Polarean Imaging Plc
Group Annual Report & Accounts 2017
Company Number 10442853
Group Annual Report and Financial Statements
for the year ended 31 December 2017
Contents
Page
2
3
Company Information
Chairman’s Statement
4 Chief Executive Officer’s Statement
6
Strategic Report
15 Directors’ Report
19 Statement of Directors’ Responsibilities
20 Corporate Governance Statement
22
Independent Auditors’ Report
26 Consolidated Statement of Comprehensive Income
27 Consolidated Statement of Financial Position
28 Company Statement of Financial Position
29 Consolidated Statement of Changes in Equity
30 Company Statement of Changes in Equity
31 Consolidated Statement of Cash Flows
32 Company Statement of Cash Flows
33 Notes to the Financial Statements
56 Notice of the Annual General Meeting
Polarean Imaging plc
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Directors & Advisers
Directors
Company Information
Richard Morgan
Richard Hullihen
Kenneth West
Bastiaan Driehuys
Jonathan Allis
Juergen Laucht
Robert Bertoldi
Non-Executive Chairman
Chief Executive Officer
Chief Operating Officer
Chief Technology Officer
Non-executive Director
Non-executive Director
Non-executive Director
Company Secretary
Stephen Austin
Chief Financial Officer William Patrick
Registered Office
27-28 Eastcastle Street
London, W1W 8DH
Company number
Registered in England and Wales number 10442853
Nominated adviser
and broker
Independent Auditor
Registrar
Bankers
Legal Advisers
to the Group
Financial Public Relations
Advisers
Financial Advisor
Northland Capital Partners Limited
40 Gracechurch Street
2nd Floor
London, EC3V 0BT
Crowe Clark Whitehill LLP
St Brides House
10 Salisbury Square
London EC4Y 8EH
Share Registrars Limited
The Courtyard
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Surrey, GU9 7DR
Silicon Valley Bank
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Reed Smith LLP
The Broadgate Tower
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Walbrook PR
4 Lombard Street
London, EC3V 9HD
The Life Science Division
127 Great Portland Street
London, W1W 5PL
European Investor Relations
Bavariaring 26
D-80336 Munchen
MC Services AG
Polarean Imaging plc
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Chairman’s Statement
The transition from a private company to a publicly traded one is never easy. Being a public company requires an
entirely different standard of performance in areas that are not usually considered key to the success of the business
when it is privately held. It is a great credit to the leadership of any company if this transition is successfully
accomplished with new shareholders and additional capital being brought into the picture. It is notable that Polarean
(the “Group”) has the distinction, at the time of writing, of being the only life-science IPO to be completed in London
so far this year.
Polarean’s technology solutions promise to bring critical new tools to physicians helping patients suffering from a
wide range of pulmonary issues. The tools available today remain either limited in scope and accuracy or invasive
and expensive. The unmet medical need is enormous. Fortunately, the steady advance of the state of the art in MRI
technology, particularly faster data acquisition times, has enabled most scanners to acquire images, in detail and in
3D, in less than ten seconds. The widespread use of Magnetic Resonance Imaging (“MRI”) systems in the US and
Europe, makes available a very large installed base of scanners that can be used to implement Polarean’s proprietary
technology in a cost-effective manner, once it is approved for clinical use. The clinical trials to gain such approval
are scheduled to start very soon and we expect them to be concluded within twelve months, following which the
Company will need to prepare the New Drug Application (NDA) for submission to the FDA. The protocol for the
trials has been set in collaboration with the FDA and Polarean and its clinical and scientific advisors believe the non-
inferiority margins agreed with the FDA are achievable with the trial size and timeframe indicated. We continue to
expect to launch clinically approved systems in early 2020.
Polarean’s technology has been in development for almost 20 years and the Group’s systems are already in use by
researchers at over a dozen leading academic and medical institutions in the United States and Europe. One of these
is the Cincinnati Children’s Hospital where the team is working closely with Polarean, with funding from a grant
provided by the Small Business Innovation Research Program, to develop applications in cystic fibrosis. Cystic
fibrosis is one of the most debilitating conditions, especially in children and is particularly hard to diagnose, monitor
and manage. This network of key opinion leaders who are working closely with the Group, creates an expanding group
of knowledgeable experts who will be crucial in effecting broad adoption of the clinically approved technology by
leading medical institutions in the US and elsewhere.
The team at Duke University, led by one of Polarean’s founders, Professor Bastiaan Driehuys, is actively advancing
the state of the art with new developments in critical areas such as gas exchange. These developments promise to
facilitate the application of the technology in a range of additional conditions beyond ventilation, such as pulmonary
fibrosis and pulmonary vascular disease, two diseases of increasing prevalence for which current diagnostic methods
are very invasive and not very effective.
We believe Polarean has immense promise and the fact that it has reached this critical juncture is a great credit to the
team in North Carolina who have brought it this far. The road ahead will no doubt present challenges but we face that
journey with determination and high confidence in the strength of the technology and the commitment of the team.
Richard Morgan
Non-executive Chairman
12 June 2018
Polarean Imaging plc
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Chief Executive Officer’s Statement
2017- A Year of Preparation and Accomplishment
The Group was formed on 31 May 2017 when Polarean Imaging Plc (the “Company” or “Parent Company”) Company
acquired Polarean, Inc (the “Subsidiary”) and spent the remainder of the year working towards the Company’s listing
on AIM, which was successfully completed in the first quarter of 2018.
We were also busy making arrangements for our Phase III Clinical Trials and we achieved several critical milestones
in research and development (“R&D”) and manufacturing in support of those trials, including:
•
•
•
•
•
engaging contract research organizations (“CROs”) specializing in medical imaging non-inferiority trials like
ours at the institutions where we are conducting the trials and then continuing to develop the plans for the trials
in conjunction with those selected CROs;
entering into contracts with the trial sites;
preparing our quality systems and product documentation in order to outsource production to a local
professional manufacturer who is already GMP-certified;
continuing to develop and protect important intellectual property, adding to our dominant patent position; and
identifying, evaluating and selecting a candidate, Linde who are one of the largest global industrial gas suppliers,
and entering into agreements to package and distribute our proprietary 129Xe drug, in preparation for the Phase
III clinical trials. We are fortunate to have Nukem Isotopes GmbH as a strategic investor and supplier of our
enriched 129Xe raw material and we thank them for their support.
In addition, in late 2017 our R&D group significantly improved the performance of our polariser product, which has
resulted in better images and has potentially reduced the amount of xenon required to be inhaled by the patient to
make the images, thereby improving patient acceptance as well as our product economics, which your Directors and
your clinical team consider to be a tremendous accomplishment.
The Opportunity
The US Healthcare annual burden of pulmonary disease is US$150 billion and your Directors see a tremendous
opportunity to bring our technology’s quantitative, reproducible, non-invasive method for diagnostic and therapeutic
guidance to medicine. We believe it will benefit patients, improve outcomes and reduce costs. This is important as the
current cumulative global costs of asthma, COPD, emphysema, cystic fibrosis, idiopathic pulmonary fibrosis,
interstitial lung disease, and pulmonary vascular disease are huge.
While working to achieve FDA approval for clinical use, Polarean continues to serve the medical imaging research
market by providing xenon polarizers to enable functional MRI of the pulmonary system. This brings dynamic, high-
resolution, regional, image based information to pulmonary physicians whose best alternative tool is spirometry, a
relatively inaccurate measurement of expired breath. Current imaging technologies are not often used for assessing
lung function, despite the revolutionary effects of MRI in other medical applications.
Our Clinical Trial
Our Phase III Clinical Trial is a head-to-head, non-inferiority trial which is comparing our technology to the 40 year
old nuclear medicine technique using radioactive 133Xe and gamma cameras. The trial involves 80 patients in total,
and will be conducted at two of our closest collaborative sites, the University of Virginia and Duke University. We
are characterising ventilation in two sets of patients being evaluated for surgical procedures: those who are being
evaluated for lung lobar resection surgery and those being evaluated for lung transplant. In each case their pre-
operative expired vital capacity is measured through spirometry. Our technology and the existing nuclear medicine
standard of care are used to assess the remaining post-operative vital capacities. Our trial focuses entirely on the pre-
operative assessment and it makes no difference whether the patient is chosen for surgery or not. We have to allow
for an equivalence margin in order to be non-inferior. We expect the trial to proceed as planned to a successful outcome
and anticipate the trial to result, in due course, in the Group receiving FDA approval to commercialise the product and
process.
Polarean Imaging plc
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Chief Executive Officer’s Statement
continued
2017 Financial Results
We encountered difficult market conditions when looking to quote the Company but we were pleased to raise £3
million (before expenses), in addition to the £0.7 million that was raised in December 2017 via the issue of convertible
loan notes, in order to fund the clinical trials. In this phase of our development, with sales to academic institutions that
are acquiring the technology predominantly by way of grant funding, our forecasting of revenue and price is typically
on target but there are challenges in estimating the timing of the receipt of orders. We partly mitigate this by way of
payment terms that include significant deposits, minimizing working capital timing effects. Operationally, our
performance has been as expected, with revenue of US$1.24 million and operating gross margins at over 50%.
2018 and Beyond
In 2018, we look forward to commencing our clinical trial and the continued expansion of our installed base of systems
through additional sales of research units to academic institutions. Our R&D focus has shifted slightly and is now
mainly looking at the imaging of gas exchange and the regional assessment of lung tissue function, beyond ventilation,
led by our founder and Chief Technology Officer, Dr. Bastiaan Driehuys at Duke University. The Directors have seen
tremendous interest in pulmonary vascular disease as an emerging application, which is good news for the Group
looking towards the future.
Polarean is fortunate to have an outstanding collection of world-class collaborators and customers in both the US and
Europe. Additionally, we support the “129Xe MRI Clinical Trials Consortium” and the crucial work they do in
collaborative research, training investigators, providing infrastructure for evaluating new techniques, and multi-
institution sharing of magnetic resonance (MR) techniques and image analysis methods. We would like to thank the
National Heart Lung and Blood Institute for their continued support of our Small Business Innovation Research
Program grant with Cincinnati Children’s Hospital Medical Center. In addition, we have developed solid working
relationships with MRI systems manufacturers and exclusive relationships with global industrial gas suppliers, all key
to our future as we scale the business.
On behalf of the entire staff of Polarean Imaging, I would like to thank you for your investment in and support of the
Group and we look forward to continuing to develop and deliver this critical life-saving and life-improving technology
to physicians and patients everywhere.
Richard Hullihen
Chief Executive Officer
12 June 2018
Polarean Imaging plc
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Strategic Report
1. Introduction
The Group comprises medical drug-device combination companies operating in the high resolution medical imaging market. The
Group develops equipment that enables existing MRI systems to achieve an improved level of pulmonary functional imaging and
specialises in the use of polarised Xenon gas (129Xe) as an imaging agent to visualise ventilation (the ability of air to reach the
alveoli) and gas exchange (the ability of oxygen to diffuse through the alveolar membrane into the pulmonary vasculature)
regionally down to the smallest airways of the lungs, the tissue barrier between the lung and the bloodstream and in the pulmonary
vasculature; a novel diagnostic approach. The Group also develops and manufactures the high performance MRI radiofrequency
(RF) coils which are a required component for imaging 129Xe in the MRI system. The development of these coils by the Group
facilitates the adoption of the Xenon technology by providing application-specific RF coils which optimise the imaging of 129Xe
in MRI equipment.
The Group was formed on 31 May 2017 when the Company acquired Polarean, Inc (the Subsidiary). The Subsidiary was
formed as a result of two mergers: the first between Polarean Merger-Sub Inc. and m2m, a company that the Subsidiary had
developed a relationship with during the course of previous research and commercialisation programmes in the US and the
second between m2m and the Subsidiary. m2m was previously a portfolio company of Amphion Innovations plc
(‘Amphion’), developer of medical, life science, and technology businesses, which is itself currently quoted on AIM.
2.
Investment Case
Pulmonary disease currently affects hundreds of millions of people globally, including approximately 174 million people who
suffer from Chronic Obstructive Pulmonary Disease (COPD), which is responsible for approximately 6% of all such deaths
globally each year. In the US more than 30 million people suffer from a chronic lung disease such as COPD, which includes
emphysema, chronic bronchitis and asthma. In addition to its significant human toll, pulmonary disease also represents an
economic burden in excess of US$150 billion annually in the US alone.
Every type of pulmonary disease involves some combination of ventilation and/or gas exchange impairment, yet the successful
and cost-effective treatment of lung disease is hampered by sub-optimal methods for quantifying pulmonary ventilation and
gas exchange. Current diagnostic techniques are either imprecise (such as spirometry) and/or expose the patient to potentially
dangerous radiation (such as x-rays, CT scans and nuclear scintigraphy). While spirometry has benefits as a screening tool,
none of these current methods can visualise ventilation or gas exchange regionally in the smallest airways, where lung disease
typically begins and where improvements from new pharmaceutical therapies can first be detected.
As such, the Group operates in an area of significant unmet medical need and a number of key milestones are expected to be
achieved by the Group over the next 12 to 24 months. The FDA has accepted the Group’s Phase III trial design. The most important
near-term milestone will be the successful completion of the FDA Phase III clinical trial in the US for the Group’s technology. The
proposed 80 patient non-inferiority trial will take place at Duke University Medical Center and the University of Virginia, two
leading US research hospitals. The trial is expected to commence very soon and to last for approximately 18 months, which
includes the time required to prepare the New Drug Application (NDA). Upon completion of the Phase III trial and filing of the
NDA, the Directors anticipate receiving a broad indication for use from the FDA following the FDA’s review period.
The Group’s technology overcomes important limitations of current lung diagnostic methods, providing the ability to visualise,
quantify and monitor both the structure and function of the smallest airways and alveolar spaces with enhanced sensitivity and
without harmful radiation. This provides a unique, valuable and more precise tool to help diagnose disease earlier, identify the type
of intervention likely to benefit a patient, monitor the efficacy of treatment and facilitate developing new therapies for pulmonary
diseases.
Polarean Imaging plc
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Strategic Report
continued
3. Group Structure and History
The Company was incorporated in England and Wales on 24 October 2016 with company registration number
10442853. The Company’s registered office is 27-28 Eastcastle Street, London, W1W 8DH.
Polarean Merger-Sub Inc., one of the companies involved in the first merger which resulted in the creation of the Subsidiary,
was incorporated by the Subsidiary as a wholly-owned subsidiary incorporated in the US State of North Carolina on 23
November 2016. Polarean Merger-Sub, Inc. had its registered office at 2 South Salisbury Street, Raleigh, NC 27601 prior to
being merged with and into m2m on 30 May 2017.
m2m, the company involved in both of the mergers which created the Subsidiary, was formed in the US State of Delaware on 18
February 1999 following the merger of spin out companies from Columbia University and the University of Queensland
respectively, which was enabled by a financing round led by Amphion.
The Subsidiary was incorporated in the US State of North Carolina on 10 June 2011 and has its registered office at Wells
Fargo Capitol Center, 150 Fayetteville Street, Suite 2300, Raleigh, NC 27601-2958.
On 17 May 2017 Polarean Merger-Sub, Inc. and m2m entered into a conditional agreement to complete the m2m Merger.
The m2m Merger was conditional on completion of the Pre-Merger Fundraise. The m2m Merger and the Pre-Merger
Fundraise were announced by Amphion on 31 May 2017. As a result of this transaction, the Subsidiary became the sole
shareholder of m2m.
On 31 May 2017, following completion of the share exchange with the former shareholders of the Subsidiary, the Company
became the sole shareholder of the Subsidiary. Thereafter, the Subsidiary’s board of directors determined that it was in the
best interests of the Group to simplify the Subsidiary’s corporate structure by merging m2m with and into the Subsidiary,
with the Subsidiary being the surviving entity. This internal restructuring was completed on 1 September 2017.
