OptiBiotix Health Plc Annual Report 2021

Plain-text annual report

optibiotix.com To find out more please contact OptiBiotix on: info@optibiotix.com OptiBiotix Health Plc | Innovation Centre, Innovation Way, Heslington, York, YO10 5DG, UK. OptiBiotix Health Plc © 2018 OptiBiotix Health Plc. All rights reserved. ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2021 Contents Company Information Chairman’s Report Chief Executive’s Statement Strategic Report Directors’ Report Report of the Independent Auditors Consolidated Statement of Comprehensive Income 2 3 6 11 16 19 25 Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Company Statement of Financial Position Company Statement of Changes in Equity 26 27 Consolidated Statement of Cash Flows 28 Company Statement of Cash Flows Notes to the Consolidated Statements of Cash Flows Notes to the Company Statements of Cash Flows 29 Notes to the Financial Statements 30 31 32 33 34 1 OptiBiotix Health Plc Company Information Directors: S P O’Hara R Davidson M Christie C Brinsmead S Hammond S Kolyda Secretary: Mark Collingbourne 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 9th Floor 107 Cheapside London EC2V 6DN Brokers: Cenkos Securities plc 6-7-8 Tokenhouse Yard London EC2R 7AS Website Address: www.optibiotix.com Annual Report and Accounts 2021 2 Chairman’s Report For the year ended 31 December 2021 turnover growth the year, despite The Group continued to make excellent strategic, commercial, scientific and financial progress during the challenging and uncertain trading environment created by the global Covid pandemic. Both the Probiotic and Prebiotic businesses achieved and strong improved they profits, successfully built sales of the first- generation ingredients developed by the Group, secured additional regulatory approvals, and reached new agreements with larger commercial partners to extend their global reach. Since the year-end the Group has successfully floated its formerly wholly-owned probiotic subsidiary, ProBiotix Health plc, as a separate company to maximise its growth potential and deliver increased value to Group shareholders, following the model set by the flotation of SkinBioTherapeutics plc in 2017. The Group’s financial strength provides it with an excellent platform to accelerate the commercialisation of first-generation products via partners and increasingly direct sales to consumers, and take to market its second-generation technologies which have the potential for sustained future growth. as Results Group sales for the 12 months ended 31 December 2021 (grew by 45.3% to £2.2m (2020: £1.5m). Administrative expenses (excluding non-cash items such as share-based payments and amortisation) increased by 32.4% to £2.1m (2020: £1.6m), largely due to one-oﬀ recruitment and consultancy costs, and investment in strengthening our commercial management team. Gross proﬁt increased by 27.7% to £1.1m (2020: £0.9m). Both the Probiotic and Prebiotic divisions, which ﬁrst achieved proﬁtability in 2020, delivered substantially increased EBITDA. The Company received an additional £2.9m (2020: £0.7m) during the year in proceeds from the sale of shares in SkinBioTherapeutics plc (SBTX), which is not included in the Group sales ﬁgures. As of 31 December 2021, the Company continued to hold 20.8% of the issued 333 OptiBiotix Health Plc share capital of SBTX, valued at £13.7m (31 December 2020: £8.9m). The increase in the value of the continuing investment in SBTX resulted in a Group net proﬁt for the year of £6.3m (2020: £5.8m). The Group’s ﬁnancial position remains strong, with total cash on the balance sheet at the year-end increasing by 122% to £2.0m (2020: £0.9m). Once R&D tax credits, recoverable VAT, and debtors and creditors are accounted for the balance is £3.2m (2020: £1.4m). Strategy is a Optibiotix Health life sciences business founded on the development of probiotic and prebiotic compounds which modify the microbiome to tackle obesity, high cholesterol, diabetes, and skincare: all markets oﬀering strong growth potential in many parts of the world. Our proven two-stage growth strategy has been to build the brand presence and early sales of our ﬁrst-generation products (principally LPLDL® in Probiotics and SlimBiome® in Prebiotics) through deals with multiple partners in multiple territories around the world, while at the same time pursuing the development of our more innovative second- generation products that oﬀer potentially larger future returns. This means that our partners cover the marketing and regulatory costs of entering new markets with new products whilst allowing us to build a brand presence. This strategy has been designed with two separate legal entities (Probiotix Health Ltd and OptiBiotix Ltd) focused on commercialising products, while the holding company OptiBiotix Health plc acquires and develops the novel technologies to build the new product pipeline, and provide the necessary scientiﬁc and clinical studies, publications and regulatory approvals. We also have a signiﬁcant shareholding in a third company, SkinBiotherapeutics plc, which was founded by our group CEO, and has delivered £4.3m of value to our shareholders through share sales since its IPO in 2017, and in which we retain a stake valued at £8.4m as at 1 June 2022. OptiBiotix Health plc Overview: shareholding and key products Chairman’s Report (continued) As we have always stated, this structure gives our shareholders exposure to multiple opportunities within the emerging microbiome space, and aﬀords the potential to deliver additional value through separate public listing of the divisions, as we have accomplished since the beginning of the new ﬁnancial year with the ﬂotation of ProBiotix Health plc. This has allowed ProBiotix Health to raise £2.5m to accelerate the commercial development of its products and has given our shareholders a direct stake in the business through the distribution of shares. The Company retains a substantial shareholding of 44% in its former subsidiary, which will in future be accounted for as an associate. Business development Among the many positive developments during the year, which the Chief Executive discusses more fully in his report, I would particularly like to highlight: • • • • the signiﬁcant strengthening and professionalisation of our business development and commercial management team, most notably through the appointment of René Kamminga as CEO of our Prebiotic business, OptiBiotix Ltd; the conclusion of major new commercial agreements with market-leading partners in both the Probiotic and Prebiotic businesses, moving us towards our goal of having eight to ten large national or international partners for our ﬁrst-generation products, and two to three partners for each of our second- generation technologies; the publication of multiple scientiﬁc and clinical studies and industry reports aﬃrming our position as an industry leader in understanding of the microbiome; and further regulatory endorsements, including Health Canada approval of our SlimBiome® weight management product. The Board and senior management As noted in the last annual report, we signiﬁcantly strengthened the Board through new appointments in the opening months of the ﬁnancial year, ensuring that we have the right mix of skills to lead the Group through the next stage of its strategic development. Christopher Brinsmead CBE joined the Board as a non-executive director on 1 January 2021, bringing to us more than 30 years of experience in the pharmaceutical and healthcare sectors as a senior executive FTSE 350 company director and chairman. Chris was Chairman of AstraZeneca Pharmaceuticals UK and President of AstraZeneca UK and Ireland from 2001-2010, and President of the Association of the British Pharmaceutical Industry (ABPI) from 2008-2010. Stephen Hammond MP joined the Board as a non-executive director on 2 March 2021, further complementing our skillset through his experience of a successful career in fund management and investment banking with Dresdner Kleinwort Benson and Commerzbank Securities prior to entering Parliament in 2005, and his subsequent senior roles in government. René Kamminga joined us on 6 April 2021 as Chief Executive Oﬃcer of our wholly owned subsidiary OptiBiotix Ltd. We are already seeing the beneﬁts of his long experience and track record of growing sales of speciality ingredients and products, and his extensive network of industry contacts. Since the year-end we have signiﬁcantly strengthened our senior executive team below the main Board, as the Chief Executive reports below. Outlook Following the restructuring of the Group through the successful ﬂotation of ProBiotix Health plc, we are focused on the development of our exciting prebiotic business OptiBiotix Ltd, while retaining a substantial stake in the continuing growth of ProBiotix Health as an associate. The three commercial agreements we signed at the end of 2021 with well-known national and international brands are indicative of the future direction of the Group as we move to focus on fewer and larger business partners. This long-planned strategic shift creates the potential for extending our global reach, enhancing the reputation of our products and generating substantial volume sales, though it should also be recognised that these larger partners tend to operate on longer timescales than the smaller and quicker-to-market enterprises with which we forged our initial commercial agreements. It also means that we will receive fewer but much larger orders for our products than in the past, so that revenues will accrue less evenly through the year, and our results for future ﬁnancial periods may reﬂect such timing diﬀerences. We have invested substantially in building a stronger professional commercial management team that is well qualiﬁed and equipped to lead the business in this next phase of its development, as we look to launch more new products and focus increasingly on selling ﬁnished products direct to consumers, while continuing to develop sales of our ﬁrst-generation ingredients to businesses and working to realise the commercial potential of our development pipeline. British Retail Consortium accreditation, achieved at the beginning of the new ﬁnancial year, demonstrates our compliance with an internationally recognised food safety standard that will allow us to greatly accelerate the development and sales of ﬁnished products to consumers through the retail channel. Annual Report and Accounts 2021 4 Chairman’s Report (continued) Although the war in Ukraine and global inﬂationary pressures have created an undoubtedly challenging trading environment for many companies including our own, I am conﬁdent that we have the right structure, strategy, management skills, technologies and commercial partners to deliver growing value for our shareholders and an exciting long-term future for the Group. Neil Davidson CBE Chairman 27 June 2022 5 OptiBiotix Health Plc Chief Executive’s Report For the year ended 31 December 2021 OptiBiotix offers investors a unique opportunity to participate in the growth potential afforded by one of the most progressive and exciting areas of biotechnological research: the modulation of the human microbiome. This is a market projected to grow at a CAGR of 31% between 2023 and 2029 (Markets and Markets, 2022). The Group innovative unique develops products across multiple areas of the microbiome that are protected by an extensive and growing international portfolio of patents and trademark underpinned by strong science and clinical studies. Products are transferred for commercial exploitation to trading divisions which have the ability to deliver additional shareholder value through the achievement of separate listings or exits. Everything we do is designed to maximise the earning potential of each of our products while maintaining tight cost control and limiting investor risk. STRATEGIC DEVELOPMENT We are successfully progressing a two-stage strategy that continues to deliver for our investors as planned. In the ﬁrst stage of development, our two independent trading businesses have built a strong recurring revenue base and achieved proﬁtability through the development of business-to-business sales of our ﬁrst-generation functional ingredients: principally LPLDL® in Probiotics and SlimBiome® in Prebiotics. The Group has also beneﬁted in SkinBioTherapeutics plc (SBTX). substantially investment from our Our business model has been designed to maximise the income potential of each of our products while limiting investment risk and managing costs by securing appropriate business partners in a wide and growing range of territories. Having established our scientiﬁc and brand credibility through an initial focus on smaller partners that were able to bring products quickly to market, we are now able to develop a smaller number of relationships with larger partners that oﬀer the opportunity both to increase volume sales in existing markets, and to extend our geographical reach. As anticipated, the increasing association of our products with internationally recognised retail and pharmaceutical partners and established brands (e.g. MyProtein, OptiSlim) has created a virtuous circle of further interest from other potential partners and markets. As we engage with an increasing number of larger partners, the Company will have to manage competing interests for product and territory exclusivity. Now we have established a strong ﬁnancial base and brand credibility through our business-to-business sales, we are increasing our eﬀorts on developing higher-margin ﬁnal product sales, including direct sales to consumers in strategic markets. This direct sales strategy will have a mutually beneﬁcial eﬀect in also driving sales of