ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 30 NOVEMBER 2018
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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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
C Wood
R Davidson
M Christie
S Kolyda
F Narbel
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 2018 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
Europe, the USA, and more recently China.
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
USD40 billion in 2016. For probiotic supplements the retail value was USD4.3 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 USD3.3 billion.
(Source: Euromonitor International June 2017).
The OptiBiotix Difference
• Utilises validated technology platforms
which reduce the risk of developing
products which modify the microbiome
and improve health
• Extensive and valuable IP portfolio of
90+ patents and 40+ trademarks,
• Commercial partners in place for all
platforms with global brands
• 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 innovate with new differentiated
solutions
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 USD19 billion to USD31 billion 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.
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3
OptiBiotix Health Plc
Overview of OptiBiotix
Key highlights of the year
December – The appointment of Neil Davidson CBE as Non
executive chairman bringing sector specific commercial expertise
and a track record of building shareholder value
June – Non-exclusive agreement with global dairy company to
explore the use of SweetBiotix® calorie free sweet fibres in dairy
food products.
February – Presentation of research at an international
conference (ProBiota 2018) with DSM, on the development of a
prebiotic which selectively enhances the growth of
Lactobacillus rhamnosus GG (“LGG®”)
April – Exclusive agreement with Trigen Pharma to
commercialise OptiBiotix’s own label CholBiome® products
in Pakistan.
May – Exclusive agreement with Akums Drugs and
Pharmaceuticals to exclusively manufacture and supply
products containing LPLDL®, in India.
May – SlimBiome® wins award for Weight Management
Ingredient of the Year at the Vitafoods European tradeshow in
Geneva.
May – LPLDL® non exclusive agreement with Seed Health to
commercialise products containing LP-LDL® in the USA.
June – Exclusive license agreement with ALFASIGMA to
commercialise food supplements containing LPLDL® in Italy.
June – Exclusivity with global corporate for the scale up and
manufacture of SweetBiotix®
September – Exclusive agreement with a US company for LPLDL®
as a drug product with 6 figure milestone payments
October – Non exclusive distribution agreement with CTC
Holding to distribute SlimBiome® weight in the Philippines,
Vietnam, Indonesia and Colombia.
November – SlimBiome® receives CE mark and approval as a
medical device.
December – Exclusive distribution for SlimBiome® Medical in
Greece and Cyprus.
December – Appointment of Dr Fred Narbel as Managing
Director of OptiBiotix’s prebiotic division
Annual Report and Accounts 2018 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 achieved media and industry attention which has strengthened the
commercial development of its products leading to a significant number of
commercial agreements.
Brief outlook on 2019:
The focus for 2019 is on reaching new agreements, ensuring existing agreements generate revenues for SlimBiome® and LPLDL® and extending
commercial reach further into the US and Asia. 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 which are now maturing into
multiple opportunities across a wide range of application areas with a number of large corporates both on manufacturing and application
development.
We have achieved a number of scientific awards for our science at ProBiota and wonweight Management of the Year fro SlimBiome at
Viafoods 2018.
“Rewarding true innovation and cutting edge research in healthy foods, supplements and nutrition”
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OptiBiotix Health Plc
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OptiBiotix Deal Pipeline
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Eu
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Annual Report and Accounts 2018 6
Chairman’s and Chief Executive’s Statement
We are pleased to present OptiBiotix
the
Health plc’s
and
“Company”)
accounts
ended
30 November 2018.
(“Optibiotix” or
report
annual
year
the
for
The 12 months to 30 November 2018
have seen the continued transition of
the Company from a research and
development business to a company
showing strong commercial traction for
its award winning products and technologies with significant deal flow
and rapidly growing revenues. This period has seen eighteen
commercial agreements signed in the year to 30 November 2018, eight
more than the 10 deals concluded in 2017. OptiBiotix has now
completed twenty eight deals reflecting international interest from
industry in high value ingredients and products which have a strong
scientific and clinical evidence base. Of these deals approximately 20%
are with companies whose annual turnover is greater than one billion
dollars, and represent an opportunity to access global markets with
large corporate partners.
As the year progressed, an increasing number of agreements started to
generate income with revenue growth in the second half of the year
significantly higher than at the start of the year. As existing deals
contribute to full year revenues, partners continue to grow sales with
new product launches in 2019, and new agreements continue to be
signed on a regular basis, we anticipate further revenue growth in 2019.
Key to OptiBiotix’s success is its strong science, independent clinical
studies, and key opinion leader endorsement. Whilst each product 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 respected by industry.
Working with world leading key opinion leaders who support
the science behind our products.
This systematic approach has led to OptiBiotix’s science winning awards
at international conferences (ProBiota 2017 and 2018) and its two
products, LPLDL and SlimBiome®, being nominated for awards, with
SlimBiome® winning the award for best weight management ingredient
at Food Matters in November 2017, and Vitafoods in May 2018. Of
particular note in 2018 was the award for best scientific abstract at
ProBiota with co-authors DSM for developing a prebiotic which
selectively increased the growth rate of DSM”s Lactobacillus rhamnosus
GG (LGG®), contained within its Culturelle® range. We believe this is the
777
OptiBiotix Health Plc
first reported publication of an optimised prebiotic for LGG®, one of the
world’s best-selling probiotics. We see the combination of a probiotic
and a prebiotic, which selectively enhances the probiotics growth and
functionality, creates a means to provide product differentiation and
enhance the benefits of existing probiotic products in the market. We
anticipate further commercial progress in this area in 2019.
We were also pleased by results of a clinical study carried out by the
University of Roehampton which demonstrated that human volunteers
taking SlimBiome® had statistically significant reductions in weight, BMI,
hip circumference, percentage body fat, fat mass and systolic blood
pressure (P<0.01) after four weeks of SlimBiome® intake. Significant
reductions in cravings for savoury foods (P<0.001) and a trend for
reduced sweet cravings were recorded from the end of week one of the
treatment onwards, accompanied by a significant improvement in
mood (P<0.01). This study added further evidence to other clinical
studies and consumer feedback which shows SlimBiome® has a
significant impact on food cravings and hunger, leading to easier and
more successful weight loss, typically 2-3lbs per week.
We believe this strategy of investing in strong science and clinical
studies, which independently demonstrate the safety and efficacy of
our products, provides clear product differentiation and stimulates high
industry interest, leading to strong deal flow. As the Company continues
its transition from a technology company to a product company, it will
continue to carry out further studies and present its science at
international conferences and in leading peer reviewed journals around
the world.
Of particular note in the last year is the recognition of this systematic
approach from pharmaceutical companies who have signed deals to
develop LPLDL® as a drug product, and the award of medical device
status and CE mark for SlimBiome®. These represent significant value
enhancing steps as they extend the commercial opportunities for LPLDL®
and SlimBiome®
into the high value medical products and
pharmaceutical drug markets.