In December 2017 the Group raised £647,127 via the issuance of the convertible loan notes in order to progress key
workstreams ahead of the commencement of the Phase III trials (the “Convertible Loan Notes”). The Convertible Loan
Notes and any accrued interest automatically converted into fully paid ordinary shares at a conversion price equal to 90 per
cent. of the placing price upon Admission. The Convertible Loan Notes have an interest rate of 10 per cent. per annum. The
holder of each Convertible Loan Note was granted warrants to subscribe for ordinary shares at Admission. The number of
warrants to be issued is equal to 20 per cent. of the par value of the Convertible Loan Notes held by each shareholder, divided
by the placing price. The exercise period for the warrants is 12 months from Admission.
4. Information on Polarean, m2m and Strategy of Group
4.1 Polarean, Inc. – Background
The Subsidiary was co-founded by Dr Bastiaan Driehuys, a current Director of the Company, and John Sudol, a former
director of the Subsidiary, in 2011. Prior to co-founding the Subsidiary, Dr Driehuys was a member of a research team at
Princeton University in the early 1990s which was amongst the first research teams to focus on hyperpolarised gas MRI
technology, in particular isotopically enriched Helium (3He), and developed and held key patents relating to the technology.
The technology was acquired in 1999 by Amersham, Inc. (“Amersham”), with the goal of commercialising hyperpolarised
Helium products to be marketed and distributed alongside Amersham’s full line of contrast agent products. Dr Driehuys led
the development efforts for Amersham, which continued the development of these hyperpolarised Helium products
throughout the early 2000s until GE Healthcare (“GE”) acquired Amersham in 2004.
GE continued the research and development of hyperpolarised gas MRI after the acquisition of Amersham, focusing on 129Xe
as a more effective substitute for 3He in visualising ventilation. GE also began to explore ways in which 129Xe could be used to
image gas exchange within the lung in addition to ventilation. These work programmes culminated in the conduct of a
Phase I/II clinical trial at Duke University in 2008-2009. GE also filed INDs with the FDA for both 3He and 129Xe.By
2010, after an investment of around US$40 million in the technology and with the regulatory path for hyperpolarised gas
remaining unclear, GE decided to out-license the hyperpolarised gas technology and the related patent families that it had
developed and/or maintained to the Subsidiary, due to the scale at the time and the early stage nature of the technology’s
development.
Polarean Imaging plc
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Strategic Report
continued
In December 2011, the Subsidiary negotiated the acquisition of all of GE’s assets related to the hyperpolarised MRI
project, including an inventory of polarisers and parts and the licenses (or outright ownership) of the related patent
families.
Following the acquisition of GE’s hyperpolarisation assets, the Subsidiary focused on three key objectives:
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building and selling polarisers to research users to generate operating revenue and to disseminate the
technology to academic research institutions that generate clinical data in order to build additional interest in
the technology;
further developing the xenon hyperpolarisation technology in order to meet clinical use specification
requirements; and
liaising with the FDA in order to clarify the FDA regulatory path under which the product could achieve
clearance to market for clinical use.
In July 2012, the US Congress passed the FDA Safety and Innovation Act and the Medical Gas Act, which clarified
and simplified the path under which hyperpolarised gas MRI technology could be approved for clinical use by the
FDA.
As a result of discussions between the Group and the FDA, the Directors believe that a clearer path towards regulatory
approval now exists. As such, following Admission the Group intends to focus on conducting the clinical studies
required for FDA approval to market.
Between 2012 and May 2017, the Subsidiary generated over US$3.7 million of revenue from selling polarisers to customers
in Canada, Germany, the UK and the US for research use, relating to both clinical (human) and pre-clinical (animal)
applications. In addition, the Subsidiary received additional funding of approximately US$2.5 million from Nukem and
other Series A investors. Prior to the m2m Merger, the Subsidiary was also successful in receiving grant funding, including
a US$3 million grant awarded in April 2017 by the US National Heart, Lung and Blood Institute (NHLBI) following a
competitive application process (for which the research will be conducted with its clinical collaborator, the Cincinnati
Children’s Hospital) and a US$250,000 small business research loan from the North Carolina Biotech Center in March
2017, which was also awarded following a competitive application process.
4. m2m Imaging – Background
Following its formation in 1999, m2m focused on the design and development of high performance MRI RF coils for
the global research market. Primarily, m2m focused on the custom development of application-specific coils for multi-
nuclei high field MR, known as micro-imaging. m2m also developed technologies and intellectual property relating to
the use of cryogenics and high temperature superconductors for use in MRI RF coils.
Prior to the m2m merger, m2m had generated more than US$8 million in revenue over the course of its lifetime from sales
to academic and research institutions and major pharmaceutical companies in Canada, Germany, the UK and the US. In
addition, m2m was ISO 9001 and ISO 13485 certified and certain serially produced products were CE marked. A
significant percentage of m2m’s products went to market embedded in the imaging systems of major system manufacturers,
including Bruker, Siemens, Varian and Agilent, all of which had supply relationships in place with m2m.
Polarean Imaging plc
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Strategic Report
continued
4.3 Rationale for the m2m Merger
The Subsidiary developed a relationship with m2m as a result of various research programmes that both companies
were involved with in the US.
Each new application in Xenon imaging requires new, clinically optimised, RF coils designed specifically for detecting the
Xenon signals and currently the major manufacturers of MRI systems do not engage in early stage development of these
RF coils. As such, both the Subsidiary and m2m agreed to execute the m2m Merger as Xenon-specific coils gate the use
of Xenon on existing MRI systems. It is anticipated that having access to this coil technology will accelerate the
development and use of the techniques that the Subsidiary has developed, thus removing a barrier to market entry for the
Group’s technology. In addition, as the applications of the Group’s technology move beyond the initial pulmonary function,
key elements of the proprietary technology platform which had initially been developed by m2m, specifically relating to
the use of cryogenics in RF signal detection, may play a key role in enabling and improving the viability of these
applications.
4.4 The Group’s Technology and Products
The Subsidiary is a clinical-stage company and its lead product has been designated as a drug-device combination by the
FDA. The Subsidiary’s product enables the visualisation of hyperpolarised 129Xe (“HPX”) via MRI technology to help
diagnose lung disease earlier, identify the type of intervention likely to benefit a patient and to monitor the efficacy of
treatment. As a result of the FDA’s drug-device designation, the Subsidiary’s products will be approved and sold only for
use with each other. The products are currently being used at a number of research sites on a pre-FDA clearance basis to
facilitate the research and evaluation of lung function, to assist in making improved disease progression assessment and to
clearly visualise the effectiveness of several therapeutics which are under development. The Group currently generates
revenue from the sale of its 129Xe gas hyperpolarisation platform.
Implementing the Group’s technology in a clinical setting is straightforward: prior to the MRI scan a patient breathes
in a small amount of inert HPX to provide an extremely strong MRI signal. This transforms the MRI from a technology
that is not applicable to the lungs into one that is able to provide multiple images of the lung structure and function in
one 10-20 second breath-hold. HPX MRI overcomes the limitations of traditional pulmonary function testing as HPX
MRI:
•
•
•
is more accurate and reproducible than spirometry and other traditional pulmonary function tests, enabling the
detection and mapping of small and localised changes in lung ventilation and gas exchange over time;
provides regional information about lung disease without exposure to ionising radiation or radioactivity; and
assesses ventilation and gas exchange in the smallest airways, where disease often begins.
The Group’s technology works in conjunction with traditional MRI, transforming it into a powerful diagnostic modality
for the lung. The Group’s approach is to take 129Xe, an inert gas, and hyperpolarise the nucleus to create an MRI signal
which is approximately 100,000 times stronger than a conventional MRI signal. When the MRI scan is undertaken, the
HPX resonates at different frequencies: (i) in the bronchioles and alveoli of the lung; (ii) in the barrier tissue of the lung;
and (iii) when dissolved in arterial blood in the pulmonary vasculature, thus providing information on ventilation (the
ability of air to reach the alveoli) and gas exchange (the ability of air to diffuse through the alveolar membrane into the
pulmonary vasculature). As all pulmonary diseases result from impairments to the free flow of air through bronchioles,
or from abnormal gas exchange between the lung alveoli and the pulmonary vasculature, the images that result from HPX
MRI scans which have been executed using the Group’s technology can aid diagnosis, as the physician’s ability to clearly
identify issues with ventilation and gas exchange on a regional basis, down to the smallest of airways, is enhanced.
Hyperpolarisation of the 129Xe is accomplished by placing a non-radioactive isotope of Xenon (129Xe) into a beam of circularly
polarised laser light in the presence of very small concentration of the alkali metal Rubidium, which acts as a physical catalyst
in the hyperpolarisation process. The result is 129Xe whose nuclear magnetic spin is highly aligned but not chemically or
biologically different than unpolarised 129Xe, an inert gas. This hyperpolarised state persists for around 2 hours
allowing ample time to administer the HPX to the patient.
Polarean Imaging plc
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Strategic Report
continued
The Group’s products include:
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•
•
•
the 129Xe gas, blended and made under GMP at high purity, to be polarised within the polariser;
the polariser itself, of which the latest model, the Polarean 9820 Xenon Hyperpolariser, has been designed
to deliver up to 3 litres of HPX per hour (approximately 5-10 doses) of which each dose is to be used within
30 minutes of its production in order to retain sufficient polarisation to create a strong image;
the dose delivery inhalation bag, made of HPX-compatible impermeable plastic materials and a mouthpiece
for ease of inhalation; and
the Polarean 2881 Polarisation Measurement Station, which provides a calibrated measurement of the
polarisation of hyperpolarised gas within the dose delivery inhalation bag.
The Group currently designs and builds the polariser equipment and has relationships with GMP gas producers to
supply the Group with high purity 129Xe.
In order to take advantage of the Group’s current products, an MRI machine is required to be outfitted with hardware and
software capable of operating at 129Xe frequency to detect the HPX signal. In addition, the patient will need to wear a
129Xe RF chest coil to allow for detecting the HPX MR signal in the lungs. Approximately 35,000 MRI machines are
currently in use worldwide and technically many of these can be easily adapted to be used with 129Xe frequency. The
Group’s products can be placed near the MRI scanner for ease of radiology workflow and, following the m2m Merger,
the Group has continued to explore ways to further integrate the Group’s existing technology with the coils which had
previously been the focus of m2m.
4.5 Location
The Group is based at the Meridian Corporate Center, located in the Research Triangle Park area of North Carolina, which
provides a favourable location at which to further develop the core technology and product range. The Group’s facilities
consist of more than 4,000 square feet of combined offices, laboratory space, inventory warehouse and assembly and testing
areas. The Group benefits from facilities that were originally purpose-built by GE for the design and manufacture of
hyperpolarisation equipment and components, pursuant to FDA-mandated guidelines.
Within these facilities are a dedicated research and development laboratory equipped with 3-phase power, central
compressed air, specialty gas handling and distribution and separate heating, ventilation and air conditioning. The
laboratory area also includes optical cell production equipment capable of simultaneous processing of four optical cells
for Xenon applications. The laboratory is designed for safe operation of class 4 lasers and is equipped with laser power
and spectral testing apparatus.
The Group also maintains a dedicated polariser test bed that is used for product development and a dedicated NMR
system capable of delivering available electromagnetic field strength, utilised for calibrating absolute polarisation
measurements of hyperpolarised gas samples.
4.6 The Regulatory Environment
At present, prior to the receipt of any approvals for clinical use, the Group sells its polarisers and disposables for research
use only to academic medical centres with their research being subject to oversight by their respective institutional review
boards and the FDA or equivalent regulatory body.
The Group has held regular meetings with the FDA to develop a path towards approval for clinical use and the FDA has
indicated its willingness to accept a very broad indication for use for the Group’s technology – for the evaluation of
pulmonary function – as opposed to its use being limited to any particular pulmonary disease or condition. The FDA has
reviewed proposals for the Group’s Phase III clinical trials and has provided clearance for the trials to take place. The Phase
III trials include a total of 80 patients and the FDA has indicated that it will also accept existing literature-based data in
fulfilment of certain safety and toxicology requirements. The Directors believe that this broad indication and limited clinical
trial size provides the Group with a sizeable, addressable market at a modest clinical trial cost.
Polarean Imaging plc
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Strategic Report
continued
4.7 The Group’s Customers
The Group’s existing customer base already comprises some of the world’s luminary medical imaging research institutions.
Indeed, there are currently twelve research institutions worldwide utilising the Group’s system and products, including
Cincinnati Children’s Hospital, the University of Virginia, University of Wisconsin – Madison and Duke University in the
US, Robarts Research Institute and Hospital for Sick Children (SickKids) in Canada, the University of Oxford and the
University of Nottingham in the UK and the Fraunhofer Institute for Toxicology and Experimental Medicine in Germany.
At the date of this report, there are currently 17 Xenon Hyperpolariser units installed at these and several other leading
research hospitals and the Group anticipates selling further units for research purposes during the course of the Phase III
clinical trial.
4.8 The Group’s Suppliers
The Group has entered into Master Service Agreements with two CROs in relation to the Phase III trial. Pharma Start
LLC, doing business as Firma Clinical Research, has been engaged to project manage the trial and will oversee the
recruitment of patients for the trial. In addition, Icon Clinical Research Limited will assist with the medical imaging
aspects of the trial.
The Group has a long-standing relationship with Nukem Isotopes GmbH, a leading global supplier of 129Xe, the isotope
of Xenon which is provided to the various gas blenders that in turn supply gas to the Group.
In December 2017 the Group signed a letter of intent (“LoI”) with Linde Electronics and Speciality Gases, a division of
Linde Gas North America LLC (“Linde”), in relation to a potential product supply agreement. Under the terms of the LoI,
the Group and Linde have agreed to negotiate, prepare and sign a product supply agreement for the supply of industrial gas
to the Group, subject to all required licenses and approvals being obtained by the parties.
4.9 Current Trading and Prospects
Trading of the Group since IPO continues to be in line with the Directors’ expectations. The potential of the Group’s
technology enables the Directors to view the future with confidence ahead of the commencement of the Phase III
clinical trials and the exploitation of the addressable markets for the Group’s technology.
4.10 Growth Strategy
The Group estimates that in the short term it will generate additional revenue from the sale of hyperpolarisers to global
research institutions and the Directors believe that the market for polarisers will grow as the technology gains wider
acceptance as a tool for studying lung disease and for monitoring the effectiveness of therapeutics. At present, a number of
major pharmaceutical companies are working with universities that are well known to the Group, regarding the use of HPX
MRI technology to help guide clinical trials of developmental pharmaceutical products which is raising awareness of
the Group’s technology and product range.
The FDA have accepted the Group’s Phase III clinical trial design and upon completion of the Phase III trial and subsequent
FDA approval, the Group will adopt a traditional market entry strategy of building market awareness for its technology
through key opinion leaders and a direct sales force to reach the key decision makers within its initial target market of large
academic medical centres. In implementing this strategy, the Group benefits from more than 400 journal articles on the use
of hyperpolarised gas MRI that are currently published in peer-reviewed journals. Over time, as more research centres
purchase the Group’s equipment and begin clinical studies, an increasing number of peer reviewed scientific articles are
likely to be published, further enhancing the Group’s credibility and raising awareness of the Group’s technology. The Group
also intends to continue patenting and in-licensing hyperpolarised gas technology IP to protect its current position.
Following completion of the Phase III trial and upon receipt of FDA clearance to market the technology, the Group’s initial
sales targets will be the radiology departments of top academic hospital organisations in the US, who are opinion leaders in
the use of new diagnostic technologies and their application in a clinical setting.
Subsequently, the Group will seek to expand its sales and marketing teams. Because of the specialty nature of the Group’s
products in the pulmonary specialist market, which is concentrated in approximately 1,000 medical centres, the Directors
believe that a small specialty sales force can be deployed effectively at reasonable cost.
The Group may also choose to partner with companies that offer complementary products.
