and
operating policies. Significant influence is presumed to exist when the Group holds between 20 and 50 percent of the voting power
of another entity. Investments in associates are accounted for under the equity method and are recognised initially at cost. The cost
of the investment includes transaction costs.
The consolidated financial statements include the Group’s share of profit or loss and other comprehensive income of equity-
accounted investees, after adjustments to align the accounting policies with those of the Group, from the date that significant
influence commences until the date that significant influence ceases.
When the Group’s share of losses exceeds its interest in an equity-accounted investee, the carrying amount of the investment,
including any long-term interests that form part thereof, is reduced to zero, and the recognition of further losses is discontinued
except to the extent that the Group has an obligation or has made payments on behalf of the investee.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
(i) Current tax
Current taxes are based on the results shown in the financial statements and are calculated according to local tax rules using tax
rates enacted or substantially enacted by the statement of financial position date.
Income tax is recognised in the income statement or in equity if it relates to items that are recognised in the same or a different
period, directly in equity.
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or
paid to the taxation authorities.
(ii) Deferred tax
Deferred tax is provided, using the liability method, on temporary differences at the statement of financial position date between
the tax base of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences.
Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax assets and unused tax losses,
to the extent that it is probable that taxable profit will be available against which the deductible temporary differenced, and the
carrying forward or unused tax assets and unused tax losses can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all or part of the deferred tax assets to be utilised. Conversely, previously
unrecognised deferred tax assets are recognised to the extent that it is probable that sufficient taxable profit that sufficient taxable
profit will be available to allow all or part of the deferred tax asset to be utilised.
35
OptiBiotix Health Plc
2. Accounting Policies (continued)
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or
the liability is settled, based on the tax rates and tax laws that have been enacted or substantively enacted at the balance sheet
date.
Investments
Investments in subsidiaries are held at cost less any impairment.
Financial instruments
Financial assets and financial liabilities are recognised when the group becomes a party to the contractual provisions of the
instrument.
Inventory
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. Net
realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.
Trade and other receivables
Trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. Subsequent to the initial recognition, trade and receivables and measured at amortised cost less impairment losses for bad
and doubtful debts, except where the receivables are interest-free loans made to related parties without any fixed repayment terms
or the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less impairment losses for bad and
doubtful debts.
Impairment losses for bad and doubtful debts are measured as the difference between the carrying amount of financial asset and
the estimated future cash flows, discounted where the effect of discounting is material.
Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held on call, together with other short term highly liquid investments
which are not subject to significant changes in value and have original maturities of less than three months.
Fair values
The carrying amounts of the financial assets and liabilities such as cash and cash equivalents, receivables and payables of the company
at the statement of financial position date approximated their fair values, due to relatively short term nature of these financial
instruments
Trade and other payables
Trade and other payables are initially recognised at fair value and thereafter stated in amortised cost, except where the payables are
interest free loans made by related parties without any fixed repayment terms or the effect of discounting would be immaterial, in
which case they are stated at cost.
Impairment of non-financial assets
At each statement of financial position date, the group reviews the carrying amounts of its investments to determine whether there
is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the
asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows
that are independent from other assets, the group estimates the recoverable amount of the cash-generating unit to which the asset
belongs. An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that
the asset may be impaired.
Annual Report and Accounts 2017 36
2. Accounting Policies (continued)
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable
amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-
generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the
relevant asset is carried at a re-valued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised
estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would
have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an
impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the
reversal of the impairment loss is treated as a revaluation increase.
Capital management
Capital is made up of stated capital, premium and retained earnings. The objective of the group’s capital management is to ensure
that it maintains strong credit ratings and capital ratios. This will ensure that the business is correctly supported and shareholder
value is maximised.
The group manages its capital structure through adjustments that are dependent on economic conditions. In order to maintain or
adjust the capital structure, the company may choose to change or amend dividend payments to shareholders or issue new share
capital to shareholders. There were no changes to the objectives, policies or processes during the year ended 30 November 2017.
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received. Incremental costs directly attributable to the
issuance of new ordinary shares are deducted against share capital.
Share-based compensation
The fair value of the employee and suppliers services received in exchange for the grant of the options is recognised as an expense.
The total amount to be expensed over the vesting year is determined by reference to the fair value of the options granted, excluding
the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions
are included in assumptions about the number of options that are expected to vest. At each statement of financial position date,
the entity revises its estimates of the number of options that are expected to vest. It recognises the impact of the revision to original
estimates, if any, in the income statement, with a corresponding adjustment to equity.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share
premium when the options are exercised.