As the scientific and consumer understanding of the role of the
microbiome in the prevention of disease and the maintenance of health
grows we see substantial opportunities in international markets for our
products. We look forward to converting this interest into growing
revenue streams from license deals and supply agreements in the
months and years ahead.
During the period to date we have achieved a number of key objectives,
which continue to build shareholder value. These include:-
•
•
A US manufacturing, supply and profit sharing agreement
with Cereal Ingredients, Inc for SlimBiome®.
Completion of five successful human taste studies on
SweetBiotix® demonstrating high sweetness and low off
flavours.
•
•
•
•
•
•
•
•
•
•
•
•
•
A five year distribution agreement with Trigen Pharma
International 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 drug products containing
LPLDL® in India.
A non exclusive agreement with Seed Health to produce,
promote, market, and commercialise products containing
LPLDL® in the USA.
A non-exclusive license with one of the world’s largest
providers of dairy products to explore the potential for using
OptiBiotix’s SweetBiotix® technology to reduce the sugar
content in a range of its dairy food products.
the
Exclusive agreement with a US company
development of LPLDL® as a drug product with a six figure
milestone payments at signing and at two subsequent
conditional milestones, amounts totalling a seven-figure sum.
for
Exclusive license agreement with AlfaSigma to commercialise
food supplements containing LPLDL® in Italy.
Non exclusive distribution agreement with CTC Holding to
distribute SlimBiome® in the Philippines, Vietnam, Indonesia
and Colombia.
Launch of OptiBiotix online selling own brand GoFigure® and
CholBiome® products direct to market providing a shop
window for its LPLDL® and SlimBiome® technologies.
Award for SlimBiome® for Weight Management Ingredient of
the Year at Vitafoods 2018 and ‘Best Functional Ingredient for
Health and Wellbeing’ at Food Matters.
for best scientific abstract at ProBiota 2018
Award
co-authored with DSM
identification and
for
development of a prebiotic which selectively enhances the
growth of Lactobacillus rhamnosus GG (“LGG®”) in the gut.
the
Independent human studies from by Oxford Brookes
University demonstrating that volunteers who took
SlimBiome® compared to a placebo feel fuller and are less
hungry, have less food cravings, and eat less sweet and fatty
foods.
The granting of medical device status and a CE mark for
SlimBiome® extending its application as a food ingredient
into high value medical products within consumer healthcare
and pharmaceutical markets.
The appointment of Neil Davidson as Non-Executive
Chairman bringing sector expertise, a network of industry
contacts, and over 30 years of operational and Board
experience as Chairman, Chief Executive and Director of FTSE
100, AIM and private companies.
The investment in OptiBiotix of £450k by new non executive
board members Neil Davidson and Sean Christie.
•
•
Strategy
OptiBiotix’s strategy is to develop microbiome product with a scientific
and clinical evidence base targeted at large markets (>£100 million)
where there are high growth opportunities (CAGR >10%), and a large
unmet demand. Given the evolving nature of the microbiome
OptiBiotix’s approach has been designed to reduce investor risk by
building multiple opportunities within the microbiome space across a
number of platforms which create food ingredients, supplements and
pharmaceutical products with partners. This multi partner,
multi-channel approach, enables OptiBiotix to maximize the income
potential of each product, whilst limiting the risk related to any
individual deal. This is reflected in OptiBiotix’s deal structure in which
approximately 20% of deals are with companies whose annual turnover
greater than one billion dollars, and the remaining 80% are with small
to medium size companies who are quicker to market. Common to
each partner is an existing industry reputation and an established
distribution network within the target market.
This allows OptiBiotix to operate on a very asset-light infrastructure with
manufacturing, regulatory approvals, and sales and marketing
infrastructure funded by OptiBiotix’s partners such that license and
royalty fees are largely cost free. Whilst this strategy takes longer to
develop than single license deals it is a low risk, low cost approach to
accessing multiple consumer healthcare and pharmaceutical markets
around the world, and if successful, has the potential to cumulatively
generate substantive revenues and profitability in the forthcoming
years.
The large number of agreements signed in 2018 across multiple
application areas represents early execution of this strategy. These
agreements are starting to generate recurrent revenue streams and will
form the backbone of future sales growth. We anticipate further
execution of this strategy in 2019 with growing revenues against a
continued low-cost base creating profitable divisions across all areas of
the Company.
In April 2017, OptiBiotix’s majority owned skincare subsidiary,
SkinBiotherapeutics (formerly SkinBiotix), was admitted to AIM with an
associated £4.5 million institutional and private client investment
manager fundraise. SkinBiotherapeutics plc is making solid progress in
Annual Report and Accounts 2018 8
industry validation of
building relationships with potential commercial partners, successfully
completing human studies, and building a commercial leadership team.
As its partnership discussions turn into commercial agreements
providing
its technology we anticipate
SkinBiotherapeutics plc will grow in value whereupon 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 separately listed companies, and with
it the prospect of multiple returns.
As part of this strategy OptiBiotix raised £1.025 million through the issue
of convertible loan notes for its wholly owned subsidiary ProBiotix
Health Limited. The funds will be used to provide funding for an
independent exit or potential initial public offering of ProBiotix in the
UK, Europe, or the US, depending on market conditions. This is in line
with OptiBiotix’s strategy to form separate divisions, which could in due
course become separate legal entities with the potential for a separate
public listing.
Commercial
The last twelve months has seen the continued transition of OptiBiotix®
from a research and development Company to a commercial business
with the signing of eighteen agreements with products now being
commercialised in over thirty countries. This includes a number of
agreements with leading manufacturing partners within India. This
introduces local manufacture to the supply chain to meet the needs of
existing and new corporate partners and extend the opportunities
offered by our products into the fast growing India and Southern Asia
markets. We anticipate further deals with manufacturing partners in
other territories as we extend the reach of OptiBotix’s products around
the world.
The company has now signed twenty eight agreements since the
European launch of it products at Vitafoods in May 2017, and USA
product launch at Supply Side West in September 2017. These include
ten agreements for the Probiotic division, six for SlimBiome®, and two
for SweetBiotix®. Three of these agreements extend LPLDL® into drug
biotherapeutics with one agreement for SlimBiome® as a Medical
Device. In the LPLDL® drug biotherapeutics deals, the partner provides all
funding for drug registration and approvals in return for exclusivity. With
the US partner deal, OptiBiotix receives milestone and/or royalty
payments based on product development and future product sales. This
is a low cost, low risk approach to enter the pharmaceutical space,
which, if successful, has the potential to create significant value uplift
for OptiBiotix in the years ahead. Similarly, for SlimBiome®, its registration
as a medical device with CE mark extends the application of SlimBiome®
from food products into high value medical products and opens up
access to consumer healthcare and pharmaceutical markets across
Europe. This means that OptiBiotix’s products are now being
commercialised as
ingredients, medical devices, drug
biotherapeutics, and supplements through retail and online platforms
around the world.
food
This is all part of a commercial strategy based on closing out deals across
multiple levels of the value chain, starting with manufacturing
agreements (e.g Sacco, Knighton), royalty bearing license deals with
formulation partners (e.g Nutrilinea, Cereal Ingredients) for the supply
of white label and branded products, and distribution agreements
directly with retailers. This allows OptiBiotix to develop multiple
formulations and/or applications, which have the science, cost structure,
and synergistic mode of action to create a wide product range, suitable
for different territories in consumer health, pharmaceutical, and retail
companies around the world.