ingredients included in ﬁnal products we sell direct to consumers. Our products continue to gain endorsement from scientiﬁc studies, industry awards and regulatory approvals. We were particularly pleased that SlimBiome® won ﬁrst place in the Weight Maintenance Category of the US Nutrition Industry Executive Awards in 2021 and was approved as a licensed product with strong health claims for weight management by Health Canada, which is renowned as one of the world’s most demanding regulators. We believe these are substantive achievements for early-stage products. Following the separate ﬂotation of our Probiotic business as ProBiotix Health plc in March 2022, we are now strongly placed to focus on the growth potential of our Prebiotic business, OptiBiotix Ltd, through our new CEO, René Kamminga. The conclusion of three new commercial agreements with market-leading partners in the UK, India and Saudi Arabia at the end of the year have delivered an important extension of our geographic reach for SlimBiome® in the main markets of Europe and Asia, while the launch of new lean muscle mass ingredient, LeanBiome® provides us with a point of entry to the lucrative and fast-growing sports nutrition market. After COVID-19 delayed product development we are making good progress with the commercialisation of our second-generation prebiotic products: the growing SweetBiotix® family of functional ﬁbres that act as low calorie, prebiotic sweeteners; and Microbiome Modulators to target a range of human diseases. These products carry higher development risks than our ﬁrst-generation products but address much larger market opportunities, aﬀording very substantial potential for future growth in revenues and proﬁts. FINANCIAL RESULTS As the Chairman has noted, Group sales for the 12 months ended 31 December 2021 grew by 45.3% to £2.2m (2020: £1.5m), despite diﬃcult global trading conditions. The Probiotic business, contained within our wholly owned subsidiary ProBiotix Health Ltd, increased sales by 34.0% to £1.1m (2020: £0.8m). However, income for the prior year included a £250,000 milestone payment for the development of LPLDL® into a pharmaceutical, so that underlying product sales growth year-on-year was 92.6%. The division delivered a 104% increase in EBITDA to £179K (2020: £88K). The Prebiotic business, within our wholly owned subsidiary OptiBiotix Ltd, increased sales by 59.3% to £1.1m (2020: £0.6m), with underlying sales (excluding licensing fees) growing by 122%, with an EBITDA of £13K ( 2020: £36k). Annual Report and Accounts 2021 6 Chief Executive’s Report (continued) Group administrative expenses (excluding non-cash items such as share-based payments and amortisation) increased by 32.4% to £2.1m (2020: £1.6m), largely due to one-oﬀ recruitment and consultancy costs, and investment in strengthening our management team. from the sale of shares As the Chairman has noted, the Company received an additional £2.9m (2020: £0.7m) during the year in SkinBioTherapeutics plc (SBTX), which is not included in the Group sales ﬁgures. As of 31 December 2021, the Company continued to hold 20.8% of the issued share capital of SBTX, valued at £13.7m ( 2020: £8.9m). The increase in the value of the continuing investment in SBTX resulted in a Group net proﬁt for the year of £6.3m (2020: £5.8m). SBTX continues to make progress commercialising its products. It is worth noting that our initial investment of approximately £700,000 in this business in 2016 has delivered £4.3m of value to OptiBiotix shareholders through share sales to date (a multiple of 6.1 of our initial investment). If OptiBiotix had raised funds via a placing rather than sold SBTX shares this would equate to an additional 9.7m shares (11.1%) and associated shareholder dilution. The Company’s’ continuing interest in SBTX is valued at approximately £8.4m as of 1 June 2022. PROBIOTICS: ProBiotix Health plc The cornerstone of our Probiotic business is LPLDL®, a unique probiotic for cardiovascular health, the sales of which, either as an ingredient or ﬁnal product, grew by 34% during the year, or as direct comparison by 92.6% when excluding the £250K milestone payment received in 2020. The Group developed the science, carried out human studies to conﬁrm product safety and eﬃcacy, and protected its commercial interests with a broad IP portfolio comprising some 36 patents. In line with our strategy, ProBiotix Health then took responsibility for commercialising the product by building a supply chain of licensed partners to manufacture, formulate, and distribute LPLDL® around the world. By the end of 2021 we had partners commercialising LPLDL® in over 60 countries including the world’s largest probiotic market, the USA, in partnership with Seed Health. Four new commercial agreements were concluded in 2021, of which the most signiﬁcant was the signing in August of a new agreement with Seed Health expanding its territories from the US to include Europe, Oceania (Australia, New Zealand etc.) and Asia (excluding India) for the supply of LPLDL® in Seed’s DS-01 multi- strain synbiotic product. We reached new agreements with Compson Biotechnology in Taiwan, INSCOBEE Inc in South Korea and Bioscience Marketing in Malaysia, all covering both LPLDL® and our own branded CholBiome® range containing it, designed to build the reputation and brand awareness of our own label products across Asia. We have developed our own unique range of patented and proprietary food supplements containing LPLDL® under the CholBiome® brand, comprising CholBiomex3 to reduce cholesterol, CholBiomeBP to lower blood pressure and CholBiomeVH to promote vascular health. This gives us a product portfolio which allows us to create diﬀerent formulations to allow us to enter international markets around the world. This is important as regulatory conditions vary widely across the world. For example, Monacolin K is used extensively across Asia but prohibited in food supplements in North America and has restricted dosage in Europe. Our CholBiome® product range has been developed to meet existing and anticipated regulatory requirements in international markets. Actial Farmaceutica Srl, with which we announced an agreement in July 2020 for the distribution of CholBiome® products, is taking longer to launch products than originally planned due to COVID-19 delays impacting on regulatory approvals. However, ProBiotix Health hopes to announce progress on this in the months ahead. Whilst ProBiotix Health’s focus is on commercialising products into the supplement and over the counter pharma markets there is potential for the further development of LPLDL® in drug biotherapeutics. This is a complex area where regulatory pathways are not fully established, timescales are long and investment costs and development risks are high. As such, this is being progressed with partners with the necessary skills and expertise to take drug products to market who pay milestones and royalties. As part of our exploration of potential additional applications for the product, we announced in January that we are jointly funding a PhD studentship and clinical study into the role of the microbiome in stress, anxiety and sleep disorders with the Universities of Southampton and Trento. We hope to have some early data at the start of 2023. LPLDL® has been determined as Generally Recognized As Safe (‘GRAS’) by the US Food and Drug Administration (FDA) and has pharmaceutical GMP manufacture designation. Post period we began to see the beneﬁts of achieving GRAS with our partner in Uruguay, Grancha Poncha, launching a yoghurt, Yo-Life®, with a cholesterol health claim. This is a signiﬁcant milestone, as it extends the use of LPLDL® into functional dairy foods with a health claim which may be replicated in other territories and other functional foods on a global scale. The launch follows over two and a half years of product development to ensure the addition of LPLDL® to yoghurt does not change its taste, texture, or shelf life, and provides an active dose in milligram amounts and a cost advantage over stanols or sterols which typically require doses of 2gms. With the dairy sector accounting for over 85% of the global probiotic market, we believe that this is an area with potential for signiﬁcant future growth. 7 OptiBiotix Health Plc Chief Executive’s Report (continued) PREBIOTICS: OptiBiotix Ltd SweetBiotix® Our Prebiotic business continues its focus on growing sales of its ﬁrst- generation prebiotic weight management ingredient SlimBiome®, and on continuing to progress the commercialisation of more innovative second-generation products including SweetBiotix® and Microbiome Modulators. SlimBiome®/LeanBIome® Despite the global slump in the weight-management sales during the COVID-19 pandemic (Nutritional Outlook, 24, 4) sales of SlimBiome® and LeanBiome® as an ingredient or ﬁnal product grew by 122% during the year, aided by signiﬁcant new product launches such as THG and range extensions in the UK and Oceania. Our established UK partner Holland & Barrett expanded their SlimExpert® own brand range of weight management products containing SlimBiome® from three to eight products in March 2021, with the range now including powdered beverages, shakes and porridge. In July 2021, Arrotex Pharmaceuticals, Australia’s largest private pharmaceutical company, launched a Very Low Calorie Diet (VLCD) weight management product containing SlimBiome®, Bioslim VLCD, through pharmacies and online across Australia. Also, in July 2021 our existing customer Optipharm expanded their portfolio of products containing SlimBiome® with the launch of the Optiman brand, sold exclusively through the Chemist Warehouse online pharmacy. In October 2021 we extended our market reach by entering the sports nutrition market with LeanBiome® a scientiﬁcally formulated sports nutrition ingredient which supports athletes seeking to increase lean muscle mass to change their body composition. In December 2021 we signed a number of signiﬁcant new commercial agreements with large partners Apollo Hospitals in India and Nahdi Medical in Saudi Arabia which extended the geographic reach of the business and will hopefully lead to important new product launches in 2022. In January 2022 The Hut Group’s Myprotein launched the Impact Diet Lean (IDL) product range containing LeanBiome®, developed to build lean muscle mass faster. IDL shakes were launched into the main markets of Europe and Asia during Q1 and will be followed up by product range extensions throughout the year. Our second-generation SweetBiotix® family of products is based on the concept of creating a sweet ﬁbre that has a low glycaemic index, which enhances the microbiome. The concept uses recent advances in science, requires new manufacturing processes to be developed, and represents a step change from existing products on the market or to the best of our knowledge and partner discussions, known to be under development. Our aim is to build a broad range of products suitable for a wide range of application areas which can meet the needs of multiple partners, on applications as diverse as dairy, cereals, and hot and cold beverages. Each of these must be assessed in terms of ﬂavour optimisation, stability (typically 12 months with 24 months preferred), dosage, safety, tolerance, health beneﬁts, and the ﬁnal product cost proﬁle. We are progressing the commercialisation of SweetBiotix® on a number of fronts. Following the agreement we signed in the second half of 2020, our US manufacturing partner has successfully manufactured SweetBiotix® using an industrial scale process and is now optimising yields and reducing wastage. Our agreement, covering only one part of the SweetBiotix® portfolio, grants an exclusive licence in return for our partner making a signiﬁcant investment to cover all the manufacturing, marketing and commercialisation costs, while paying annual royalties to OptiBiotix. Additionally we are working with one of the world’s leading companies specialising in taste and sweetness on jointly developing, scaling up and commercialising another group of SweetBiotix® products. A number of corporates with leading positions in the food and beverages markets have also signed Material Transfer Agreements to develop applications for SweetBiotix®. Microbiome Modulators The Company has developed an innovative approach to allow it to precision engineer the microbiome. This is one of the most exciting areas of microbiome therapeutics as it creates the potential for targeted treatment of a range of human diseases. Development work was slowed by COVID-19 reducing access to Universities and Contract Research Organisations in 2020 and early 2021. This work has now progressed and we have achieved the production of Microbiome Modulators using a process suitable for industrial scale-up. Work is ongoing to optimise the process and test whether the functionality has been retained before initiating full scale-up and commercialisation. This is a really exciting area of development which, if successful, could revolutionise the use of the microbiome therapies in healthcare, potentially allowing the creation of precision prebiotics which can engineer the gut microbiome to prevent, manage and treat human diseases. We will be increasing our investment in Microbiome Modulators to accelerate the development activities currently taking place. Annual Report and Accounts 2021 8 Chief Executive’s Report (continued) INTELLECTUAL PROPERTY PROSPECTS Our Intellectual Property strategy has been based of building a portfolio of overlapping patents to protect our commercial interests and reduce the risk of any particular patents failing to grant or being opposed by a competitor. This means that we have multiple composition, application, and process