The fair value of share-based payments recognised in the income statement is measured by use of the Black Scholes model, which
takes into account conditions attached to the vesting and exercise of the equity instruments. The expected life used in the model
is adjusted; based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural
considerations. The share price volatility percentage factor used in the calculation is based on management’s best estimate of future
share price behaviour and is selected based on past experience, future expectations and benchmarked against peer companies in
the industry.
Property, plant and equipment
Property, plant and equipment are stated at historical cost less subsequent accumulated depreciation and accumulated impairment
losses, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
37
OptiBiotix Health Plc
2. Accounting Policies (continued)
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured
reliably. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.
Depreciation on property, plant and equipment is calculated using the straight-line method to write off their cost over their estimated
useful lives at the following annual rates:
Computer equipment
30%
Useful lives and depreciation method are reviewed and adjusted if appropriate, at the end of each reporting period.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to
arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and
equipment is determined as the difference between the sales proceeds and the carrying amount of the relevant asset, and is
recognised in profit or loss in the year in which the asset is derecognised.
Intangibles – Patents
Separately acquired patents are shown at historical cost. Patents have a finite useful life and are carried at cost less accumulated
amortisation. Amortisation is calculated using the straight line method to allocate the cost of the patents over their estimated useful
life of twenty years once the patents have been granted.
Research and Development
Research expenditure is written off to the statement of comprehensive income in the year in which it is incurred. Development
expenditure is written off in the same way unless the directors are satisfied as to the technical, commercial and financial viability of
individual projects. In this situation, the expenditure is deferred and amortised over the period during which the company is expected
to benefit.
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the company and the revenue can
be reliably measured, regardless of when the payment is made. Revenue is measured at the fair value of the consideration received
or receivable, excluding discounts, rebates and sales taxes or duty.
Merger relief reserve
The merger relief reserve arises from the 100% acquisition of OptiBiotix Limited whereby the excess of the fair value of the issued
ordinary share capital issued over the nominal value of these shares is transferred to this reserve in accordance with section 612 of
the Companies Act 2006.
Critical accounting judgments and key sources of estimation uncertainty
The preparation of the financial statements requires management to make estimates and assumptions concerning the future that
affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the reporting periods.
Annual Report and Accounts 2017 38
2. Accounting Policies (continued)
Critical accounting judgments and key sources of estimation uncertainty (Continued)
The resulting accounting estimates will, by definition, differ from the related actual results.
•
Share based payments
•
•
The fair value of share based payments recognised in the income statement is measured by use of the Black Scholes model,
which takes into account conditions attached to the vesting and exercise of the equity instruments. The expected life used
in the model is adjusted; based on management’s best estimate, for the effects of non-transferability, exercise restrictions
and behavioural considerations. The share price volatility percentage factor used in the calculation is based on management’s
best estimate of future share price behaviour and is selected based on past experience, future expectations and benchmarked
against peer companies in the industry.
Amortisation
Management have estimated that the useful life of the fair value of the patents acquired on the acquisition to be 20 years.
The estimate will be reviewed annually and revised if the useful life is deemed to be lower than 20 years based on the trading
business or any changes to patent law.
Impairment Reviews
IFRS requires management to undertake an annual test for impairment of indefinite lived assets and, for finite lived assets to
test for impairment if events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. Impairment testing is an area involving management judgement, requiring assessment as to whether the
carrying value of assets can be supported by the net present value of future cash flows derived from such assets using cash
flow projections which have been discounted at an appropriate rate. In calculating the net present value of the future cash
flows, certain assumptions are required to be made in respect of highly uncertain matters.
3. Segmental Reporting
In the opinion of the directors, the group has one class of business, being that of research and development. The group’s primary
reporting format is determined by the geographical segment according to the location of its establishments. There is currently only
one geographic reporting segment, which is the UK. All costs are derived from the single segment.
4. Employees and Directors
Wages and salaries
Directors remuneration
Directors Fees
Social security costs
39
OptiBiotix Health Plc
Year ended
30 November 2017
£
Year ended
30 November 2016
£
141,185
463,965
70,500
58,456
734,106
144,736
283,333
136,863
52,473
617,405
4. Employees and Directors (continued)
The average monthly number of employees during the year was as follows:
Directors
Research and development
Directors’ remuneration
Directors’ share based payments
Bonus
Total emoluments
Year ended
30 November 2017
No.