Polarean Imaging plc
11
Strategic Report
continued
Furthermore, the Directors believe that the Group’s products will benefit a number of clinical applications. While the Group’s
HPX MRI technology provides more specific information than currently available using existing lung diagnostic procedures
(especially spirometry), the Group will focus its use on specific clinical conditions where the high accuracy of HPX MRI and
greater cost are justified. The Directors do not believe that HPX MRI will replace low-cost spirometry as a general screening
tool but believe that it should add value in more demanding clinical applications where HPX MRI addresses unmet diagnostic
needs. These applications could include, but are not limited to, the following:
the monitoring of COPD therapy, especially for the most severe cases;
the management of cystic fibrosis exacerbations;
•
•
• a more efficient diagnosis of dyspnoea and the chronic cough;
• providing guidance for radiation therapy planning of lung cancer treatment;
• providing guidance for interventional pulmonology procedures including ablation and the placement of valves
and stents;
• surgical procedure planning for lung transplant and volume reduction surgery;
• diagnosis of IPF and monitoring of IPF therapy; and
• diagnosis of PAH and monitoring of therapy.
The Directors will also seek to develop relationships with a range of strategic partners and will evaluate opportunities
which will enable the Group to address its target markets globally, either alone or in collaboration with a partner.
5.
Intellectual Property (“IP”)
The Group’s technology has been developed in four areas: (i) hyperpolarising gas; (ii) assuring the quality of the
hyperpolarised gas; (iii) using the polarised gas in MRI applications; and (iv) developing and producing specialised
RF coils to improve signal-to-noise ratios (“SNR”).
GE had put a comprehensive patent policy in place to protect its technology from potential competitors. The Group is
now the sole owner of this IP portfolio, which is based on 22 patent families, and when combined with the 7 patents that
were previously owned by m2m, that were transferred to the Group following the m2m Merger, the Group’s portfolio
covers four broad types of patents:
•
imaging methods – these cover the imaging of a subject, or patient, who has inhaled a hyperpolarised noble gas and the
functionality of the gas as a contrast agent. Newly licensed technology from Duke University extends the protection
over these patents through to the early 2030s;
• hyperpolarisation methods – these are Polarimetry patents covering the methods by which noble gases are
polarised and the methods by which the resulting polarised gas is isolated and delivered to patients. The latest
of these patents expire in the early 2020s;
• hyperpolarisation equipment – these patents cover the multiple preferred mechanical design and automation
elements of hyperpolarised equipment; and
• RF coil patents – these patents cover the use of cryogenics to improve RF coils SNR and image quality and may
play an important part in the next generation of applications such as neurological, cardiac and oncology imaging.
Polarean is committed to proactively developing further IP, both internally and through licensing arrangements with third
parties, as part of the Group’s overall growth strategy. The third parties are likely to include the Group’s key collaborative
academic sites, such as Duke University, that are seeking to develop emerging applications and technologies. Because of
the Group’s extensive patent portfolio and leading market position, the Directors believe the Group is an attractive
licensing partner for academic research institutions that are interested in out-licensing such IP.
One such patent application (US15/120013), which is currently pending, relates to improving the overall efficiency of the
hyperpolarisation process. This patent has also been exclusively licensed to the Group by Duke University. The Directors
believe that this patent, if prosecuted successfully to issuance, would enable the Group to protect methods for increasing
the level of hyperpolarisation significantly, which could improve the competitive economics of the Group’s products.
These patents are also pending in Europe and other international jurisdictions.
6. Principal risks and uncertainties
Polarean Imaging plc
12
Strategic Report
continued
The principal risks and uncertainties facing the Group are detailed below:
Early stage of operations
The Group’s operations are at an early stage of development and there can be no guarantee that the Group will be able to, or
that it will be commercially advantageous for the Group to, develop its proprietary technology. Further, the Group currently
has no positive operating cash flow and its ultimate success will depend on the Directors’ ability to implement the Group’s
strategy, generate cash flow and access capital markets.
Regulatory approvals and compliance
The Group will need to obtain various regulatory approvals (including FDA and EMA approvals) and otherwise comply
with extensive regulations regarding safety, quality and efficacy standards in order to market its future products. These
regulations, including the time required for regulatory review, vary from country to country and can be lengthy, expensive
and uncertain.
Future funding requirements
The Group will need to raise additional funding or enter into a strategic partnership with industry partners to undertake
work beyond that being funded by the Placing and Subscription. There is no certainty that this will be possible at all
or on acceptable terms.
Dependence on key personnel
The success of the Group, in common with other businesses of a similar size, will be highly dependent on the expertise and
experience of the Directors and key employees. However, the retention of such key personnel cannot be guaranteed. Should
key personnel leave the Group’s business, prospects, financial condition or results of operations may be materially
adversely affected.
Intellectual property and proprietary technology
No assurance can be given that any current or future patent applications will result in granted patents, that the scope
of any patent protection will exclude competitors or provide competitive advantages to the Group, that any of the
Group’s patents will be held valid if challenged or that third parties will not claim rights in or ownership of the patents
and other proprietary rights held by the Group.
Technology and products
The Group is a manufacturer and service provider for noble gas polariser devices and ancillary instruments with a special
focus on pulmonary imaging. The development and commercialisation of its proprietary technology and future products,
which are in early stages of development, will require multiple series of clinical trials and there is a risk that safety and
efficacy issues may arise when the products are tested. There is also a risk that there will be delays to the development of the
products or that unforeseen technical problems arise as the Group’s technology becomes increasingly automated. These risks
are common to all new medical products and there is also a risk that the clinical trials may not be successful.
Research and development risk
The Group will be operating in the life sciences and medical device development sector and will look to exploit opportunities
within that sector. The Group will therefore be involved in complex scientific research and industry experience indicates that
there may be a very high incidence of delay or failure to produce results. The Group may not be able to develop new products
or to identify specific market needs that can be addressed by technology solutions developed by the Group.
Polarean Imaging plc
13
Strategic Report
continued
Reliance on third parties
The business model for the Group anticipates that it will have limited internal resources over the next few years and that it
will use third party providers wherever possible to conduct the research, development, registration, manufacture, marketing
and sales of its proposed products. The commercial success of the Group’s products will depend upon the performance of
these third parties.
Manufacturing
There can be no assurance that the Group’s proposed products will be capable of being manufactured in commercial
quantities, in compliance with regulatory requirements and at an acceptable cost. The Group intends to outsource the
manufacture of the raw materials and finished products required in connection with the research, development and
commercial manufacture of its proposed products and, as such, will be wholly dependent upon third parties for the provision
of adequate facilities and raw material supplies. 129Xe, the specific isotope of Xenon which is the active ingredient in the
Group’s drug-device product, is available from a limited number of suppliers and there can be no assurance that adequate
supplies of this material at acceptable cost can be obtained. In addition, where the Group is dependent upon third parties for
manufacture, its ability to procure the manufacture of the drug-device in a manner which complies with regulatory
requirements may be constrained, and its ability to develop and deliver such products on a timely and competitive basis may
be adversely affected.
Product development timelines
Product development timelines are at risk of delay, particularly since it is not always possible to predict the rate of patient
recruitment into clinical trials. There is a risk therefore that product development could take longer than presently expected
by the Directors. If such delays occur the Group may require further working capital. The Directors shall seek to minimise
the risk of delays by careful management of projects.
General legal and regulatory issues
The Group’s operations are subject to laws, regulatory restrictions and certain governmental directives, recommendations and
guidelines relating to, amongst other things, occupational safety, laboratory practice, the use and handling of hazardous
materials, prevention of illness and injury, environmental protection and animal and human testing. There can be no assurance
that future legislation will not impose further government regulation, which may adversely affect the business or financial
condition of the Group. Furthermore, as the Group already has some exposure to the UK market, there is a risk that possible
changes resulting from the Brexit negotiations could lead to additional barriers to trade and regulatory divergence which could
adversely affect the Group
Healthcare pricing environment
In common with other healthcare products companies, the ability of the Group and any of its licensees or collaborators to
market its products successfully depends in part on the extent to which reimbursement for the cost of such products and
related treatment will be available from government health administration authorities, private health coverage insurers and
other organisations.
Richard Morgan
Non-executive Chairman
12 June 2018
Polarean Imaging plc
14
Directors’ Report
The Directors present their report on the affairs of Polarean Imaging plc (the “Company”) and its subsidiaries, referred
to as the Group, together with the audited Financial Statements and Independent Auditors’ Report for the year ended
31 December 2017.
Principal Activities
The main activity of the Group is a drug device manufacturer and service provider for noble gas polarizer devices, its
proprietary 129Xe drug and ancillary instruments with a special focus on pulmonary imaging.
Results and Dividends
The financial performance for the year, including the Group’s Statement of Comprehensive Income and the Group’s
financial position at the end of the year, is shown in the Financial Statements on pages 26 to 32.
The Directors do not recommend the payment of a dividend (2016: US$nil).
Going Concern
The Group is in its development stage and has not yet moved to full commercial exploitation of its IP. During the year
ended 31 December 2017 the Group recorded a loss after tax of US$3,957,821 (2016: loss of US$1,059,713) and a net
cash outflow from operating activities of US$2,615,691 (2016: US$759,987).
On 21 December 2017 the Company raised proceeds of US$0.9 million from investors by the issue of a convertible
loan note. After the balance sheet date the Company raised a further US$3.2 million net of costs from a placing and
subscription of new shares on admission to AIM.
In considering the appropriateness of this basis of preparation, the Directors have reviewed the Group’s working capital
forecasts for a minimum of 12 months from the date of the approval of this financial information. Based on their
consideration the Directors have reasonable expectation that the Group has adequate resources to continue for the
foreseeable future and that carrying values of intangible assets are supported. Thus, they continue to adopt the going
concern basis of accounting in preparing this financial information.
Future Developments
The Company’s future developments are outlined in the Strategic Report on pages 6 to 14.
Research Design & Development
Research and development is performed by employees of the company. The Group is committed to increasing
its R&D budget to meet anticipated market demands for additional technology. In addition, the company also
in-licenses technology from collaborative academic institutions. Details of R&D carried out during the year are
contained in the Strategic Report.
Financial Risk Management
Financial risk management policies and objectives for capital management are outlined in the principal risks and
uncertainties section of the strategic report on page 13 and in note 25 to the financial statements.
Directors’ indemnities
The Group has made qualifying third-party indemnity provisions for the benefit of its Directors, which were made
during the year and remain in force at the date of this report.
Subsequent Events
Details of significant events since the reporting period are contained in note 28 of the financial statements.
Polarean Imaging plc
15
Directors
The Directors who served the Company during the year and up to the date of this report were as follows:
Directors’ Report
continued
Richard Morgan
Richard Hullihen
Kenneth West
Bastiaan Driehuys
Jonathan Allis
Robert Bertoldi
Juergen Laucht
(Appointed 30 May 2017)
(Appointed 30 May 2017)
(Appointed 30 May 2017)
(Appointed 30 May 2017)
(Appointed 27 September 2017)
(Appointed 24 October 2016)
(Appointed 30 May 2017)
The biographical details of the Directors of the Company are set out on the Company’s website www.polarean.com
Directors’ emoluments
2017
Non-executive directors
Richard Morgan
Jonathan Allis
Robert Bertoldi
Juergen Laucht
Executive Directors
Bastiaan Driehuys
Richard Hullihen (Note A)
Kenneth West (Note B)
Total
Salary, Fees &
Bonus
US$
Benefits
US$
Share based
payments
US$
-
-
-
-
-
-
-
-
-
155,714
121,254
-
8,059
5,727
-
-
-
-
-
-
-
-
Total
US$
-
-
-
-
-
163,773
126,981
Note A: Richard Hullihen agreed to a salary deferral in 2017. The amount included in salaries is US$51,547.
Note B: Kenneth West agreed to a salary deferral in 2017. The amount included in salaries is US$46,392.
Directors’ interests
The Directors who held office at 31 December 2017 and subsequent to year end had the following direct interest in
the ordinary shares of the Company at 31 December 2017.
Directors’ beneficial interests in shares of the Company:
Richard Morgan
Richard Hullihen
Robert Bertoldi
Kenneth West
Bastiaan Driehuys
Jonathan Allis
Juergen Laucht
2017
Number
-
57,643
-
8,087
449,401
-
-
2017
Number (adjusted
for share split)
-
1,540,211
-
216,085
12,007,994
-
-
2017
%
-
3.18
-
0.45
24.77
-
-
2016
Number
-
-
-
8,087
449,401
-
-
After the reporting date, on 16 February 2018 the Company sub-divided its share capital on the basis of
26.71999:1. The number of Ordinary shares in issue in the Company at 31 December 2017 reflecting the sub -
division was 48,470,160.
The shareholdings noted above include those shares held by connected persons of the individual direct or.
Polarean Imaging plc
16
Directors’ beneficial interests in options to subscribe for additional shares of the Company:
Directors’ Report
continued
Richard Morgan
Richard Hullihen
Robert Bertoldi
Kenneth West
Bastiaan Driehuys
Jonathan Allis
Juergen Laucht
2017
Number
-
-
-
10,000
30,000
-
-
2017
Number (adjusted
for share split)
-
-
-
267,200
801,600
-
-
2016
Number
-
-
-
10,000
30,000
-
-
Kenneth West’s options have an exercise price of US$0.90 (US$.0337adjusted for share split). They were issued
on 16 December 2015 and expire on 16 December 2025. 15,000 of Bastiaan Driehuys’ options with an exercise
price of US$0.11 (US$.00412 adjusted for share split) were issued on 15 December 2014 and expire on 15
December 2024 and 15,000 options with an exercise price of US$0.90 were issued on 16 December 2015 and
expire on 16 December 2025.
The options holdings noted above include those shares held by connected persons of the individual director.
On 20 April 2018, the Company issued 9,619,200 Options to certain directors, persons discharging managerial
responsibilities (“PDMR”) and employees. The exercise price for the Options is £0.15 being the price at which
Polarean’s Ordinary Shares were placed at Admission. The Options will vest in equal portions on an annual basis
on the anniversary of Admission, over a four-year period from the date of Admission. The options term expires
on 29 March 2028.
The following directors were a part of the grant of PDMR options were:
• Richard Morgan was granted 534,400 options;
• Richard Hullihen was granted 2,135,440 options;
• Robert Bertoldi was granted 534,400 options;
• Kenneth West was granted 1,646,018 options;
• Bastiaan Driehuys was granted 534,400 options;
•
Juergen Laucht was granted 534,400 options; and
•
Jonathan Allis was granted 534,400 under a separate option grant.
Directors’ beneficial interests in warrants to subscribe for additional shares of the Company:
Richard Morgan
Richard Hullihen
Robert Bertoldi
Kenneth West
Bastiaan Driehuys
Jonathan Allis
Juergen Laucht
2017
Number
19,598
-
19,598
-
5,556
-
-
2017
Number (adjusted
for share split)
523,659
-
523,659
-
148,456
-
-
2016
Number
-
-
-
-
5,556
-
-
The warrants issued to Richard Morgan and Robert Bertoldi are part of the Amphion Warrants. They have an
exercise price of £0.25. The warrants expire on 31 May 2018 unless the Company raises a minimum of $5 million
at £0.25 on or before 31 May 2018. The warrants issued to Bastiaan Driehuys have an exercise price of US$0.01
(US$.00037 adjusted for share split). The warrant holdings noted above include those shares held by connected
persons of the individual director.
Polarean Imaging plc
17
Directors’ Report
continued
Common, Options and Warrant Shares:
(On a fully-diluted
basis)
Richard Morgan
Richard Hullihen
Kenneth West
Bastiaan Driehuys
Jonathan Allis
Robert Bertoldi
Juergen Laucht
Number of shares at
31 December 2017
19,598
57,643
8,087
449,401
-
19,598
-
% held at 31
December 2017
0.8
2.5
0.8
20.8
-
0.8
-
Number of shares at 31
May 2018
1,093,059
3,915,660
2,033,218
13,612,451
534,400
1,151,392
534,400
% held at 31 May
2018
1.12
4.00
2.08
13.91
0.55
1.18
0.55
Note: March 2018, the Company declared a stock split of 26.72:1.