patents to protect each area of our business. Whilst this approach is more costly, it reduces our future commercial risk. As patents are granted in key territories (typically the US, Europe, Canada, Japan, Australia, India) the Group has been able to reﬁne its patent portfolio to reduce IP costs whilst continuing to protect its commercial interests. Our strategy and investment have enabled the Group to build an extensive and valuable intellectual property portfolio of more than 100 patents worldwide: 36 in ProBiotix Health and 73 in OptiBiotix. In addition to these patents, we have registered approximately over 80 trademarks (21 in ProBiotix Health and 62 in Optibiotix) providing ‘double IP’ – a combination of patents and supporting trademarks which allows the Group to build its trademarked brands supported by its patents. This approach allows the Group to protect its commercial interests and limit competitors from launching similar products and in combination creates a valuable IP portfolio in the microbiome ﬁeld. We are constantly reviewing and updating our patent and trademark portfolio according to commercial needs. MANAGEMENT As the Chairman has reported, we substantially strengthened our Board and senior management team through new non-executive and executive appointments in the early months of the ﬁnancial year under review. I am pleased to note that a number of these new senior colleagues have demonstrated their commitment to the Group, and their conﬁdence in our future prospects, by making personal investments in the Company’s shares. It is also pleasing to note that other members of the Board and senior management team took the opportunity to invest in OptiBiotix during 2021. Since the beginning of the new ﬁnancial year, we have made a number of senior appointments below the level of the main Board. Paul Cannings joined us in January 2022 as Head of Operations & Quality, and in March 2022 we announced the appointments of Zac Sniderman as Business Development & Sales Director North America, Shiraz Butt as E-Commerce Director, and Karl Burkitt as Marketing Director. These new additions will ensure that we continue to meet the quality and regulatory requirements of our growing network of commercial partners around the world; maintain our drive to expand ingredient sales, particularly in the large North American market; and develop the sales of ﬁnal products containing our unique ingredients both to businesses and direct to consumers. We have continued to make good progress since the beginning of the current ﬁnancial year, despite the challenging global trading environment. Signiﬁcant developments in the year to date include: • • • • • The achievement of British Retail Consortium accreditation, conﬁrming our compliance with the Global Food Safety Initiative (‘GFSI’) benchmark. This certiﬁcation by one of the leading international food safety standards, accepted by most large retailers and their suppliers worldwide, is an important support to our commercial strategy of increasing our sales of ﬁnal product solutions to partners in the retail channel. Our entry into the sports nutrition market with the launch of LeanBiome®, a scientiﬁcally supported dietary ﬁbres and a trace mineral, developed to support athletes increase lean muscle mass and to improve metabolism, gut health and satiety. Our new distribution agreement with leading e-commerce retailer The Hut Group, signed in December 2021, saw LeanBiome® launched in January 2022 in its Impact Diet Lean product as part of its My Protein range in the UK, with territorial expansion across Europe, Asia and the USA planned in the course of the year. The reformulation of WellBiome®, our functional ﬁbre and mineral blend, with new ingredients that will allow us to make new health claims for the products. The new WellBiome® will form the basis for a science-based health and wellness platform oﬀering a range of products to improve cognitive, immune, bone, digestive and cardiovascular health to support healthy ageing. Publication in January 2022 of a third human volunteer study on the medical eﬃcacy of LPLDL®, demonstrating through a placebo- controlled trial that LPLDL® delivered large and statistically signiﬁcant reductions in total cholesterol, LDL-C (bad) cholesterol and Apolipoprotein B (widely accepted as the most important causal agent of atherosclerotic cardiovascular disease), with no compliance, tolerance or safety issues. The results of this and other studies suggest eﬃcacy similar to many statins and other treatments more typically associated with pharmaceuticals, suggesting considerable potential in high value pharmaceutical and OTC markets for the use of LPLDL® in individuals who are unwilling or unable to tolerate other treatments. Publication in February 2022 of a consumer study undertaken among purchasers from our own e-commerce website of CholBiomex3, our proprietary food supplement containing LPLDL®, which conﬁrmed its eﬀectiveness in reducing cholesterol with no reports of side-eﬀects or any tolerance issues. 9 OptiBiotix Health Plc Chief Executive’s Report (continued) • • • Admission of ProBiotix Health plc to the AQSE Growth Market on 31 March 2022, raising £2.5m for the further development of our former Probiotic subsidiary through a placing and subscription of new shares, while giving our own shareholders a dividend in specie of 0.554673 ProBiotix share for every OptiBiotix share held. Good progress in the development of OptiBiotix Health India, the new subsidiary whose formation we announced in November 2021. This gives us much improved access to a huge, rapidly growing and increasingly prosperous market of 1.3bn people. India is expected to account for the majority of the world’s middle- class consumers by 2035. With high levels of cardiovascular disease and obesity already prevalent in the country, we see excellent opportunities local manufacturing partners and to develop sales of both ingredients and higher-margin ﬁnal products in the years ahead. improve engagement with our to The appointment of Steen Andersen as Chief Executive Oﬃcer of ProBiotix Health plc. This is part of a long-planned strategy to appoint experienced industry business leaders to each part of the business allowing me, as Group CEO to focus on identifying and developing the new technologies that will provide the Group with a pipeline of products to deliver future growth and market value. As the Group matures, we are moving on from a period when we announced very frequent news reports on our progress in developing the science behind our products and in growing our global network of relatively small business partners. The focus now is on building our sales by extending product ranges and territories, gaining regulatory approvals for health claims, migrating to larger partners, and developing sales of ﬁnal products direct to consumers. This will lead to us reporting less news, but of a more substantive nature. It also means, as the Chairman has noted, that our future ﬁnancial results will reﬂect fewer but much larger sales to a smaller number of big partners and consequently revenues reported less evenly through the year. The strong growth in revenues and proﬁts in 2021 despite the diﬃcult global environment is testimony to the eﬀectiveness of our strategy. We continue to make good progress against our stated aims of focusing on a smaller number of large partners in key strategic markets and grow our direct-to-consumer sales, the beneﬁts of which we expect to begin realising in the current year. There is an exciting opportunity for growth as we bring the second-generation products to market, while we retain exposure to the growth potential in probiotics and skincare through the Group’s shareholdings in ProBiotix Health plc and SkinBioTherapeutics plc. Our strong ﬁnancial position has allowed us to invest in expanded sales and marketing capabilities that will help us to increase our sales of ﬁnal products direct to consumers through retail channels. We hope to see the return on this investment later this year and beyond. It also gives us the capability to in-license or acquire additional technologies that will ensure a continuous pipeline of solutions to deliver diversiﬁed growth for the Group and strengthen our position as one of the leading companies in the rapidly growing microbiome space. Stephen O’Hara Chief Executive 27 June 2022 Annual Report and Accounts 2021 10 Strategic Report For the year ended 31 December 2021 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 £2,007,448 as at 31 December 2021 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 Statements 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 Strategic Report (continued) 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. COVID-19 The global implications of the economic impact of COVID-19 could aﬀect sales and proﬁtability Currency ﬂuctuations will impact both sales and costs. Our initial product oﬀering is not price-sensitive. Substantial cost increases will be passed on. 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 Loss of key personnel Technology Commercialisation Working capital Material adverse impact on the Group’s ﬁnancial condition and prospects. Competitive remuneration packages, nil cost options to reduce market volatility The Group is launching products that are not already available in the consumer market. 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 has encouraged customers to build up material stocks of ingredients to meet user demand from end user customers. Flexible payment terms have been given to customers to pay for stock. If stocks are not used, would they become unusable. The Group has responded to consumer demand. The Group consultants to manage the process and negotiate contracts. recruited experienced management and Ingredients have a three-year shelf life risk of non-usability is reduced. As end user requirements become formalised and production time frames for ingredients come down it will be possible for Group customers to hold less stock of ingredients which will in turn reduce the debtor balances outstanding at period end. Cyber attacks Cyber-attacks could delay or impair operations as which would have ﬁnancial implications. Training, anti-virus software, all users have multifactor authorisation for accounts, weekly review of attempts 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 Impact Mitigation Intellectual Property litigation 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 2021 12 Strategic Report (continued) Key Performance Indicators Financial Year to 31 December 2021 £’000 Year to 31 December 2020 £’000 Revenue Operating Loss Profit/(Loss) for the period Cash as at 31 December 2021 2,213 1,523 (1,365) (1,111) 6,261 5,802 865 2,007 During the year to 31 December 2021 the company has achieved a number of key objectives to build shareholder value, these are laid out in the CEO report on pages 6 to 10. Non-financial The Board recognises the importance of KPI’s in driving appropriate behaviour and enabling of Group performance. For the year to 31 December 2021 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: 1. Customer relationships 2. IP and trademark registrations 3. Service quality and brand awareness 4. Attraction, motivation and retention of employees Dividends No dividends can be distributed for the year to 31 December 2021. Future Developments 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 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 three Non-Executive Directors. The Chairman’s and Chief Executive Statement on pages 3 to 10 gives information on the future outlook of the Group. 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. 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 S Kolyda Executive Director – Research and Development Director M Havid-Hansen Executive Director – Probiotix Health Limited René Kamminga Executive Director – OptiBiotix Limited 13 OptiBiotix Health Plc Strategic Report (continued) Board Committees: Remuneration Committee The Remuneration Committee is made up of Chris Brinsmead, as Chairman with Neil Davidson and Sean Christie 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, is chaired by Sean Christie with Neil Davidson and Chris Brinsmead. 