ANNUAL REPORT AND ACCOUNTS
FOR THE PERIOD ENDED 31 DECEMBER 2019
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
2
3
11
15
18
24
25
26
27
28
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
29
30
31
32
33
1
OptiBiotix Health Plc
Company Information
Directors: S P O’Hara
P Wennström
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 2019 2
Chairman’s Statement
I am pleased to report a period of very
significant progress, during which
Optibiotix has achieved a real step
change in its planned transition from a
research and development specialist
into a market-leading and profitable
commercial operation. The business is
now growing revenues and achieving
global reach and recognition for its
unique technologies and products. We
have grown sales across all divisions,
signed 24 new agreements extending our reach into 46 countries, and
significantly strengthened our management team, all while maintaining
cost control and a strong balance sheet.
Strategy
is a
Optibiotix Health
life sciences business founded on the
development of compounds to tackle obesity, cardiovascular disease
and diabetes: all conditions that are affecting growing numbers of
people in all parts of the world.
Our growth strategy is to secure multiple deals with multiple partners
– manufacturers, formulators and distributors – so that we have control
of the complete value chain for all the compounds we develop, and can
extract value for our shareholders at each stage.
We also seek to reduce risk by reaching agreements with manufacturers
in a range of different countries: hence our SlimBiome® compound is
produced by separate companies in the UK, Continental Europe, USA,
Australia and India, to which we will soon add a manufacturer in China.
Formulators apply our compounds to a range of different uses; the
common factor is that our patented and trademarked products such
as LPLDL® and SlimBiome® act as the ‘Intel’ inside a wide and growing
range of food, beverage, supplement, and medical products around
the world.
This careful, low-risk approach is delivering on exactly the schedule
envisaged when the Company began the process of commercialisation
in 2017. This saw initial deals being secured that year, a broadening of
reach in 2018, and the build-up of revenues from contracts in 2019. We
now have a secure platform to deliver strong sales growth and with the
aim of achieving profitability in 2020.
Business development
Among the many positive developments during the period, which the
Chief Executive discusses more fully in his report, I would particularly
like to highlight the achievement of US Food & Drug Administration
GRAS status for LPLDL®, and its pharmaceutical Good Manufacturing
Practice designation. Together these achievements open the way for
LPLDL® to be used as a functional ingredient in a range of food, dairy
and beverage products across the USA, and pave the way for its use as
an active ingredient in pharmaceutical products. Similarly, significant
potential should be unlocked by the award in Europe of a CE mark for
SlimBiome® and its registration as a medical device.
I am also pleased that the effectiveness of our products continues to
gain recognition through the achievement of major industry awards,
with the naming of SlimBiome® as Weight Management Ingredient of
the Year: Asia at Vitafoods in Singapore constituting a particular highlight
of the year.
Board and management
This has been my second year as Chairman and it has been a real
pleasure to see the business growing and maturing in line with all my
expectations when I joined the Board at the beginning of 2018.
As announced in the last annual report, Dr Fred Narbel joined the
Company on 1 March 2019 as Managing Director of our integrated
Prebiotics division containing our SweetBiotix®, OptiBiotic® and
microbiome modulating technology platforms. I believe we now have
an excellent mix of executive talent in the scientific and commercial
expertise of our founder and CEO Stephen O’Hara; the proven
management skills and extensive industry contacts of Dr Fred Narbel;
and the scientific leadership of our Research & Development Director
Dr Sofia Kolyda. These are complemented by the expertise of my non-
executive colleagues Peter Wennström and Sean Christie, with Peter
bringing us more than 25 years of experience in international brand
management and specialist consultancy, and Sean possessing extensive
experience of finance, corporate governance, mergers and acquisitions.
Outside the main Board, Stephen Prescott joined us as CEO of our
wholly-owned subsidiary ProBiotix Health Ltd in May 2019, while Steve
Riley continues as head of our Consumer Health division, with
responsibility for our Online store that makes our unique products
available direct to consumers. During the period Fred Narbel, Steve
Prescott and Steve Riley were given full P&L responsibility for their
respective divisions, charged with growing sales while managing costs.
333
OptiBiotix Health Plc
Outlook
As shown in the recent trading update (RNS: 18 May 2020) we continue
to grow our top line with strong commercial progress in the first three
months of 2020 increasing sales of LPLDL® and SlimBiome® as
ingredient or final product by 928% when compared to the same period
last year and extending geographic reach and brand presence into
119 countries. As we benefit from increasing revenues from established
deals, and new agreements begin to deliver sales we anticipate further
revenue growth in 2020. Encouraging developments in our new
financial year include the launch of SlimBiome® with Holland & Barrett
in the UK, the launch of products with Walmart in the US, and a deal to
enter the Chinese market. AlfaSigma in Italy and Akum in India are also
both commercialising products in their home markets that will
contribute to our sales growth during the year.
The renegotiation of our contract with Sacco S.r.l. in March 2020,
extending this until 2023 and changing it from a profit sharing to a
manufacturing and supply basis, is illustrative of the increasing leverage
we can exercise as sales volumes increase, and will capture a greater
share of value for our investors. This is an important precedent that we
expect to follow in other contract renegotiations during the year.
We continue to explore the potential for a dual NASDAQ listing in the
USA to capitalise on growing North American consumer and investor
interest in the microbiome, broaden our investor base and reduce the
share price volatility caused by the low liquidity associated with our
current AIM listing in the UK.
Despite the pressures on the global economy caused by the Covid-19
pandemic, we continue to look to achieve revenue growth and
profitability in all three of our divisions in the current year, and remain
confident in our ability to deliver growing value for our shareholders in
the longer term.
N Davidson
Chairman
27 May 2020
Annual Report and Accounts 2019 4
Chief Executive’s Statement
of
the
OptiBiotix offers investors a unique
opportunity to participate in the
growth potential afforded by one the
most progressive and exciting areas
of biotechnological research: the
modulation
human
microbiome. Everything we do
involves the application of science to
improve human health, developing
pharmaceutical grade solutions to
deliver food and dietary supplements
of proven effectiveness; these are protected by our extensive
international portfolio of patents and trademarks. Our low risk
business model involves working with a range of local partners who
are recognised and respected leaders in their fields to gain access
to fast-growing markets around the world, developing a truly
global reach that is delivering strong sales growth.
Strategic development
As the Chairman has noted, our strategy is designed to maximise the
income potential of each of our products while limiting investment risk,
and managing costs. We focus on large markets, valued at £100m or
more, that are growing rapidly, showing a compound annual growth
rate (CAGR) of 10 per cent or more, and where there is a large unmet
demand. We aim to satisfy this demand by developing food ingredients,
supplements and pharmaceutical products with a range of appropriate
partners in a wide and growing range of territories. Our partners vary in
size from $1bn turnover corporations to small, fast-growing companies,
but all share an established industry reputation and an effective
distribution network within their target market.
Our commercial strategy involves completing deals across multiple
levels of the value chain, starting with manufacturing agreements such
as that signed with Sacco S.r.l. in Italy in 2017 to manufacture LPLDL®;
this was then complemented by royalty bearing licence deals with
formulation and distribution partners such as Nutrilinea, and final
distribution partners like AlfaSigma.
While this strategy takes longer to develop than concluding a single
licence deal, and requires close collaboration with partners, the multi-
channel approach enables OptiBiotix to maximise the income potential
of each product, whilst limiting the risk related to any individual deal.
Key to this strategy is working with the right commercial partners and
ensuring that their sales and marketing teams are provided with the
supporting science and training to highlight the benefits of our
technology in order to maximise sales growth. As we extend our reach
into new application areas, create new products, and expand into new
territories, the scale of our opportunity enlarges.
The next phase of our strategy, on which we have now embarked, is to
drive the business to profitability. This is not just about continuing to
grow sales, but also about managing costs, renegotiating contracts as
volumes increase, reducing the cost of goods to OptiBiotix, and
focusing on higher margin products. This will be an important part of
building a profitable and sustainable business.
The renegotiation of our terms of trade in an extended contract with
Sacco S.r.l., announced in March 2020, provides an excellent illustration
of this approach. Our original agreement with them in 2017 was a profit-
sharing deal which encouraged and rewarded the manufacturer to use
their industry network to promote and sell our products. This is a very
cost-effective approach in the early days of building a business, since
the manufacturer effectively becomes our global sales team without
any cost to us, as they carry out marketing activities, promotion at
exhibitions, application development and so forth.
However, as our sales volumes increase our leverage improves, allowing
us to renegotiate our contract from profit share to manufacture and
supply – where we buy the product and then sell on to our other
partners. The advantages of this are two-fold: we can reduce our cost of
goods from the manufacturer as volumes increase, and we can also exert
increased leverage on our formulation and distribution partners as we
become the direct sales link to them. Whist this may initially increase
operating costs whilst we build stock levels, particularly to support retail
partners who deliver large volume sales and require a responsive supply
chain, this should ultimately deliver greater profitability.
Our contracts are typically of one to three years’ duration and we expect
to renegotiate a number of current agreements from a profit sharing to
a manufacturing and supply basis during the current year, allowing us
to capture more of the value chain for our shareholders by increasing
control and profitability.
The historic uneven weighting of revenue towards the second half of
our financial year will be smoothed out as more contracts are renewed
on these terms.
This allows OptiBiotix to operate on a very asset-light infrastructure with
manufacturing product, regulatory approvals, and sales and marketing
infrastructure all funded by our partners so that licence and royalty fees
are largely cost-free and flow straight to our bottom line. This is a low
risk, low cost approach to accessing multiple consumer healthcare and
pharmaceutical markets around the world and has the potential to
cumulatively generate substantial revenues and profitability in the
years ahead.