Share option schemes
In order to provide incentive for the management and key employees of the Group, the Company awards stock
options. The Directors will define a new plan in 2018 and implement. The existing options granted prior to the
merger were converted to options in Polarean Imaging, Plc.
Substantial Shareholders
As well as the Directors’ interests reported above, the following interests of 3.0% and above as at the date of this
report were as follows at 31 December 2017 (on a fully-diluted basis):
Number of shares, options or warrants
Amphion Innovations plc
Bastiaan Driehuys
NUKEM Isotopes Imaging GmbH
John Sudol
W.B. Nominees Limited
Technology Commercialization Group
Kiarash Emami
Note: March 2018, the Company declared a stock split of 26.72:1.
597,976
484,957
252,462
282,265
188,260
104,831
80,500
Corporate Responsibility
% held
25.6
20.8
10.8
12.1
8.06
4.5
3.5
The Board recognises its employment, environmental and health and safety responsibilities. It devotes
appropriate resources towards monitoring and improving compliance with existing standards. The Executive
Directors are responsible for these areas at Board level, ensuring that the Group’s policies are upheld and
providing the necessary resources.
Employees
The Group is committed to achieving equal opportunities and to complying with relevant anti -discrimination
legislation. It is established Group policy to offer employees and job applicants the opportunity to benefit from
fair employment, without regard to their sex, sexual orientation, marital status, race, religion or belief, age or
disability. Employees are encouraged to train and develop their careers.
The Group has continued its policy of informing all employees of matters of concern to them as employees, both
in their immediate work situation and in the wider context of the Group’s well -being. Communication with
employees is affected through the Board, the Group’s management briefings structure, formal and informal
meetings and through the Group’s information systems.
Polarean Imaging plc
18
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Strategic Report, the Directors’ Report and the Financial
Statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the
directors have elected to prepare the financial statements in accordance with International Financial Reporti ng
Standards (IFRSs’) as adopted by the EU and applicable law.
Under company law the directors must not approve the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the Company and 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 accounting estimates that are reasonable and prudent;
•
state whether applicable accounting standards have been followed, subject to any material departures
disclosed and explained in the financial statements;
prepare the financial statements on the going concern basis unless it is inappr opriate to presume that
the Group will continue in business.
•
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 Group 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.
They are further responsible for ensuring that the Strategic Report and the Directors’ Report and other
information included in the Annual Report and Financial Statements is prepared in accordance with applicable
law in the United Kingdom.
The maintenance and integrity of the Polarean Imaging plc web site is the responsibility of the directors; the
work carried out by the auditors does not involve the consideration of these matters and, accordingly, the auditors
accept no responsibility for any changes that may have occurred in the accounts since they were initially
presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of the
accounts and the other information included in annual reports may differ from legislation in other jurisdictions.
Auditors
Each of the persons who are directors at the time when this Directors' report is approved has confirmed that:
•
•
so far as that director is aware, there is no relevant audit information of which the Group and the Group's
auditor is unaware; and
that director has taken all the steps that ought to have been taken as a director in order to be aware of
any relevant audit information and to establish that the Company and the Group's auditor is aware of
that information.
Crowe Clark Whitehill LLP has expressed its willingness to continue in office and a resolution to re appoint the
firm as Auditor and authorising the Directors to set their remuneration will be proposed at the forthcoming
Annual General Meeting.
Richard Morgan
Non-executive Chairman
12 June 2018
Polarean Imaging plc
19
Corporate Governance Report
The Board is committed to proper standards of Corporate Governance, managing the Group in an efficient, effective,
entrepreneurial and ethical manner for the benefit of shareholders over the longer term.
The Directors have adopted the requirements of the Quoted Companies Alliance's Corporate Governance Code for
Small and Mid-Size Quoted Companies (the "QCA Code"), to the extent that they consider it appropriate having regard
to the Company's size, board structure, stage of development and resources.
Jonathan Allis is currently the Company's only independent (as defined in the QCA Code) non-executive director. The
Company acknowledges that the guidance in the QCA Code is for a company to have at least two independent non-
executive directors. However, the Directors are satisfied that at Admission the Company's board composition is
appropriate given the Company's size and stage of development. The Directors shall keep the position under regular
review and to the extent additional independence is felt to be required on the Board, it shall be sought.
The Group acknowledges the new AIM Rules regarding Corporate Governance which were announced in March 2018
and will ensure they are implemented on a timely basis before the 28 September 2018 deadline
Board
The Group is run by the Board of Directors, which comprises four non-executive directors and three executive
directors. As the business grows and becomes more complex it is anticipated that the Board will be added to.
The Board meets regularly and is responsible for the Group’s corporate strategy, monitoring financial performance,
approval of capital expenditure, treasury and risk management policies. Board papers are sent out to all directors in
advance of each Board meeting including management accounts and accompanying reports from those responsible.
Board Committees
The Board has established an Audit Committee and a Remuneration Committee with delegated duties and
responsibilities.
Audit Committee
Robert Bertoldi, Non-Executive Director, is Chairman of the Audit Committee. The other members of the Committee
are Richard Morgan and Juergen Laucht. The Audit Committee is responsible for ensuring that the financial
performance, position and prospects for the Group are properly monitored, controlled and reported on and for meeting
the auditors and reviewing their reports relating to accounts and internal controls.
Remuneration Committee
Richard Morgan, Non-Executive Director, is Chairman of the Remuneration Committee. The other members of the
Committee are Bastiaan Driehuys and Juergen Laucht. The Remuneration Committee is responsible for reviewing
performance of Executive Directors and determining the remuneration and basis of service agreement with due regard
for the UK Corporate Governance Code. The Remuneration Committee also determines the payment of any bonuses
to Executive Directors and the grant of options.
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. The Board as a whole will also be responsible for
AIM compliance.
Anti-Bribery Policy
The Group has in place appropriate guidance, training and implementation of procedures to ensure compliance with
the UK Bribery Act.
The Group is committed to the highest standards of personal and professional ethical behaviour. This must be reflected
in every aspect of the way in which the Company operates.
The Group takes a zero-tolerance approach to bribery and corruption and we are committed to act professionally, fairly
and with integrity in all our business dealings. Any breach of this policy will be regarded as a serious matter by the
Company and is likely to result in disciplinary action and potentially the involvement of the police.
Internal Control
The Board is responsible for the Group’s system of internal control and for reviewing its effectiveness. Such a system
is designed to manage rather than eliminate risk of failure to achieve the business objectives and can only provide
reasonable and not absolute assurance against material misstatement or loss.
Polarean Imaging plc
20
Corporate Governance Report
continued
The system of internal financial control comprises those controls established to provide reasonable assurance of:
• The safeguarding of assets against unauthorised use or disposal; and
• The maintenance of proper accounting records and the reliability of financial information used within the business
and for publication
The key procedures of internal financial control of the Group are as follows:
• The Board reviews and approves budgets and monitors performance against those budgets on a monthly basis.
• The Group has clearly defined reporting and authorisation procedures relating to the key financial areas
Share Dealing
The Group has a Share Dealing Code, which will apply to any person discharging management responsibility,
including the Directors and members of the senior management team and any closely associated persons and applicable
employees.
The Share Dealing Code imposes restrictions beyond those that are imposed by law (including by FSMA and the
Market Abuse Regulation (EU) No.596/2014 and other relevant legislation) and its purpose is to ensure that persons
discharging managerial responsibility and persons connected with them do not abuse, and do not place themselves
under suspicion of abusing, price-sensitive information that they may have or be thought to have, especially in periods
leading up to an announcement of both financial results and the results of the Group's clinical trials. The Share Dealing
Code sets out a notification procedure which is required to be followed prior to any dealing in the Company's securities.
Communications with Shareholders
The Group is strongly committed to the maintenance of good investor relations and seeks, wherever possible to be a
relationship of mutual understanding with both its institutional and private client investors. Additionally, the Board
seeks to meet with shareholder whenever possible and to use the Group’s website www.polarean.com to communicate
with all shareholders.
The board also welcomes shareholders’ enquiries, which may be sent via the Group’s website.
Polarean Imaging plc
21
Independent Auditors’ report to the members of
Polarean Imaging plc
Opinion
We have audited the financial statements of Polarean Imaging plc (the “Parent Company”) and its subsidiaries (the
“Group”) for the year ended 31 December 2017, which comprise:
•
•
•
•
•
the Group statement of comprehensive income for the year ended 31 December 2017;
the Group and parent company statements of financial position as at 31 December 2017;
the Group and parent company statements of cash flows for the year then ended;
the Group and parent company statements of changes in equity for the year then ended; and
the notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the financial statements is applicable
law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
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 2017 and of the Group’s loss for the period then ended;
the group financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union;
the parent company financial statements have been properly prepared in accordance with IFRSs as adopted
by the European Union as applied in accordance with the provisions of the Companies Act 2006; and
•
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the
financial statements section of our report. We are independent of the Group 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, and we have
fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which ISAs (UK) require us to report to
you when:
• The directors’ use of the going concern basis of accounting in the preparation of the financial statements is not
appropriate; or
• The directors have not disclosed in the financial statements any identified material uncertainties that may cast
significant doubt about the Group’s or the parent company’s ability to continue to adopt the going concern basis
of accounting for a period of at least twelve months from the date when the financial statements are authorised for
issue.
Overview of our audit approach
Materiality
In planning and performing our audit we applied the concept of materiality. An item is considered material if it could
reasonably be expected to change the economic decisions of a user of the financial statements. We used the concept
of materiality to both focus our testing and to evaluate the impact of misstatements identified.
Based on our professional judgement, we determined overall materiality for the Group financial statements as a whole
to be US$190,000, which represents 5% of the Group’s loss.
We use a different level of materiality (‘performance materiality’) to determine the extent of our testing for the audit
of the financial statements. Performance materiality is set based on the audit materiality as adjusted for the judgements
made as to the entity risk and our evaluation of the specific risk of each audit area having regard to the internal control
environment.
Where considered appropriate performance materiality may be reduced to a lower level, such as, for related party
transactions and directors’ remuneration.
Polarean Imaging plc
22
Independent Auditors’ report to the members of
Polarean Imaging plc
continued
We agreed with the Audit Committee to report to it all identified errors in excess of US$6,000. Errors below that
threshold would also be reported to it if, in our opinion as auditor, disclosure was required on qualitative grounds.
Overview of the scope of our audit
Polarean Imaging plc and its subsidiaries are accounted for from one operating location in North Carolina, USA. Our
audit was conducted from the main operating location and all subsidiary companies were within the scope of our audit
testing.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, 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) that we identified. These matters included 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.
How the scope of our audit addressed the key audit
matter
We designed procedures to test each revenue
stream and considered whether the revenue recognition
policy applied to the revenue stream was appropriate.
Our testing in this area included agreeing that revenue was
appropriately recognised. This included cut off procedures.
Key audit matter
Revenue recognition
Revenue is a significant figure in these financial
statements and is generated from various streams.
Our audit risk focuses on the risk that revenues may be
to meet market expectations. We
overstated
specifically
that either revenue
identified risks
transactions recorded in the year may not exist (the
risk of fictitious revenue transactions) or that revenues
transactions recorded in the year may not have been
despatched to the customer before year end and
therefore may have been recorded in the incorrect
period.
The accounting policy is documented in note 3
Accounting for the acquisition of the m2m
technology and the subsequent group
reconstruction
The Group acquired the m2m technology in the year
in exchange for the issue of shares in the Subsidiary to
the vendor, which has been accounted for as an
acquisition of an asset or a group of assets that does
not constitute a business.
We obtained management's assessment of the fair values of
the m2m technology acquired by the Group during the year,
together with the valuation of the intangible asset arising, as
further explained in Note 3 to the financial statements. We
the valuation basis and
challenged management on
assumptions.
The Company acquired the Subsidiary in the year in
exchange for the issue of shares in the Company to
shareholders in the Subsidiary. The Directors consider
the acquisition of the entire issued common stock of
the Subsidiary by the Company in exchange for
equivalent equity participation in the Company to be a
group re-organisation and not a business combination
and to fall outside the scope of IFRS3.
We reviewed the basis of accounting for the acquired m2m
technology and the group reorganisation.
Our audit procedures in relation to these matters were designed in the context of our audit opinion as a whole. They
were not designed to enable us to express an opinion on these matters individually and we express no such opinion.
Polarean Imaging plc
23
Independent Auditors’ report to the members of
Polarean Imaging plc
continued
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.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion based on the work undertaken in the course of our 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 directors’ report and strategic report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In light of the knowledge and understanding of the group and the parent company and their environment obtained in
the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to
you if, in our opinion:
•
•
•
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of the directors for the financial statements
As explained more fully in the directors’ responsibilities statement set out on page 19, the directors are responsible for
the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and parent company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s
report.
Polarean Imaging plc
24
Independent Auditors’ report to the members of
Polarean Imaging plc
continued
Use of our report
This report is made solely to the Group'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 Group'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 Group and the Group's members as a body, for our audit
work, for this report, or for the opinions we have formed.
Stephen Bullock (Senior Statutory Auditor)
for and on behalf of
Crowe Clark Whitehill LLP
Statutory Auditor
London
12 June 2018
Polarean Imaging plc
25
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2017
Revenue
Cost of sales
Gross profit
Administrative expenses
Depreciation
Amortisation
Selling and distribution expenses
Loss on contingent consideration revaluation
Share-based payment
Total administrative expenses
Operating loss
Finance income
Finance expense
Loss before tax
Taxation expense
Year ended 31
December
2017
US$
Year ended 31
December
2016
US$
1,237,163
(297,215)
939,948
(4,051,000)
(7,478)
(361,746)
(28,752)
-
(414,866)
880,645
(488,888)
391,757
(1,282,313)
(4,747)
(4,600)
(35,238)
(5,000)
(115,399)
(4,863,842)
(1,447,297)
(3,923,894)
129
(34,056)
(3,957,821)
-
(1,055,540)
147
(4,320)
(1,059,713)
-
Notes
4
11
12
19
6
7
7
10
Loss for the year and total other comprehensive expense
(3,957,821)
(1,059,713)
Loss per share
Basic and diluted (US$)
The results reflected above relate to continuing activities.
9
(3.71)
(0.99)
The accompanying notes on pages 33 to 55 are an integral part of these financial statements.
Polarean Imaging plc
26
Consolidated Statement of Financial Position
as at 31 December 2017
Notes
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Trade and other receivables
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity attributable to holders of the parent
Share capital
Share premium
Group re-organisation reserve
Other equity
Share based payment reserve
Retained losses
Non-current liabilities
Provision for contingent consideration
Deferred revenue
Current liabilities
Trade and other payables
Borrowings
Deferred revenue
TOTAL EQUITY AND LIABILITIES
12
11
14
15
14
16
17
18
18
18
19
18
20
21
22
23
21
2017
US$
2016
US$
4,661,250
21,341
12,539
4,695,130
649,860
488,861
960,217
2,098,938
6,794,068
23,000
11,985
3,961
38,946
321,661
16,035
97,847
435,543
474,489
23,291
1,448,037
7,813,337
87,305
826,545
(6,758,108)
3,440,407
1
-
1,976,367
-
238,172
(2,800,287)
(585,747)
316,000
-
316,000
1,906,376
1,104,723
26,562
3,037,661
6,794,068
316,000
10,257
326,257
562,515
104,541
66,923
733,979
474,489
These Financial Statements were approved and authorised for issue by the Board of Directors on 12 June 2018
and were signed on its behalf by:
Richard Morgan
Non-executive Chairman
The accompanying notes on pages 33 to 55 are an integral part of these financial statements.