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 Section 172 Statement Under s172 of the Companies Act 2006 the Directors have a duty to act in good faith in a way that is most likely to promote the success of the Company for the beneﬁt of its members as a whole, having regard to the likely consequences of decisions for the long term, the interests of the Company’s employees, the need to foster relationships with other key stakeholders, the impact on the community and the environment, maintaining a reputation for high standards of business conduct, and the need to act fairly as between members of the Company. Key decisions made by the Board during 2021 were related primarily to • the signiﬁcant strengthening and professionalisation of our business development and commercial management team, most notably through the appointment of René Kamminga as CEO of our Prebiotic business, Optibiotix Ltd, • the conclusion of major new commercial agreements with market-leading partners in both the Probiotic and Prebiotic businesses, moving us towards our goal of having eight to ten large national or international partners for our ﬁrst-generation products, and two to three partners for each of our second-generation technologies; • the publication of multiple scientiﬁc and clinical studies and industry reports aﬃrming our position as an industry leader in understanding of the microbiome; • further regulatory endorsements, including Health Canada approval of our SlimBiome® weight management product. • As well as ensuring the Group had suﬃcient cash runway to meet the slowdown associated with the pandemic. During the year, the Group augmented the cash balance by raising £2,900,936 via the partial disposal of in SkinBioTherapeutics plc. it’s holdings Annual Report and Accounts 2021 14 Strategic Report (continued) Employee engagement As a very small company in terms of staﬀ, Board members have multiple points of contact with staﬀ; through Board meeting feedback, participation in regular management meetings involving all staﬀ, and ad hoc interactions in relation to speciﬁc matters. These forums provide staﬀ with an opportunity to give their views which can then be taken into account in making decisions likely to aﬀect their interests. Speciﬁc matters of concern to them as employees are dealt with in management meetings and by email. Corporate developments and Company performance are discussed in regular management meetings. All staﬀ are eligible for the Group’s share option scheme and this encourages involvement in the Company’s performance. Stakeholder Engagement The Group has a small number of major suppliers and distributors that support its delivery of strategy and corporate goals. The selection of, relationships with, and execution of, contracted work by these parties is considered regularly by the Executive Directors and at each Board meeting by all Directors. Shareholder Engagement Due to the ongoing eﬀects of the COVID-19 pandemic, face-to-face engagement with shareholders during the year was limited. However, the Directors continued to engage with shareholders via regular regulatory news announcements as well as interactive investor meetings in order to keep them up to date on progress. Environmental and Community Impact There was no adverse impact on the community or environment from the decisions made by the Board during the year. On Behalf Of The Board S P O’Hara 27 June 2022 15 OptiBiotix Health Plc Directors’ Report For the year ended 31 December 2021 The Directors present their report and the audited ﬁnancial statements of the group for the year to 31 December 2021. Principal Activity The principal activity of the group 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. Directors The directors who served the company during the year and up to the date of this report were as follows: Executive Directors S P O’Hara S Kolyda F Narbel (Resigned 26 May 2021) Non-executive Directors P Wennstrom (Resigned 1 January 2021) R Davidson M Christie C Brinsmead (Appointed 1 January 2021) S Hammond (Appointed 2 March 2021) 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 10,212,986 503,000 150,000 – – – 50,000 Percentage Held Ordinary shares of £0.02 each Warrant exercise price Ordinary shares of £0.02 each Option exercise price 11.60% 0.57% 0.17% – – – 0.06% – – – – – – – – – – – – – – 6,099,135 385,000 100,000 165,000 358,722 – – £0.08 £0.73 £0.95 £0.73 £0.20 – – S P O’Hara R Davidson M Christie S Kolyda S Kolyda C Brinsmead S Hammond 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 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. Annual Report and Accounts 2021 16 Directors’ Report (continued) Substantial Shareholdings Substantial shareholdings include directors as at 27 June 2022 were as follows: 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. Stephen O’Hara Finance Yorkshire Seedcorn LP % of shares issued 11.6 10.7 The share price per share at 31/12/2021 was £0.46 (31/12/2020: £0.58) Financial Instruments The Group’s exposure to ﬁnancial risk is set out in note 24 to the ﬁnancial statements. Research And Development The Chairman’s and Chief Executive Statement on pages 3 to 10 gives information on the Group’s research and development activities. Events After The Reporting Period Refer to Note 25 to the ﬁnancial statements for further details. Publication Of Accounts On Group Website Financial statements are published on the Group’s website. The maintenance and integrity of the website is the responsibility of the Directors. The Directors’ responsibilities also extend to the ﬁnancial statements contained therein. Going Concern The ﬁnancial statements have been prepared on the assumption that the Group is a going concern. When assessing the foreseeable future, the Directors have looked at the budget for the next 12 months from the date of this report, the cash at bank available as at the date of approval of this report and are satisﬁed that the Group should be able to cover its quoted maintenance cost, other administrative expenses, as well as its ongoing research and development expenditure. Management have not seen a material disruption to the business as a result of the COVID-19 outbreak, however events are being kept under constant review, and remedial action will be taken if the situation demands it. 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 UK adopted international accounting standards (IFRS). 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: • select suitable accounting policies and then apply them consistently. • make judgements and estimates that are reasonable and prudent. • state whether the Group and parent company ﬁnancial statements have been prepared in accordance with IFRS 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 Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. 17 17 OptiBiotix Health Plc OptiBiotix Health Plc Directors’ Report (continued) 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 Group’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 future outlook and the risks and uncertainties faced by the Group in the Strategic Report on page 14. On Behalf Of The Board S P O’Hara 27 June 2022 Annual Report and Accounts 2021 18 Independent Auditor’s Report to the Members of OptiBiotix Health Plc For the year ended 31 December 2021 Opinion We have audited the ﬁnancial statements of Optibiotix Health Plc (the ‘parent company’) and its subsidiaries (the ‘Group’) for the year ended 31 December 2021 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 United Kingdom adopted International Accounting Standards (IFRSs) 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 2021 and of the Group’s proﬁt for the year then ended; • the Group ﬁnancial statements have been properly prepared in accordance with IFRSs; • the parent company ﬁnancial statements have been properly prepared in accordance with IFRS’s as applied in accordance with the provisions of the Companies Act 2006; and Based on the work we have performed, we have not identiﬁed any material uncertainties relating to events or conditions that, individually or collectively, may cast signiﬁcant doubt on the group's ability to continue as a going concern for a period of at least twelve months from when the ﬁnancial statements are authorised for issue. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. Our approach to the 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 ﬁnancial statements have been prepared in accordance with the requirements of the Companies Act 2006. The Group ﬁnancial statements are a consolidation of 4 reporting units, comprising the Group’s operating businesses and holding companies. 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 In auditing the ﬁnancial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the ﬁnancial statements is appropriate. Our evaluation of the directors’ assessment of the entity’s ability to continue to adopt the going concern basis of accounting included reviews of expected cash ﬂows for a period of 12 months, to determine expected cash burn, which was compared to the liquid assets held in the entity. 19 OptiBiotix Health Plc 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. 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. Independent Auditor’s Report to the Members of OptiBiotix Health Plc (continued) Key audit matter How our audit addressed the key audit matter Carrying value of investments and recoverability of group receivables – Company risk The amount owed to the Company at the year end by the subsidiary Optibiotix Limited was written oﬀ in the year (£932k). The amount owed by Probiotix Health Limited was £318k. The carrying values of investments in group companies was as follows: Optibiotix Limited: £2,000,000 Probiotix Health Limited: £1,000 The Healthy Weight Loss Company Limited: £50,000 Carrying value of investments – Group risk At the year end the group had investments of £13.65m 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 £2.64m at the period ended 31 December 2021, of which £194k is in relation to 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. Following derecognition as an associate the investment was revalued to market value. This was agreed to open market information. Intangible assets in the accounts have been allocated useful lives and therefore an annual impairment test is not required. 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. Recoverability of trade receivables The group had trade receivables amounting to £1,413,882 as receivable as at the year end. We reviewed post year end receipts to ensure debtors were recovered satisfactorily. There is a risk that these are not fully recoverable and require impairment. Where amounts were not recovered we reviewed other support and correspondence to ensure the existence of the debtor and to assess the likelihood of recovery. We further challenged management and sought corroborative evidence where amounts were considered due and not fully recovered. Annual Report and Accounts 2021 20 Independent Auditor’s Report to the Members of OptiBiotix Health Plc (continued) Key audit matter Revenue recognition The Group has multiple revenue streams comprising sales of goods, licensing agreements and royalty arrangements, including ongoing and milestone payments. The recognition of revenue of these items is determined by the terms of agreement with customers and as such is widely varied. We identiﬁed a risk of inaccurate or incomplete recognition of revenue due to the incorrect allocation of milestones to service contracts, and an inappropriate recognition of revenue on sales of goods for which revenue is recognised over time. The assumptions and judgements made in estimating the percentage of completion require a signiﬁcant degree of management judgement and are susceptible to management override and represent a fraud risk. How our audit addressed the key audit matter We have performed the following audit procedures: • assessed the appropriateness of the Group’s revenue recognition accounting policies; • reviewed key contracts with customers and tested that the Group has correctly accounted for the revenue arising from these contracts in accordance with the accounting policies; • performed detailed testing on individually signiﬁcant contracts, including substantiating a sample of transactions with underlying documents; • evaluated whether revenue has been appropriately presented and disclosed in the ﬁnancial statements. Based on the audit work performed, we are satisﬁed that management have appropriately accounted for revenue in line with their accounting policy and in accordance with the requirements of IFRS 15. We are also satisﬁed that all necessary disclosure have been made in the consolidated ﬁnancial statements. 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. 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 forecast assumptions, including reviewing the forecast revenue and corroborated the assumptions; and The key assumptions that impact the conclusions are the levels of future revenue, and the ability to control the operating costs. • considered the appropriateness of the group’s disclosures in relation to going concern in the ﬁnancial statements. 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. 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. 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. 