Of particular note in 2018 was the signing of two deals with global
partners for SweetBiotix®, sweet natural healthy sugars which are not
digested in the human gut and hence calorie free. These partners are
looking to explore the potential to reduce the sugar content in a range
of applications, in particular dairy. These agreements are part of a
number of on-going discussions with potential partners who have
expertise in either the manufacturing and/or application development
of high value speciality ingredients within food and beverage products.
One of these partners is funding the pilot scale up and supply of two
batches of SweetBiotix® for consumer testing and further application
development. Investors are cautioned that discussion with corporate
partners takes place within a corporate process and timescale, and are
often subject to strict confidentiality clauses which prevents any
disclosure of progress or otherwise.
With growing concerns over traditional sugars and artificial sweeteners
there is the potential to replace existing ‘unhealthy’ sugars products with
non-digestible, low calorie, healthy, SweetBiotix®. Publication of the
results on our human studies and accompanying media reports 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.
The focus for 2019 is on further extending our reach into new
application areas and new territories, and translating industry interest
into deal flow and further revenue growth. In addition to the registration
of SlimBiome® as a medical device, and the development of LPLDL® as a
pharmaceutical drug product, we will extend the application of LPLDL®
from its use as a supplement into use as a food and dairy ingredient.
This is in line with our strategy of building revenues and market
presence of our patented and trademarked products (LPLDL®,
SlimBiome®) as the ‘Intel’ inside a wide range of food, beverage,
supplement, and medical products around the world.
The online platform launched in autumn 2018 creates another channel
to market and a shop window for our technologies and products. The
999
OptiBiotix Health Plc
addition of CholBiome®, and CholBiome® 3X, and muesli pots to the
store has lead to month on month increase in sales. We anticipate
adding new products, including SlimBiome® Medical, to the online store
and growing contribution from online sales in 2019.
Results
OptiBiotix’s results for the 12 months ended 30 November 2018 are set
out in the Consolidated Statement of Comprehensive Income.
The results show revenue for the year of £514K. The majority of this
income (£434k) was generated in the second half of the year (June to
30 November 2018) as an increasing number of agreements started to
generate revenues. These figures, albeit from a low base, represent a
543% increase in income from H1 to H2 and a 169% increase on 2017
income of £191K. As existing deals contribute to full year revenues,
partners continue to grow sales with new product launches in 2019,
and new agreements continue to be signed, we would hope to see
continued revenue growth in 2019.
Administrative expenses for 2018 were £1,850,403, down £223,865
(17.5%) from administrative expenses of £2,074,268 in 2017. This
reflected a £141,719 reduction in research and development costs (2018:
£160,673; 2017: £302,392) as the company transitions from a research
and development business to a commercial business. Reductions were
also seen in patent and IP costs (2018: £88,003; 2017: £129,043) as
patents were granted reducing filing costs, and legal and professional
fees ( 2018: £26,563; 2017: £130,729), which were higher in 2017 due to
the public listing of SkinBiotherapeutics plc. Within 2018 administration
expenses of £267,943 was for non-cash expenses representing
depreciation, amortisation, and share based payment devaluations.
The operating loss for the period was £1,498,896, which was £627,906
less than for the same period last year (2017: £2,126,802).
At 30 November 2018, the Company had £1.33 million cash in the bank.
Once R&D tax credits, and recoverable VAT are added back, the balance
was c. £1.67 million. On 14 December 2018, post accounting period,
Probiotix Health Ltd, a wholly owned subsidiary of OptiBiotix Health,
announced it had raised £1.025 million of capital through the issue of
convertible loan notes in preparation for a potential initial public
offering. Of this £198K was received before 30 November with the
remaining received post accounting period. With this funding and
growing revenues, the cash position remains strong and sufficient to
cover the delivery of existing commercial plans.
The share of loss from OptiBiotix’s associate, SkinBiotherapeutics (SBTX),
has increased substantially from £294,278 in 2017 to £448, 223 in 2018,
representing an increase in SkinBiotherapeutics scientific and clinical
activity. This is an accounting adjustment and has no impact on the
Groups cash balance.
Board and Management
We continue to evolve the Board in line with the Company’s
development. The last twelve months has seen a number of board
additions to reflect the increased commercial focus.
We were pleased to announce the appointment of Neil Davidson CBE
as Non-Executive Chairman in January 2018 and Sean Christie, as a
Non-Executive Director, who joined us in September 2018. Neil brings
to the Board over thirty years of operational and Board experience as
Chairman and Chief Executive of FTSE 100, AIM, and private companies.
Sean brings financial, investor and M&A expertise and a strong track
record of delivering revenue growth and creating shareholder value.
Both come with a wide network of contacts in the food industry and a
wealth of experience on the Board of some of the UK’s largest public
companies. Their addition to the board increases the Company’s sector
specific expertise and brings experience of working within a large
publicly listed company.
We believe with the addition of Neil and Sean, 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 Peter Wennström, one of the world’s leading experts in
functional food innovation and marketing. Dr Sofia Kolyda as Director
of Research and Development brings specialised expertise in prebiotics.
They are complemented by Christina Wood who brings sales and
marketing expertise and our CFO Mark Collingbourne.
Gareth Barker will step down from the board at the end of April 2019
due to work commitments in his new role. Gareth was Vice President of
Human Nutrition & Health (EMEA) at DSM and took on a new role of
President of Personal Care and Aroma Ingredients at DSM in early 2018.
On behalf of the Board, I would like to thank Gareth for his contribution
in helping guide OptiBiotix through its early developmental years and
wish him well in his new role at DSM.
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.
At the end of the accounting period we announced that Dr Fred Narbel
would join the board as Managing Director of the prebiotic division
containing its SweetBiotix®, OptiBiotic® and microbiome modulating
technology platforms. Frederic was Vice President of Sales for Nutrition
Solutions at Agropur, a company with annualised sales of $6.4 billion
(2017), and joined us on 1 March 2019. This appointment reflects the
growing partner interest in OptiBiotix’s microbiome modulators and
SweetBiotix®. Fred’s experience of speciality food ingredients will help
drive the commercialisation of OptiBiotix’s pipeline of products, and in
time, add another revenue stream to the growing revenues from
OptiBiotix’s LPLDL® and SlimBiome® products.
Annual Report and Accounts 2018 10
Outlook
The last twelve months have seen the continued transition of OptiBiotix
from a research and development business to a company showing
strong commercial traction for its award winning products and
technologies, with significant deal flow and rapidly growing revenues.
We anticipate further revenue growth in 2019 as existing deals
contribute to full year revenues, and partners continue to grow sales.