A further benefit expected to flow through to the bottom line is that
our research and development costs are set to fall as a proportion of
sales now that clinical studies to confirm the efficacy of SlimBiome® and
LPLDL® are essentially complete. Intellectual property expenditure will
also reduce now that patent and trademark registration in most key
territories has been completed, and core patents have been granted.
As part of this process whilst we will continue to register core patents
in all major territories (typically US, Europe, Canada, Japan, Australia,
555
OptiBiotix Health Plc
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India) we will limit supporting patents to Europe and the USA. This
should reduce IP costs whilst continuing to protect our commercial
interests.
Finally, we announced the appointment of Goetz Partner Securities
(“Goetz”) in June 2019 as financial advisers to the Company with the aim
of improving institutional and family funds buy side access from within
Europe. As part of our focus on managing costs we intend to transition
our agreement with Goetz from a fixed monthly payment to an ad hoc
project by project basis at the end of May 2020.
Operational highlights
During the period we have met a significant number of important
objectives that continue to build value for our shareholders. Key
achievements of the period include:
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The award of a CE mark and registration of SlimBiome as a medical
device.
The recognition of OptiBiotox’s cholesterol and blood pressure
reducing Lactobacillus plantarum LP-LDL probiotic strain
determined as Generally Recognized As Safe (GRAS). GRAS is a
United States Food and Drug Administration (FDA) designation
and extends the potential applications of LP-LDL to use as a
functional ingredient in food, dairy, and beverage products across
the USA.
Pharmaceutical GMP manufacturer approval of LPLDL®.
Pharmaceutical GMP proves that a drug substance (LPLDL®) is
produced consistently with pharmaceutical grade quality. GMP
process validation is required by customers and health authorities
around the globe to commercialise active ingredients as drugs.
The validation of LPLDL® pharmaceutical GMP manufacture is a
significant step in the development of LPLDL® as a pharmaceutical
drug product.
The award of a licence from the Food Standards and Safety
Authority India (FSSAI) to OptiBiotix’s manufacturing partner, Zeon
Life Sciences, to manufacture SlimBiome and SlimBiome
containing products in India.
The appointment of EIWA Trading Company to import, market and
distribute OptiBiotix’s cholesterol and blood pressure-reducing
probiotic strain Lactobacillus plantarum LP-LDL in Japan.
The launching of LP-LDL in pharmacies of El Corte Inglés, Spain's
biggest department store in all of Spain’s major cities, with IENP
under the “39ytú” brand.
A license agreement with Kappa Bioscience AS (“Kappa”) for the
use of Lactobacillus plantarum LPLDL® in a new application area
within cardiovascular health in twenty seven countries.
The raise of £1.025 million through the issue of convertible loan
notes for OptiBiotix to provide funding for a potential initial public
offering of wholly owned subsidiary ProBiotix Health, of which
OptiBiotix subscribed for £250,000.
The appointment of Extensor and subsequent territory extension
to import, market and distribute GoFigure® products in Poland,
Ukraine, Estonia, Lithuania, Latvia, Kazakhstan, Kyrgyzstan,
Tajikistan, Uzbekistan, Turkmenistan, Armenia, Azerbaijan, Georgia,
Belarus, Moldova and Russia. This is the start of a strategy to take
OptiBiotix’s own label GoFigure® products to international markets
to build brand recognition, and create demand for SlimBiome, the
functional ingredient within Gofigure® products.
An agreement with Nutrilinea Srl to develop a food supplement
containing LP-LDL for the reduction of high blood pressure
(hypertension). Nutrilinea will cover the cost of all product
development, manufacturing and human studies in return for
12 months exclusivity for the European market. ProBiotix has
exclusivity for the UK and all other markets outside Europe.
An agreement with Agropur to manufacture, supply and distribute
OptiBiotix’s SlimBiome® weight management technology in the
USA, Canada and Mexico.
An agreement with Maxum Foods Pty Ltd to manufacture, supply
and distribute OptiBiotix’s SlimBiome® weight management
technology in Australia and New Zealand.
The launch of two products formulated with SlimBiome in India:
Metalite – a supplement to aid with effective weight
management. and Metalite Pro – a high protein meal replacement
(www.metalitepro.com).
Winning the award for Weight Management Ingredient of the Year:
Asia, for SlimBiome, at the Vitafoods Asia trade exhibition
tradeshow in Singapore. The award is given to the product
identified by a panel of scientific, regulatory and industry experts
demonstrating leading edge research and innovation in the
weight management market.
Annual Report and Accounts 2019 6
Post-period end highlights
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The launch of a product range containing OptiBiotix's SlimBiome®
the
proprietary weight management
SlimBiome® brand with Holland & Barrett.
technology under
The launch of a food supplement containing LPLDL® by
ALFASIGMA, the first of its kind nutraceutical probiotic in Italy for
cholesterol reduction.
An agreement with Granja Pocha S.A. (“Granja Pocha”) for the
inclusion of LPLDL® into a functional yogurt product in Uruguay,
South America.
Successful completion of a three month study of 40 patients for a
new food supplement containing LPLDL® (CholBiome BP) carried
out by the University of Pavia,, Italy and showed statistically
significant reductions in both systolic, diastolic blood pressure
levels, and cholesterol levels.
An agreement with OptiPharm, whose flagship brand, Optislim, is
Australia’s leading weight management brand, for the use
OptiBiome® weight management ingredient in over 20 countries
including Australia, parts of Asia, New Zealand, Middle East, Gulf
States and North America.
The listing of SlimBiome containing products in Walmart and
Costco in the USA and Canada.
The signing of a deal with Pierce Asia taking OptiBiotix products
to China.
Regulatory approvals
In December 2019 we were delighted to achieve a CE mark and
registration of SlimBiome® as a medical device by the European
regulatory authorities. This was supported by independent human
studies at a number of universities which demonstrated that, when
compared to a control group, people who took SlimBiome® feel fuller
and are less hungry; experience fewer food cravings; and change their
food choice to eat fewer sweet and fatty foods. This registration unlocks
significant further potential for the application of SlimBiome® beyond
its current use as a functional food ingredient with the formulation and
sachet presentation the basis for Holland and Barrett’s launch of
products in 2020.
Previously, in April 2019, our partner Zeon Life Sciences was awarded a
licence by the Food Standards and Safety Authority India (FSSAI) to
manufacture SlimBiome® and SlimBiome®-containing products in India.
We have also made very important strides in the official recognition of
our cholesterol and blood pressure reducing Lactobacillus plantarum
LPLDL® probiotic strain. This was Generally Recognized As Safe (GRAS)
by the United States Food and Drug Administration (FDA) in February
2019. Securing this GRAS designation extended the potential
applications of LPLDL® to its use as a functional ingredient in food, dairy,
and beverage products across the USA.
In October 2019 we also secured from the FDA Pharmaceutical Good
Manufacturing Practice (GMP) approval of LPLDL®, which is important
in proving that LPLDL® is produced consistently to pharmaceutical grade
quality. GMP process validation is required by customers and health
authorities around the world to commercialise active ingredients as
drugs. The validation of LPLDL® pharmaceutical GMP manufacture is a
significant step in the development of LPLDL® as a pharmaceutical
drug product.
New partnerships and product launches
In February 2019 we appointed EIWA Trading Company to import,
market and distribute OptiBiotix’s cholesterol and blood pressure-
reducing probiotic strain Lactobacillus plantarum LPLDL® in Japan.
In May 2019 we reached an agreement with the Italy-based Nutrilinea
Srl to develop a food supplement containing LPLDL® for the reduction
of high blood pressure (hypertension). Nutrilinea covered the cost of all
product development, manufacturing and human studies in return for
12 months exclusivity within the Continental European market. ProBiotix
retains exclusivity for the UK and all other markets outside Europe.
Following successful human studies, OptiBiotix intends to launch a
blood pressure product CholBiomeBP in 2020.
In the same month we signed an agreement with Instituto Español de
Nutrición Personalizada, S.A. (IENP) for the use of LPLDL® in personalised
food supplements in Spain. IENP has already launched LPLDL® under
the ‘39ytú’ brand in pharmacies of El Corte Inglés, Spain’s largest
department store chain with outlets in all the country’s major cities.
In June 2019 we signed an agreement with the dairy co-operative
Agropur to manufacture, supply and distribute OptiBiotix’s SlimBiome®
weight management technology in the USA, Canada and Mexico.
In the same month we appointed the well-known Polish brand Extensor
to import, market and distribute GoFigure® weight management
products directly to consumers in Poland, and subsequently agreed a
territory extension that also covers Ukraine, Estonia, Lithuania, Latvia,
Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, Turkmenistan, Armenia,
Azerbaijan, Georgia, Belarus, Moldova and Russia. This is the start of a
strategy to take OptiBiotix’s own label GoFigure® products to
international markets, build brand recognition, and create demand for
SlimBiome®, the functional ingredient within Gofigure® products.
In July 2019 we signed a licence agreement with Kappa Bioscience AS
for the use of Lactobacillus plantarum LPLDL® in a new application area
within cardiovascular health in 27 countries.
7
OptiBiotix Health Plc
In August 2019 we concluded an agreement with the Australian dairy
ingredients company Maxum Foods Pty Ltd to manufacture, supply and
distribute OptiBiotix’s SlimBiome® weight management technology in
Australia and New Zealand.