21 OptiBiotix Health Plc Independent Auditor’s Report to the Members of OptiBiotix Health Plc (continued) 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 £202,000 (2020: £206,000) £178,000 (2020: £120,000) How we determined it 1% of gross assets (2020: 1.5% gross assets) 1% of gross assets (2020: 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 the used by 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. This ﬁgure was £27,000. We agreed with the Audit Committee that we would report to them misstatements identiﬁed during our audit above £10,100 for the Group (2020: £10,650) and £8,900 for the Parent (2020: £6,000) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons. Other information The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the ﬁnancial statements and our auditor’s report thereon. Our opinion on the ﬁnancial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the ﬁnancial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the ﬁnancial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the ﬁnancial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: • the information given in the strategic report and the directors’ report for the ﬁnancial year for which the ﬁnancial statements are prepared is consistent with the ﬁnancial statements; and • the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception In the light of the knowledge and understanding of the group and parent company and its environment obtained in the course of the audit, we have not identiﬁed material misstatements in the strategic report or the directors’ report. Annual Report and Accounts 2021 22 Independent Auditor’s Report to the Members of OptiBiotix Health Plc (continued) 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: The extent to which the audit was considered capable of detecting irregularities including fraud • 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 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 page 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. Our approach to identifying and assessing the risks of material misstatement including fraud and non-compliance with laws and regulations, was as follows: in respect of irregularities, • the senior statutory auditor ensured the engagement team collectively had the appropriate competence, capabilities and skills; • to identify or recognise non-compliance with applicable laws and regulations; • we focused on speciﬁc laws and regulations which we considered may have a direct material eﬀect on the ﬁnancial statements or the operations of the company. • we assessed the extent of compliance with the laws and regulations identiﬁed above through making enquiries of management and inspecting legal correspondence; and • identiﬁed laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit. We assessed the susceptibility of the company’s ﬁnancial statements to material misstatement, including obtaining an understanding of how fraud might occur, by: • making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud; • considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations. To address the risk of fraud through management bias and override of controls, we: • performed analytical procedures to identify any unusual or unexpected relationships; • tested journal entries to identify unusual transactions; • assessed whether in determining the accounting estimates set out in Note 1 were indicative of potential bias; judgements and assumptions made Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. • investigated the rationale behind signiﬁcant or unusual transactions. In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to: • agreeing ﬁnancial statement disclosures to underlying supporting documentation; 23 OptiBiotix Health Plc Independent Auditor’s Report to the Members of OptiBiotix Health Plc (continued) • reading the minutes of meetings of those charged with governance; Use of this report • enquiring of management as to actual and potential litigation and claims; • obtaining conﬁrmation of compliance from the company’s legal advisors. There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from ﬁnancial transactions, the less likely it is that we would become aware of non- compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any. Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion. 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. 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. Sachin Ramaiya (Senior Statutory Auditor) For and on behalf of Jeffreys Henry LLP, Statutory Auditor Finsgate 5-7 Cranwood Street London EC1V 9EE Other matters which we are required to address 27 June 2022 We were reappointed as auditors by the company at the Annual General Meeting to audit the ﬁnancial statements for the year ending 31 December 2021. Our total uninterrupted period of engagement is 8 years, covering the periods ending 30 November 2014 to 31 December 2021. 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 2021 24 Consolidated Statement of Comprehensive Income For the year ended 31 December 2021 Notes Year ended 31 December 2021 £ Year ended 31 December 2020 £ 2,212,932 1,523,247 (1,089,589) (643,428) 1,123,343 879,819 (60,288) (127,248) (288,455) (247,895) (2,139,915) (1,616,069) (2,488,657) (1,991,212) (1,365,314) (1,111,393) (47,600) (44,954) 122 98 (47,478) (44,856) – (303,448) – 4,165,223 7,500,681 2,955,739 88,618 48,967 6,176,507 5,710,232 84,523 91,635 6,261,030 5,801,867 – – 6,261,030 5,801,867 6,261,030 5,801,867 – – 6,261,030 5,801,867 7.15p 6.65p 6.55p 6.07p 6 5 5 11 11 11 11 7 8 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 Gain on disposal of an associate Gain on investments Profit on disposal of investments Profit/(Loss) before tax Corporation tax Profit/(Loss)for the period Other comprehensive income Total comprehensive income for the period Total comprehensive income attributable to: Owners of the company Non-controlling interests Earnings per share from continued operations Basic profit/(loss) per share – pence Diluted profit/(loss) per share – pence All activities relate to continuing operations The notes on pages 34 to 54 form part of these financial statements 25 OptiBiotix Health Plc Consolidated Statement of Financial Position As at 31 December 2021 ASSETS Non-current assets Intangibles 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 Convertible loan notes TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES Notes As at 31 December 2021 £ As at 31 December 2020 £ 9 11 12 13 7 14 15 16 16 16 16 16 16 17 18 19 2,640,672 13,650,927 16,291,599 101,877 1,552,490 191,249 2,007,448 3,853,064 20,144,663 1,758,812 2,537,501 927,595 1,500,000 92,712 11,319,998 35,782 18,172,400 600,904 600,904 552,000 819,359 1,371,359 1,972,263 20,144,663 2,735,621 8,962,564 11,698,185 184,236 645,823 310,435 864,680 2,005,174 13,703,359 1,758,812 2,537,501 867,307 1,500,000 92,712 5,058,968 35,782 11,851,082 518,995 518,995 561,523 771,759 1,333,282 1,852,277 13,703,359 These financial statements were approved and authorised for issue by the Board of Directors on 27 June 2022 and were signed on its behalf by: S P O’Hara Director Company Registration no. 05880755 The notes on pages 34 to 54 form part of these financial statement Annual Report and Accounts 2021 26 Consolidated Statement of Changes in Equity For the year ended 31 December 2021 Share- Non- Convertible Merger based Called up Retained Share Controlling Debt Relief Payment Share capital Earnings Premium interest Reserve Reserve reserve £ £ £ £ £ £ £ Balance at 31 December 2019 1,708,811 (742,899) 1,646,873 35,782 92,712 1,500,000 740,059 Profit for the year – 5,801,867 – – – – – Issues of shares during the year 50,001 – 950,003 – – – – Share issue costs – – (59,375) – – – – Share options and warrants – – – – – – 127,248 Total equity £ 4,981,338 5,801,867 1,000,004 (59,375) 127,248 Balance at 31 December 2020 1,758,812 5,058,968 2,537,501 35,782 92,712 1,500,000 867,307 11,851,082 6,261,030 Profit for the year – 6,261,030 – – – – – 60,288 Share options and warrants – – – – – – 60,288 Balance at 31 December 2021 1,758,812 11,319,998 2,537,501 35,782 92,712 1,500,000 927,595 18,172,400 The notes on pages 34 to 54 form part of these financial statements 27 OptiBiotix Health Plc Consolidated Statement of Cash Flows For the year ended 31 December 2021 Cash flows from operating activities Cash utilised by operations Tax received Interest received Net cash outflow from operating activities Cash flows from investing activities Purchase of intangible assets Net cash outflow from investing activities Cash flows from financing activities Share issues 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 The notes on pages 34 to 54 form part of these financial statements Notes Year ended 31 December 2021 £ Year ended 31 December 2020 £ 1 2 (1,759,446) 194,664 121 (1,564,661) (193,506) (193,506) – 2,900,936 2,900,936 1,142,769 864,680 2,007,448 (928,061) – 98 (927,963) (350,345) (350,345) 940,629 746,751 1,687,380 409,072 455,608 864,680 Annual Report and Accounts 2021 28 Notes to the Consolidated Statement of Cash Flows For the year ended 31 December 2021 1. Reconciliation of loss before income tax to cash outflow from operations Year ended 31 December 2021 £ Year ended 31 December 2020 £ Operating loss (1,365,314) Decrease/(Increase) in inventories 82,359 (Increase) in trade and other receivables (900,666) Increase/ (Decrease) in trade and other payables 81,910 Depreciation charge – Share Option expense 60,288 Amortisation of patents and development costs 288,455 Net forex differences (478) Net cash outflow from operations (1,759,446) (1,111,393) (121,475) (37,190) (42,630) 393 127,248 247,502 9,484 (928,061) 2. Cash and Cash Equivalents Cash and cash equivalents The notes on pages 34 to 54 form part of these financial statements Year ended 31 December 2021 £ 2,007,448 Year ended 31 December 2020 £ 864,680 29 OptiBiotix Health Plc Company Statement of Financial Position As at 31 December 2021 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 2021 £ As at 31 December 2020 £ Notes 11 13 13 13 15 16 16 16 16 17 15,731,832 318,127 16,049,959 65,900 1,705,291 1,771,191 17,821,150 1,758,812 2,537,501 1,500,000 927,595 11,055,990 17,779,898 11,043,469 329,057 11,372,526 89,420 532,769 622,189 11,994,715 1,758,812 2,537,501 1,500,000 867,307 5,268,171 11,931,791 41,252 41,252 62,924 62,924 17,821,150 11,994,715 The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent Company income statement account. The profit for the parent Company for the year was £5,787,819 (2020: Loss £1,168,767). These financial statements were approved and authorised for issue by the Board of Directors on 27 June 2022 and were signed on its behalf by: S P O’Hara Director Company Registration no. 05880755 The notes on pages 34 to 54 form part of these financial statements Annual Report and Accounts 2021 30 Company Statement of Changes in Equity For the year ended 31 December 2021 Called up Share capital £ Retained Earnings £ Share Premium £ Merger Share-based Payment reserve £ Relief Reserve £ Total equity £ Balance at 31 December 2019 1,708,811 6,436,938 1,646,873 1,500,000 740,059 12,032,681 Loss for the year Issues of shares during the year Financing costs Share options and warrants – (1,168,767) – 50,001 – – – – – 950,003 (59,375) – – – – – – (1,168,767) – – 1,000,004 (59,375) 127,248 127,248 Balance at 31 December 2020 1,758,812 5,268,171 2,537,501 1,500,000 867,307 11,931,791 Profit for the year Share options and warrants – – 5,787,819 – – – – – – 5,787,819 60,288 60,288 Balance at 31 December 2021 1,758,812 11,055,990 2,537,501 1,500,000 927,595 17,779,898 The notes on pages 34 to 54 form part of these financial statements 31 OptiBiotix Health Plc Company Statement of Cash Flows For the year ended 31 December 2021 Cash flows from operating activities Cash utilised by operations Interest received Net cash outflow from operating activities Cash flows from financing activities Net amounts to subsidiaries 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 The notes on pages 34 to 54 form part of these financial statements Year ended 31 December 2021 £ Year ended 31 December 2020 £ Notes 1 2 (1,754,689) – (1,754,689) 26,275 – 2,900,936 2,927,211 1,172,522 532,769 1,705,291 (369,036) 46 (368,990) (924,864) 940,629 746,751 762,516 393,526 139,243 532,769 Annual Report and Accounts 2021 32 Notes to the Company Statement of Cash Flows For the year ended 31 December 2021 1. Reconciliation of loss before income tax to cash generated from operations Operating (loss)/Profit Increase/(Decrease) in trade and other receivables Loan Write off (Decrease)/Increase in trade and other payables Share Option expense Net cash outflow from operations 2. Cash and Cash Equivalents Cash and cash equivalents The notes on pages 34 to 54 form part of these financial statements Year ended 31 December 2021 £ Year ended 31 December 2020 £ (2,748,727) 23,521 931,903 (21,673) 60,287 (1,754,689) (6,760,976) (64,713) 6,301,667 27,738 127,248 (369,036) As at 31 December 2021 £ 1,705,291 As at 31 December 2020 £ 532,769 33 OptiBiotix Health Plc Notes to the Financial Statements For the year ended 31 December 2021 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 UK adopted international accounting standards (IFRSs), IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. These are the ﬁrst ﬁnancial statements prepared under UK adopted international accounting standards. On 31 December 2020, IFRS as adopted by the European Union at that date was brought into UK law and became UK adopted international accounting standards, with future changes being subject to endorsement by the UK Endorsement Board. Optibiotix Health Plc transitioned to UK-adopted International Accounting Standards in its consolidated and parent company ﬁnancial statements on 1 January 2021. This change constitutes a change in accounting framework. However, there is no change on recognition, measurement or disclosure in the ﬁnancial year reported as a result of the change in framework. Basis of preparation The ﬁnancial statements have been prepared under the historical cost convention. The functional currency is GBP. 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 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 these ﬁnancial statements 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 seen a material disruption to the business as a result of the COVID-19 pandemic, nor the current political crises in Europe. Management will keep events under constant review, and remedial action will be taken if the situation demands it. 