More of our existing agreements will start to generate revenues in 2019,
particularly with larger partners launching products in international
markets in late 2019, and new agreements continue to be signed
in 2019.
We anticipate further revenue growth will occur from our online
platform (OPTIBIOTIX.Online), which has been making good progress
under the leadership of Steve Riley. Sales have increased month on
month as we have extended our range with the launch of new products
(e.g. Muesli, CholBiome®), and invested in a mixture of digital and
newspaper advertising. To support online sales growth we anticipate
adding new products, including SlimBiome® Medical, to the online store
and extending the GoFigure® product range. We anticipate revenues in
2019 from SlimBiome® Medical (which received its CE mark and medical
device registration at the end of the accounting period), and our
SweetBiotix®, OptiBiotic® and microbiome modulating platforms.
Revenue growth from these areas will benefit from the appointment of
Frederic Narbel as Managing Director of OptiBiotix’s prebiotic division.
We are seeing growing interest from international partners in OptiBiotix’s
own label CholBiome® and GoFigure® brands and intend to invest in
marketing to build the brand. If this is successful we believe there are
opportunities to leverage the brand to launch OptiBiotix own label
products with partners across the world and build substantive value in
these assets. This is being supported by a large investment in patents
and trademarks to broaden protection in international markets.
OptiBiotix now has an extensive and valuable intellectual property
portfolio of over ninety patents and forty trademarks.
The Company will continue to invest in its science and clinical studies
and present these in peer reviewed scientific journals and at
international conferences, with the endorsement of world key opinion
leaders. These presentations and publications raise OptiBiotix’s profile
and reputation, attract commercial and media interest in our products,
and provide the scientific evidence for sales and marketing literature in
support of product commercialisation. We are particularly pleased that
our science continues to win awards at scientific conferences as this
increases industry interest. We were particularly pleased to win the best
scientific abstract at ProBiota 2018 with DSM for the first reported
publication of an optimised prebiotic for LGG®, contained within DSM’s
Culturelle® range. 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
11
OptiBiotix Health Plc
the probiotic industry, a market expected to be worth more than
$46.5 billion by 2020 (Markets and Markets).
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 and an area of significant
potential growth in 2019. With supplements alone accounting for
US$2.06 billion sales and projected to grow by 55% to US$3.3 billion by
2021, and food and beverage products accounting for $5 billion per
annum, (“Trends, Innovations and Opportunities Driving The Global
Probiotics Market, Euromonitor International June 2017”), the US is a large
and rapidly growing market opportunity for probiotics such as LPLDL®.
We were pleased to announce post year end, in February 2019, that the
Independent Expert Panel ruled in favour of LPLDL® GRAS status. This is a
significant achievement and a major commercial milestone for the US
market as it expands the potential applications of LPLDL® from use as a
supplement to inclusion as a functional ingredient in a wide range of
food, dairy, beverage, and high value medical food applications, across
the USA. The regulatory approval and extension of our products into
other application areas, particularly food and beverages, 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 future.
With a population of 1.3 billion people and cardiovascular disease
accounting for up to 26% of all deaths (The Times of India June 8, 2014),
15-20% of children overweight, and 60-70% of adolescents remaining
overweight or obese in their adulthood years India represents a
substantial opportunity for OptiBiotix’s products. In a recent visit to India
the Company met with around thirty companies who identified a
growing trend within India to improve Health and Wellbeing and an
interest in products to help manage lifestyle diseases like heart disease
and obesity. We believe India offers a substantial business opportunity
which if realised could deliver multimillion pound revenues annually.
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
exploit the revenue potential of the products. As these develop, our aim
is to 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, Europe, or the US, depending on market conditions.
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 transition from a technology to product company requires a
different focus and skill set. The appointment of Neil Davidson and Sean
Christie is the start of the process of bringing board level sector and
into agreements in new territories and application areas in the months
ahead to continue rapidly growing revenues in this new and exciting
area of science which has the potential to revolutionise the future of
healthcare.
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.
N Davidson and S OHara
26 April 2019
FTSE100 expertise into the company. We are pleased that both Neil and
Sean have invested in the region of £450,000 in OptiBiotix since their
appointment early in 2018. This level of financial commitment from such
established industry leaders as new board members provides
reassurance to the Board on its strategy.
The Company is developing technology and products in the
microbiome space, a market growing at 22.3% per year, and described
by health experts as “healthcare’s most promising and lucrative frontier”
(Markets and Markets). The Board believes OptiBiotix® is at the leading
edge in this space and has the right strategy, team, and award winning
technology and products in place, to build a substantive business over
the next few years. We are particularly pleased by the results customers
are achieving with our products with substantive reductions in
cholesterol using CholBiome® X3 and typical weight loss of 2-3lbs per
week with SlimBiome® and GoFigure® products.
The last twelve months has seen continued progress in building a
broad-based microbiome business with a diversity of IP and commercial
agreements which provides shareholders with multiple opportunities.
The large number of agreements signed in 2018 across multiple
application areas and territories represent early tangible evidence of this
progress. The next stage of the process is to build on existing revenues
streams to continue building sales in 2019 against a continued low-cost
base creating profitable divisions across all areas of the Company.
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
Annual Report and Accounts 2018 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 23
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 £1,324,307 as at 30 November 2018 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 2 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
New regulations could add complexity and delays
to operations.
The current consensus is that Brexit will not affect the
regulations that are relevant to our business.
Currency fluctuations could increase costs and
affect profitability.
Currency fluctuations will impact both sales and costs. Our
initial product offering is not price-sensitive. Substantial cost
increases will be passed on.
Technology
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
The Group is launching products that are 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.
Financial Risks
Impact
Mitigation
Future funding
requirements
Legal Risks
Intellectual
Property
litigation
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 2018 14
Key Performance Indicators
Non-financial
Financial
Year to
30 November
2018
£’000
Year to
30 November
2017
£’000
Revenue
Profit/(Loss) for the period
Cash as at 30 November 2018
514
(1,893)
1,324
191
1,918
1,247
During the year to 30 November 2018 the company has achieved a
number of key objectives which continue to build shareholder value.
These include:
• Eighteen commercial agreements with manufacturing, application
The Board recognises the importance of KPIs in driving appropriate
behaviour and enabling of Group performance. For the year to
30 November 2018 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
and distribution partners
No dividends can be distributed for the year ended 30 November 2018.
• Award for SlimBiome® for Weight Management Ingredient of the
Year at Vitafoods 2018 and ‘Best Functional Ingredient for Health
and Wellbeing’ at Food Matters
• Award for best scientific abstract at ProBiota 2018 for the
identification and development of a prebiotic which selectively
enhances the growth of Lactobacillus rhamnosus GG (“LGG®”)
• The granting of medical device status and a CE mark for
SlimBiome®
• The appointment of Neil Davidson as Non-executive Chairman
bringing sector and FTSE 100 experience to the company.