Year ended
30 November 2016
No.
6
2
8
6
2
8
Year ended
30 November 2017
No.
Year ended
30 November 2016
No.
475,350
46,173
38,000
559,523
253,333
23,389
30,000
306,722
Emoluments paid to the highest paid director
212,800
200,000
Directors’ remuneration
Details of emoluments received by Directors of the Group for the year ended 30 November 2017 are as follows:
A Reynolds
S P O’Hara
G Barker
J Laird
P Wenstromm
P Rehne
C Wood
Total
Remuneration
and fees
£
Share based
payments
£
35,500
212,800
17,500
43,000
17,500
95,250
91,800
513,350
–
–
10,761
2,000
–
16,706
16,706
46,173
Total
£
35,500
212,800
28,261
45,000
17,500
111,956
108,506
559,253
Annual Report and Accounts 2017 40
5. Net Finance Income/(Costs)
Finance Income:
Bank Interest
Finance Costs:
Loan interest
Net Finance Income / (Costs)
6. Expenses – analysis by nature
Research and development
Directors’ fees & remuneration (Note 4)
Wages and Salaries
Staff training and recruitment
Auditor remuneration – audit fees (Company only £16,000 (2016: £8,000))
Auditor remuneration – non audit fees
Brokers & Advisors
Advertising & marketing
Share based payments charge
Depreciation on property, plant and equipment
Amortisation of patents
Patent and IP costs
Consultancy fees
Legal and professional fees
Public Relations costs
Travel costs
Other expenses
Year ended
30 November 2017
£
Year ended
30 November 2016
£
142
(6,154)
(6,012)
165
–
165
Year ended
30 November 2017
£
Year ended
30 November 2016
£
302,392
513,350
141,185
57,678
34,000
2,300
71,360
73,728
56,932
6,998
112,969
129,043
202,838
130,729
43,860
79,400
294,371
308,083
420,196
144,736
10,295
20,000
2,000
70,267
61,394
34,150
808
112,968
101,427
212,390
23,664
38,265
66,960
138,083
Total administrative expenses
2,244,169
1,765,736
41
OptiBiotix Health Plc
7.
Income Tax
Corporation tax credit
Corporation tax credit prior year
Deferred tax movement
Total taxation
Analysis of tax expense
Year ended
30 November 2017
£
Year ended
30 November 2016
£
(183,951)
(21,902)
(22,594)
(228,447)
(120,000)
(31,950)
(22,594)
(174,544)
No liability to UK corporation tax arose on ordinary activities for the year ended 30 November 2017 nor for the year ended 30
November 2016.
Year ended
30 November 2017
£
Year ended
30 November 2016
£
Profit (Loss) on ordinary activities before income tax
1,689,194
(1,515,666)
Loss on ordinary activities multiplied by the standard rate of corporation
tax in UK of 19.33% (2016 – 20%)
326,521
(303,133)
Effects of:
Disallowables
Income not taxable
R&D enhanced deductions
Effect of research & development tax credit
Capital allowances
Amortisation
Revenue items capitalised
Other timing differences
Unused tax losses carried forward
Tax credit
124,946
(793,300)
(138,607)
(205,854)
–
843
(991)
(22,594)
480,589
(228,447)
13,435
–
(93,553)
(131,950)
738
–
–
(22,594)
382,513
(174,544)
The group has estimated losses of £1,760,341 (2016: £946,187) and estimated excess management expenses of £2,091,815
(2016: £1,692,401).
The tax losses have resulted in a deferred tax asset at 19% of approximately £732,676 (2016: £543,000) which has not been recognized
as it is uncertain whether future taxable profits will be sufficient to utilise the losses.
Current tax asset – Group
Research & development tax credit claimed
2017
£
183,952
2016
£
120,000
Annual Report and Accounts 2017 42
8. Earnings per Share
Basic earnings per share is calculated by dividing the earnings attributable shareholders by the weighted average number of ordinary
shares outstanding during the period.
Reconciliations are set out below:
2017
Basic and diluted EPS
Basic EPS
Diluted EPS
Earnings
£
1,907,641
1,907,641
Weighted average
Number of shares
No.