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 Annual Report and Accounts 2021 34 Notes to the Financial Statements (continued) 2. Accounting Policies (continued) Standards, amendments and interpretations effective and adopted in 2021 Several amendments and interpretations apply for the ﬁrst time in 2021. Standard or Interpretation Title IFRS 16 IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 COVID-19-Related Rent Concessions (Amendment to IFRS 16) Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) Effective for annual periods beginning on or after 1 June 2020 1 January 2021 Standards, amendments and interpretations issued and effective in 2021 but not relevant There are no IFRSs or IFRIC interpretations that are eﬀective and not relevant to the Group. Standards, amendments and interpretations issued but not yet effective in 2021 There were a number of standards and interpretations which were in issue at 31 December 2021 but not eﬀective for periods commencing 1 January 2021 and have not been adopted for these ﬁnancial statements. The Directors have assessed the full impact of these accounting changes on the Company. To the extent that they may be applicable, the Directors have concluded that none of these pronouncements will cause material adjustments to the Group’s ﬁnancial statements. They may result in consequential changes to the accounting policies and other note disclosures. The new standards will not be early adopted by the Group and will be incorporated in the preparation of the Group ﬁnancial statements from the eﬀective dates noted below. Standard or Interpretation Title Effective for annual periods beginning on or after IFRS 16 IAS 37 IAS 16 IFRS IFRS 3 IAS 1 IFRS 17 IAS 1 IAS 12 IAS 8 COVID-19-Related Rent Concessions beyond 30 June 2021. (Amendment to IFRS 16) Onerous Contracts – Cost of Fulfilling a Contract. (Amendments to IAS 37) Property, Plant and Equipment: Proceeds before Intended Use. (Amendments to IAS 16) Annual Improvements to IFRS Standards 2018–2020 Reference to the Conceptual Framework. (Amendments to IFRS 3) Classification of Liabilities as Current or Non-current. (Amendments to IAS 1) IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance Contracts. Disclosure of Accounting Policies. (Amendments to IAS 1 and IFRS Practice Statement 2) Deferred Tax related to Assets and Liabilities arising from a Single Transaction. (Amendments to IAS 12) Definition of Accounting Estimates. (Amendments to IAS 8) 1 April 2021 1 January 2022 1 January 2022 1 January 2022 1 January 2022 1 January 2023 1 January 2023 1 January 2023 1 January 2023 1 January 2023 There are no other IFRSs or IFRIC interpretations that are not yet eﬀective that would be expected to have a material impact on the Group. The Directors anticipate that the adoption of these standard and the interpretations in future period will have no material impact on the ﬁnancial statements of the company. 35 OptiBiotix Health Plc Notes to the Financial Statements (continued) 2. Accounting Policies (continued) Basis of consolidation The consolidated ﬁnancial statements incorporate the ﬁnancial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the ﬁnancial and operating policies of an investee entity so as to obtain beneﬁts from its activities. The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the eﬀective date of acquisition or up to the eﬀective date of disposal, as appropriate. Where necessary, adjustments are made to the ﬁnancial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation. Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reﬂect the changes in their relative interests in the subsidiaries. Any diﬀerence between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company. When the Group loses control of a subsidiary, the proﬁt or loss on disposal is calculated as the diﬀerence between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. Where certain assets of the subsidiary are measured at revalued amounts or fair values and the related cumulative gain or loss has been recognised in other comprehensive income and accumulated in equity, the amounts previously recognised in other comprehensive income and accumulated in equity are accounted for as if the Company had directly disposed of the related assets (i.e. reclassiﬁed to proﬁt or loss or transferred directly to retained earnings). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IFRS 9 governance “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 Annual Report and Accounts 2021 36 Notes to the Financial Statements (continued) 2. Accounting Policies (continued) 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 Revenue is measured at the fair value of sales of goods and services less returns and sales taxes. The Group has analysed its business activities and applied the ﬁve-step model prescribed by IFRS 15 to each material line of business, as outlined below: Sale of products The contract to provide a product is established when the customer places a purchase order. The performance obligation is to provide the product requested by an agreed date, and the transaction price is the value of the product as stated in our order acknowledgement. The performance obligation is typically met when the product is dispatched and so revenue is primarily recognised for each product when dispatching takes place. In some limited situations when the product is complete but the customer is unable to take delivery the performance obligation is met when the customer formally accepts transfer of risk and control even though the product has not been dispatched. License arrangements Revenue is recognised when the customer obtains control of the rights to use the IP. The performance obligations are considered to be distinct from any ongoing distribution arrangements which are treated in line with sales of products. Milestone payments Where the transaction price includes consideration that is contingent upon a future event or circumstance, the contingent amount is allocated entirely to that performance obligation if certain criteria are met. Revenue is recognised at the point of time of the performance obligation being satisﬁed. 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. Investments at fair value Equity investments are held at fair value at the balance sheet date with any proﬁt or loss for the year being taken to the Income statement. The value of listed investments being calculated at the closing price on the balance sheet date. 37 OptiBiotix Health Plc Notes to the Financial Statements (continued) 2. Accounting Policies (continued) Employee Benefits The Group operates a deﬁned contribution pension scheme. Contributions payable by the Group’s pension scheme are charged to the income statement in the period in which they relate. 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. Financial instruments Financial assets and ﬁnancial liabilities are recognised when the group becomes a party to the contractual provisions of the instrument. Loans and receivables are initially measured at fair value and are subsequently measured at amortised cost, plus accrued interest, and are reduced by appropriate provisions for estimated irrecoverable amounts. Such provisions are recognised in the statement of income. Equity investments comprise investments which do have a ﬁxed maturity and are classiﬁed as non current assets if they are intended to be held for the medium to long term. They are measured at fair value through proﬁt or loss. Trade receivables are initially measured at fair value and are subsequently measured at amortised cost less appropriate provisions for estimated irrecoverable amounts. Such provisions are recognised in the statement of income. Annual Report and Accounts 2021 38 Notes to the Financial Statements (continued) 2. Accounting Policies (continued) Cash and cash equivalents comprise cash in hand and demand deposits and other short-term highly liquid investments with maturities of three months or less at inception that are readily convertible to a known amount of cash and are subject to an insigniﬁcant risk of changes in value. Trade payables are not interest-bearing and are initially valued at their fair value and are subsequently measured at amortised cost. Equity instruments are recorded at fair value, being the proceeds received, net of direct issue costs. Share Capital – Ordinary shares are classiﬁed as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of taxation, from the proceeds. Financial instruments require classiﬁcation of fair value as determined by reference to the source of inputs used to derive the fair value. This classiﬁcation uses the following three-level hierarchy: Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 – inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs). 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. Impairment of non-financial assets At each statement of ﬁnancial position date, the Group reviews the carrying amounts of its investments to determine whether there is any indication that those assets have suﬀered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash ﬂows that are independent from other assets, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indeﬁnite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash ﬂows are discounted to their present value using a pre-tax discount rate that reﬂects current market assessments of the time value of money and the risks speciﬁc to the asset for which the estimates of future cash ﬂows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a re-valued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. Capital management Capital is made up of stated capital, premium, 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. 39 OptiBiotix Health Plc Notes to the Financial Statements (continued) 2. Accounting Policies (continued) 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 2021. 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. Convertible debt reserve The convertible debt reserve is the equity component of the convertible loan notes that have been issued. Share-based compensation The fair value of the employee and suppliers services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting year is determined by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions (for example, proﬁtability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. At each statement of ﬁnancial position date, the entity revises its estimates of the number of options that are expected to vest. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised. The fair value of share-based payments recognised in the income statement is measured by use of the Black Scholes model, which takes into account conditions attached to the vesting and exercise of the equity instruments. The expected life used in the model is adjusted; based on management’s best estimate, for the eﬀects of non-transferability, exercise restrictions and behavioural considerations. The share price volatility percentage factor used in the calculation is based on management’s best estimate of future share price behaviour and is selected based on past experience, future expectations and benchmarked against peer companies in the industry. Property, plant and equipment Property, plant and equipment are stated at historical cost less subsequent accumulated depreciation and accumulated impairment losses, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic beneﬁts associated with the item will ﬂow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to proﬁt or loss during the ﬁnancial period in which they are incurred. Depreciation on property, plant and equipment is calculated using the straight-line method to write oﬀ their cost over their estimated useful lives at the following annual rates: Computer equipment 30% Useful lives and depreciation method are reviewed and adjusted if appropriate, at the end of each reporting period. An item of property, plant and equipment is derecognised upon disposal or when no future economic beneﬁts are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the diﬀerence between the sales proceeds and the carrying amount of the relevant asset and is recognised in proﬁt or loss in the year in which the asset is derecognised. Annual Report and Accounts 2021 40 Notes to the Financial Statements (continued) 2. Accounting Policies (continued) 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 10 years during which the Company is expected to beneﬁt. Merger relief reserve The merger relief reserve arises from the 100% acquisition of OptiBiotix Limited whereby the excess of the fair value of the issued ordinary share capital issued over the nominal value of these shares is transferred to this reserve in accordance with section 612 of the Companies Act 2006. Critical accounting judgments and key sources of estimation uncertainty The preparation of the ﬁnancial statements requires management to make estimates and assumptions concerning the future that aﬀect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the ﬁnancial statements and the reported amounts of revenues and expenses during the reporting periods. The resulting accounting estimates will, by deﬁnition, diﬀer from the related actual results. • • • • Share based payments The fair value of share based payments recognised in the income statement is measured by use of the Black Scholes model, which takes into account conditions attached to the vesting and exercise of the equity instruments. The expected life used in the model is adjusted; based on management’s best estimate, for the eﬀects of non-transferability, exercise restrictions and behavioural considerations. The share price volatility percentage factor used in the calculation is based on management’s best estimate of future share price behaviour and is selected based on past experience, future expectations and benchmarked against peer companies in the industry. Amortisation Management have estimated that the useful life of the fair value of the patents acquired on the acquisition to be 20 years. Research and developments that have been capitalised in line with the recognition criteria of IAS38 have been estimated to have a useful economic life of 10 years. These estimates will be reviewed annually and revised if the useful life is deemed to be lower based on the trading business or any changes to patent law. Impairment reviews IFRS requires management to undertake an annual test for impairment of indeﬁnite lived assets and, for ﬁnite lived assets to test for impairment if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment testing is an area involving management judgement, requiring assessment as to whether the carrying value of assets can be supported by the net present value of future cash ﬂows derived from such assets using cash ﬂow projections which have been discounted at an appropriate rate. In calculating the net present value of the future cash ﬂows, certain assumptions are required to be made in respect of highly uncertain matters. Derecognition of an associate Management have reviewed the existing relationship with Skinbiotherapeutics Plc in light of changes in the Group’s power to participate in the ﬁnancial and operating decisions of the entity, in line with the requirements of IAS28. In the prior year following a signiﬁcant dilution in shareholding and a change to the board structure of the entity, it was determined that the signiﬁcant inﬂuence had been lost and the associate would be de-recognised. This year it is still considered to be an investment. 