In December 2019 we launched two new products formulated with
SlimBiome® to the Indian market in partnership with Anthem BioPharma
and Zeon Life Sciences: Metalite, a supplement to aid with effective
weight management, and Metalite Pro, a high protein meal
replacement (www.metalitepro.com).
Awards
We were delighted to win the award for Weight Management Ingredient
of the Year: Asia for SlimBiome® at the Vitafoods Asia trade exhibition
tradeshow in Singapore in September 2019. The award is given to the
product identified by a panel of scientific, regulatory and industry
experts demonstrating leading edge research and innovation in the
weight management market. This follows on from our Weight
Management Ingredient of the Year awards for SlimBiome® in Europe
(2018) and 2017 (UK), demonstrating a high level of industry recognition
across global markets. The Company also received The Grocer New
Product Award 2019, in the breakfast category, for its GoFigure Matcha
Tea & Pistachio Muesli. This is a major food industry award and shows
how SlimBiome can effectively be incorporated into everyday breakfast
products to support healthy weight management.
Results
As announced on 23 March, we changed our financial year-end to
31 December to align our reporting with that of similar companies on
other international exchanges. We are therefore reporting results for
the 13 months to 31 December 2019 (prior year: 12 months to
30 November 2018).
Total sales for the year were £744,883 (2018: £541,614). with other
income of £617,000, including, inter alia, income resulting from the
partial disposal of SkinBioTherapeutics plc shares as previously reported.
The sales figure is less than the £808k reported in the unaudited figures
(RNS: January 17 2020), as it no longer includes approximately £60,000
worth of LPLDL® which was invoiced and part paid in 2019 which under
IFRS 15, the new international reporting standard, will now be
accounted for in the 2020 accounts as delivery did not take place until
2020.
In line with previous years, the majority of income was generated in the
second half of the year (H1 2019: £148,818). We expect this trend to
continue in 2020 with a gradual smoothing in this second half as income
from ingredient, white label and own label products sold through
retailers or direct to consumers online, provide more evenly distributed
income throughout the year.
Administrative expenses for the 13 months to end of December 2019
were £2,559,440 an increase of £709,037 from the £1,850,403 in the
12 months to November 2018. A large part of this increase (£261,904)
arises from the combination of one-off regulatory costs (£185,447) and
the increase in consultancy costs (£76,457) from achieving GRAS and
GMP manufacture for LPLDL®. We calculate approximately £154,200 of
expenses arises from the change in accounting period creating an
additional month in this year’s accounts. The appointment of Dr Fred
Narbel and Steve Prescott contributed to an increase in Directors fees
of £290,665. Director costs include the remuneration costs of Christina
Wood who left in August 2019 but was remunerated to the end of
November as part of her contractual 3 month notice period. Within 2019
administration expenses there were £355,304 of non-cash expenses
representing depreciation, amortisation and share based payment
devaluations, an increase of £85,174 on 2018 (£270,130).
The share of loss from OptiBiotix’s associate, SkinBiotherapeutics (SBTX),
was £296,344. This is an accounting adjustment and has no impact on
the Groups cash.
At 31 December 2019, the Group had £455,608 cash in the bank. Once
R&D tax credits (£190,435), and recoverable VAT (£59,345) are added
back, the balance was £705,388. On 17 April 2020, post accounting
period, the Group raised £1.0 million through the issue of 2,500,000 new
ordinary shares. With this funding and growing revenues, the cash
position remains strong and sufficient to cover the delivery of existing
commercial plans.
Management
We significantly strengthened our management team during the year
with the appointment in March 2019 of Dr Fred Narbel as Managing
Director of our Prebiotics division. Fred Narbel was formerly Vice
President of Sales for Nutrition Solutions at Agropur, a major North
American dairy company with sales of $6.7 billion in 2018. He has
brought us extensive experience of selling speciality food ingredients
in international markets, a wide network of contacts in the high value
speciality food ingredients industry, and a strong track record of rapidly
growing sales.
Outside the main Board, Stephen Prescott joined as Chief Executive
Officer of OptiBiotix’s wholly owned subsidiary, ProBiotix Health Ltd in
May 2019. Steve will step down from the Board of ProBiotix Health Ltd
and leave the Company by mutual consent at the end of May 2020.
Mikkel Hvid-Hansen, who joined ProBiotix as European Sales Director in
February 2020 will take on an extended role as Commercial Director
with Stephen O’Hara acting as CEO of ProBiotix Health Ltd.
Annual Report and Accounts 2019 8
We anticipate further additions and changes to the management team
and the Board of both OptiBiotix and ProBiotix Health in line with the
growth aspirations of both companies and the aim of transitioning to a
profitable and sustainable business.
Prospects
Despite the global challenges with Coronavirus we have continued to
extend our global reach in 2020 signing 14 agreements for the year to
date. These include 10 for SlimBiome® and 4 for LPLDL®. These
agreements aim to extend the Company’s geographic reach into
119 countries.
Significant developments in the period to date include the launch of a
product range containing OptiBiotix's SlimBiome® proprietary weight
management technology under the SlimBiome® brand with Holland &
Barrett in the UK. Sales of the first products launched have exceeded
our expectations and we are working with our partners to extend the
product range.
In Italy, our partner AlfaSigma has launched a food supplement
containing LPLDL® which is the first nutraceutical probiotic for
cholesterol reduction to reach the market there.
Also in Italy, the University of Pavia has successfully completed a three
month study of 40 patients for a new food supplement containing
LPLDL® (CholBiome BP) which showed statistically significant reductions
in both systolic and diastolic blood pressure levels, and in cholesterol
levels, for the participants.
In March 2020 we announced a new global manufacturing and supply
agreement for LPLDL® with Italy-based Sacco S.r.l., extending our deal
with them until 2023 and changing our original profit-sharing terms to
allow us to benefit from lower prices for LPLDL® as sales increase, and
to receive commission from Sacco following successful sales of LPLDL®
to dairy customers.
We have signed a new agreement with Granja Pocha S.A. for the
inclusion of LPLDL® in a functional yogurt product in Uruguay. The use
of LPLDL® in functional foods is an important precedent which has the
potential for replication in other territories.
Having achieved FDA GRAS and GMP manufacture standards, we hope
to build on this proof of concept by Granja Pocha to further extend the
application of LPLDL® from its use as a supplement into use as a food
and dairy ingredient in 2020.
We have concluded an agreement with OptiPharm (whose flagship
brand, Optislim, is Australia’s leading weight management brand) for
the use of our OptiBiome® weight management ingredient in over 20
countries including Australia, New Zealand, North America, parts of Asia,
Gulf states and the wider Middle East.
In May 2020 OptiBiotix Health PLC announced that it had entered into
a three-year distribution agreement with the Asian focused B2B product
developer and distributor Pierce Group, granting it exclusive rights to
import and commercialise OptiBiotix's SlimBiome® weight management
ingredient and LPLDL®, our cholesterol-lowering probiotic, in China and
Hong Kong.
We also announced in May 2020 a non-exclusive licence agreement for
our SlimBiome® trademark with Smart For Life, Inc. and the related
launch of cookies containing OptiBiotix's SlimBiome® proprietary weight
management technology in the USA and Canada; the cookies will be
sold through Walmart in the USA, Costco in Canada, and online.
Our commercial plans for 2020 are centred on extending our reach into
new application areas, including hypertension, immune and cognitive
health, continuing to enter new territories, and supporting established
partners like Agropur in the USA, AlfaSigma in Italy, and Akums in India,
in the commercialisation of products in their territories.
Our own Online store – https://optibiotix.online – is offering a growing
range of meal replacements, snacks and supplements including
porridge, muesli, flapjacks and gummies containing SlimBiome® to aid
weight management and CholBiome® probiotic supplements
containing LPLDL® to reduce cholesterol. These products act as a shop
window for partners and to test new products before expanding into
other territories and presenting to retailers. This approach has led to
successful product launches in Holland and Barrett, and paved the way
for product acceptance in Walmart, and Costco. We cannot predict the
future in these difficult times but hope this approach will lead to more
products being launched online, and partners looking to extend their
product ranges in the year ahead.
The recent trading update (RNS: 18 May 2020) shows strong commercial
progress in the three months of this year with OptiBiotix extending its
geographic reach and brand presence into 119 countries. With more
agreements generating revenues, and a greater number of deals
generating income in the first year of agreement, we have seen a large
increase in revenues (928%) when compared to the same period last
year. We anticipate further revenue growth in 2020 as existing deals
contribute to full year revenues, we extend the application of our
products into new areas, and continue to execute deals with new
partners.
9
OptiBiotix Health Plc
Investor and consumer interest in the human microbiome is growing
steadily, presenting us with a market opportunity that is large and
expanding. We will continue to devote our efforts to increasing our
range of applications, products and territories in order to capitalise on
this opportunity. Our strategy of developing microbiome products with
a strong scientific and clinical evidence base with key opinion leader
support has provided clear product differentiation and stimulated high
commercial interest. We look forward to converting this interest into
agreements in new territories and application areas in the months ahead
to continue to grow revenues in this new and exciting area of science
which has the potential to revolutionise the future of healthcare.
Stephen O’Hara
Chief Executive
27 May 2020
Annual Report and Accounts 2019 10
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 £455,608 as at 31 December 2019 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 3 to 10.
Principal Risks And Uncertainties Facing
The Group
Technology and products
The Group is involved in the discovery and development of microbiome
modulation products. 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
marketplace 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.