78,586,791
87,831,953
Profit per-share
Pence
2.43
2.17
2016
Basic and diluted EPS
Earnings attributable to ordinary shareholders
Earnings
£
Weighted average
Number of shares
No.
Loss per-share
Pence
(1,297,871)
77,683,891
1.67
As at 30 November 2017 there were 7,845,237 (2016: 10,345,237) outstanding share options and 1,399,925 (2016: 1,983,709)
outstanding share warrants, both are potentially dilutive.
9. Company’s result for the year
The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent Company
income statement account.
The profit for the parent Company for the year was £3,360,503 (2016 loss: £387,076).
43
OptiBiotix Health Plc
10. Intangible assets
Group
Cost
At 1 December 2015
Additions
At 30 November 2016
Additions
Disposals
Amortisation
At 1 December 2015
Amortisation charge for the year
At 30 November 2016
Amortisation charge for the year
At 30 November 2017
Carrying amount
At 30 November 2017
At 30 November 2016
Development
Costs and
Patents
£
2,259,369
162,213
2,421,582
43,382
(198,834)
2,266,130
112,968
112,968
225,936
112,968
338,904
1,927,226
2,195,646
Annual Report and Accounts 2017 44
11. Property, plant and equipment
Group
Cost
At 30 November 2015
Additions
At 30 November 2016
Additions
At 30 November 2017
Depreciation
At 30 November 2015
Charge for the year
At 30 November 2016
Charge for the year
At 30 November 2017
Carrying amount
At 30 November 2017
At 30 November 2016
£
3,064
10,551
13,615
1,804
15,419
1,052
808
1,860
6,998
8,858
6,561
11,755
The additions are in respect of additional 16% of the share capital of The Healthy Weight Loss Company Limited.
12. Investments
Set out below is the associate of the group as at 30 November 2017 which is material to the group. The entity listed below have
share capital consisting solely of ordinary shares, which are held by the group. The country of incorporation is also the principal
place of business and the proportion of ownership interest is the same as the proportion of voting rights held.
Group: Investments in associate undertakings
Cost
At 30 November 2015 and 2016
Additions
At 30 November 2017
Carrying amount
At 30 November 2017
At 30 November 2016
£
–
4,189,022
4,189,022
4,189,022
–
On 4 April 2017 the group reduced its shareholding in its subsidiary, SkinBioTherapeutics Plc, from 52% to 41.9% as a result of their
listing on the AIM stock exchange and is now accounted for as an associate under the equity accounting method.
45
OptiBiotix Health Plc
12. Investments (continued)
As at 30 November 2017, the group directly held the following associates:
Country of
incorporation
Name of company Principal activities and place of business
Proportion of
equity interest
2017
SkinBioTherapeutics Plc Research & Development United Kingdom
41.9% of ordinary shares
The effect of the acquisition is set out in the table below:
Disposal of subsidiary Investment to become an Associate
Market value of shareholding at date of listing
Existing investment
Profit on disposal of subsidiary
Company: Investments in subsidiary undertakings
Cost
At 30 November 2015
Additions
At 30 November 2016
Additions
Disposals
Carrying amount
At 30 November 2017
At 30 November 2016
2017
£
4,483,300
(660,100)
3,823,200
£
2,000,100
735,105
2,735,205
74,999
660,100
2,150,104
2,735,205
As at 30 November 2017, the company directly held the following subsidiaries:
Country of
incorporation
Name of company Principal activities and place of business
Proportion of
equity interest
2017
OptiBiotix Limited Research & Development United Kingdom
100% of ordinary shares
The Healthy Weight Loss Health foods United Kingdom
Company Limited
68% of ordinary shares
13. Inventories
Group Company
2017
2017 2016 £
Finished goods 8,890 26,625 –
2016
£
–
Annual Report and Accounts 2017 46
14. Trade and other Receivables
Group Company
2017 2016 2017
£ £ £
2016
£
Current
Accounts receivable 20,249 79,238 –
Amounts owed by group undertakings – – 2,645,210
Other receivables 77,275 105,121 73,992
Prepayments and accrued income 8,598 9,871 7,658
106,122 194,230 2,726,860
–
1,856,003
23,142
8,931
1,888,076
15. Cash and Cash Equivalents
Group Company
2017 2016 2017
£ £ £
2016
£
Cash and bank balances 1,247,431 3,115,366 1,007,769
2,187,451
16. Called Up Share Capital
Issued share capital comprises:
Ordinary shares of 2p each – 79,331,477 (2016: 78,150,534)
Deferred shares of 19p each – Nil (2016: 26,001,739)
Deferred shares of 0.9p – Nil (2016: 63,373,961)
Deferred shares of 0.09p – Nil (2016: 135,587,295)
2017
£
1,586,628
–
–
–
1,586,628
2016
£
1,563,286
4,940,330
570,366
122,028
7,196,010