Polarean Imaging plc
27
Company Statement of Financial Position
as at 31 December 2017
Notes
2017
US$
2016
US$
ASSETS
Non-current assets
Investment in subsidiaries
Current assets
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity attributable to holders of the parent
Share capital
Share premium
Merger reserve
Other Reserve
Share based payment reserve
Retained losses
Current liabilities
Trade and other payables
Borrowings
TOTAL EQUITY AND LIABILITIES
13
14
16
17
18
18
18
19
18
22
23
4,342,848
4,342,848
1,891,495
23,106
1,914,601
6,257,449
23,291
1,448,037
4,322,527
87,305
521,514
(956,714)
5,445,960
25,742
785,747
811,489
6,257,449
-
-
1
-
1
1
1
-
-
-
-
-
1
-
-
-
1
The loss for the financial year dealt with in the financial statements of the parent Company was US$956,714
(2016: US$nil).
These Financial Statements were approved and authorised for issue by the Board of Directors on 12 June 2018
and were signed on its behalf by:
Richard Morgan
Non-executive Chairman
The accompanying notes on pages 33 to 55 are an integral part of these financial statements.
Polarean Imaging plc
28
Consolidated Statement of Changes in Equity
for the year ended 31 December 2017
Share
capital
US$
Share
premium
US$
Other
equity
US$
Share
based
payment
reserve
US$
Group re-
org reserve
US$
Retained
losses
US$
Total
equity
US$
-
-
1
-
1
1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
122,773
1,976,367
(1,740,574)
358,566
-
-
(1,059,713)
(1,059,713)
-
115,399
-
-
-
-
1
115,399
238,172
1,976,367
(2,800,287)
(585,747)
238,172
1,976,367
(2,800,287)
(585,747)
-
-
(3,957,821)
(3,957,821)
2,970 1,982,094
(534,057)
-
-
-
-
-
20,320
-
-
-
-
-
87,305
-
173,507
414,866
-
-
-
-
-
5,836,970
-
-
-
-
-
-
1,985,064
(360,550)
414,866
5,857,290
87,305
As at 1 January 2016
Comprehensive income
Loss for the year
Transactions with owners
Issue of shares
Share-based payment
expense
As at 31 December 2016
As at 1 January 2017
Comprehensive income
Loss for the year
Transactions with owners
Issue of shares
Share issue costs
Share-based payments
Group re-organisation
Convertible loans
As at 31 December 2017
23,291 1,448,037
87,305
826,545
7,813,337
(6,758,108)
3,440,407
The accompanying notes on pages 33 to 55 are an integral part of these financial statements.
Polarean Imaging plc
29
Company Statement of Changes in Equity
for the year ended 31 December 2017
Share
capital
US$
Share
premium
US$
Other
equity
US$
Share based
payment
reserve
US$
Merger
reserve
US$
Retained
losses
US$
Total
equity
US$
-
-
1
1
1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1
1
1
(956,714)
(956,714)
23,290 1,982,094
(534,057)
-
-
-
-
-
-
-
-
87,305
- 4,322,527
-
-
-
173,507
348,007
-
- 6,327,911
(360,550)
-
348,007
-
87,305
-
As at 1 January 2016
Comprehensive income
Loss for the year
Transactions with owners
Issue of shares
As at 31 December 2016
As at 1 January 2017
Comprehensive income
Loss for the year
Transactions with owners
Issue of shares
Share issue costs
Share-based payments
Convertible loans
As at 31 December 2017
23,291 1,448,037
87,305
521,514 4,322,527
(956,714) 5,445,960
The accompanying notes on pages 33 to 55 are an integral part of these financial statements.
Polarean Imaging plc
30
Consolidated Statement of Cash Flows
for the year ended 31 December 2017
Year ended
31 December
Year ended 31
December 2016
2017
US$
US$
Cash flows from operating activities
Loss before tax
Adjustments for non-cash/non-operating items:
Depreciation of plant and equipment
Amortisation of intangible assets
Increase in provision for contingent consideration
Share based compensation
Issue of warrants in lieu of fees
Interest paid
Interest received
Write off share issuance costs
Operating cash flows before movements in working capital
(Increase)/Decrease in inventories
(Increase)/Decrease in trade and other receivables
Increase in trade and other payables
Decrease in deferred revenue
Cash used in operations
Income taxes
Net cash used in operating activities
Cash flows from investing activities
Purchase of plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Issue of shares
Interest paid
Interest received
Proceeds from (repayment of) borrowings
Net cash generated by/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of year
Cash and cash equivalents at end of year
(3,957,821)
(1,059,713)
7,478
361,746
-
414,866
-
34,056
(129)
-
(3,139,804)
(328,199)
(440,931)
1,343,861
(50,618)
(2,615,691)
4,747
4,600
5,000
50,213
65,186
4,320
(147)
-
(925,794)
80,403
119,492
67,031
(101,119)
(759,987)
-
-
(2,615,691)
(759,987)
(16,834)
(16,834)
(10,933)
(10,933)
2,481,808
(34,056)
129
1,047,014
3,494,895
862,370
97,847
960,217
-
(4,320)
147
(39,459)
(43,632)
(814,552)
912,399
97,847
The accompanying notes on pages 33 to 55 are an integral part of these financial statements
Polarean Imaging plc
31
Company Statement of Cash Flows
for the year ended 31 December 2017
Cash flows from operating activities
Loss before tax
Adjustments for non-cash/non-operating items:
Share based payment expense
Operating cash flows before movements in working capital
Increase in trade and other receivables
Increase in trade and other payables
Cash used by operations
Income taxes
Net cash used by operating activities
Cash flows from financing activities
Loans to related parties
Issue of notes and loans
Issue of shares
Net cash generated by financing activities
Increase in cash and cash equivalents
Cash and cash equivalents at the beginning of period
Cash and cash equivalents at end of period
Year ended
31 December
2017
US$
Year ended
31 December
2016
US$
(956,714)
348,007
(608,707)
-
25,742
(582,965)
-
(582,965)
(1,851,022)
832,579
1,624,514
606,071
23,106
-
23,106
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The accompanying notes on pages 33 to 55 are an integral part of these financial statements.
Polarean Imaging plc
32
Notes to the Financial Statements
1
General information
The Company is incorporated under the laws of England and Wales under the Companies Act 2006. The registered
number is 10442853 and its registered office is at 27-28 Eastcastle Street, London, W1W 8DH. The Company is
listed on AIM of the London Stock Exchange.
The Company is the parent company of Polarean, Inc (the “Subsidiary”, together the “Group”). The principal activity
of the Group is developing next generation medical imaging technology. The Subsidiary is incorporated in the United
States of America and has a registered office of 2500 Meridian Parkway #175, Durham, NC 27713, USA.
2
Adoption of new and revised International Financial Reporting Standards
No new IFRS standards, amendments or interpretations became effective in 201 7 which had a material effect on
these Financial Statements.
At the date of approval of these Financial Statements, the directors have considered IFRS Standards and
Interpretations, which have not been applied in these Financial Statements, were in issue but not yet effective.
New standards, amendments and interpretations
The following new standards have not been early adopted in this historical financial information:
-
-
-
IFRS 9 “Financial instruments” effective 1 January 2018;
IFRS 15 “Revenue from contracts with customers”, effective 1 January 2018; and
IFRS 16 “Leases”, effective 1 January 2019.
The notes IFRS 15 Revenue from Contracts with Customers which is to be adopted for all accounting periods
beginning on or after 1 January 2018. IFRS 15 introduces a five-step approach to revenue recognition based on the
delivery of performance obligations and an assessment of when control is transferred. This differs from existing IAS
11 and IAS 18 which focus on the transfer of “risk and reward” as the point of recognition. An assessment of the
impact of IFRS 15 has been completed. The review has concluded that revenue recognition under IFRS 15 is expected
to be consistent with current practice for the Group’s revenue and had IFRS 15 been applied in the current reporting
period, it would not have had a material impact on the financial statements.
The Company also notes IFRS16 Leases which takes effect and will be adopted in 2019. This IFRS will require the
Company to recognise the lease on its premises as both an asset and a rental commitment in its statement of financial
position. Details of future obligations are disclosed in note 24(b). If IFRS 16 had been adopted at the balance sheet
date, assets and liabilities increase by approximately US$256,000 with an immaterial impact on the reported results.
IFRS 9 is applicable retrospectively and includes revised requirements for the classification and measurement of
financial instruments. Key changes to accounting requirements under IFRS 9 which may be relevant to the Company
include the requirement to apply a new impairment model based on expected loss in recognising impairment of
financial assets including trade and other Receivables. This may result in the recognition of additional impairment
losses against the carrying values of these financial assets, at a point in time which is earlier than under the current
accounting policies. Management have assessed that the impact is likely to be immaterial to the financial statements.
3
Significant accounting policies
Basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards as
adopted by the European Union (“IFRS”) and under the historical cost convention, as modified by the use of fair value
for financial instruments measured at fair value. The financial statements are presented in United States Dollars
(“US$”) except where otherwise indicated.
The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies
have been consistently applied to all the years presented, unless otherwise stated.
Polarean Imaging plc
33
Notes to the Financial Statements
continued
3
Significant accounting policies continued
Basis of consolidation
On 30 May 2017 Polarean Merger-Sub, Inc., a subsidiary of the Subsidiary, completed a merger process under which it
acquired substantially all of the assets of m2m Imaging Corp (“m2m”), a portfolio company of Amphion Innovations plc
engaged in the development of high performance MRI RF coils for the global research market, primarily in micro-
imaging. By 2016 m2m had been inactive for several years due to an inability to raise funds. At the date of the merger
the assets of m2m were its technology and patents. The merger was effected by way of court sanction in the process of
which the Subsidiary acquired, through a special purpose entity, Polarean Merger Sub, Inc. the assets of another special
purpose entity, m2m Merger Sub, Inc., with m2m Merger Sub, Inc. being the surviving entity. After the reporting date,
on 1 September 2017, m2m Merger Sub, Inc. was merged into the Subsidiary with the Subsidiary being the surviving
entity, the effect being that m2m Merger Sub, Inc. was collapsed and the Subsidiary had acquired the m2m assets.
As part of the arrangements for the merger 576,430 shares in the Subsidiary were issued to the former shareholders in
m2m with the intention that all parties would exchange their stock in Polarean, Inc. for shares in the Group on a pro rata
basis as soon as practicable.
The Directors consider the merger between the Subsidiary and m2m Acquisition, Inc. as a consequence of which the
group acquired the exclusive worldwide rights to m2m’s technology and patents does not meet the definition of an
acquisition of a business as set out in IFRS3 and has therefore be accounted for as the acquisition of an asset or a group
of assets that does not constitute a business.
IFRS3 requires that in such cases the acquirer shall identify and recognise the individual identifiable assets acquired
(including those assets that meet the definition of, and recognition criteria for, intangible assets in IAS 38 Intangible
assets) and to allocate the cost of the individual identifiable assets and liabilities on the basis of their relative fair values
at the date of purchase. Such a transaction or event does not give rise to goodwill.
The provisional estimate of the fair value of the assets acquired under the merger arrangement of US$4,999,996 represents
the aggregate estimated value of the financial obligations of the former m2mshareholders which were converted into
equity in m2m prior to the merger agreement
The Directors consider the acquisition of the entire issued common stock of the Subsidiary by the Company in exchange
for equivalent equity participation in the Company to be a group re-organisation and not a business combination and to
fall outside the scope of IFRS3. Having considered the requirements of IAS 8 and the relevant UK and US guidance, the
transaction has been accounted for on a merger or pooling of interest basis as if both entities had always been combined,
using book values, with no fair value adjustments made nor goodwill recognised.
Going concern
The financial statements have been prepared on the going concern basis.
The Directors consider the going concern basis of preparation to be appropriate in preparing the financial statements.
The key conclusions are summarised below:
The Group is in its development stage and has not yet moved to full commercial exploitation of its IP. During the year
ended 31 December 2017 the Group recorded a loss after tax of US$3,957,821 (2016: loss of US$1,059,713) and a
net cash outflow from operating activities of US$2,615,691 (2016: US$759,987).
On 21 December 2017 the Group raised proceeds of US$0.9 million from investors by the issue of a convertible loan
note. After the balance sheet date the Group raised a further US$3.2 million net of costs from a placing and subscription
of new shares on admission to AIM.
In considering the appropriateness of this basis of preparation, the Directors have reviewed the Group’s working
capital forecasts for a minimum of 12 months from the date of the approval of this financial information. Based on
their consideration the Directors have reasonable expectation that the Group has adequate resources to continue for
the foreseeable future and that carrying values of intangible assets are supported. Thus, they continue to adopt the
going concern basis of accounting in preparing this financial information.
Polarean Imaging plc
34
Notes to the Financial Statements
continued
3
Significant accounting policies continued
Revenue recognition
Sale of goods
Revenue comprises the fair value of the sale of goods to external customers, net of applicable sales tax, rebates,
promotions and returns. Revenue is recognised on the sale of goods when the significant risks and rewards of
ownership of the goods have passed to the buyer and the amount of revenue can be measured reliably. Revenue on
goods delivered is recognised when the customer accepts delivery and on services when those services have been
rendered
Rendering of services
Revenue from a contract to provide parts and services is recognised in the period in which the services are provided
in accordance with the stage of completion of the contract when all the following conditions are satisfied:
•
•
•
•
the amount of revenue can be measured reliably;
is it probable that the Group will receive the consideration due under the contract;
the stage of completion of the contract at the end of the reporting period can be measured reliably, and;
the costs incurred and the costs to complete the contract can be measured reliably.
Any unexpired portion of service contract or payment received in advance in respect of service contracts either
partially completed or not started, are included in the deferred income and released over their remaining term.
Grant revenue
Grants are not recognised until there is a reasonable assurance that the Group will comply with the conditions attaching
to them and that the grants will be received. Grants are treated as deferred income and released to the income statement
on the achievement of the relevant performance criteria.
Property, plant and equipment
Owned assets
Items of property, plant and equipment are stated at cost or deemed cost less accumulated depreciation and impairment
losses. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its
working condition for its intended use. When parts of an item of property, plant and equipment have different useful
lives, those components are accounted for as separate items of property, plant and equipment.
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.
Depreciation
Depreciation is charged to profit or loss on a straight-line basis over the estimated useful lives of each part of an item
of property, plant and equipment. The estimated useful lives are as follows:
● Computer and IT equipment – 33% straight line
● Leasehold improvements – 3 – 4% straight line
● Laboratory equipment – 20% straight line
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, or if there is an
indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised
within “other operating income” in the statement of income.
Polarean Imaging plc
35
Notes to the Financial Statements
continued
3
Significant accounting policies continued
Intangible Assets
Patents and related rights which are acquired through a business combination, are assessed by reviewing their net
present value of future cash flows. Patents are currently amortised over their useful life, not exceeding 10 years.
Internally generated intangible assets – research costs are costs incurred in research activities and are recognised as
an expense in the period in which they are incurred. An internally generated intangible asset arising from the
development of commercial technologies is recognised only if all of the following conditions are met:
•
•
•
•
•
•
it is probable that the asset will create future economic benefits;
the development costs can be measured reliably;
technical feasibility of completing the intangible asset can be demonstrated;
there is the intention to complete the asset and use or sell it;
there is the ability to use or sell the asset; and
adequate technical, financial and other resources to complete the development and to use or sell the asset are
available.
At this time the Directors consider that the Group does not meet all of those conditions and development costs are
therefore recorded as expense in the period in which the cost is incurred.
Inventory
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the weighted
average cost principle and includes expenditure incurred in inventories, adjusted for rebates, and other costs incurred
in bringing them to their existing location.
Impairment of non-financial assets
Non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s
carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less
costs to sell and value in use. For the purposes of assessing impairment, assets are reviewed at the lowest levels for
which there are separately identifiable cash flows (cash-generating units).
Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment
at each reporting date.