11
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.
COVID-19
The global implications of the economic impact
of COVID-19 could affect sales and profitability.
Although COVID-19 has affected some parts of the
consumer business. The majority of sales are in the business
to business sector across many countries so the impact is
very limited.
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
The Group is launching products that are not
already available in the consumer market.
The Group has responded to consumer demand.
Commercialisation
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
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.
Legal Risks
Intellectual
Property
litigation
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 2019 12
Key Performance Indicators
Non-financial
Financial
Period to
31 December
2019
£’000
Year to
30 November
2018
£’000
The Board recognises the importance of KPI’s in driving appropriate
behaviour and enabling of Group performance. For the period to
31 December 2019 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 KPI’s going forward:
Revenue
Profit/(Loss) for the period
Cash as at 31 December 2019
745
514
(2,118) (1,893)
1,324
456
During the period to 31 December 2019 the company has achieved a
number of key objectives which continue to build shareholder value.
These include:
1. Customer relationships
2.
IP and trademark registrations
3. Service quality and brand awareness
4. Attraction, motivation and retention of employees
Dividends
• The award of a CE mark and registration of SlimBiome as a medical
No dividends can be distributed for the period to 31 December 2019 .
device
• The recognition of OptiBiotox’s cholesterol and blood pressure
reducing Lactobacillus plantarum LP-LDL probiotic strain
determined as Generally Recognized As Safe (GRAS). GRAS is a
United States Food and Drug Administration (FDA) designation and
extends the potential applications of LP-LDL to use as a functional
ingredient in food, dairy, and beverage products across the USA
• Pharmaceutical GMP manufacturer approval of LPLDL®.
Pharmaceutical GMP proves that a drug substance (LPLDL®) is
produced consistently with pharmaceutical grade quality. GMP
process validation is required by customers and health authorities
around the globe to commercialise active ingredients as drugs. The
validation of LPLDL® pharmaceutical GMP manufacture is a
significant step in the development of LPLDL® as a pharmaceutical
drug product.
• The award of a licence from the Food Standards and Safety Authority
India (FSSAI) to OptiBiotix’s manufacturing partner, Zeon Life
Sciences, to manufacture SlimBiome and SlimBiome containing
products in India
• Appointment of Dr Fred Narbel as Managing Director of our
Prebiotics division. Fred Narbel was formerly Vice President of Sales
for Nutrition Solutions at Agropur, a major North American dairy
company with sales of $6.7 billion in 2018. He has brought us
extensive experience of selling speciality food ingredients in
international markets, a wide network of contacts in the high value
speciality food ingredients industry, and a strong track record of
rapidly growing sales.
Future Developments
The Chairman’s and Chief Executive Statement on pages 2-10 gives
information on the future outlook of the Group.
Corporate Governance
Executive Management:
The Group’s current executive team comprises:
S O’Hara Executive Director and CEO; with overall responsibility
for all Group activities.
Dr F Narbel Executive Director – Managing Director Prebiotix
Dr S Kolyda Executive Director – Research and Development
Director
S Prescott Executive Director – CEO Probiotix Health Limited
Corporate Responsibility
The Board takes regular account of the significance of social,
environmental and ethical matters affecting the Group wherever it
operates. It has developed a specific set of policies on corporate social
responsibility, which seek to protect the interests of all of its stakeholders
through ethical and transparent actions and include an anti-corruption
policy and code of conduct.
Corporate Governance:
The Group is committed to high standards of corporate governance and
seeks to continually evaluate its policies, procedures and structures to
ensure that they are fit for purpose.
In order to protect the interests of its shareholders and other
stakeholders the Board has chosen to adopt the Quoted Companies
Alliance (QCA) Corporate Governance Code for Small and mid-size
13
OptiBiotix Health Plc
Quoted Companies (the “QCA Code”), and the Directors are always
prepared, where practicable, to enter into dialogue with all such parties
to promote a mutual understanding of objectives.
By complying with this code the Company ensured compliance with
the new AIM Rules regarding Corporate Governance introduced
September 2018.
Full details of the Company’s policy on Corporate Governance can be
found on the website under:
https://www.optibiotix-ir.com/content/investors/corporate-governance
Composition of the Board of Directors
The Board of Directors is currently comprised of the Chairman, Chief
Executive Officer, the Managing Director Prebiotix division, the Research
and development Director, CEO Probiotix Health Limited an and the two
Non-Executive Directors.
Role of the Board:
The role of the Board is to agree the Group’s long-term strategy and
direction and to monitor achievement of its business objectives. The
Board meets several times per annum, either by teleconference or in
person. Furthermore, it holds additional meetings as are necessary to
transact ongoing business.
Board Committees:
Remuneration Committee
The Remuneration Committee is made up of Neil Davidson and Peter
Wennstrőm and has access to external expertise should that be required.
This committee is responsible for the scale and structure of the
remuneration of the Chief Executive, the Executive Directors and reports
to the Chief Executive. The recommendations of the committee must
be approved by the Board of Directors. No director or manager shall be
involved in decisions relating to his/her own remuneration.
AIM Rules Compliance Committee
The AIM Rules Compliance Committee is chaired by Neil Davidson. This
committee is charged with ensuring that the Group has sufficient
procedures, resources and controls in place to ensure compliance with
the AIM rules for companies. Among other things, the committee shall
ensure that an Executive Director is at all times able to respond to
requests for information from the Nominated Adviser and that all
Directors and employees are aware of their obligations with regards to
the disclosure of any trading in the Group’s shares.
Audit Committee
The Audit Committee, which comprises Peter Wennström as Chairman
and Neil Davidson. This committee is required to monitor the integrity
of the financial statements of the Group, including the interim and
annual reports. The committee also reviews financial returns to
regulators and any financial information contained in announcements
of a price sensitive nature. The committee shall also consider and make
recommendations to the Board regarding resolutions to be put to
shareholders for approval at the Annual General Meeting, with respect
to the appointment or re-appointment of the Group’s external auditors.
The Audit Committee, together with the external auditors, are
responsible for determining the scope of the annual audit.
Nomination Committee
The Company does not currently have a nomination committee as the
Board does not consider it appropriate to establish such a committee
at this stage of the Company’s development. Decisions which would
usually be taken by the nomination committee will be taken by the
Board as a whole.
Employees
The Group engages its employees in all aspects of the business and
seeks to remunerate them fairly. The Group gives full and fair
consideration to applications for employment regardless of age, gender,
colour, ethnicity, disability, nationality, religious beliefs or sexual
orientation. The Board takes employees’ interest into account when
making decisions. Any suggestions from employees aimed at improving
the Group’s performance are welcomed.
Suppliers and Contractors
The Group recognises that the goodwill of its contractors, consultants
and suppliers is crucial to the success of its business, and seeks to build
and maintain this goodwill through fair and transparent business
practices. The Group aims to settle genuine liabilities in accordance with
contractual obligations.
Health and Safety
The Board recognises that it has a responsibility to provide strategic
leadership and direction in the development and maintenance of the
Group’s health and safety strategy, in order to protect all of its
stakeholders.
On Behalf Of The Board
S P O’Hara
27 May 2020
Annual Report and Accounts 2019 14
Directors’ Report
The Directors present their report and the audited financial statements
of the group for the period to 31 December 2019.
Principal Activity
The principal activity of the group is that of identifying and developing
microbial strains,compounds and formulations for use in food
ingredients, and active compounds that can impact on human
physiology, deriving potential health benefits.
Directors
The directors who served the company during the period and up to
the date of this report were as follows:
Executive Directors
S P O’Hara
C Wood (Resigned 18 August 2019)
P Rehne (Resigned 22 February 2019)
S Kolyda
F Narbel (Appointed on 1 March 2019)
Non-executive Directors
G Barker (Resigned 30 April 2019)
P Wennstrom
R Davidson
M Christie
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
10,165,129
503,000
–
150,000
357,722
–
70,950
–
–
Percentage
Held
Ordinary
shares of
£0.02 each
Warrant
exercise
price
Ordinary
shares of
£0.02 each
11.6%
0.54%
–
0.14%
0.42%
–
0.1%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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 £0.695p at any time up to 29 June 2027, subject to vesting
conditions.
15
OptiBiotix Health Plc
Substantial Shareholdings
Substantial shareholdings include directors as at 27 May 2020 were as
follows:
Stephen O’Hara
Finance Yorkshire Seedcorn LP
% of shares issued
11.6
10.7
The share price per share at 31/12/2019 was £0.66 (30/11/2018:
£0.92)
Financial Instruments
The Group’s exposure to financial risk is set out in Note 23 to the financial
statements.
Research And Development
The Chairman’s and Chief Executive Statement on page 3-10 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
however events are rapidly evolving and at this stage, it is difficult to
assess reliably whether there will be any material disruption in the future
which could adversely impact the group’s forecast.
Subsequent to the year end, the group announced the successful
completion of an equity fundraise of £1.0 million on 17 April 2020 to fund
the growth of the business and delivery of existing commercial plans.
After making enquiries, the directors have a reasonable expectation that
the Group has adequate resources to continue in operational existence
for the foreseeable future. Accordingly, they continue to adopt a going
concern basis in preparing the annual report and financial statements.
Statement Of Directors’ Responsibilities
The Directors are responsible for preparing the Directors’ Report and the
financial statements in accordance with applicable laws and regulations.