Future Developments
The Chairman’s and Chief Executive Statement on pages 2-12 gives
information on the future outlook of the Group.
On Behalf Of The Board
S P O’Hara
26 April 2019
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 2018.
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:
Executive Directors
S P O’Hara
C Wood
P Rehne
S Kolyda (Appointed on 4 July 2018)
F Narbel (Appointed on 1 March 2019)
Non-executive Directors
G Barker
P Wennström
R Davidson (Appointed on 1 January 2018)
M Christie (Appointed on 10 September 2018)
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:
Issued Share Capital
Share Warrants
Share Options
Ordinary
shares of
£0.02 each
10,103,031
478,000
–
125,000
357,722
–
–
–
–
Percentage
Held
Ordinary
shares of
£0.02 each
Warrant
exercise
price
Ordinary
shares of
£0.02 each
11.8%
0.56%
–
0.14%
0.42%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6,099,135
385,000
–
100,000
–
500,000
500,000
165,000
358,722
Option
exercise
price
£0.08
£0.73
–
£0.95
–
£0.695
£0.785
£0.73
£0.20
S P O’Hara
R Davidson
P Wennström
M Christie
G Barker
C Wood
F Narbel
S Kolyda
S Kolyda
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 R Davidson were granted on 13 July 2018 and are exercisable at £0..73 at any time up 13 July 2024, subject to vesting
conditions.
The share options held by M Christie were granted on 21 September 2018 and are exercisable at £0.95 at any time up 21 September 2028, subject
to vesting conditions.
The share options held by F Narbel were granted on 27 March 2019 and are exercisable at £0.785 at any time up 27 March 2029, subject to vesting
conditions.
The 358,772 share options held by S Kolyda were granted on 10 March 2015 and are exercisable at £0.20 at any time up 10 March 2025, subject to
vesting conditions.
The 165,000 share options held by S Kolyda were granted on 13 September 2018 and are exercisable at £0.73 at any time up 13 September 2019,
subject to vesting conditions.
The share options held by C Wood were granted on 29 June 2017 and are exercisable at £0.695 at any time up to 29 June 2027, subject to vesting
conditions.
Annual Report and Accounts 2018 16
Substantial Shareholdings
Statement Of Directors’ Responsibilities
Substantial shareholdings including Directors as at 23 April 2019 were
as follows:
The Directors are responsible for preparing the Directors’ Report and the
financial statements in accordance with applicable laws and regulations.
Stephen O’Hara
Finance Yorkshire Seedcorn LP
% of shares issued
11.18
11.05
The share price per share at 30/11/2018 was £0.92 (30/11/2017:
£0.69)
Financial Instruments
The Group’s exposure to financial risk is set out in Note 23 to the financial
statements.
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
Research And Development
consistently;
The Chairman’s and Chief Executive Statement on page 2-12 gives
information on the Group’s research and development activities.
Political And Charitable Contributions
The Group made no charitable or political contributions during the
period.
Events After The Reporting Period
Refer to Note 24 to the financial statements for further details.
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.
17
OptiBiotix Health Plc
• 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.
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 13.
On Behalf Of The Board
S P O’Hara
26 April 2019
Annual Report and Accounts 2018 18
Independent Auditor’s Report to the Members of
OptiBiotix Health Plc
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 2018 which comprise the consolidated income
statement, consolidated statement of comprehensive
income,
consolidated statement of changes in equity, company statement of
changes in equity, consolidated statement of financial position,
company statement of financial position, consolidated statement of
cash flows, company statement of cash flows 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 Group financial statements is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European
Union. The financial reporting framework that has been applied in the
preparation of the parent company financial statements is applicable
law and International Financial Reporting Standards (IFRSs) as adopted
by the European Union as applied in accordance with the provision 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 2018
and of the Group’s loss for the year then ended;
• the Group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
• the parent company financial statements have been properly
prepared in accordance with IFRS’s as adopted by the European
Union 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.
Basis for opinion
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.
Our audit approach
Overview
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.
• Carrying value of investments and recoverability of receivables
• Capitalisation of development costs and carrying value of intangible
assets
These are explained in more detail below
Audit scope
• We conducted audits of the complete financial information of
OptiBiotix Health Plc, OptiBiotix Limited, The Healthy Weight Loss
Company Limited and ProBiotix Health Limited.
• We performed specified procedures over certain account balances
and transaction classes at other Group companies.
• Taken together, the Group companies over which we performed
our audit procedures accounted for 100% of the 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)
and 100% of revenue.
19
OptiBiotix Health Plc
Key audit matter
How our audit addressed the key audit matter
Carrying value of investments and recoverability of Group
receivables – Company Risk
The amount owed to the Company at the year- end by the subsidiary
OptiBiotix Limited is £4,044,646.
The carrying value of investments in Group companies are as follows:
OptiBiotix Limited : £2,000,000
ProBiotix Health Limited : £1,000
The Healthy Weight Loss Company Limited : £50,000
Impairment of The Healthy Weight Loss Company Limited:
As the company has not been trading as of September 2018, the
Directors feel it is prudent to write down the investment to £50,000
to reflect change in trading status. The remaining investment reflects
the value of the ‘gofigure’ brand held.
Carrying value of investments – Group Risk
At the year end the Group had investments of £3.74 million made up
of the investment in SkinBiotherapeutics plc.
We carried out a review of the investments held in the subsidiaries.
Management’s
underlying assumptions audited.
impairment workings were reviewed and the
We reviewed management’s basis for impairment across the Company
and agree with their approach.
As part of the review of management’s forecasts, consideration was
given to the capability of the subsidiary to repay the amount within a
12-month period.
The estimation of the residual value held in The Healthy Weight Loss
Company Limited has been assessed.
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.
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
Carrying value of intangible assets and capitalisation of
development costs
The Group had intangible assets of £2.25 million at the year ended
31 December 2018 (2017: £1.92 million), of which £467,639 (2017: £Nil)
were development costs capitalised in the year.
The remaining costs are comprised of the fair value of patents
acquired on the acquisition of OptiBiotix Limited.
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 development costs are amortised in a straight line over 10 years,
a period the Directors believe to be in line with industry standard.
Intangible assets in the accounts have been allocated useful lives and
therefore an annual impairment test is not required. However, as
OptiBiotix Limited is loss making we considered if there were indicators
of impairment and reviewed the discounted cash flow forecasts.
The development costs capitalised in the year were evaluated against
the recognition criteria of IAS38. The estimated useful economic life
assigned to the costs was reviewed.
Annual Report and Accounts 2018 20
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
£126,000 (2017: £94,000).
£120,000 (2017: £52,000).
How we determined it
1.5% of gross assets.
1% of gross assets.
(2017: average of 3% revenue, 10% profit/loss
before tax, 1% gross assets).
(2017: average of 3% revenue, 10% profit/loss
before tax, 1% gross assets).