41 OptiBiotix Health Plc Notes to the Financial Statements (continued) 3. Segmental Reporting In the opinion of the directors, the Group has one class of business, in three geographical areas being that of identifying and developing microbial strains, compounds and formulations for use in the nutraceutical industry. The Group sells into three highly interconnected markets, all costs assets and liabilities are derived from the UK location. Revenue analysed by market Probiotics Functional Fibres Revenue analysed by geographical market UK US Rest of world Year ended 31 December 2021 £ Year ended 31 December 2020 £ 1,100,132 112,800 2,212,932 821,126 702,121 1,523,247 Year ended 31 December 2021 £ Year ended 31 December 2020 £ 647,649 827,135 734,148 2,212,932 369,892 654,524 498,831 1,523,247 During the reporting period one customer represented £727,135 (32.9%) of Group revenues. (2020: one customer generated £497,416 representing 32.6% of Group revenues) 4. Employees and Directors Wages and salaries Directors’ remuneration* Directors’ fees* Social security costs Pension costs Year ended 31 December 2021 £ Year ended 31 December 2020 £ 181,702 493,987 455,400 82,754 43,542 1,257,386 82,448 404,500 406,399 52,231 33,518 979,096 *Total Directors’ remuneration £949,387 (2020: £810,899) see Directors’ remuneration note below Annual Report and Accounts 2021 42 Notes to the Financial Statements (continued) 4. Employees and Directors (continued) The average monthly number of employees during the period was as follows: Directors Research and development Directors’ remuneration Directors’ share based payments Bonus* Pension Total emoluments Emoluments paid to the highest paid director Year ended 31 December 2021 No. Year ended 31 December 2020 No. 9 3 12 6 2 8 Year ended 31 December 2021 £ Year ended 31 December 2020 £ 841,888 33,514 107,500 34,882 1,017,784 254,000 763,399 102,533 47,500 33,518 946,950 218,000 Total £ 24,996 261,800 87,010 33,259 72,526 127,551 25,000 20,738 159,602 205,302 *Total Directors’ remuneration £949,388 see Directors’ remuneration note below Included in total emoluments paid to Directors are capitalised wages of £92,611 (2020: £187,241) Directors’ remuneration Details of emoluments received by Directors of the Group for the period ended 31 December 2021 are as follows: Remuneration Share based Pension and fees payments Costs £ £ £ A Reynolds* 24,996 – – S P O’Hara 254,000 – 7,800 F Narbel * 82,867 – 4,143 S Christie 25,000 8,259 – R Davidson 55,000 17,526 – S Kolyda 114,250 7,729 5,572 C Brinsmead 25,000 – – S Hammond 20,738 – – M Hvid-Hansen* 152,002 – 7,600 R Kamminga 195,535 – 9,767 Total 949,388 33,514 34,882 1,017,784 *For disclosure in relation to directors’ fees please refer to Note 20. 43 OptiBiotix Health Plc Notes to the Financial Statements (continued) 5. Net Finance Income/(Costs) Finance Income: Bank Interest Finance Cost : Loan note interest Net Finance Income/(Costs) 6. Expenses – analysis by nature Year ended 31 December 2021 £ Year ended 31 December 2020 £ 121 98 (47,600) (44,954) (47,479) (44,856) Year ended 31 December 2021 £ Year ended 31 December 2020 £ Research and development Directors’ fees & remuneration (Note 4)* Salaries Auditor remuneration – audit fees (Consolidated accounts £21,250 (2020: £18,250) 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 64,319 856,777 181,702 41,822 12,700 208,579 41,506 60,288 – 288,455 114,788 262,262 28,389 68,185 16,061 242,824 85,703 623,658 82,448 42,720 11,400 123,531 86,673 127,248 393 247,502 136,762 76,704 42,625 82,394 31,434 190,017 Total administrative expenses 2,488,657 1,991,212 *£856,777 is net of £92,611 capitalised in the year, total remuneration £949,388 as per note 4. Annual Report and Accounts 2021 44 Notes to the Financial Statements (continued) 7. Corporation Tax Corporation tax credit Under provision prior year Deferred tax movement Overseas tax suffered Total taxation Analysis of tax expense Year ended 31 December 2021 £ Year ended 31 December 2020 £ (75,000) (9,523) – (84,523) (120,000) – 28,185 180 (91,635) No liability to UK corporation tax arose on ordinary activities for the year ended 31 December 2021 nor for the year ended 31 December 2020. Profit (Loss) on ordinary activities before income tax 6,176,506 5,710,232 Year ended 31 December 2021 £ Year ended 31 December 2020 £ Loss on ordinary activities multiplied by the standard rate of corporation tax in UK of 19% (2020 – 19%) Effects of: Disallowables Income not taxable Accelerated depreciation R&D tax credit claimed Amortisation Revenue items capitalised Other timing differences Overseas tax suffered Unused tax losses carried forward Tax credit 1,173,536 1,084,944 13,619 (1,545,707) – (75,000) 33,342 (36,785) 9,477 – 342,995 (84,523) 89,931 (1,362,287) 75 (120,000) 27,851 (66,566) 28,185 180 226,052 (91,635) The Group has estimated losses of £4,626,000 (2020: £4,266,000) and estimated excess management expenses of £3,786,000 (2020: £2,555,000). The tax losses have resulted in a deferred tax asset at 25% (2020: 19%) of approximately £1,156,000 (2020: £810,000) which has not been recognized as it is uncertain whether future taxable proﬁts will be suﬃcient to utilise the losses. 45 OptiBiotix Health Plc Notes to the Financial Statements (continued) 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 2021 £ 310,435 (194,663) 477 75,000 191,249 2020 £ 190,435 – – 120,000 310,435 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: 2021 Basic and diluted EPS Basic EPS Diluted EPS Earnings £ 6,261,029 6,261,029 Weighted average Number of shares No. 87,574,152 95,536,395 2020 Basic EPS Diluted EPS Earnings £ 5,801,867 5,801,867 Weighted average Number of shares £ 87,207,703 95,569,946 Profit per-share Pence 7.15p 6.55p Loss per-share Pence 6.65 6.07 As at 31 December 2021 there were 7,632,907 (2020: 8,032,907) outstanding share options and 329,336 (2020: 329,386) outstanding share warrants. Annual Report and Accounts 2021 46 Notes to the Financial Statements (continued) 9. Intangible assets Group Cost At 31 December 2019 Additions Disposals At 31 December 2020 Additions Disposals At 31 December 2021 Group Amortisation At 31 December 2019 Amortisation charge for the year At 31 December 2020 Amortisation charge for the year At 31 December 2021 Carrying amount At 31 December 2021 At 31 December 2020 The company had no intangible assets 47 OptiBiotix Health Plc Development Costs and Patents £ 3,321,930 350,345 – 3,672,275 193,506 – 3,865,781 Development Costs and Patents £ 689,152 247,502 936,654 288,455 1,225,109 2,640,672 2,735,621 Notes to the Financial Statements (continued) 10. Property, plant and equipment Group Cost At 31 December 2019 Additions Disposals At 31 December 2020 Additions Disposals At 31 December 2021 Depreciation At 31 December 2019 Charge for the year At 31 December 2020 Charge for the year At 31 December 2021 Carrying amount At 31 December 2021 At 31 December 2020 £ 8,461 – – 8,461 – – 8,461 8,068 393 8,461 – 8,461 – – The company had no property plant and equipment. 11. Investments Group Investments Set out below is the investment in Skinbiotherapeutics PLC which is material to the Group. The investment treated as an associate of the group until 2 November 2020, after which time the shareholding dropped to 24.65% and has been recalculated as an equity investment. 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. Available for sale investments At the beginning of the period Additions Revaluations Share of loss Disposal of shares during year At 31 December 2021 £ 2020 £ 8,962,564 2,842,834 7,500,681 – (2,812,318) 13,650,927 7,120,962 (303,449) (697,783) 8,962,564 Annual Report and Accounts 2021 48 Notes to the Financial Statements (continued) 11. Investments (continued) Company Investments Available for sale investments At the beginning of the period Additions Revaluations Disposal of shares during year Investments in subsidiary undertakings At the beginning of the period At 31 December 2021 £ 2020 £ 8,962,564 4,131,651 7,500,681 (2,812,318) 13,650,927 2,080,905 2,080,905 15,731,832 5,528,696 (697,783) 8,962,564 2,080,905 2,080,905 11,043,469 As at 31 December 2021 the Company directly held the following subsidiaries: Country of incorporation Name of company Principal activities and place of business Proportion of equity interest OptiBiotix Limited Research & Development United Kingdom 100% of ordinary shares Optibiotix Health India Health foods India Private Limited The Healthy Weight Loss Health foods United Kingdom Company Limited 100% of ordinary shares 68% of ordinary shares ProBiotix Health Ltd Health foods United Kingdom 100% of ordinary shares ProBiotix Limited Health foods United Kingdom 100% of ordinary shares 12. Inventories Group Company 2021 2020 2021 £ £ £ Finished goods 101,877 184,236 – 2020 £ – During the period £1,089,588 (2020: £643,428) has been expensed to the income statement. 49 OptiBiotix Health Plc Notes to the Financial Statements (continued) 13. Trade and other Receivables Group Company 2021 2020 2021 £ £ £ 2020 £ Non-current Amounts owed by group undertakings – – 318,127 – – 318,127 Current Accounts receivable 1,413,882 512,437 – Other receivables 82,587 110,634 39,544 Prepayments and accrued income 56,021 22,752 26,356 1,552,490 645,823 65,900 14. Cash and Cash Equivalents Group Company 2021 2020 2021 £ £ £ Cash and bank balances 2,007,448 864,680 1,705,291 329,057 329,057 – 71,278 18,142 89,420 2020 £ 532,769 15. Called Up Share Capital Issued share capital comprises: Ordinary shares of 2p each – 87,940,601 (2020: 87,940,601) 2021 £ 1,758,812 1,758,812 2020 £ 1,758,812 1,758,812 16. Reserves 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. Annual Report and Accounts 2021 50 Notes to the Financial Statements (continued) 17. Trade and other payables Current: Group Company 2021 2020 2021 £ £ £ Accounts Payable 422,948 359,321 18,452 Accrued expenses 175,138 157,039 22,800 Other payables 2,818 2,635 – Total trade and other payables 600,904 518,995 41,252 2020 £ 40,174 22,750 – 62,924 18. 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 25% (2020: 19%). The movement on the deferred tax account is as shown below: At 31 December 2020 Movement in the period At 31 December 2021 2021 £ 561,523 (9,523) 552,000 2020 £ 522,350 39,173 561,523 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. 19. 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: Balance brought forward Additions Equity element Liability component Interest charged at effective interest rate Non-current liability 2021 £ 771,759 – – 771,759 47,600 819,359 2020 £ 726,805 – – 726,805 44,954 771,759 Interest expense is calculated by applying the eﬀective interest rate of 6% to the liability component. 51 OptiBiotix Health Plc Notes to the Financial Statements (continued) 20. Related Party Disclosures Group During the year to 31 December 2021 £87,010 (2020: £184,132) was paid to F Narbel in respect of Director’s services provided. During the year to 31 December 2021 £24,996 (2020: £24,996) was paid to Reyco Limited for the services of Adam Reynolds as Director of ProBiotix Health Limited During the year to 31 December 2021 the Group was charged £44,507 (2020: £42,000) for services provided by Morrison Kingsley Consultants Limited, a company controlled by Mark Collingbourne, Chief Financial Oﬃcer. Company During the year Optibiotix Health PLC loaned Probiotix limited £570. The balance owing at the 31 December 2021 was £53,835 (2020, £80,119). There was no interest charged during the year During the year Optibiotix Health PLC loaned Optibiotix Limited £1,551,651 during the year of which £619,749 was repaid. The balance at the year end of £931,903 (2020, £6,301,666 was cancelled. This does not impact on the consolidated Group accounts. 21. Ultimate Controlling Party No one shareholder has control of the company. 22. Share Based payment Transactions (i) Share options The Company had introduced a share option programme to grant share options as an incentive for employees of the former subsidiaries. Each share option converts into one ordinary share of the Company on exercise. No amounts are paid or payable by the recipient on receipt of the option and the Company has no legal obligation to repurchase or settle the options in cash. The options carry neither rights to dividends nor voting rights prior to the date on which the options are exercised. Options may be exercised at any time from the date of vesting to the date of expiry. Movements in the number of share options outstanding and their related weighted average exercise prices are as follows: Number of options Average exercise price 2021 2020 2021 No. No. £ 2020 £ Outstanding at the beginning of the period 8,032,907 7,765,907 0.21 Granted during the period 300,000 – Forfeited/cancelled during the year (400,000) (33,000) 0.785 Exercised during the period – – Outstanding at the end of the period 7,632,907 8,032,907 0.18 0.20 0.57 0.695 0.21 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. Annual Report and Accounts 2021 52 Notes to the Financial Statements (continued) 22. Share Based payment Transactions (continued) For the share options issued in 2015 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. For the share options issues in 2020 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 1,241 days (2020: 1,639 days) and the maximum term is 10 years. The share price per share at 31/12/21 was £0.46 (31/12/2020: £0.55) 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. The fair values of the last share options issued 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 (ii) Warrants 02/06/2020 57p 57p 0.25% 35% 10 years 24p 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 2021 2020 2021 No. No. £ 2020 £ Outstanding at the beginning of the period 329,336 329,386 0.08 Outstanding at the end of the period 329,386 329,336 0.08 0.08 0.08 A charge of £60,288 (2020: £127,248) has been recognised during the year for the share based payments over the vesting period. 