Company law requires the directors to prepare financial statements for
each financial period. Under that law the directors have, as required by
the AIM Rules for Companies of the London Stock Exchange, elected to
prepare financial statements in accordance with International Financial
Reporting Standards (IFRS) as adopted for use in the European Union.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Group and of the profit or loss of the Group
for that period. In preparing these financial statements, the Directors are
required to:
Refer to Note 24 to the financial statements for further details.
• select suitable accounting policies and then apply them
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.
Management have considered its forecast of the group’s cash
requirements reflecting contracted and anticipated future revenue and
the resulting net cash outflows. Management have not yet seen a
material disruption to the business as a result of the COVID-19 outbreak,
consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether the company financial statements have been
prepared in accordance with IFRS as adopted by the European
Union, subject to any material departures disclosed and explained
in the financial statements; and
• prepare the financial statements on the going concern basis, unless
it is inappropriate to presume that the Company will continue in
business.
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 Group’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.
16
OptiBiotix Health Plc
Annual Report and Accounts 2019 16
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 11.
On Behalf Of The Board
S P O’Hara
27 May 2020
17
OptiBiotix Health Plc
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 period ended
31 December 2019 which comprise the consolidated statement of
comprehensive income, consolidated statement of financial position,
consolidated statement of changes in equity, consolidated statement
of cash flows, company statement of financial position, company
statement of changes in equity, 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 31 December 2019
and of the Group’s loss for the period 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
• The use of the going concern basis.
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.
Annual Report and Accounts 2019 18
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 period-end by the
subsidiary OptiBiotix Limited is £5,706,922.
The amount owed by Probiotix Health Limited was £234,438
The carrying values of investments in group companies was as follows:
OptiBiotix Limited : £2,000,000
ProBiotix Health Limited : £235,438
The Healthy Weight Loss Company Limited : £50,000
Impairment of The Healthy Weight Loss Company Limited:
The directors made an impairment provision to reduce the carrying
value of its investment in the company to £50,000 representing the
value of its major asset – the ‘go-figure brand’
Carrying value of investments – Group Risk
At the period end the group had investments of £3.09m made up of
the investment in SkinBiotherapeutics plc.
There is a risk that the investment in Skinbiotherapeutics PLC requires
impairment.
Carrying value of intangible assets and capitalisation of
development costs
The Group had intangible assets of £2.63m at the year ended
31 December 2019, of which £594,976 were development costs
capitalised in the year.
Intangible assets comprise of development costs and fair value of
patents acquired on the acquisition of OptiBiotix Limited.
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.
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.
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 period were evaluated
against the recognition criteria of IAS38. The estimated useful
economic life assigned to the costs was reviewed.
19
OptiBiotix Health Plc
Key audit matter
Going Concern
Management judgement is required in assessing whether the group
is a going concern as it has historically incurred losses and does not
have borrowing facilities.
The Directors have considered the cash requirements of the business
for the following 12 months. As part of this process, they have taken
into account existing liabilities, along with detailed operating cashflow
requirements. The projections prepared include ongoing running
costs of the group and committed expenditure at the date of
approving the financial statements.
The key assumptions that impact the conclusions are the levels of
future revenue, and the ability to control the operating costs.
There are therefore inherent risks that the forecasts may overstate
future revenue due to the timing of closure of future contracts, or
understate future costs, and that the group will not be able to operate
within its cash resources and continue to operate as a going concern.
How our audit addressed the key audit matter
We have performed the following audit procedures:
• obtained management’s forecasts and cash flow analysis, and their
going concern assessment;
• assessed the reliability of forecasts to date by agreeing historical
actuals to budgets, and challenging the current forecasts;
• tested the clerical accuracy of management’s forecast;
• challenged management’s
including
reviewing the forecast revenue and corroborated the assumptions;
and
forecast assumptions,
• considered the appropriateness of the group’s disclosures in relation
to going concern in the financial statements.
As detailed above, we note that there are inherent risks over the
group’s forecasts and the potential timing of the conversion of the
group’s contract pipeline. We further note that the group has
historically been loss making given the level of research and
development expenditure.
However, we have seen the £1.0m equity fundraise post year end.
Based on the audit work performed we are satisfied that although
there are inherent uncertainties associated with the forecast, the group
appears to have sufficient funds for at least 12 months following the
signing of this audit report. We are also satisfied that all necessary
disclosures have been made in the consolidated financial statements.
Annual Report and Accounts 2019 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
£109,000 (2018: £126,000)
£109,000 (2018: £120,000)
How we determined it
1.5% of gross assets
1% of gross assets (restricted to group materiality)
(2018: 1.5% gross assets)
(2018: 1% gross assets)
Rationale for
benchmark applied
We believe that gross assets is a primary measure
the
used by
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
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 £25,000 and
£68,000.
We agreed with the Audit Committee that we would report to them
misstatements identified during our audit above £5,450 for the Group
(2018: £6,300) and £5,450 for the Parent as well as misstatements below
those amounts that, in our view, warranted reporting for qualitative
reasons.
An overview of the scope of our audit
As part of designing our audit, we determined materiality and assessed
the risks of material misstatement in the financial statements. In
particular, we looked at where the directors made subjective judgments,
for example in respect of significant accounting estimates that involved
making assumptions and considering future events that are inherently
uncertain. As in all of our audits we also addressed the risk of
management override of internal controls, including evaluating whether
there was evidence of bias by the directors that represented a risk of
material misstatement due to fraud.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough
work to be able to give an opinion on the financial statements as a
whole, taking into account the structure of the Group and the Company,
the accounting processes and controls, and the industry in which they
operate.
The Group financial statements are a consolidation of 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, Probiotix Health 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.
Other information
The directors are responsible for the other information. The other
information comprises the information included in the annual report,
21
OptiBiotix Health Plc
other than the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to
determine whether there is a material misstatement in the financial
statements or a material misstatement of the other information. If, based
on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that
fact. We have nothing to report in this regard.
Opinions on other matters prescribed by
the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors’ report
for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
• the strategic report and the directors’ report have been prepared in
accordance with applicable legal requirements.
Matters on which we are required to
report by exception
In the light of the knowledge and understanding of the group and
parent company and its environment obtained in the course of the
audit, we have not identified material misstatements in the strategic
report or the directors’ report.
We have nothing to report in respect of the following matters in relation
to which the Companies Act 2006 requires us to report to you if, in our
opinion:
• adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
• the parent company financial statements are not in agreement with
the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are
not made; or
• we have not received all the information and explanations we
require for our audit.
Responsibilities of Directors
As explained more fully in the directors’ responsibilities statement set
out on pages 16-17, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and
fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the group’s and parent company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the parent company or
to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of
the financial statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these
financial statements.
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.
Other matters which we are required to
address
We were appointed as auditors by the company at the Annual General
Meeting on 11 June 2019 to audit the financial statements for the period
ending 31 December 2019. Our total uninterrupted period of
engagement is 6 years, covering the periods ending 30 November 2014
to 31 December 2019.
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.