Financial assets
Classification
The Group classifies its financial assets as loans and receivables. The classification depends on the purpose for which
the investments were acquired. Management determines the classification of its investments at initial recognition.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments. They are initially
recognised at fair value and are subsequently stated at amortised cost using the effective interest method.
Impairment of financial assets
Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on
the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of
the amounts due under the terms receivable, the amount of such a provision being the difference between the net
carrying amount and the present value of the future expected cash flows associated with the impaired asset.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less.
Polarean Imaging plc
36
Notes to the Financial Statements
continued
3
Significant accounting policies continued
Financial liabilities
Trade and other payables
Trade and other payables are initially recognised at fair value and subsequently measured at amortised cost. Accounts
payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-
current liabilities.
Convertible debt
The proceeds received on issue of the Group's convertible debt are allocated into their liability and equity components.
The amount initially attributed to the debt component equals the discounted cash flows using a market rate of interest
that would be payable on a similar debt instrument that does not include an option to convert. Subsequently, the debt
component is accounted for as a financial liability measured at amortised cost until extinguished on conversion or
maturity of the bond. The remainder of the proceeds is allocated to the conversion option and is recognised in the
"Other equity" within shareholders' equity, net of income tax effects.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried
at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is
recognised in the income statement over the period of the borrowings using the effective interest method.
Borrowings are de-recognised from the statement of financial position when the obligation specified in the contract is
discharged, is cancelled or expires. The difference between the carrying amount of a financial liability that has been
extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or
liabilities assumed, is recognised in the income statement as other operating income or finance costs.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the
liability for at least 12 months after the reporting period.
Employee benefits: pension obligations
The Group operates a defined contribution plan. A defined contribution plan is a pension plan under which the Group
pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further
contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service
in the current and prior periods.
The Group has no further payment obligations once the contributions have been paid. The contributions are recognised
as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a
cash refund or a reduction in the future payments is available.
Provisions
A provision is recognised in the statement of financial position when the Group has a present legal or constructive
obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle
the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a
pre-tax rate that reflects current market assessments of the time value of money and, when appropriate, the risks
specific to the liability. The increase in the provision due to the passage of time is recognised in finance costs.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown
in share premium as a deduction from the proceeds.
Net finance costs
Finance costs
Finance costs comprise interest payable on borrowings, direct issue costs, dividends on preference shares and foreign
exchange losses; and are expensed in the period in which they are incurred.
Finance income
Finance income comprises interest receivable on funds invested, and foreign exchange gains.
Interest income is recognised in the income statement as it accrues using the effective interest method.
Polarean Imaging plc
37
Notes to the Financial Statements
continued
3
Significant accounting policies continued
Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards
of ownership to the lessee. All other leases are classified as operating leases.
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as
operating leases. The costs associated with operating leases are taken to the income statement on an accruals basis
over the period of the lease.
Income tax
Income tax for the years presented comprises current and deferred tax. Income tax is recognised in the income
statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in
equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or
substantively enacted at the statement of financial position date, and any adjustment to tax payable in respect of
previous years.
Deferred tax is recognised on temporary differences arsing between the tax bases of assets and liabilities and their
carrying amounts.
The following temporary differences are not recognised if they arise from a) the initial recognition of goodwill, and
b) for the initial recognition of other assets or liabilities in a transaction other than a business combination that at the
time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is determined using tax rates
and laws that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the
related deferred tax asset is realised or the deferred income tax liability is settled.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available
against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that
the related tax benefit will be realised.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by
the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle
the balances on a net basis.
Critical accounting estimates and judgements
The preparation of the Group’s financial statements under IFRS as endorsed by the EU requires the directors to make
estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities. Estimates and judgements are continually evaluated and are based on historical experience and
other factors including expectations of future events that are believed to be reasonable under the circumstances. Actual
results may differ from these estimates.
The directors consider that the following estimates and judgements are likely to have the most significant effect on
the amounts recognised in the financial statements.
Carrying value of intangible assets, property, plant and equipment
In determining whether there are indicators of impairment of the Group’s intangible assets, the directors take into
consideration various factors including the economic viability and expected future financial performance of the asset
and when it relates to the intangible assets arising on a business combination, the expected future performance of the
business acquired.
Polarean Imaging plc
38
Notes to the Financial Statements
continued
4
Segmental Information
IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group
that are regularly reviewed by the chief operating decision maker (which takes the form of the Board of Directors) as
defined in IFRS 8, in order to allocate resources to the segment and to assess its performance.
The chief operating decision maker has determined that the Group has one operating segment, the development and
commercialisation of gas polariser devices and ancillary instruments. Revenues are reviewed based on the products
and services provided: Polarisers, Parts and Upgrade, Service and Other revenue.
The Group operates in Canada, Germany, the United Kingdom and the United States of America.
Revenue by origin of geographical segment for all entities in the Group is as follows:
Revenue
Canada
Germany
United Kingdom
United States of America
Total
Non-current assets
United States of America
Total
Product and services revenue analysis
Revenue
Polarisers
Parts & Upgrade
Service
Grants
Total
Year ended
Year ended
31 December
31 December
2017
US$
340,113
24,617
111,765
760,668
1,237,163
2016
US$
5,269
-
38,433
836,943
880,645
Year ended
Year ended
31 December
31 December
2017
US$
4,695,130
4,695,130
2016
US$
38,946
38,946
Year ended
Year ended
31 December
31 December
2017
US$
340,113
91,529
154,528
650,993
1,237,163
2016
US$
600,000
46,022
131,866
102,757
880,645
Management measures revenues by reference to the Group’s core services and products and related services, which
underpin such income.
Polarean Imaging plc
39
Notes to the Financial Statements
continued
5
Employees and Directors
Staff costs for the Group and the Company during the year:
Wages and Salaries
Social Security Costs
Year ended
31 December
2017
US$
837,619
321,009
1,158,628
Year ended
31 December
2017
No.
Year ended
31 December
2016
US$
356,762
137,059
493,821
Year ended
31 December
2016
No.
Average number of employees (including directors)
Senior management including directors
-
- R&D and clinical trial
- Administration
Total
5
7
1
13
2
2
1
5
Key management compensation
The following table details the aggregate compensation paid to key management personnel.
Salaries and fees
Social security costs
Year ended
31 December
2017
US$
512,636
196,462
709,098
Year ended
31 December
2016
US$
207,804
79,833
287,637
Key management personnel include all directors who together have authority and responsibility for planning,
directing, and controlling the activities of the Group and senior divisional managers.
6
Operating loss
Depreciation
- Owned plant and equipment
- Leased plant and equipment
Amortisation of intangible assets
Research expenses
Operating lease costs
Auditors remuneration (note 8)
Polarean Imaging plc
40
Year ended
31 December
2017
US$
Year ended
31 December
2016
US$
6,939
539
361,746
167,655
68,335
143,792
4,387
360
4,600
145,443
59,984
-
Notes to the Financial Statements
continued
7
Net finance costs
Interest income
Total finance income
Finance costs on loans
Total finance costs
8
Auditor remuneration
Auditors remuneration
Fees payable to the Group’s auditor for audit of Parent
Company and Consolidated Financial Statements
Fees payables to the Group’s auditor for other services
(assurance related services)
9
Loss per share
Year ended
31 December
2017
US$
129
Year ended
31 December
2016
US$
147
129
147
34,056
34,056
4,320
4,320
Year ended
31 December
2017
US$
Year ended
31 December
2016
US$
45,237
98,555
-
-
The loss per share has been calculated using the loss for the year and the weighted average number of ordinary
shares outstanding during the year, as follows:
Loss for the year attributable to shareholders of the Group (US$)
Weighted average number of ordinary shares*
Basic and diluted loss per share
Year ended
31 December
2017
US$
(3,957,821)
1,066,516
Year ended 31
December
2016
US$
(1,059,713)
1,066,516
(3.71)
(0.99)
For diluted loss per share, the weighted average number of ordinary shares in issue is adjusted to assume
conversion of all potential dilutive warrants, options and convertible loans over ordinary shares. Potential
ordinary shares resulting from the exercise of warrants. options and the conversion of convertible loans have an
anti-dilutive effect due to the Group being in a loss position. As a result, diluted loss per share is disclosed as
the same value as basic loss per share.
Due to the nature of the share capital structure of the Group in 2016, the weighted average number of ordinary
shares in 2017 has been used in 2016.
Polarean Imaging plc
41
Notes to the Financial Statements
continued
10
Taxation
There were no charges to current corporate taxation due to the losses incurred by the Group in the period. No deferred
tax assets have been recognised due to the uncertainty of reversal being dependant on future taxable profits.
Income taxes computed at the statutory federal income tax of 35% (2016: 34%) and the state income tax of 3.30%
(2016: 3.30%). UK corporation tax is calculated at 19.25% of the estimated assessable profits for the year.
Loss on ordinary activities before tax
Loss on ordinary activities multiplied by the rate of corporation tax
in the US as above
Effects of:
Adjustments for rate of tax in other jurisdictions
Unrelieved tax losses carried forward
Total taxation charge/(credit)
Year ended
31 December
2017
US$
(3,957,821)
Year ended
31 December
2016
US$
(1,059,713)
(1,385,237)
(370,900)
226,518
1,158,719
-
-
370,900
-
The tax reform act of 1986 contains provisions which limit the ability to utilise the net operating loss carryforwards
in the case of certain events including significant changes in ownership interests. If the Group’s net operating loss
carryforward, the Group would incur a federal income tax liability even though net operating loss carryforwards would
be available in future years.
11
Property, plant and equipment
Cost
At 1 January 2016
Additions
At 31 December 2016
Additions
At 31 December 2017
Accumulated depreciation
At 1 January 2016
Depreciation expense
At 31 December 2016
Depreciation expense
At 31 December 2017
Carrying amount
At 31 December 2016
At 31 December 2017
Leasehold
improvements
US$
Furniture and
equipment
US$
Computers
and IT
equipment
US$
-
2,695
2,695
-
2,695
-
360
360
539
899
2,335
1,796
19,433
8,238
27,671
-
27,671
17,122
2,394
19,516
2,775
22,291
8,155
5,380
8,232
-
8,232
16,834
25,066
4,744
1,993
6,737
4,164
10,901
1,495
14,165
Total
US$
27,665
10,933
38,598
16,834
55,432
21,866
4,747
26,613
7,478
34,091
11,985
21,341
Polarean Imaging plc
42
Notes to the Financial Statements
continued
12
Intangible assets
Cost
At 1 January 2016
Additions
At 31 December 2016
Additions – m2m (see note 3 – basis of consolidation)
At 31 December 2017
Accumulated amortisation
At 1 January 2016
Amortisation expense
At 31 December 2016
Amortisation expense
At 31 December 2017
Carrying amount
At 31 December 2016
At 31 December 2017
13
Investment in subsidiary undertakings
Company
Cost
At 31 December 2016
Additions
At 31 December 2017
Carrying amount
At 31 December 2016
At 31 December 2017
Patents
US$
46,000
-
46,000
4,999,996
5,045,996
18,400
4,600
23,000
361,746
384,746
Total
US$
46,000
-
46,000
4,999,996
5,045,996
18,400
4,600
23,000
361,746
384,746
23,000
4,661,250
23,000
4,661,250
Subsidiary
Undertakings
US$
-
4,342,848
4,342,848
-
4,342,848
The Directors annually assess the carrying value of the investment in the Subsidiary and in their opinion no
impairment provision is currently necessary.
The net carrying amounts noted above relates to the Subsidiary.
The subsidiary undertakings during the year were as follows:
Polarean Inc.
Registered office address
2500 Meridian Parkway #175, Durham, NC 27713, USA
Country of
incorporation
USA
Interest
held
%
100
Polarean Imaging plc
43
Notes to the Financial Statements
continued
14
Trade and other receivables
Amounts falling due after one
year
Deposit
¤
Group
Year ended
31 December
2017
US$
12,539
Year ended
31 December
2016
US$
3,961
Company
Year ended
31 December
2017
US$
Year ended
31 December
2016
US$
- - -
Amounts falling due within one year
Trade receivables
Other receivables
Prepayments
Due from Group undertakings
Called up share capital not fully paid
Due from borrowings
Group
Company
Year ended
31 December
2017
US$
Year ended
31 December
2016
US$
Year ended
31 December
2017
US$
Year ended
31 December
2016
US$
750
11,260
415,331
31,686
-
620
40,474
488,861
-
4,155
-
620
-
-
-
-
1,851,021
-
40,474
16,035
1,891,495
-
1
-
-
-
-
1
Trade receivables disclosed above are classified as loans and receivables and are therefore measured at
amortised cost. The Directors consider that the carrying amount of trade and other receivables approximates
their fair value.
As at 31 December 2017, there were no receivables past due or considered to be impaired (2016: Nil).
All non-current receivables are due within five years from the end of the reporting period.
15
Inventory
Component parts
Group
Year ended
31 December
2017
US$
649,860
Year ended
31 December
2016
US$
321,661
16
Cash and cash equivalents
Cash at bank and in hand
Group
Company
Year ended
31 December
2017
US$
960,217
Year ended
31 December
2016
US$
97,847
Year ended
31 December
2017
US$
23,106
Year ended
31 December
2016
US$
-
Polarean Imaging plc
44
Notes to the Financial Statements
continued
17
Share capital
The issued share capital of the Company was as follows:
Allotted and called up - Ordinary
shares of 1p each
At beginning of period
Issue of shares to subscribers
Sub-division
Issue of shares on group reorganisation
Issue of shares to investors
At end of period
2017
No.
1
-
99
1,582,587
231,316
1,814,003
2017
US$
1
-
-
20,320
2,970
23,291
2016
No.
2016
US$
-
1
-
-
-
1
-
1
-
-
-
1
The Company was incorporated on 24 October 2016 with issued share capital of £1 comprising 1 ordinary share
of £1 each. On 30 May 2017 the share capital of the Group was divided into 100 ordinary shares of 1p each.
On 30 May 2017 the Company issued 1,582,687 new ordinary shares as consideration for the acquisition of
100% of the issued share capital of the Subsidiary.
On 31 May 2017, the Company raised US$2 million of pre-IPO funding by way of the issue of 231,316 new
ordinary shares at a price of £6.68 per share.
After the reporting date, on 16 February 2018 the Company sub-divided its share capital on the basis of
26.71999:1. The number of ordinary shares in issue in the Company at 31 December 2017 reflecting the sub-
division was 48,470,142.
18
Reserves
a) Group
Share premium
Share premium represents the excess of subscription amounts for the issue of shares over nominal value of shares
issued, less any attributable share issue costs.
Group re-organisation reserve
The group re-organisation reserve arose on the transaction under which the Group acquired the Subsidiary by
way of a group re-organisation.
Other equity
Includes the value of conversion rights on convertible loans.
Share based payment reserve
The share based payments reserves represents the fair value of options and warrants issued to shareholders in
the Company including arrangements transferred from the Subsidiary on acquisition by the Group and the pre-
IPO investment round.
Retained losses
Includes all current and prior year retained profits and losses.
b) Company
Share premium
Share premium represents the excess of subscription amounts for the issue of shares over nominal value of shares
issued, less any attributable share issue costs.
Polarean Imaging plc
45
Notes to the Financial Statements
continued
18
Reserves continued
Merger reserve
The merger reserve represents the fair value of the consideration given in excess of the nominal value of the
ordinary shares issued by the Group to effect the acquisition of the Subsidiary. As permitted by s612 of the
Companies Act 2006 share premium has not been recognised on the shares issue by the Group. As permitted by
IAS 27, the net assets of the subsidiary at acquisition have been treated as the deemed cost of the Group’s
investment in its individual financial information.
Share based payment reserve
The share based payments reserves represents the fair value of options and warrants issued to shareholders in
the Group including arrangements transferred from the Subsidiary on acquisition by the Group and the pre-IPO
investment round.
Retained losses
Includes all current and prior year retained profits and losses.