Rationale for
benchmark applied
We believe that gross assets is a primary measure
used by
the
performance of the Group, whilst the subsidiaries
are in varied states of development and trading.
in assessing
shareholders
shareholders
We believe that gross assets is a primary measure
used by
the
performance of the Company, given that it is
largely a holding company for the trading
subsidiaries.
in assessing
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 4 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.
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 £6,300 for the Group
(2017: £4,700) and £6,000 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.
21
OptiBiotix Health Plc
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
• 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.
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.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of
our auditor’s 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:
Other matters which we are required to
address
• 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
We were appointed as auditors by the company at the Annual General
Meeting on 11 June 2018 to audit the financial statements for the period
ending 30 November 2018. Our total uninterrupted period of
engagement is 5 years, covering the periods ending 30 November 2014
to 30 November 2018.
Annual Report and Accounts 2018 22
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.
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.
Sudhir Rawal
(Senior Statutory Auditor)
For and on behalf of
Jeffreys Henry LLP, Statutory Auditor
Finsgate
5-7 Cranwood Street
London
EC1V 9EE
26 April 2019
23
OptiBiotix Health Plc
Consolidated Statement of Comprehensive Income
Revenue
Cost of sales
Gross Profit
Share based payments
Depreciation and amortisation
Other administrative costs
Total administrative costs
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
Earnings per share from continued operations
Basic profit/(loss) per share – pence
Diluted profit/(loss) per share – pence
The notes on pages 33 to 53 form part of these financial statements
Notes
Year ended
30 November 2018
£
Year ended
30 November 2017
£
514,289
(162,782)
351,507
128,222
141,908
1,580,273
(1,850,403)
(1,498,896)
–
169
169
(448,223)
–
(1,946,950)
54,371
(1,892,579)
–
(1,892,579)
(1,919,276)
26,697
(1,892,579)
(2.33)p
(2.33)p
191,073
(73,706)
117,367
56,932
119,966
2,067,271
(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
6
5
5
12
7
8
Annual Report and Accounts 2018 24
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
Retained Earnings
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
As at
30 November 2018
£
As at
30 November 2017
£
10
11
12
13
14
7
15
16
18
19
2,253,089
3,143
3,740,799
5,997,031
30,433
373,803
303,952
1,324,307
2,032,495
8,029,526
1,694,488
1,603,904
602,739
1,500,000
1,624,348
36,897
7,062,376
520,989
520,989
446,161
446,161
967,150
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
(2,805,347)
10,200
7,045,716
239,395
239,395
384,092
384,092
623,487
8,029,526
7,669,203
These financial statements were approved and authorised for issue by the Board of Directors on 26 April 2019 and were signed on
its behalf by:
S P O’Hara
Director
Company Registration no. 05880755
The notes on pages 33 to 53 form part of these financial statements
25
OptiBiotix Health Plc
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 2016
7,196,010 (10,345,513)
6,144,357
90,692
1,500,000
417,585 5,003,131
Profit for the year
–
1,907,441
–
10,200
Issues of shares during the year
23,343
Share options and warrants
Non-controlling Interest
Cancellation of shares
during the year
–
–
–
–
–
135,361
–
–
–
–
–
(90,692)
–
(5,632,725)
5,632,725
–
–
–
–
–
– 1,917,641
–
158,704
56,932
56,932
–
–
(90,692)
–
Balance at 30 November 2017
1,586,628
(2,805,347)
6,279,718
10,200
1,500,000
474,517 7,045,716
Loss for the year
–
(1,919,276)
–
26,697
Issues of shares during the year
107,860
Share options and warrants
Cancellation of share
premium account
–
–
–
–
1,673,157
–
6,348,971
(6,348,971)
–
–
–
–
–
–
–
– (1,892,579)
– 1,781,017
128,222
128,222
–
–
Balance at 30 November 2018
1,694,488
1,624,398
1,603,904
36,897
1,500,000
602,739 7,062,376
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 33 to 53 form part of these financial statements
Annual Report and Accounts 2018 26
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
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
15
The notes on pages 33 to 53 form part of these financial statements
Year ended
30 November 2018
£
Year ended
30 November 2017
£
(1,233,717)
169
–
(1,233,548)
(2,954)
(469,639)
–
(470,593)
1,781,017
1,781,017
76,876
1,247,431
1,324,307
(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
27
OptiBiotix Health Plc
Notes to the Consolidated Statement of Cash Flows
1. Reconciliation of loss before income tax to cash outflow from operations
Year ended
30 November
2018
£
Year ended
30 November
2017
£
Operating loss (1,498,896)
(Increase)/Decrease in inventories (21,543)
Increase in trade and other receivables (267,681)
Increase in trade and other payables 281,594
Depreciation charge 2,187
Share Option expense 128,222
Amortisation of patents and development costs 139,721
Loss on disposal of tangible and intangible assets 2,679
Net cash outflow from operations (1,233,717)
(2,126,802)
17,735
(172,336)
209,220
6,998
56,932
112,968
–
(1,895,285)
2. Cash and Cash Equivalents
Cash and cash equivalents
The notes on pages 33 to 53 form part of these financial statements
Year ended
30 November
2018
£
1,324,307
Year ended
30 November
2017
£
1,247,431
Annual Report and Accounts 2018 28
Company Statement of Financial Position
ASSETS
Non-current assets
Investments
Other receivables
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
Total Equity
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
As at
30 November 2018
£
As at
30 November 2017
£
Notes
12
14
14
15
16
18
6,534,300
4,242,286
10,776,586
9,242
1,167,437
1,176,679
11,953,265
1,694,488
1,603,904
1,500,000
602,739
6,323,134
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
11,724,265
10,311,521
229,000
229,000
56,407
56,407
11,953,265
10,367,928
These financial statements were approved and authorised for issue by the Board of Directors on 26 April 2019 and were signed on
its behalf by:
S P O’Hara
Director
Company Registration no. 05880755
The notes on pages 33 to 53 form part of these financial statements
29
OptiBiotix Health Plc
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 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
Loss for the period
–
(496,495)
–
Issues of shares during the year
107,860
Share options and warrants
Cancellation of share premium account
–
–
–
–
1,673,157
–
6,348,971
(6,348,971)
–
–
–
–
–
–
(496,495)
1,781,015
128,222
128,222
–
–
Balance at 30 November 2018
1,694,488
6,323,134
1,603,904
1,500,000
602,739 11,724,265
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 reserverepresents the cumulative amounts charged in respect of unsettled warrants and options issued.