Annual Report and Accounts 2019 22
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
27 May 2020
23
OptiBiotix Health Plc
Consolidated Statement of Comprehensive Income
Revenue from contracts with customers
Cost of sales
Gross Profit
Share based payments
Depreciation and amortisation
Other administrative costs
Total administrative expenses
Operating loss
Finance cost
Finance income
Share of loss from associate
Profit on disposal of investments
Loss before tax
Corporation tax
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
All activities relate to continuing activities
The notes on pages 33 to 53 form part of these financial statements
Notes
Period ended
31 December 2019
£
Year ended
30 November 2018
£
744,883
(352,080)
392,803
137,320
217,904
2,204,216
(2,559,440)
(2,166,637)
(44,467)
111
(44,506)
(296,344)
265,481
(2,241,856)
123,468
(2,118,388)
–
(2,118,388)
(2,117,273)
(1,115)
(2,118,388)
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)
(2.49)p (2.30)p
(2.49)p (2.30)p
6
5
5
12
7
8
Annual Report and Accounts 2019 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
Convertible debt reserve
Retained Earnings
Non-controlling interest
Total Equity
LIABILITIES
Current liabilities
Trade and other payables
Non – current liabilities
Deferred tax liability
Loan Notes
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
Notes
As at
31 December 2019
£
As at
30 November 2018
£
10
11
12
13
14
7
15
16
17
17
17
17
17
17
18
19
20
2,632,778
393
3,092,807
5,725,978
62,761
607,308
190,435
455,608
1,316,112
7,042,090
1,708,811
1,646,873
740,059
1,500,000
92,712
(492,925)
35,782
5,231,312
561,623
561,623
522,350
726,805
1,249,155
1,810,778
7,042,090
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
8,029,526
These financial statements were approved and authorised for issue by the Board of Directors on 27 May 2020 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
Share-
Non- Convertible Merger based
Called up Retained Share Controlling Debt Relief Payment
Share capital Earnings Premium interest Reserve Reserve reserve
£ £ £ £ £ £ £
Balance at 30 November 2017 1,586,628 (2,805,347) 6,279,718 10,200 – 1,500,000 474,517
Loss for the year – (1,919,276) – 26,697 – – –
Issues of shares during the year 107,860 – 1,673,157 – – – –
Share options and warrants – – – – - – 128,222
Cancellation of share premium account – 6,348,971 (6,348,971) – – – –
Balance at 30 November 2018 1,694,488 1,624,348 1,603,904 36,897 – 1,500,000 602,739
Loss for the period – (2,117,273) (1,115) – – –
Issues of shares during the period 14,323 – 42,969 – – – –
Share options and warrants – – – – – 137,320
Value of conversion rights on convertible loan notes – – – – 92,712 – –
Total
equity
£
7,045,716
(1,892,579)
1,781,017
128,222
–
7,062,376
(2,118,388)
57,292
137,320
92,712
Balance at 31 December 2019 1,708,811 (492,925) 1,646,873 35,782 92,712 1,500,000 740,059
5,231,312
The notes on pages 33 to 53 form part of these financial statements
Annual Report and Accounts 2019 26
Consolidated Statement of Cash Flows
Notes
1
Period ended
31 December 2019
£
Year ended
30 November 2018
£
(2,036,532)
313,173
(57)
168
(1,233,717)
–
–
169
(1,723,248)
(1,233,548)
–
(594,923)
(594,923)
57,292
775,050
617,130
1,449,472
(868,699)
1,324,307
455,608
(2,954)
(467,639)
(470,593)
1,781,017
–
–
1,781,017
76,876
1,247,431
1,324,307
Cash flows from operating activities
Cash utilised by operations
Tax received
Interest paid
Interest received
Net cash outflow from operating activities
Cash flows from investing activities
Purchases of property, plant and equipment
Purchase of intangible assets
Net cash outflow from investing activities
Cash flows from financing activities
Share issues
Issue of loan notes
Disposal of investments
Net cash inflow from financing activities
Increase/(decrease) in cash and equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
15
The notes on pages 33 to 53 form part of these financial statements
27
OptiBiotix Health Plc
Notes to the Consolidated Statement of Cash Flows
1. Reconciliation of loss before income tax to cash outflow from operations
Period ended
31 December
2019
£
Year ended
30 November
2018
£
Operating loss (2,166,637)
(Increase)/Decrease in inventories (32,328)
Increase in trade and other receivables (233,505)
Increase in trade and other payables 40,634
Depreciation charge 2,750
Share Option expense 137,320
Amortisation of patents and development costs 215,234
Loss on disposal of tangible and intangible assets –
(1,498,896)
(21,543)
(267,681)
281,594
2,187
128,222
139,721
2,679
Net cash outflow from operations (2,036,532)
(1,233,717)
2. Cash and Cash Equivalents
Cash and cash equivalents
The notes on pages 33 to 53 form part of these financial statements
Period ended
31 December
2019
£
Year ended
30 November
2018
£
455,608
1,324,307
Annual Report and Accounts 2019 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
31 December 2019
£
As at
30 November 2018
£
Notes
12
14
14
15
16
17
17
17
17
18
6,212,556
5,941,360
12,153,916
24,707
139,243
163,950
6,534,300
4,242,286
10,776,586
9,242
1,167,437
1,176,679
12,317,866
11,953,265
1,708,811
1,646,873
1,500,000
740,059
6,436,938
1,694,488
1,603,904
1,500,000
602,739
6,323,134
12,032,681
11,724,265
285,185
285,185
229,000
229,000
12,317,866
11,953,265
These financial statements were approved and authorised for issue by the Board of Directors on 27 May 2020 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 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)
1,781,017
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
Profit for the period
Issues of shares during the period
Share options and warrants
–
113,804
14,323
–
–
–
–
42,969
–
–
–
–
–
–
113,804
57,291
137,320
137,320
Balance at 31 December 2019
1,708,811
6,436,938
1,646,873
1,500,000
740,059 12,032,861
The notes on pages 33 to 53 form part of these financial statements
Annual Report and Accounts 2019 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
Proceeds from disposal of investments
Net cash inflow from financing activities
Increase/(decrease) in cash and equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
15
The notes on pages 33 to 53 form part of these financial statements
Period ended
31 December 2019
£
Year ended
30 November 2018
£
(1,702,719)
104
(1,702,615)
–
–
57,292
617,129
674,421
(1,028,194)
1,167,437
139,243
(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
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 in trade and other receivables
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
Period ended
31 December
2019
£
Year ended
30 November
2018
£
(457,816) (496,495)
(1,438,409) (1,327,028)
56,186 172,593
137,320 128,222
– (197,725)
–
99,999
(1,702,719)
(1,620,434)
As at
31 December
2019
£
As at
30 November
2018
£
139,243
1,167,437
Annual Report and Accounts 2019 32
Notes to the Financial Statements
1. General Information
OptiBiotix Health plc is a Public Limited 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 at Innovation centre, Innovation Way, Heslington, York. The Company is listed on the AIM market of the London Stock
Exchange (ticker: OPTI).
The principal activity is that of identifying and developing microbial strains, compounds, and formulations for use in food ingredients,
supplements and active compounds that can impact on human physiology, deriving potential health benefits.
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.
Management have considered its forecast of the group’s cash requirements reflecting contracted and anticipated future revenue
and the resulting net cash outflows. Management have not yet seen a material disruption to the business as a result of the COVID-19
outbreak, however events are rapidly evolving and at this stage, it is difficult to assess reliably whether there will be any material
disruption in the future which could adversely impact the group’s forecast.
Subsequent to the year end, the group announced the successful completion of an equity fundraise of £1.0 million on 17 April 2020
to fund the growth of the business and delivery of existing commercial plans.
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 2018 and have not been early adopted:
33
OptiBiotix Health Plc
2. Accounting Policies (continued)
New Standards, amendments and interpretations issued but not effective
Application date of Application date of
Reference Title Summary standard Company
IFRS 16 Lease IFRS 16 Leases published Periods commencing on 1 January 2020
or after 1 January 2019
IFRS 9 Financial Amendments to IFRS 9, ‘Financial Periods commencing on 1 January 2020
instruments instruments’ – Prepayment features or after 1 January 2019
with negative compensation
Application date of Application date of
Reference Title Summary standard Company
IAS 28 Investments Amendments to IAS 28, ‘Investments Periods commencing on 1 January 2020
in associates in associates’ Long-term interests in or after 1 January 2019
associates and joint ventures
IAS 19 Employee Amendments to IAS 19, ‘Employee Periods commencing on 1 January 2020
benefits benefits’ – Plan amendment, or after 1 January 2019
curtailment or settlement
IFRS 3 Business Amendments to IFRS 3, ‘Business Periods commencing on 1 January 2020
combinations combinations’, definition of a business or after 1 January 2020
IAS 1 Presentation Amendments to IAS 1, ‘Presentation Periods commencing on 1 January 2020
of financial of financial statements’, and IAS 8, or after 1 January 2020
statements’ ‘Accounting policies, changes in
accounting estimates and errors’
definition of material
IFRS 17 Insurance Principles for the recognition, Periods commencing on 1 January 2021
contracts measurement, presentation an or after 1 January 2021
disclosure of insurance contracts
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 31 December each year, previously 30 November. 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.
Annual Report and Accounts 2019 34
2. Accounting Policies (continued)
Basis of consolidation (continued)
Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are
accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted
to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling
interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners
of the Company.
When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate
of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the
assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. Where certain assets of the subsidiary
are measured at revalued amounts or fair values and the related cumulative gain or loss has been recognised in other comprehensive
income and accumulated in equity, the amounts previously recognised in other comprehensive income and accumulated in equity
are accounted for as if the Company had directly disposed of the related assets (i.e. reclassified to profit or loss or transferred directly
to retained earnings).
The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on
initial recognition for subsequent accounting under IAS 39 “Financial Instruments: Recognition and Measurement” or, when
applicable, the cost on initial recognition of an investment in an associate or a jointly controlled entity.
Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination
is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group,
liabilities incurred by the group to the former owners of the acquiree and the equity interests issued by the group in exchange for
control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the acquisition
date, except that:
–
–
–
deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured
in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively;
liabilities or equity instruments related to share-based payment transactions of the acquiree or the replacement of an
acquiree's share-based payment transactions with share-based payment transactions of the group are measured in
accordance with IFRS 2 Share-based Payment at the acquisition date; and
assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations are measured in accordance with that standard.
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.
Revenue recognition
In the current year, the Group has applied IFRS 15 Revenue from Contracts with Customers (as amended in April 2016) which is
effective for an annual period that begins on or after 1 January 2018. IFRS 15 introduced a 5 step approach to revenue recognition.
Far more prescriptive guidance has been added in IFRS 15 to deal with specific scenarios.
35
OptiBiotix Health Plc
2. Accounting Policies (continued)
Investments in associates
Associates are those entities in which the Group has significant influence, but not control or joint control over the financial and
operating policies. Significant influence is presumed to exist when the Group holds between 20 and 50 percent of the voting power
of another entity. Investments in associates are accounted for under the equity method and are recognised initially at cost. The cost
of the investment includes transaction costs.
The consolidated financial statements include the Group’s share of profit or loss and other comprehensive income of equity-
accounted investees, after adjustments to align the accounting policies with those of the Group, from the date that significant
influence commences until the date that significant influence ceases.
When the Group’s share of losses exceeds its interest in an equity-accounted investee, the carrying amount of the investment,
including any long-term interests that form part thereof, is reduced to zero, and the recognition of further losses is discontinued
except to the extent that the Group has an obligation or has made payments on behalf of the investee.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
(i) Current tax
Current taxes are based on the results shown in the financial statements and are calculated according to local tax rules using tax
rates enacted or substantially enacted by the statement of financial position date.
Income tax is recognised in the income statement or in equity if it relates to items that are recognised in the same or a different
period, directly in equity.
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or
paid to the taxation authorities.
(ii) Deferred tax
Deferred tax is provided, using the liability method, on temporary differences at the statement of financial position date between
the tax base of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences.
Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax assets and unused tax losses,
to the extent that it is probable that taxable profit will be available against which the deductible temporary differenced and the
carrying forward or unused tax assets and unused tax losses can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all or part of the deferred tax assets to be utilised. Conversely, previously
unrecognised deferred tax assets are recognised to the extent that it is probable that sufficient taxable profit that sufficient taxable
profit will be available to allow all or part of the deferred tax asset to be utilised.
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 are held at cost less any impairment.
Annual Report and Accounts 2019 36
2. Accounting Policies (continued)
Financial instruments
Financial assets and financial liabilities are recognised when the group becomes a party to the contractual provisions of the
instrument.
Inventory
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. Net
realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.
Trade and other receivables
Trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. Subsequent to the initial recognition, trade and receivables and measured at amortised cost less impairment losses for bad
and doubtful debts, except where the receivables are interest-free loans made to related parties without any fixed repayment terms
or the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less impairment losses for bad and
doubtful debts.
Impairment losses for bad and doubtful debts are measured as the difference between the carrying amount of financial asset and
the estimated future cash flows, discounted where the effect of discounting is material.
Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held on call, together with other short term highly liquid investments
which are not subject to significant changes in value and have original maturities of less than three months.
Fair values
The carrying amounts of the financial assets and liabilities such as cash and cash equivalents, receivables and payables of the
Company at the statement of financial position date approximated their fair values, due to relatively short term nature of these
financial instruments
Trade and other payables
Trade and other payables are initially recognised at fair value and thereafter stated in amortised cost, except where the payables are
interest free loans made by related parties without any fixed repayment terms or the effect of discounting would be immaterial, in
which case they are stated at cost.
Impairment of non-financial assets
At each statement of financial position date, the Group reviews the carrying amounts of its investments to determine whether there
is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the
asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows
that are independent from other assets, the group estimates the recoverable amount of the cash-generating unit to which the asset
belongs. An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that
the asset may be impaired.
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.
37
OptiBiotix Health Plc
2. Accounting Policies (continued)
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, other reserves 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 period ended 31 December 2019.
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.
Convertible Loans
Compound financial instruments issued by the Group comprise convertible notes that can be converted to share capital at the
option of the holder, and the number of shares to be issued does not vary with changes in their fair value.
The liability component of a compound financial instrument is recognised initially at the fair value of a similar liability that does not
have an equity conversion option. The equity component is recognised initially at the difference between the fair value of the
compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs
are allocated to the liability and equity components in proportion to their initial carrying amount.
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.
Annual Report and Accounts 2019 38
2. Accounting Policies (continued)
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 ten years during which the Company is
expected to benefit.
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can
be reliably measured, regardless of when the payment is made. Revenue is measured at the fair value of the consideration received
or receivable, excluding discounts, rebates and sales taxes or duty.
Merger relief reserve
The merger relief reserve arises from the 100% acquisition of OptiBiotix Limited whereby the excess of the fair value of the issued
ordinary share capital issued over the nominal value of these shares is transferred to this reserve in accordance with section 612 of
the Companies Act 2006.
Convertible debt reserve
The convertible debt reserve is the equity component of the convertible loan notes that have been issued.
39
OptiBiotix Health Plc
2. Accounting Policies (continued)
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 identifying and developing microbial strains,
compounds and formulations for use in the nutraceutical industry. 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. The Directors believe that income, costs, assets and liabilities are interconnected and as there is only one location
all income and costs are derived from the single segment. Subsequent to the year end the business is developing into new territories
and the directors will assess the need for segmental reporting for the year ended 31 December 2020.
4. Employees and Directors
Wages and salaries
Directors remuneration*
Directors fees*
Social security costs
Pension costs
*Total Directors remuneration £958,253 see Directors’ remuneration note below.
Period ended
31 December 2019
£
Year ended
30 November 2018
£
53,037
647,421
310,832
76,508
26,459
1,114,257
23,274
576,228
41,083
79,319
54,385
774,289
Annual Report and Accounts 2019 40
4. Employees and Directors (continued)
The average monthly number of employees during the period was as follows:
Directors
Research and development
Period ended
31 December 2019
No.
Year ended
30 November 2018
No.
8
2
10
8
2
10
Period ended
31 December 2019
£
Year ended
30 November 2018
£
Directors’ remuneration*
Directors’ share based payments
Bonus*
Pension
Total emoluments
Emoluments paid to the highest paid director
*Total Directors remuneration £958,253 see Directors’ remuneration note below.
873,253
123,362
85,000
28,618
1,110,233
248,000
Included in total emoluments paid to Directors are capitalised wages of £248,707 (2018: £221,703).
Directors’ remuneration
Details of emoluments received by Directors of the Group for the period ended 31 December 2019 are as follows:
Remuneration
and fees
£
Share based
payments
£
A Reynolds*
S P O’Hara
F Narbel
G Barker*
S Christie
R Davidson
S Kolyda
P Wenstromm*
P Rehne
C Wood
S Prescott*
Total
*For disclosure in relation to directors’ fees please refer to Note 21
41
OptiBiotix Health Plc
29,165
248,000
139,105
6,048
27,083
59,583
106,666
19,548
56,268
149,820
116,967
–
37,910
–
13,343
34,893
14,954
–
3,180
19,082
572,311
120,793
45,000
53,834
791,938
212,897
Total
£
29,165
248,000
177,015
6,048
40,426
94,476
121,620
19,548
59,448
168,902
116,967
958,253
123,362
1.081,615
5. Net Finance Income/(Costs)
Finance Income:
Bank Interest
Finance Cost:
Loan note interest
Net Finance Income/(Costs)
6. Expenses – analysis by nature
Period ended
31 December 2019
£
Year ended
30 November 2018
£
111
(44,467)
(44,356)
169
–
169
Period ended
30 December 2019
£
Year ended
30 November 2018
£
Research and development
Regulatory Costs
Directors’ fees & remuneration (Note 4)*
Auditor remuneration – audit fees (consolidated accounts £17,500, 2018: £17,000)
Auditor remuneration – non audit fees (tax compliance)
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
167,869
185,447
709,546
42,220
6,200
113,036
66,556
137,320
2,750
215,234
55,483
223,016
24,399
101,795
171,448
337,121
160,673
–
418,881
47,293
6,000
86,414
48,201
128,222
2,187
139,721
88,003
146,559
26,563
152,082
120,541
279,063
Total administrative expenses
2,559,440
1,850,403
*£709,546 is net of £248,707 capitalised in the year, total remuneration £958,253 as per note 4.
Annual Report and Accounts 2019 42
7. Corporation Tax
Period ended
31 December 2019
£
Year ended
30 November 2018
£
Corporation tax credit (190,435)
Under provision prior year (9,221)
Deferred tax movement 76,188
Overseas tax suffered –
Total taxation (123,468)
(120,000)
–
62,069
3,560
(54,371)
Analysis of tax expense
No liability to UK corporation tax arose on ordinary activities for the period ended 31 December 2019 nor for the year ended
30 November 2018.
Period ended
31 December 2019
£
Year ended
30 November 2018
£
Loss on ordinary activities before income tax (2,241,856)
(1,946,950)
Loss on ordinary activities multiplied by the standard rate of corporation
tax in UK of 19% (2018 – 19.33%) (425,953)
Effects of:
Disallowables
Income not taxable
Accelerated capital allowances
Accelerated depreciation
R&D enhanced deductions
R&D tax credit claimed
Amortisation
Revenue items capitalised
Other timing differences
Overseas tax suffered
Unused tax losses carried forward
Tax credit
56,787
(50,441)
–
523
(141,042)
(199,656)
40,895
(65,072)
76,188
–
584,303
(123,468)
(376,345)
62,017
–
(571)
–
(122,086)
(120,000)
27,008
(90,395)
62,069
3,560
500,372
(54,371)
The Group has estimated losses of £3,253,189 (2018: £1,646,423) and estimated excess management expenses of £2,248,357
(2018: £2,093,197).
The tax losses have resulted in a deferred tax asset at 19% of approximately £1,045,294 (2018: £710,528) which has not been
recognised as it is uncertain whether future taxable profits will be sufficient to utilise the losses.
43
OptiBiotix Health Plc
7. Corporation Tax (continued)
Current tax asset – Group
Balance brought forward
Received during the year
Prior year adjustment
Research & development tax credit claimed
8. Earnings per Share
2019
£
303,952
(313,170)
9,218
190,435
190,435
2018
£
183,952
–
–
120,000
303,952
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:
2019
Basic and diluted EPS
Basic EPS
Diluted EPS
Earnings
£
(2,118,388)
(2,118,388)
Weighted average
Number of shares
No.
85,262,488
85,262,488
2018
Basic EPS
Diluted EPS
Earnings
£
(1,892,579)
(1,892,579)
Weighted average
Number of shares
£
82,233,690
82,233,690
Loss per-share
Pence
(2.49)
(2.49)
Loss per-share
Pence
(2.30)
(2.30)
As at 31 December 2019 there were 7,765,907 (2018: 8,272,907) outstanding share options and 324,019 (2018: 1,045,524) 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 period
The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent Company
income statement account.
The profit for the parent Company for the period was £113,804 (2018: Loss £496,495).
Annual Report and Accounts 2019 44
Development
Costs and
Patents
£
2,266,130
467,639
(6,763)
2,727,006
594,924
3,321,930
338,904
139,721
(4,708)
473,917
215,235
689,152
2,632,778
2,253,089
10. Intangible assets
Group
Cost
At 1 December 2017
Additions
Disposals
At 30 November 2018
Additions
Disposals
At 31 December 2019
Amortisation
At 1 December 2017
Amortisation charge for the year
Eliminated on disposal
At 30 November 2018
Amortisation charge for the period
Eliminated on disposal
At 31 December 2019
Carrying amount
At 31 December 2019
At 30 November 2018
The company had no intangible assets.