19
Share based payments
Share options
The Company grants share options at its discretion to Directors, management and employees. These are
accounted for as equity settled transactions. Should the options remain unexercised after a period of ten years
from the date of grant the options will expire unless an extension is agreed to by the board. Options are
exercisable at a price equal to the Company’s quoted market price on the date of grant or an exercise price to
be determined by the board.
Details of share options granted, exercised, lapsed and outstanding at the yea r-end are as follows:
Number
of share
options
2017
193,000
-
-
-
193,000
161,101
Weighted
average
exercise
price
(US$)
2017
0.40
-
-
-
0.40
Number
of share
options
2016
163,000
30,000
-
-
193,000
Weighted
average
exercise
price (£)
2016
0.33
0.90
-
-
0.40
0.35
137,129
0.26
Outstanding at beginning of year
Granted during the year
Forfeited/lapsed during the year
Exercised during the year
Outstanding at end of the year
Exercisable at end of the year
Polarean, Inc 2011 Plan
Between the date of adoption of the 2011 Plan on 1 December 2011 and 31 December 2016 the Subsidiary
issued stock options in the Subsidiary to eligible participants. At 31 December 2016 the maximum number of
option shares issuable under the Plan was 240,000. The exercise price of shares in the Subsidiary issued under
the 2011 Plan shall be not less than the fair value of the underlying shares in the Subsidiary on the date of grant
as determined by the board. Vesting terms may vary slightly but options gener ally vest over four years and are
exercisable for a period of ten years from date of grant. No options were issued under the 2011Plan in the year
ended 31 December 2017.
On 30 May 2017, by way of a Stock Option Substitution Agreement, the 193,000 outstanding 2011 options in
the Subsidiary were substituted into 193,000 options over shares in the Company. The Stock Option
Substitution Agreement did not vary or amend any of the terms and condition of the options granted .
No new options over shares in the Company were issued in the year ended 31 December 2017.
After the reporting date, on 16 February 2018 the Company sub-divided its share capital on the basis of
26.71999:1. The number of options outstanding in the Company at 31 December 2017 reflecting the sub-
division was 5,156,960.
Polarean Imaging plc
46
Notes to the Financial Statements
continued
19
Share based payments continued
The fair value of options granted has been calculated using the Black Scholes model which has given rise to
fair values per share ranging from US$0.06 to US$0.58. This is based on risk-free rates ranging from 1.41% to
2.55% and volatility ranging from 52% to 61%.
The Black Scholes calculations for the options granted resulted in a charge of US$66,859 (2016: US$50,213)
which has been expensed in the year.
The weighted average remaining contractual life of the share options is 6.2 years (2016: 7.2 years).
All share options are equity settled on exercise.
Share warrants
The Company grants share warrants at its discretion to Directors, management, employees, advisors and lenders.
These are accounted for as equity settled transactions. Terms of warrants very from agreement to agreement.
Details for the warrants granted, exercised, lapsed and outstanding at the year-end are as follows:
Outstanding at beginning of year
Granted during the year
Outstanding at end of the year
Number of
share warrants
2017
190,174
149,101
339,275
Weighted
average exercise
price (US$)
2017
0.17
0.19
0.17
Number
of share
warrants
2016
190,174
-
190,174
Weighted
average exercise
price (US$)
2016
0.17
-
0.17
Exercisable at end of the year
Note: The figures stated here are pre the share consolidation.
163,617
0.12
145,388
0.17
On 1 December 2011, the Subsidiary issued share warrants for an aggregate of 20,000 ordinary in the Subsidiary
(“2011 Warrants”) in exchange for legal services. The exercise price of the 2011 Warrants is US$0.001 per share
and the options vested immediately and are exercisable for a period of 10 years after issuance. The 2011 Warrants
are exercisable only for cash and subject to customary anti-dilution provisions.
On 3 June 2013, the Subsidiary issued share warrants for an aggregate of 31,917 shares in the Subsidiary (“2013
Warrants”) in exchange for consulting services. The exercise price of the 2013 Warrants is US$0.11 per share
and vested ratably over 18 months and are exercisable for a period of 10 years after issuance. The 2013 Warrants
are exercisable only for cash and subject to customary anti-dilution provisions.
On 21 April 2014, the Subsidiary issued shares warrants for an aggregate of 55,556 shares in the Subsidiary
(“April 2014 Warrants”) in exchange for extending the maturity date of the 2012 convertible notes from 31
December 2013 to 31 December 2015. The strike price of the April 2014 Warrants was US$0.01 per share and
vested immediately and were exercisable for a period of 10 years after issuance. The April 2014 Warrants are
exercisable only for cash and subject to customary anti-dilution provisions.
On 3 December 2014, the Subsidiary issued common stock warrants for an aggregate of 72,914 shares of the
Subsidiary’s common stock (“December 2014 Warrants”) in exchange for consulting services. The strike price
of the December 2014 Warrants was US$0.20 per share and the December 2014 Warrants vest ratably over 48
months and are exercisable for a period of 10 years after issuance. The December 2014 Warrants are exercisable
only for cash and subject to customary anti-dilution provisions.
On 30 May 2017, by way of a Warrant Substitution Agreement the outstanding warrants in the Subsidiary were
substituted into warrants over shares in the Company. The Warrant Substitution Agreement did not vary or
amend any of the terms and conditions of the warrants granted.
Polarean Imaging plc
47
Notes to the Financial Statements
continued
19
Share based payments continued
On completion of the m2m merger the Company granted a warrant of 5% of the issued share capital of the
Subsidiary following the merger to Amphion Innovations Plc, Robert Bertoldi and Richard Morgan. A total of
97,993 warrants were issued pursuant to the Amphion Warrant Instrument.
On 31 May 2017 the Company granted 46,264 warrants to subscribers as part of the pre-merger fundraise on 31
May 2017 (Subscriber Warrants). These warrants can be exercised at any time from Admission to 25 May 2021.
As part of the pre-Admission fundraising which was completed in December 2017 the Company granted 4,844
warrants to subscribers (Pre-Admission Fundraise Warrants). These warrants can be exercised at any time from
Admission to 25 May 2021.
After the reporting date, on 16 February 2018 the Company sub-divided its share capital on the basis of
26.71999:1. The number of warrants outstanding in the Company at 31 December 2017 reflecting the sub-
division was 9,065,421.
The fair value of options granted during the year have been calculated using the Black Scholes model which has
given rise to fair values per share ranging from US$2,766 to US$2,921. This is based on risk-free rates ranging
from 1.44% and volatility ranging from 52%.
The Black Scholes calculations for the warrants granted during 2017 resulted in a charge of US$348,007 (2016:
Nil) which has been expensed in the year. In addition, fair value of warrants issued during 2017 in connection
with fundraising of US$173,507have been recognised within equity.
The weighted average remaining contractual life of the share warrants is 3.6 years (2016: 7.1 years)
20
Provision for contingent consideration
Group
Company
Year ended
31 December
2017
US$
316,000
Year ended
31 December
2016
US$
316,000
Year ended
31 December
2017
US$
-
Year ended
31 December
2016
US$
-
Provision for contingent consideration
On 19 December 2011, the Subsidiary entered into an agreement with a third party to purchase various assets,
including patents, trademarks, a license agreement and physical inventory. As consideration for this transaction,
the Subsidiary agreed to pay 5 per cent. of gross revenue on clinical sales of products that are sold related to the
patents purchased, for seven years. As of 31 December 2017, the fair value of this contingent consideration was
US$316,000 (2016:316,000). This liability is valued based on a probability weighted expected return method
using projected future cash flows. There were no significant events in the year ended 31 December 2017
necessitating revision of the probability weighted expected value of the contingent consideration.
There was therefore no profit or loss arising on revaluation of contingent consideration during the year ended 31
December 2017 (2016: loss of US$5,000).
Polarean Imaging plc
48
Notes to the Financial Statements
continued
21
Deferred revenue
Arising from service contracts
Current
Non-current
22
Trade and other payables
Trade payables
Accruals and other payables
Royalties
Group
Company
Year ended
31 December
2017
US$
Year ended
31 December
2016
US$
26,562
-
26,562
66,923
10,257
77,180
Year ended
31 December
2017
US$
-
-
Year ended
31 December
2016
US$
-
-
-
-
-
-
Group
Company
Year ended
31 December
2017
US$
711,363
945,013
Year ended
31 December
2016
US$
151,725
160,790
Year ended
31 December
2017
US$
-
-
Year ended
31 December
2016
US$
-
-
250,000
1,906,376
250,000
562,515
25,742
25,742
-
-
Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs
and are payable within 1 year.
The Directors consider the carrying value of all financial liabilities to be equivalent to their fair value.
23
Borrowings and loans
Related Party Loans
Note payable
Convertible Loan Notes
Group
Company
Year ended
31 December
2017
US$
47,086
265,750
Year ended
31 December
2016
US$
104,541
-
791,887
1,104,723
-
104,541
Year ended
31 December
2017
US$
-
-
785,747
785,747
Year ended
31 December
2016
US$
-
-
-
-
In June 2013, an unsecured subordinated promissory note was issued to a related party for a principal amount
of US$8,000 per month for 18 months for a total of US$144,000. The note bears interest at 3 per cent. per
annum. All principal and outstanding interest on the note is due in 2018. The balance outstanding is US$47,086
(2016: US$104,541).
Polarean Imaging plc
49
Notes to the Financial Statements
continued
Borrowings and loans continued
23
In April 2017, an unsecured loan note was issued for a principal amount of US250,000. The note bears interest
at 6.75 per cent. per annum. All principal and outstanding interest on the note was due in April 2018. The Group
received the initial 50 per cent. of the loan upon the completion of the loan agreement. Upon the completion of
a mid-term project report, the Group will receive 40 per cent. of the loan whilst the remaining 10 per cent. will
be received upon completion of the project. The interest on the loan notes can be converted on or prior to the
maturity date to the value of 80 per cent. of the lowest price per share paid by other purchasers of the Equity
Interest. The balance outstanding is US$131,141 (2016: Nil).
In June 2017, an unsecured promissory note was issued for a principal amount of US$150,000. The note bears
interest of 6 per cent. per annum. All principal and outstanding interest on the note is due in 2018. The balance
outstanding is US$140,750 (2016: Nil).
In December 2017, an unsecured convertible loan note was issued for a principal amount of US$903,000
(£647,147). Notes and accrued interest, at 10 per cent., automatically converted into fully paid Ordinary Shares
at a conversion price equal to 90 per cent. of the Issue Price of the Ordinary Shares upon Admission. The holder
of each convertible loan note were granted 129,425 warrants to subscribe for Ordinary Shares at Admission at
the issue price. The exercise period for the warrants will be 12 months from Admission. The balance outstanding
is US$785,747 (2016: Nil).
Net debt reconciliation
Cash and cash equivalents
Current borrowings
Non-current borrowings
Net debt
2017
US$
2016
US$
960,217
(1,104,723)
-
(144,506)
97,847
(104,541)
-
(6,694)
Cash and
cash
equivalents
US$
Current
borrowings
US$
Total
US$
Net debt at 1 January 2016
912,399
(144,000)
768,399
Cash flows
Other non-cash movements
(814,552)
-
39,459
-
(775,093)
-
Net debt at 31 December 2016
97,847
(104,541)
(6,694)
Cash flows
Other non-cash movements
862,370
-
(1,047,014)
46,832
(184,644)
46,832
Net debt at 31 December 2017
960,217
(1,104,723)
(144,506)
Polarean Imaging plc
50
Notes to the Financial Statements
continued
24
Commitments and contingencies
Periodically, the Group may be involved in claims and other legal matters. The Group records accruals for loss
contingencies to the extent that management concludes that it is probable that a liability has occurred and the
amount of the related loss can be reasonably estimated. No such accrual was deemed necessary for the year
ended 31 December 2017 (2016: Nil) Legal fees and other expenses related to litigation are expensed as incurred
and included in general and administrative expenses.
a) Royalty commitments
Royalties – The Subsidiary has entered into three agreements requiring royalty payments. One agreement is
conditional and requires a payment of 5 per cent. of gross revenue on clinical sales during the payment period
beginning on the date a product is first commercially sold, contingent on receiving FDA approval, and ending
seven years from that date. A separate agreement requires payments of 0.25 per cent. of net sales of machines,
and 20 per cent of any sublicensing income for a specific method of use of patent beginning in 2016.
Additionally, beginning five years after the effective date of 1 February 2021, there are minimum yearly
royalties of US$5,000. The third agreement requires a fixed payment of US$250,000 for use of patents.
b) Operating lease commitments
The Subsidiary has leased various properties under non-cancellable operating lease agreements.
Operating Leases – Effective 30 January 2012, the Subsidiary entered into a lease agreement with a 40 -
month term with payments ranging from US$3,961 to US$5,907 per month. This lease agreement was
extended through amendments, with a new effective termination date of 30 September 2021. The
Subsidiary incurred rent expense for the year ended 31 December 201 7 of US$68,335 (2016:
US$59,984).
The future aggregate minimum lease payments under non-cancellable operating leases are set out below.
No later than one year
Later than one year, and not later than five years
Total
Land & Buildings
2017
US$
72,205
183,421
2016
US$
63,713
257,553
255,626
321,266
The operating lease commitments for the rental of the property is calculated on a straight-line basis over
the length of the lease.
Polarean Imaging plc
51
Notes to the Financial Statements
continued
25
Financial instruments
The Group has exposure to the following key risks related to financial instruments:
i.
ii.
iii.
Market risk
Credit risk
Liquidity risk
This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives,
policies and processes for measuring and managing risk, and the Group’s management of capital. Further
quantitative disclosures are included throughout these consolidated Financial Statements.
The Group uses financial instruments including cash, loans, as well as trade receivables and payables that arise
directly from operations.
Due to the simple nature of these financial instruments, there is no material difference between book and fair
values, discounting would not give a material difference to the results of the Group and the Directors believe
that there are no material sensitivities that require additional disclosure.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss
to the Subsidiary. In order to minimise the risk, the Subsidiary endeavours only to deal with companies which are
demonstrably creditworthy and this, together with the aggregate financial exposure, is continuously monitored. The
maximum exposure to credit risk is the value of the outstanding amount.
The Directors do not consider that there is any concentration of risk within either trade or other receivables. There
are no impairments to trade or other receivables in each of the years presented.
Categories of financial instruments
Cash and cash equivalents
Loans and receivables
Trade and other receivables – current
Trade and other receivables – non-
current
Financial Liabilities measured at
amortised cost
Trade and other payables
Borrowings – current
Group
Company
Year ended
31 December
2017
US$
960,217
Year ended
31 December
2016
US$
97,847
Year ended
31 December
2017
US$
23,106
Year ended
31 December
2016
US$
-
488,861
12,539
16,035
3,961
1,891,495
-
1,906,376
1,104,723
562,515
104,541
25,742
785,747
1
-
-
-
Polarean Imaging plc
52
Notes to the Financial Statements
continued
25
Financial instruments continued
Borrowings
Financial Instruments
Related Party Loans
Note payable
Convertible Loan Notes
Total
Group
Company
Year ended
31 December
2017
US$
47,086
Year ended
31 December
2016
US$
104,541
Year ended
31 December
2017
US$
-
Year ended
31 December
2016
US$
-
265,750
791,887
-
-
1,104,723
104,541
-
785,747
785,747
-
-
-
In June 2013, an unsecured subordinated promissory note was issued to Technology Commercialization Group, for
whom Kenneth West was a retained consultant, for a principal amount of US$8,000 per month for 18 months for a
total of US$144,000. The note bears interest at 3 per cent. per annum. The balance outstanding is US$47,086 and
US$104,541 as of 31 December 2017 and 2016, respectively.
On 21 December 2017, the Company entered into subscription agreements with various investors pursuant to which
the investors have agreed to provide the Company with a total of US$903,000 (£647,147) in exchange for the issue of
convertible loan notes. Notes and accrued interest are convertible in ordinary shares of 1 penny each at a conversion
price equal to 90% of the issue price, a corresponding equity conversion feature of US$87,305 has been recognised in
other equity.