The notes on pages 33 to 53 form part of these financial statements
Annual Report and Accounts 2018 30
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
15
The notes on pages 33 to 53 form part of these financial statements
30 November 2018
Year ended
£
30 November 2017
Year ended
£
(1,620,434)
85
(1,620,349)
(1,000)
(1,000)
1,781,017
1,781,017
159,668
1,007,769
1,167,437
(1,263,554)
64
(1,263,490)
(74,895)
(74,895)
158,703
158,703
(1,179,682)
2,187,451
1,007,769
31
OptiBiotix Health Plc
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
Impairment losses
Net cash outflow from operations
2. Cash and Cash Equivalents
Cash and cash equivalents
The notes on pages 33 to 53 form part of these financial statements
Year ended
30 November
2018
£
Year ended
30 November
2017
£
(496,495) (462,696)
(1,327,028) (838,784)
172,593 (18,943)
128,222 56,932
197,725 64
99,999
(1,620,434)
–
(1,263,554)
As at
30 November
2018
£
1,167,437
As at
30 November
2017
£
1,007,769
Annual Report and Accounts 2018 32
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 (IFRS), International Accounting Standards (IASs) and International Financial Reporting Interpretations
Committee (IFRIC) interpretations (collectively ‘IFRS’) 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 IFRS 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 2017 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
33
OptiBiotix Health Plc
2. Accounting Policies (continued)
Application date of Application date of
Reference Title Summary standard Company
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 40 Investment Amendment regarding the transfer Periods commencing on 1 December 2018
property of property or after 1 January 2018
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.
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.
Annual Report and Accounts 2018 34
2. Accounting Policies (continued)
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.
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.
35
OptiBiotix Health Plc
2. Accounting Policies (continued)
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.
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.
Annual Report and Accounts 2018 36
2. Accounting Policies (continued)
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.
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 2018.
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.
37
OptiBiotix Health Plc
2. Accounting Policies (continued)
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.
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.
Annual Report and Accounts 2018 38
2. Accounting Policies (continued)
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.
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.
Research and developments that have been capitalised in line with the recognition criteria of IAS38 have been estimated to
have a useful economic life of 10 years. These estimates will be reviewed annually and revised if the useful life is deemed to
be lower 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.
39
OptiBiotix Health Plc
4. Employees and Directors
Wages and salaries
Director’s remuneration
Director’s Fees
Social security costs
Pension costs
The average monthly number of employees during the year was as follows:
Directors
Research and development
Directors’ remuneration and fees
Directors’ share based payments
Bonus
Pension
Total emoluments
Emoluments paid to the highest paid Director
Included on total emoluments paid to Directors are capitalised wages of £221,703.
Year ended
30 November 2018
£
Year ended
30 November 2017
£
23,274
576,228
41,083
79,319
54,385
774,289
141,185
463,965
70,500
58,456
36,360
770,446
Year ended
30 November 2018
No.
Year ended
30 November 2017
No.
8
2
10
6
2
8
Year ended
30 November 2018
£
Year ended
30 November 2017
£
572,311
120,793
45,000
53,834
791,938
212,897
475,350
46,173
38,000
35,592
595,115
212,800
Annual Report and Accounts 2018 40
4. Employees and Directors (continued)
Directors’ remuneration
Details of emoluments received by Directors of the Group for the year ended 30 November 2018 are as follows:
A Reynolds*
S P O’Hara
G Barker*
M Christie
R Davidson
S Kolyda
P Wennström*
P Rehne
C Wood
Total
Remuneration,
Pension and fees
£
Share based
payments
£
5,083
212,897
18,000
5,603
50,417
87,187
18,000
144,054
129,904
671,145
–
–
13,710
2,185
7,429
21,139
–
38,165
38,165
120,793
Total
£
5,083
212,897
31,710
7,788
57,846
108,326
18,000
182,219
168,069
791,938
*For disclosure in relation to Directors’ fees please refer to note 20.
5. Net Finance Income/(Costs)
Year ended
30 November 2018
£
Year ended
30 November 2017
£
169
–
169
142
(6,154)
(6,012)
Finance Income:
Bank Interest
Finance Costs:
Loan interest
Net Finance Income/(Costs)
41
OptiBiotix Health Plc
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 nil (2017: £16,000))
Auditor remuneration – non audit fees
Brokers & Advisors
Advertising & marketing
Share based payments charge
Depreciation on property, plant and equipment
Amortisation of patents and development costs
Patent and IP costs
Consultancy fees
Legal and professional fees
Public Relations costs
Travel costs
Other expenses
Year ended
30 November 2018
£
Year ended
30 November 2017
£
160,673
449,442
–
–
50,984
2,309
86,414
48,201
128,222
2,187
139,721
88,003
146,559
26,563
152,082
120,541
248,502
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
285,407
Total administrative expenses
1,850,403
2,244,169
7.
Income Tax
Year ended
30 November 2018
£
Year ended
30 November 2017
£
Corporation tax credit (120,000)
Corporation tax credit prior year –
Deferred tax movement 62,069
Overseas tax suffered 3,560
Total taxation (54,371)
(183,951)
(21,902)
(22,594)
–
(228,447)
Annual Report and Accounts 2018 42
7.
Income Tax (continued)
Analysis of tax expense
No liability to UK corporation tax arose on ordinary activities for the year ended 30 November 2018 nor for the year ended
30 November 2017.
Year ended
30 November 2018
£
Year ended
30 November 2017
£
Profit (Loss) on ordinary activities before income tax (1,946,950)
1,689,194
Loss on ordinary activities multiplied by the standard rate of corporation
tax in UK of 19.33% (2017 – 19.33%) (376,345)
Effects of:
Disallowables
Income not taxable
R&D enhanced deductions
Effect of research & development tax credit
Capital allowances
Amortisation
Revenue items capitalised
Overseas tax suffered
Other timing differences
Unused tax losses carried forward
Tax credit
62,061
–
(122,086)
(120,000)
571
27,008
(90,395)
3,560
62,069
500,372
(54,371)
326,521
124,946
(793,300)
(138,607)
(205,854)
–
843
(991)
–
(22,594)
480,589
(228,447)
The Group has estimated losses of £1,646,423 (2017: £1,760,341) and estimated excess management expenses of £2,093,197 (2017:
£2,091,815).
The tax losses have resulted in a deferred tax asset at 19% of approximately £710,528 (2017: £732,676) which has not been recognized
as it is uncertain whether future taxable profits will be sufficient to utilise the losses.
2018
£
183,952
120,000
303,952
2017
£
–
183,952
183,952
Current tax asset – Group
Balance brought forward
Research & development tax credit claimed
Balance carried forward
43
OptiBiotix Health Plc
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:
2018
Basic and diluted EPS
Basic EPS
Diluted EPS
Earnings
£
(1,919,276)
(1,919,276)
Weighted average
Number of shares
No.
Profit per-share
Pence
82,233,690 (2.33)p
82,233,690 (2.33)p
2017
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
As at 30 November 2018 there were 6,041,057 (2017: 7,845,237) outstanding share options and 1,045,524 (2017: 1,399,925)
outstanding share warrants. As the Group was loss making in the year, the options and warrants are considered anti-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 loss for the parent Company for the year was £496,495 (2017: Profit £3,360,503).