During the year the company issued the ordinary shares of £0.02 each listed below, exercised at a price of £0.08 per share in the
capital of the company following the exercise of warrants:
Date issued
04/01/2017
16/02/2017
17/11/2017
Number
29,375
16,250
538,159
583,784
Total warrants exercised in the year
47
OptiBiotix Health Plc
16. Called Up Share Capital (continued)
During the year the company issued the ordinary shares of £0.02 each listed below, exercised at the following prices per share in
the capital of the company following the exercise of share options:
Total options exercised in the year
Date issued
13/01/2017
31/08/2017
Number
333,333
2,500,000
2,833,333
Price Per Share
£0.276
£0.08
The ordinary shares are non-redeemable and provide holders with one vote per share on a vote at a company meeting. They also
provide one equal right per share in any ordinary dividend declared and one equal right per share in the distribution of any surplus
due to the ordinary shareholders on a winding up.
During the year the Company reduced its share capital from £7,203,591 to £1,570,866 by way of a special resolution confirmed by
an order of the High Court of Justice.
17 Reserves
Merger relief reserve arises from the 100% acquisition of OptiBiotix Limited on 5 August 2014 whereby the excess of the fair value
of the issued ordinary share capital issued over the nominal value of these shares is transferred to this reserve in accordance with
section 612 of the Companies Act 2006.
Retained earnings represents the cumulative profits and losses of the group attributable to the owners of the company.
Share based payment reserve represents the cumulative amounts charged in respect of unsettled warrants and options issued.
18. Trade and other payables
Current:
Group Company
2017 2016 2017
£ £ £
Accounts Payable 10,136 – –
Accrued expenses 210,965 253,764 56,407
Amount due to director 189 41 –
Other payables 18,105 – –
Total trade and other payables 239,395 253,805 56,407
2016
£
–
75,250
–
100
75,350
19. Deferred Tax
Deferred tax is provided, using the liability method, on temporary differences at the statement of financial position date between
the tax base of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 20% (2016: 20%)
Annual Report and Accounts 2017 48
19. Deferred Tax (continued)
The movement on the deferred tax account is as shown below:
At 30 November
Movement in the year
At 30 November
2017
£
406,686
(22,594)
384,092
2016
£
429,280
(22,594)
406,686
Deferred tax assets have not been recognised in respect of tax losses and other temporary differences giving rise to deferred tax
assets as the directors believe there is uncertainty whether the assets are recoverable.
20. Related Party Disclosures
During the year to 30 November 2017 the group was charged £35,500 (2016 – £59,583) for services provided by Reyco Limited, a
company controlled by A Reynolds.
During the year 30 November 2017 the group was charged £35,000 (2016 – £31,666) for services provided by Morrison Kingsley
Consultants Limited, a company controlled by Mark Collingbourne, Chief Financial Officer.
21. Ultimate Controlling Party
No one shareholder has control of the company.
22. Share Based payment Transactions
(i) Share options
The company had introduced a share option programme to grant share options as an incentive for employees of the former
subsidiaries.
Each share option converts into one ordinary share of the company on exercise. No amounts are paid or payable by the recipient
on receipt of the option and the company has no legal obligation to repurchase or settle the options in cash. The options carry
neither rights to dividends nor voting rights prior to the date on which the options are exercised. Options may be exercised at any
time from the date of vesting to the date of expiry.
Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:
Number of options Average exercise price
2017 2016 2017
No. No. £
2016
£
Outstanding at the beginning of the period 10,345,237 10,345,237 0.11
Granted during the year 1,000,000 – 0.70
Forfeited/cancelled during the year (666,667) – 0.27
Exchanged for shares (2,833,333) – 0.10
Outstanding at the end of the period 7,845,237 10,345,237 0.17
0.11
–
–
–
0.11
For the share options issued in 2014 vesting conditions dictate that half will vest if the middle market quotation of an existing
Ordinary share is 16p or more on each day during any period of at least 30 consecutive Dealing days and half will vest when a
commercial contract is signed. The two conditions are not dependent on each other and will vest separately.