Capital risk management
The Group manages its capital to ensure that it will be able to continue as a going concern while maximising returns
to shareholders through the optimisation of debt and equity balances. The Group is both equity and debt funded and
these two elements combine to make up the capital structure of the business. Equity comprises share capital, share
premium and retained losses and is equal to the amount shown as ‘Equity’ in the statement of financial position. Debt
comprises various items which are set out in further detail above and in note 23.
The Group manages the capital structure and makes adjustments to it in the light of changes to economic conditions
and risks.
(a)
Market risk
The interest rate profile of the Subsidiary’s borrowings is shown below:
Interest rate profile of interest bearing borrowings:
2017
Interest rate
Fixed rate borrowings
Related party loans
Weighted average cost of fixed rate
borrowings
Debt
US$
24,852
24,852
2016
Debt
US$
Interest rate
6-10%
104,541
8%
104,541
3%
3%
Details of the above borrowings can be found in note 23 above.
Interest rate sensitivity analysis
As the interest rates on shareholders loans are fixed, interest rate risk is considered to be very low.
Polarean Imaging plc
53
Notes to the Financial Statements
continued
Financial instruments continued
25
(b)
Liquidity risk
A maturity analysis of the Subsidiary’s shareholder borrowings is shown below:
Less than one year
One to two years
Two to five years
Total including interest cash flows
Less: interest cash flows
Total principal cash flows
Derivatives
The Group and Company have no derivative financial instruments.
26
Contingent liabilities
The Directors are not aware of any material contingent liabilities.
27
Related party transactions
2017
US$
49,631
-
-
49,631
(2,545)
47,086
2016
US$
108,861
-
-
108,861
(4,320)
104,541
In June 2013, an unsecured subordinated promissory note was issued to Technology Commercialization Group, for
whom Ken West was a retained consultant, for a principal amount of US$8,000 per month for 18 months for a total
of US$144,000. The note bears interest at 3 per cent. per annum. All principal and outstanding interest on the note
was due 3 June 2016. The balance outstanding is US$47,086 and US$104,541 as of 31 December 2017 and 2016,
respectively.
28
Subsequent events
After the reporting date, on 16 February 2018 the Company sub-divided its share capital on the basis of 26.71999:1.
The number of ordinary shares in issue in the Company at 31 December 2017 reflecting the sub-division was
48,470,142. The number of options outstanding in the Company at 31 December 2017 reflecting the sub-division
was 5,156,960. The number of warrants outstanding in the Company at 31 December 2017 reflecting the sub-division
was 9,065,421.
On 29 March 2018, the shares of Polarean Imaging Plc were admitted to trading on the AIM market of the London
Stock Exchange (‘Admission’) where approximately US$4.2 million (GBP 3 million) before expenses was raised
through the placing of 20 million Ordinary Shares.
On the 11 April 2018, the outstanding loan to North Carolina Biotechnology Center for of US$133,500,
including accrued interest and principal, was repaid in conjunction with the terms of the loan which required
repayment if the Company raised more than US$2.6 million in a six-month period.
On 20 April 2018, the Group announced that it had formally allocated 9,619,200 options to certain directors, persons
discharging managerial responsibilities (“PDMR”) and employees and 534,400 options to Jonathan Allis. The
exercise price for the options is £0.15 being the price at which Polarean’s ordinary shares were placed at Admission.
The options were granted at Admission pursuant to Polarean’s Pre-Admission Share Option Scheme dated 12
December 2017 and will vest in equal portions on an annual basis on the anniversary of Admission, over a four-year
period from the date of Admission. The options term expires on 29 March 2028.
Polarean Imaging plc
54
Notes to the Financial Statements
continued
28
Subsequent events continued
The following directors and PDMRs were a part of the grant of options were:
• Richard Morgan was granted 534,400 options;
• Richard Hullihen was granted 2,135,440 options;
• Kenneth West was granted 1,646,018 options;
• Bastiaan Driehuys was granted 534,400 options;
• Robert Bertoldi was granted 534,400 options;
•
Juergen Laucht was granted 534,400 options;
• William Patrick was granted 734,588 options;
• Kiarash Emami was granted 734,588 options;
• Neil Wadehra was granted 734,588 options; and
•
Jonathan Allis was granted 534,400 options under a separate option grant.
Also, on 20 April 2018, the Company issued a total of 2,772 new Ordinary Shares to holders of convertible loan notes
("CLNs") that were issued in December 2017, when the Group undertook a pre-Admission fundraise, in lieu of
interest payable on the CLNs (the "CLN Interest Shares").
The Company has a license agreement with Princeton University concerning its hyperpolarized noble gas imaging
technology. The amount owed is US$250,000, due May 2018. It has negotiated an agreement to an extension of that
Note, to May 2019, in exchange for an agreement to pay Princeton US$25,000 in June of 2018.
29
Control
The Group is under the control of its shareholders and not any one party. The shareholdings of the directors and entities
in which they are related are as outlined within the Director’s Report.
Polarean Imaging plc
55
Notice of the Annual General Meeting
POLAREAN IMAGING PLC
(Incorporated in England and Wales under the Companies Act 2006 with company number 10442853)
NOTICE OF ANNUAL GENERAL MEETING
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
If you are in any doubt as to what action you should take, you are recommended to seek your own
financial advice from your stockbroker or other independent adviser authorised under the Financial
Services and Markets Act 2000.
If you have recently sold or transferred all of your shares in Polarean Imaging plc, please forward
this document, together with the accompanying documents, as soon as possible either to the
purchaser or transferee or to the person who arranged the sale or transfer so they can pass these
documents to the person who now holds the shares.
NOTICE IS HEREBY GIVEN that the first annual general meeting of Polarean Imaging plc (the
‘Company’) will be held at the offices of Reed Smith LLP at The Broadgate Tower, 20 Primrose Street,
London EC2A 2RS at 2.00 p.m. on 18 July 2018 for the purpose of considering and, if thought fit,
transacting the following business:
ORDINARY BUSINESS
To consider and, if thought fit, pass the following resolutions which will be proposed as ordinary resolutions:
1. To re-elect Richard Morgan as a director of the Company (a ‘Director’), who retires under the provisions set out
in the Company’s Articles of Association (the ‘Articles’), and who, being eligible, offers himself for re-election.
2. To re-elect Richard Hullihen as a Director, who retires under the provisions set out in the Articles, and who, being
eligible, offers himself for re-election.
3. To re-elect Kenneth West as a Director, who retires under the provisions set out in the Articles, and who, being
eligible, offers himself for re-election.
4. To re-elect Bastiaan Driehuys as a Director, who retires under the provisions set out in the Articles, and who,
being eligible, offers himself for re-election.
5. To re-elect Jonathan Allis as a Director, who retires under the provisions set out in the Articles, and who, being
eligible, offers himself for re-election.
6. To re-elect Robert Bertoldi as a Director, who retires under the provisions set out in the Articles, and who, being
eligible, offers himself for re-election.
7. To re-elect Juergen Laucht as a Director, who retires under the provisions set out in the Articles, and who, being
eligible, offers himself for re-election.
8. To appoint Crowe Clarke Whitehill as the auditors of the Company to hold office from the conclusion of the
AGM to the conclusion of the next meeting at which the financial statements are laid before the Company.
9. To authorise the Directors to agree the remuneration of the auditors of the Company.
Polarean Imaging plc
56
SPECIAL BUSINESS
Notice of the Annual General Meeting
To consider and, if thought fit, pass the following resolutions as an ordinary resolution in respect of resolution 10 and
as a special resolution in respect of resolution 11:
10. To generally and unconditionally authorise the Directors for the purpose of section 551 of the Companies Act
2006 (the ‘Act’), in substitution for all existing authorities to the extent unused, to exercise all the powers of the
Company to allot or grant rights to subscribe for or to convert any security into shares in the Company up to an
aggregate number of 11,011,419 ordinary shares of £0.00037 each (being 15 per cent. of the total number of
ordinary shares in issue as at the date of this notice),
provided that this authority shall expire on the earlier of 15 months after the date of passing of this resolution
and the conclusion of the annual general meeting of the Company next following the passing of this
resolution, save that the Company may, before such expiry, make an offer or agreement which would or
might require shares or equity securities, as the case may be, to be allotted or such rights granted after such
expiry and the Directors may allot shares or equity securities or grant such rights, as the case may be, in
pursuance of such offer or agreement notwithstanding that the authority conferred by this resolution has
expired.
11. Subject to the passing of resolution 10 above, to empower the Directors, pursuant to the general authority
conferred on them and section 570 of the Act, to allot equity securities (within the meaning of section 560 of the
Act) for cash as if section 561 of the Act did not apply to any such allotment, provided that this power shall be
limited to the allotment of equity securities:
11.1. made in connection with an offer of securities, open for acceptance for a fixed period, to holders of ordinary
shares of the Company on the register on a fixed record date in proportion (as nearly as may be) to their then
holdings of such shares (but subject to such exclusions or other arrangements as the Directors may deem
necessary or expedient to deal with any legal or practical problems under the laws or requirements of any
recognised regulatory body or any stock exchange in any overseas territory or in connection with fractional
entitlements); and/or
11.2. wholly for cash (otherwise than pursuant to paragraph 11.1 above) up to an aggregate number of
11,011,419ordinary shares of £0.00037 each.
This authority shall expire on the earlier of 15 months after the date of passing of this resolution and the
conclusion of the annual general meeting of the Company next following the passing of this resolution but
the Company may, before such expiry, make an offer or agreement which would or might require shares or
equity securities, as the case may be, to be allotted or such rights granted after such expiry and the Directors
may allot shares or equity securities or grant such rights, as the case may be, in pursuance of such an offer or
agreement notwithstanding that the power conferred by this resolution has expired.
By Order of the Board
Stephen Austin
Secretary
12 June 2018
Registered Office:
27-28 Eastcastle Street
London
W1W 8DH
Polarean Imaging plc
57
Notice of the Annual General Meeting
NOTES
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
A shareholder entitled to attend and vote at the meeting convened by this notice is entitled to appoint one or more proxies to exercise all or any of
their rights to attend, speak and vote on their behalf at the annual general meeting. A proxy need not be a shareholder.
To appoint a proxy, shareholders should use the form of proxy enclosed with this notice of annual general meeting. Please carefully read the
instructions on how to complete the form of proxy. For a proxy to be effective, the instrument appointing a proxy together with the power of attorney
or such other authority (if any) under which it is signed or a notarially certified copy of the same must be deposited by 2.00 p.m. (BST) on 16 July
2018 with the Company’s registrars, Share Registrars Limited of The Courtyard, 17 West Street, Farnham, Surrey, GU9 7DR, United Kingdom
(the ‘Registrars’). The completion and return of a form of proxy does not preclude a shareholder from subsequently attending and voting at the
annual general meeting in person if he or she so wishes. If a shareholder has appointed a proxy and attends the annual general meeting in person,
such proxy appointment will automatically be terminated.
Pursuant to Regulation 41 of Uncertificated Securities Regulations 2001, the Company specifies that only those shareholders on the register of
members at 2.00 p.m. (BST) on 16 July 2018 or, if the meeting is adjourned, 48 hours before the time of the adjourned meeting (excluding any part
of a day that is not a business day), shall be entitled to attend or vote at the annual general meeting in respect of the number of ordinary shares of
£0.00037 each (the ‘Ordinary Shares’) registered in their name at that time. Changes to the register of members after that time shall be disregarded
in determining the rights of any person to attend or vote at the annual general meeting.
Any Shareholder may insert the full name of a proxy or the full names of two alternative proxies of the Shareholder’s choice in the space provided
with or without deleting ‘the Chairman of the meeting.’ A proxy need not be a Shareholder, but must attend the meeting to represent the relevant
Shareholder. The person whose name appears first on the Form of Proxy and has not been deleted will be entitled to act as proxy to the exclusion
of those whose names follow. If this proxy form is signed and returned with no name inserted in the space provided for that purpose, the Chairman
of the meeting will be deemed to be the appointed proxy. Where a Shareholder appoints as his/her proxy someone other than the Chairman, the
relevant Shareholder is responsible for ensuring that the proxy attends the meeting and is aware of the Shareholder’s voting intentions. Any
alteration, deletion or correction made in the Form of Proxy must be initialled by the signatory/ies.
A shareholder may appoint more than one proxy provided that each proxy is appointed to exercise the rights attached to a different Ordinary Share
or Ordinary Shares held by that shareholder. A shareholder may not appoint more than one proxy to exercise rights attached to any one Ordinary
Share. If a shareholder wishes to appoint more than one proxy, they should contact the Registrars on 01252 821390, +44 1252 821390 from overseas.
Lines are open from 9.00 a.m. to 5.30 p.m. Monday to Friday, excluding public holidays. Alternatively you may write to the Registrars at Share
Registrars Limited, The Courtyard, 17 West Street, Farnham, Surrey, GU9 7DR, United Kingdom for additional proxy forms and for assistance.
Any corporation which is a shareholder can appoint one or more corporate representatives who may exercise on its behalf all of its powers as a
shareholder provided that they do not do so in relation to the same Ordinary Share.
As at the close of business on the date immediately preceding this notice, the Company's issued share capital comprised 73,409,464 Ordinary
Shares. Each Ordinary Share carries the right to vote at the Annual General Meeting and, therefore, the total number of voting rights in the Company
as at close of business on the date immediately preceding this notice is 73,409,464.
A shareholder’s instructions to the proxy must be indicated in the appropriate space provided. To abstain from voting on a resolution, select the
relevant ‘Vote withheld’ box. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or
against the resolution. If no voting indication is given, your proxy will vote or abstain from voting at his or her decision. Your proxy will vote (or
abstain from voting) as he or she thinks fit in relation to any other matter which is put before the meeting.
This form of proxy must be signed by the appointor or his attorney duly authorised in writing. The power of attorney or other authority (if any)
under which the form of proxy is signed, or a notarially certified copy of the power or authority, must be received by the Registrars with the form
of proxy. If the appointor is a corporation, the form of proxy should be signed on its behalf by an attorney or duly authorised officer or executed as
a deed or executed under common seal. In the case of joint holders, the signature of any one of them will suffice, but the names of all joint holders
should be stated.
CREST members who wish to appoint a proxy or proxies through the CREST Electronic Proxy Appointment Service may do so for the Annual
General Meeting to be held at 2.00 p.m. (BST) on 18 July 2018 and any adjournment(s) thereof by following the procedures described in the CREST
manual. All messages relating to the appointment of a proxy or an instruction to a previously-appointed proxy, which are to be transmitted through
CREST, must be received by the Registrars (ID 7RA36) no later than 2.00 p.m. (BST) on 16 July 2018, or, if the annual general meeting is
adjourned, 48 hours before the time fixed for the adjourned meeting (excluding any part of a day that is not a business day).
In order to revoke a proxy instruction you will need to inform the Company by sending a signed hard copy notice clearly stating your intention to
revoke your proxy appointment to the Registrars. In the case of a shareholder which is a company, the revocation notice must be executed in
accordance with note 12 below. Any power of attorney or any other authority under which the revocation notice is signed (or a duly certified copy
of such power or authority) must be included with the revocation notice and must be received by the Registrars not less than 48 hours (excluding
any part of a day that is not a business day) before the time fixed for the holding of the annual general meeting or any adjourned meeting (or in the
case of a poll before the time appointed for taking the poll) at which the proxy is to attend, speak and to vote. If you attempt to revoke your proxy
appointment but the revocation is received after the time specified then, subject to the paragraph directly below, your proxy appointment will remain
valid.
(12)
A corporation’s form of proxy must be executed under either its common seal, if any, or under the hand of a duly authorised officer or attorney, in
each case as required under the laws of its relevant jurisdiction.
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