53 OptiBiotix Health Plc Notes to the Financial Statements (continued) 23. Financial Risk Management Objectives and Policies The Group’s ﬁnancial instruments comprise cash balances and receivables and payables that arise directly from its operations. The main risks the Group faces are liquidity risk and capital risk. The Board regularly reviews and agrees policies for managing each of these risks. The Group’s policies for managing these risks are summarised below and have been applied throughout the period. The numerical disclosures exclude short-term debtors and their carrying amount is considered to be a reasonable approximation of their fair value. Interest risk The Group is not exposed to signiﬁcant interest rate risk as it has limited interest bearing liabilities at the year end. Credit risk The Group is not exposed to signiﬁcant credit risk as it did not make any credit sales during the year. Liquidity risk Liquidity risk is the risk that Group will encounter diﬃculty in meeting these obligations associated with ﬁnancial liabilities. The responsibility for liquidity risks management rest with the Board of Directors, which has established appropriate liquidity risk management framework for the management of the Group’s short term and long-term funding risks management requirements. During the period under review, the Group has not utilised any borrowing facilities. The Group manages liquidity risks by maintaining adequate reserves and reserve borrowing facilities by continuously monitoring forecast and actual cash ﬂows, and by matching the maturity proﬁles of ﬁnancial assets and liabilities. Capital risk The Group’s objectives when managing capital are to safeguard the ability to continue as a going concern in order to provide returns for shareholders and beneﬁts to other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. 24. Post Balance Sheet Events On 7 January 2022 the Company cancelled 800,000 options with the agreement of option holders and reissued 500,000 options at a nominal value of 2 pence per share. On 27 January 2022 the Company issued 125,000 new shares following the exercise of warrants at 8 pence per share. On 9 March 2022 the company issued 60 new shares following the exercise of warrants at 8 pence per share. On 31 March 2022 , Probiotix Health Limited a wholly owned subsidiary of the Company was listed on the AQSE Growth Market with an associated fund raise and distribution is specie. Following the listing the Company retains 43.99% of the issued share capital. Annual Report and Accounts 2021 54 Notice of Annual General Meeting OPTIBIOTIX HEALTH PLC Notice is hereby given that the Annual General Meeting of OptiBiotix Health PLC (the “Company”) will be held at the oﬃces of Walbrook PR Ltd, 75 King William Street, London, EC3V 9HD on 26 July 2022 at 12:00 noon for the following purposes: 1. 2. 3. 4. To receive the Company’s Report and Accounts for the year ended 31 December 2021. To re-elect Stephen O’Hara, who retires by rotation, as a Director. To re-elect Neil Davidson, who retires by rotation, as a Director To re-appoint Jeﬀrey’s Henry LLP as auditors of the Company and to authorise the Directors to determine their remuneration. Special Business To consider and, if thought ﬁt, to pass the following resolutions as to the resolution numbered 5 as an Ordinary Resolution and as to the resolutions numbered 6 as Special Resolutions: 5. 6. THAT the Directors be and they are hereby authorised generally and unconditionally for the purposes of Section 551 of the Companies Act 2006 (the “Act”) to exercise all powers of the Company to allot shares in the Company or to grant rights to subscribe for, or to convert any security into, shares in the Company (such shares and/or rights being “Relevant Securities”) up to an aggregate nominal amount of £586,270.51 being one third of the current issued share capital, provided that this authority shall, unless renewed, varied or revoked by the Company, expire on the date being the earlier of the date 15 months after the passing of this Resolution and the conclusion of the Annual General Meeting of the Company to be held in 2023, save that the Company may, before such expiry, make oﬀers or agreements which would or might require Relevant Securities to be allotted and the Directors may allot Relevant Securities in pursuance of such oﬀer or agreement notwithstanding that the authority conferred by this Resolution has expired. This authority shall be in substitution for and shall replace any existing authority pursuant to Section 551 of the Act to the extent not utilised at the date this resolution is passed. THAT, subject to and conditional upon the passing of resolution 5, the Directors be and they are hereby generally empowered pursuant to Section 570 of the Act to allot equity securities (as deﬁned in Section 560 of the Act) for cash pursuant to the authority conferred under Resolution 5 above as if sub-section 561(1) of the Act did not apply to such allotment, provided that this power shall be limited to:- (a) (b) the allotment of equity securities in connection with a rights issue or any pre-emptive oﬀer in favour of holders of ordinary shares in the Company where the equity securities attributable to the respective interests of such holders are proportionate (as nearly as maybe) to the respective numbers of ordinary shares held by them on the record date for such allotment subject to such exclusions or other arrangements as the Directors may deem necessary or expedient to deal with fractional entitlements or any legal or practical diﬃculties under the laws of, or the requirements of, any regulatory body or stock exchange of any overseas territory or otherwise; the allotment (otherwise than pursuant to sub-paragraph (a) above) of equity securities up to an aggregate nominal value of £527,643.46 being 30% of the current issued share capital; and shall expire on the date being the earlier of the date 15 months after the passing of this Resolution and the conclusion of the Annual General Meeting of the Company to be held in 2023, provided that the Company may before such expiry make an oﬀer or agreement which would require equity securities to be allotted in pursuance of such oﬀer or agreement as if the power conferred hereby had not expired and provided further that this authority shall be in substitution for and supersede and revoke any earlier power given to directors. By Order of the Board Stephen O’Hara 27 June 2022 55 OptiBiotix Health Plc Registered Oﬃce: Innovation Centre Innovation Way Heslington York YO10 5DG Explanatory Notes to the Notice of Annual General Meeting Notes: 1. A member of the Company is entitled to appoint a proxy or proxies to attend, speak and vote at the meeting in his stead. A member may appoint more than one proxy provided each proxy is appointed to exercise rights attached to diﬀerent shares. A member may not appoint more than one proxy to exercise rights attached to any one share. A proxy does not need to be a member of the Company. 2. To be eﬀective Forms of Proxy can be registered as follows:- • by logging on to www.shareregistrars.uk.com, clicking on the “Proxy Vote” button and then following the on-screen instructions; • by post or by hand to Share Registrars Limited, 3 The Millennium Centre, Crosby Way, Farnham, Surrey GU9 7XX using the proxy form accompanying this notice; • in the case of CREST members, by utilising the CREST electronic proxy appointment service in accordance with the procedures set out below. In order for a proxy appointment to be valid the proxy must be received by Share Registrars Limited by 12:00 Noon on 22 July 2022 3. 4. To change your proxy instructions simply submit a new proxy appointment using the methods set out above and in the notes to the Form of Proxy. Note that the cut-oﬀ times for receipt of proxy appointments (see above) also apply in relation to amended instructions; any amended proxy appointment received after the relevant cut-oﬀ time will be disregarded. To be entitled to vote at the meeting (and for the purpose of the determination by Company of the number of votes they may cast), members must be entered in the Register of members at 12:00 noon on 22 July 2022 (“the speciﬁed time”). If the meeting is adjourned to a time not more than 48 hours after the speciﬁed time applicable to the original meeting, that time will also apply for the purpose of determining the entitlement of members to attend and vote (and for the purpose of determining the number of votes they may cast) at the adjourned meeting. If however the meeting is adjourned for a longer period then, to be so entitled, members must be entered on the Company’s Register of Members at the time which is not less than 48 hours before the time ﬁxed for the adjourned meeting or, if the Company gives notice of the adjourned meeting, at the time speciﬁed in that notice. 5. Appointment of proxies through CREST. CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so for the meeting and any adjournment(s) of it by using the procedures described in the CREST Manual (available via www.euroclear.com). CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. For a proxy appointment or instructions made using the CREST service to be valid, the appropriate CREST message (a CREST Proxy Instruction) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s (EUI) speciﬁcations and must contain the information required for such instructions, as described in the CREST Manual. The message, regardless of whether it constitutes the appointment of a proxy or is an amendment to the instruction given to a previously appointed proxy, must, in order to be valid, be transmitted so as to be received by Share Registrars Limited (ID 7RA36) no later than 12:00 noon. on 22 July 2022 or, in the event of an adjournment of the meeting, 2 business days before the adjourned meeting excluding non-business days. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means. CREST members and, where applicable, their CREST sponsors or voting service providers should note that EUI does not make available special procedures in CREST for any particular message. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his/her CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message Annual Report and Accounts 2021 56 Explanatory Notes to the Notice of Annual General Meeting (continued) is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in regulation 35(5)(a) of the Uncertiﬁcated Securities Regulations 2001 Resolution 1 The Directors are required by law to present to the meeting the Audited Accounts and Directors’ Report for the period ended 31 December 2021. Resolutions 2-3 Each of the Company’s Directors listed in this resolution oﬀer themselves up for re-appointment under the terms of the Company’s articles of association which state that each director must oﬀer himself or herself up for re-appointment every three years. Resolution 4 The Auditors are required to be re-appointed at each Annual General Meeting at which the Company’s Audited Accounts are presented. Resolution 5 Under the Act, the Directors may only allot shares if authorised to do so. Whilst the current authority has not yet expired, it is customary to grant a new authority at each Annual General Meeting. Accordingly, this resolution will be proposed as an ordinary resolution to grant a new authority to allot or grant rights over up to £586,270.51 in nominal value of the Company’s unissued share capital. If given, this authority will expire at the Company’s next annual general meeting following the date of the resolution. Although the Directors currently have no present intention of exercising this authority, passing this resolution will allow the Directors ﬂexibility to act in the best interests of the Company’s shareholders when opportunities arise. Resolution 6 The Directors require additional authority from the Company’s shareholders to allot shares where they propose to do so for cash and otherwise than to the Company’s shareholders pro rata to their holdings. This resolution will give the Directors power to issue new ordinary shares for cash other than to the Company’s shareholders on a pro rata basis (i) (ii) by way of a rights or similar issue or with a nominal value of up to £527,643.36. This resolution will be proposed as a special resolution. 57 OptiBiotix Health Plc optibiotix.com To find out more please contact OptiBiotix on: info@optibiotix.com OptiBiotix Health Plc | Innovation Centre, Innovation Way, Heslington, York, YO10 5DG, UK. OptiBiotix Health Plc © 2018 OptiBiotix Health Plc. All rights reserved. ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2021

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