49
OptiBiotix Health Plc
22. Share Based payment Transactions (continued)
For the share options issued in 2015 year vesting conditions dictate that some of the options will vest if the middle market quotation
of an existing Ordinary share is 40p or more on each day during any period of at least 30 consecutive Dealing days, and some will
vest if certain revenue targets are met or if certain scientific studies are completed. The conditions are not dependent on each other
and will vest separately.
For the share options issues in 2017 vesting conditions dictate that the options will vest if certain revenue conditions are met.
The share options outstanding at the period end had a weighted average remaining contractual life of 2,511 days (2016 – 2,876
days) and the maximum term is 10 years.
The fair values of the share options issued in the year were derived using the Black Scholes model. The following assumptions were
used in the calculations:
Grant date
Exercise price
Share price at grant date
Risk-free rate
Volatility
Expected life
Fair value
29/06/2017
69.50p
68.00p
0.25%
35%
10 years
24.00p
The share price per share at 30/11/2017 was £0.69 (30/11/2016: £0.65)
Expected volatility is based on a best estimate for an AIM listed entity. The expected life used in the model has been adjusted, based
on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
(ii) Warrants
On 20 February 2014, an open offer was made to the potential investors to subscribe for 203,380,942 new ordinary shares of £0.0001
each at £0.0001 each. On a 1:1 basis, warrants attach to any shares issued under the open offer convertible at any time to 30 November
2017 at £0.0004 per shares.
On 4 August 2014, the warrants in issue were consolidated in the ratio of 200:1 as part of the share reorganisation.
At a meeting of warrant holders on 24 January 2017 it was agreed to extend the exercise period for all remaining warrants to 28
January 2022 and 19 February 2022.
Movements in the number of share warrants outstanding and their related weighted average exercise prices are as follows:
Number of warrants Average exercise price
2017 2016 2017
No. No. £
2016
£
Outstanding at the beginning of the period 1,983,709 2,631,125 0.08
Exchanged for shares (583,784) (647,416) 0.08
Outstanding at the end of the period 1,399,925 1,983,709 0.08
0.08
0.08
0.08
A charge of £56,932 (2016: £34,150) has been recognised during the year for the share based payments over the vesting period.
Annual Report and Accounts 2017 50
23. Financial Risk Management Objectives and Policies
The group’s financial instruments comprise cash balances and receivables and payables that arise directly from its operations.
The main risks the group faces are liquidity risk and capital risk.
The board regularly reviews and agrees policies for managing each of these risks. The group’s policies for managing these risks are
summarised below and have been applied throughout the period. The numerical disclosures exclude short-term debtors and their
carrying amount is considered to be a reasonable approximation of their fair value.
Interest risk
The group is not exposed to significant interest rate risk as it has limited interest bearing liabilities at the year end.
Credit risk
The group is not exposed to significant credit risk as it did not make any credit sales during the year.
Liquidity risk
Liquidity risk is the risk that group will encounter difficulty in meeting these obligations associated with financial liabilities.
The responsibility for liquidity risks management rest with the Board of Directors, which has established appropriate liquidity risk
management framework for the management of the group’s short term and long-term funding risks management requirements.
During the period under review, the group has not utilised any borrowing facilities.
The group manages liquidity risks by maintaining adequate reserves and reserve borrowing facilities by continuously monitoring
forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.
Capital risk
The group’s objectives when managing capital are to safeguard the ability to continue as a going concern in order to provide returns
for shareholders and benefits to other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
24. Post Balance Sheet Events
On 20 December 2017 the company issued and allotted 73 ordinary shares of 2 pence each exercised at a price of 8 pence per share
in the capital of the Company following the exercise of warrants.
On 5 February 2018 the company issued and allotted 354,162 ordinary shares of 2 pence each exercised at a price of 8 pence per
share in the capital of the Company following the exercise of warrants.
On 9 February 2018 the company issued and allotted 800,000 ordinary shares of 2 pence each exercised at a price of 8 pence per
share in the capital of the Company following the exercise of warrants.
On 27 February 2018 the High Court of Justice confirm the Capital reduction of the share premium account.
25. Financial Commitments
The company has unrecognised contractual commitments as follows: -
• University of Reading £63,804
• CSIC – €48,264
51
OptiBiotix Health Plc
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info@optibiotix.com
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