Annual Report and Accounts 2018 44
Development
Costs and
Patents
£
2,421,582
43,382
(198,834)
2,266,130
467,639
(6,763)
2,727,006
225,936
112,968
338,904
139,721
(4,708)
473,917
2,253,089
1,927,226
10. Intangible assets
Group
Cost
At 1 December 2016
Additions
Disposals
At 30 November 2017
Additions
Disposals
At 30 November 2018
Amortisation
At 1 December 2016
Amortisation charge for the year
At 30 November 2017
Amortisation charge for the year
Eliminated on disposal
At 30 November 2018
Carrying amount
At 30 November 2018
At 30 November 2017
45
OptiBiotix Health Plc
11. Property, plant and equipment
Cost
At 30 November 2016
Additions
At 30 November 2017
Additions
Disposals
At 30 November 2018
Depreciation
At 30 November 2016
Charge for the year
At 30 November 2017
Charge for the year
Eliminated on disposal
At 30 November 2018
Carrying amount
At 30 November 2018
At 30 November 2017
12. Investments
Group
£
13,615
1,804
15,419
2,954
(9,912)
8,461
1,860
6,998
8,858
2,187
(5,727)
5,318
3,143
6,561
Set out below is the associate of the Group as at 30 November 2018 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 2017
Share of Loss
At 30 November 2018
Carrying amount
At 30 November 2018
At 30 November 2017
£
4,189,022
(448,223)
3,740,799
3,740,799
4,189,022
Annual Report and Accounts 2018 46
12. Investments (continued)
As at 30 November 2018, the Group directly held the following associates:
Country of
incorporation
Name of company Principal activities and place of business
Proportion of
equity interest
2018
SkinBioTherapeutics Plc Research & Development United Kingdom
41.9% of ordinary shares
Company: Investments in subsidiary undertakings
Cost
At 30 November 2016
Additions
Disposals
At 30 November 2017
Additions
Impairments
Carrying amount
At 30 November 2018
At 30 November 2017
£
2,735,100
74,999
(660,100)
2,149,999
1,000
(99,999)
2,051,000
2,149,999
The additions are in respect of 100% of the share capital of ProBiotix Health Limited.
As at 30 November 2018, 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
ProBiotix Health Ltd Health foods United Kingdom
100% of ordinary shares
Investments in associate
At 30 November 2018
At 30 November 2017
Total Investment
At 30 November 2018
At 30 November 2017
47
OptiBiotix Health Plc
£
4,483,300
4,483,300
6,534,300
6,633,299
13. Inventories
Group Company
2018 2017 2018
£ £ £
Finished goods 30,433 8,890 –
2017
£
–
14. Trade and other Receivables
Group Company
2018 2017 2018
£ £ £
2017
£
Non-current
Amounts owed by Group undertakings – – 4,242,286
– – 4,242,286
Current
Accounts receivable 228,825 20,249 –
Amounts owed by group undertakings – – –
Other receivables 52,190 77,275 969
Prepayments and accrued income 92,788 8,598 8,283
373,803 106,122 9,242
–
–
–
2,645,210
73,992
7,658
2,726,860
15. Cash and Cash Equivalents
Group Company
2018 2017 2018
£ £ £
2017
£
Cash and bank balances 1,324,307 1,247,431 1,167,437
1,007,769
16. Called Up Share Capital
Issued share capital comprises:
Ordinary shares of 2p each – 84,724,413 (2017: 79,331,477)
2018
£
1,694,488
1,694,488
2017
£
1,586,628
1,586,628
Annual Report and Accounts 2018 48
16. Called Up Share Capital (continued)
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:
Total warrants exercised in the year
Date issued
14/12/2017
30/01/2018
13/09/2018
Number
73
354,162
166
354,401
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
06/02/2018
19/06/2018
11/10/2018
Number
800,000
1,461,408
357,772
2,619,180
Price Per Share
£0.08
£0.08
£0.20
During the year the Company issued new ordinary shares of £0.02 at the following price per share:
Date issued
30/05/2018
Number
2,419,355
Price Per Share
£0.62
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.
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.
49
OptiBiotix Health Plc
18. Trade and other payables
Current:
Group Company
2018 2017 2018
£ £ £
Accounts Payable 115,697 10,136 –
Accrued expenses 207,103 210,965 30,000
Amount due to Director 189 189 –
Other payables 198,000 18,105 –
Amounts due to Group undertakings – – 199,000
Total trade and other payables 520,989 239,395 229,000
2017
£
–
56,407
–
–
–
56,407
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 19% (2017: 20%).
The movement on the deferred tax account is as shown below:
At 30 November
Movement in the year
At 30 November
2018
£
384,092
62,069
441,161
2017
£
406,686
(22,594)
384,092
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 30 November 2018 the Group was charged £5,083 (2017 – £35,500) by Reyco Limited, a company controlled by A
Reynolds. £18,000 (2017 – £12,000) was paid to both G Barker and P Wennström in respect of Director’s services provided.
During the year 30 November 2018 the Group was charged £36,167 (2017 – £35,000) 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
Annual Report and Accounts 2018 50
22. Share Based payment Transactions (continued)
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
2018 2017 2018
No. No. £
2017
£
Outstanding at the beginning of the period 7,845,237 10,345,237 0.17
Granted during the year 815,000 1,000,000 0.76
Forfeited/cancelled during the year – (666,667) –
Exchanged for shares (2,619,180) (2,833,333) 0.10
Outstanding at the end of the period 6,041,057 7,845,237 0.17
0.11
0.70
0.27
0.10
0.17
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.
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.
For the share options issued in 2018 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 2,146 days (2017 – 2,511
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
Grant date
Exercise price
Share price at grant date
Risk-free rate
Volatility
Expected life
Fair value
51
OptiBiotix Health Plc
13/07/2018
73.00p
76.00p
0.25%
35%
10 years
25.00p
21/09/2018
95.00p
96.90p
0.25%
35%
10 years
34.00p
22. Share Based payment Transactions (continued)
The share price per share at 30/11/2018 was £0.92 (30/11/2017: £0.69)
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
2018 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
2018 2017 2018
No. No. £
2017
£
Outstanding at the beginning of the period 1,399,925 1,983,709 0.08
Exchanged for shares (354,401) (583,784) 0.08
Outstanding at the end of the period 1,045,524 1,399,925 0.08
0.08
0.08
0.08
A charge of £128,222 (2017: £56,932) has been recognised during the year for the share based payments over the vesting period.
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.
Annual Report and Accounts 2018 52
23. Financial Risk Management Objectives and Policies (continued)
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 24 January 2019 the Company issued and allotted 7,813 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.
ProBiotix Health Limited (“the subsidiary”) obtained loans totalling £198,000 during 2018, in respect of convertible loan notes that
were issued on 11 December 2018. The issue was for a total of £1.025 million, of which £725,050 was for cash consideration. £250,000
was paid to OptiBiotix Health plc for assets transferred, and £50,000 were paid in lieu of commission costs.
53
OptiBiotix Health Plc
optibiotix.com
To find out more please contact OptiBiotix on:
info@optibiotix.com
OptiBiotix Health Plc | Innovation Centre, Innovation Way, Heslington, York, YO10 5DG, UK.
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