45
OptiBiotix Health Plc
11. Property, plant and equipment
Cost
At 30 November 2017
Additions
Disposals
At 30 November 2018
Additions
Disposals
At 31 December 2019
Depreciation
At 30 November 2017
Charge for the year
Eliminated on disposal
At 30 November 2018
Charge for the period
At 31 December 2019
Carrying amount
At 31 December 2019
At 30 November 2018
Group
£
15,419
2,954
(9,912)
8,461
–
–
8,461
8,858
2,187
(5,727)
5,318
2,750
8,068
393
3,143
The company had no property, plant and equipment.
12. Investments
Set out below is the associate of the Group as at 31 December 2019 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
Cost
At 30 November 2018
Share of loss to 4 July 2019
Disposal of shares during the period
At 31 December 2019
Carrying amount
At 31 December 2019
At 30 November 2018
£
3,740,799
(296,344)
(351,648)
3,092,807
3,092,807
3,740,799
Annual Report and Accounts 2019 46
12. Investments (continued)
S O’Hara resigned as a Director of Skinbiotherapeutics PLC on 4 July 2019. Following his resignation the shares held in
Skinbiotherapeutics PLC are treated as an investment rather than an associate company
Company: Investments in subsidiary undertakings
Cost
At 30 November 2017
Additions
Impairments
At 30 November 2018
Addition: Equity element of convertible loan notes
Carrying amount
At 31 December 2019
At 30 November 2018
£
2,149,999
1,000
(99,999)
2,051,000
29,905
2,080,905
2,051,000
As at 31 December 2019, 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
Cost
At 30 November 2017 and 2018
Disposals
Carrying amount
At 31 December 2019
At 30 November 2018
Total Investment
At 31 December 2019
At 30 November 2018
47
OptiBiotix Health Plc
£
4,483,300
(351,649)
4,131,651
4,483,300
6,212,556
6,534,300
13. Inventories
Group Company
2019 2018 2019
£ £ £
Finished goods 62,761 30,433 –
2018
£
–
During the period £352,080 (2018: £162,782) has been expensed to the income statement.
14. Trade and other Receivables
Group Company
2019 2018 2019
£ £ £
2018
£
Non-current
Amounts owed by group undertakings – – 5,941,360
– – 5,941,360
Current
Accounts receivable 511,833 228,825 –
Other receivables 59,346 52,190 19,857
Prepayments and accrued income 36,129 92,788 4,850
607,308 373,803 24,707
4,242,286
4,242,286
–
969
8,273
9,242
15. Cash and Cash Equivalents
Group Company
2019 2018 2019
£ £ £
2018
£
Cash and bank balances 455,608 1,324,307 139,243
1,167,437
16. Called Up Share Capital
Issued share capital comprises:
Ordinary shares of 2p each – 85,440,551 (2018: 84,724,413)
2019
£
1,708,811
1,708,811
2018
£
1,694,488
1,694,488
Annual Report and Accounts 2019 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 period
17. Reserves
Date issued
18/01/2019
13/03/2019
Number
7,813
708,325
716,138
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.
The convertible debt reserve is the equity component of the convertible loan notes that have been issued.
Merger relief reserve arises from the 100% acquisition of OptiBiotix Limited on 5 August 2014 whereby the excess of the fair value
of the issued ordinary share capital issued over the nominal value of these shares is transferred to this reserve in accordance with
section 612 of the Companies Act 2006.
Retained earnings represents the cumulative profits and losses of the group attributable to the owners of the company.
Share based payment reserve represents the cumulative amounts charged in respect of unsettled warrants and options issued.
18. Trade and other payables
Current:
Group Company
2019 2018 2019
£ £ £
Accounts Payable 347,822 115,697 2,686
Accrued expenses 186,329 207,103 32,500
Amount due to director 189 189 –
Other payables 27,283 198,000 –
Amounts due to group undertakings – – 250,000
Total trade and other payables 561,623 520,989 285,186
2018
£
–
30,000
–
–
199,000
229,000
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% (2018: 19%).
49
OptiBiotix Health Plc
19. Deferred Tax (continued)
The movement on the deferred tax account is as shown below:
At 30 November
Movement in the period
At 31 December 2019
2019
£
446,161
76,189
522,350
2018
£
384,092
62,069
446,161
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. Convertible Loan Notes
ProBiotix Health Limited issued 1,025,000 floating rate convertible loan notes (CLN) for £1,025,000 on 11 December 2018. The notes
are convertible into ordinary shares of the Company and converted into shares immediately prior to the occurrence of a listing of
the company, or repayable on December 2023. The conversion rate is 1 share for each note held at an amount which is equal to
50% of the listing price.
OptiBiotix Health Plc has subscribed 250,000 of the CLN for £250,000
The convertible notes are presented in the Group balance sheet as follows:
Face value of the convertible loan notes in issue as at the year end
Equity element
Liability component on initial recognition
Interest charged at effective interest rate
Non-current liability
2019
£
775,050
(92,712)
682,338
44,467
726,805
2018
£
–
–
–
–
–
Interest expense is calculated by applying the effective interest rate of 6% to the liability component.
21. Related Party Disclosures
During the period to 31 December 2019 £19,548 (2018: £18,000) was paid to P Wennstrom in respect of Director’s services provided.
During the period to 31 December 2019 £139,105 (2018: £nil) was paid to F Narbel in respect of Directors services provided
During the period to 31 December 2019 £116,966 (2018: £nil) was paid to Steven Prescott in respect of Directors services provided.
During the period to 31 December 2019 £29,165 (2018: £5,083) was paid to Reyco Limited for the services of Adam Reynolds as
Director of Probiotix Health Limited
During the period to 31 December 2019 the Group was charged £45,500 (2018: £36,167) for services provided by Morrison Kingsley
Consultants Limited, a company controlled by Mark Collingbourne, Chief Financial Officer
22. Ultimate Controlling Party
No one shareholder has control of the company.
Annual Report and Accounts 2019 50
23. Share Based payment Transactions
(i) Share options
The Company had introduced a share option programme to grant share options as an incentive for employees of the former
subsidiaries.
Each share option converts into one ordinary share of the Company on exercise. No amounts are paid or payable by the recipient
on receipt of the option and the Company has no legal obligation to repurchase or settle the options in cash. The options carry
neither rights to dividends nor voting rights prior to the date on which the options are exercised. Options may be exercised at any
time from the date of vesting to the date of expiry.
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
27 March 2019
78.50p
78.50p
0.25%
35%
10 years
26.83p
Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:
Number of options Average exercise price
2019 2018 2019
No. No. £
2018
£
Outstanding at the beginning of the period 8,272,907 10,077,087 0.23
Granted during the period 500,000 815,000 0.78
Forfeited/cancelled during the year (1,007,000) – 0.70
Exercised during the period – (2,619,180) –
Outstanding at the end of the period 7,765,907 8,272,907 0.20
0.17
0.76
–
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 issues in 2018 vesting conditions dictate that the options will vest if certain revenue conditions are met.
For the share options issues in 2019 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 1,977 days (2018: 2,146 days)
and the maximum term is 10 years.
The share price per share at 31/12/19 was £0.66 (30/11/2018: £0.92)
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OptiBiotix Health Plc
23. Share Based payment Transactions (continued)
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
2019 2018 2019
No. No. £
2018
£
Outstanding at the beginning of the period 1,045,524 1,399,925 0.08
Exercised during the period (716,138) (354,401) 0.08
Outstanding at the end of the period 329,386 1,045,524 0.08
0.08
0.08
0.08
A charge of £137,320 (2018: £128,222) has been recognised during the year for the share based payments over the vesting period.
24. Financial Risk Management Objectives and Policies
The Group’s financial instruments comprise cash balances and receivables and payables that arise directly from its operations.
The main risks the Group faces are liquidity risk and capital risk.
The Board regularly reviews and agrees policies for managing each of these risks. The Group’s policies for managing these risks are
summarised below and have been applied throughout the period. The numerical disclosures exclude short-term debtors and their
carrying amount is considered to be a reasonable approximation of their fair value.
Interest risk
The Group is not exposed to significant interest rate risk as it has limited interest bearing liabilities at the year end.
Credit risk
The Group is not exposed to significant credit risk as it did not make any credit sales during the year.
Liquidity risk
Liquidity risk is the risk that Group will encounter difficulty in meeting these obligations associated with financial liabilities.
The responsibility for liquidity risks management rest with the Board of Directors, which has established appropriate liquidity risk
management framework for the management of the Group’s short term and long-term funding risks management requirements.
During the period under review, the Group has not utilised any borrowing facilities.
The Group manages liquidity risks by maintaining adequate reserves and reserve borrowing facilities by continuously monitoring
forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.
Annual Report and Accounts 2019 52
24. Financial Risk Management Objectives and Policies (continued)
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.
25. Post Balance Sheet Events
On 27 March 2020 the company sold 3,250,000 shares in Skinbiotherapeutics plc at a price of 5 pence per share
On 19 April 2020 the Company issued and allotted 2,500,000 ordinary shares of 2 pence each exercised at a price of 40 pence per
share in the capital of the Company by way of a placing.
53
OptiBiotix Health Plc
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