Physiomics Plc
Annual Report and Financial Statements
For the Year Ended
30 June 2017
Company Registration No. 4225086
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Contents
CONTENTS
OFFICERS AND PROFESSIONAL ADVISORS
CHAIRMAN’S STATEMENT
CHAIRMAN AND CHIEF EXECUTIVE OFFICER’S STATEMENT
STRATEGIC REPORT
DIRECTORS’ REPORT
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF PHYSIOMICS PLC
INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2017
STATEMENT OF COMPREHENSIVE INCOME
STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2017
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2017
CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2017
NOTES TO THE FINANCIAL STATEMENTS
3
4
5
6
7
11
15
19
20
21
22
23
24
3
Officers and Professional Advisors
DIRECTORS
Dr P B Harper
Dr J S Millen
Dr C D Chassagnole
SECRETARY
Strategic Finance Director Limited
REGISTERED OFFICE
The Magdalen Centre
Robert Robinson Avenue
Oxford Science Park
Oxford
OX4 4GA
AUDITOR
Shipleys LLP
10 Orange Street
Haymarket
London
WC2H 7DQ
BR3 2YU
BANKER
National Westminster Bank Plc
Norwich Gentleman’s Walk
Norwich
Norfolk
NR2 1NA
SOLICITOR
Taylor Vinters LLP
Merlin Place,
Milton Road,
Cambridge
CB4 0DP
Chairman
Chief Executive Officer
Chief Operating Officer
REGISTRAR
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
NOMINATED ADVISOR
WH Ireland Limited
24 Martin Lane
London
EC4R 0DR
BROKER
Hybridan LLP
20 Ironmonger Lane
London
EC2V 8EP
Physiomics Plc is a limited liability company incorporated in England & Wales and domiciled in the United
Kingdom.
4
Chairman’s Statement
Summary of Results in the year ended 30 June 2017
•
•
•
•
Total income (revenue and grant income) decreased 9% to £270,465 (2016: £297,120)
The operating loss before exceptional costs increased 20% to £489,190 (2016: £408,614)
The loss for the year attributable to equity shareholders increased 6% to £400,526 (2016:
£378,697)
On 30 June 2017, the surplus of shareholders’ funds was £328,254 (2016: £204,153)
This year, Physiomics focused on extending and initiating new client projects utilizing its Virtual Tumour
Clinical technology and in addition invested in an Innovate UK funded feasibility study in the area of
personalised medicine that may provide a meaningful second arm to the Company’s business going forwards.
Second half revenues and profit are slightly behind our expectations mainly as a result of the timing of a
major client deal that is currently in term sheet discussions (see below) and spend on the personalised
medicine project. The Company’s cash position will remain constrained pending the finalisation of a deal
with a major client that was the subject of a company update on 2nd October, however the Directors are
keeping this under regular review and have implemented active cost control measures.
In summary the Company has:
•
•
•
•
•
•
Completed the placing of 2,220,000,000 new ordinary shares of 0.004p each at a price of 0.025p
per share to raise a total of £555,000 gross
Received payments from Sareum for modelling carried out in 2010 to support the identification
of an optimal combination regime of a Chk1 inhibitor and a DNA-damaging agent following the
licensing of a compound in this family to ProNAi Therapeutics (now Sierra Oncology)
Announced that it remains engaged with Merck Serono on a project (first announced on 3rd
March 2015) using Physiomics’ Virtual Tumour Clinical technology
Confirmed the award of a substantial Innovate UK Grant in the field of personalised medicine.
The objective of the project is to create a prototype decision support system to improve cancer
care by helping medical professionals make treatment decisions based on patient specific data
Announced the signing of two new contracts with a global pharma company for Virtual Tumour
pre-clinical predictions relating to a new oncology target, marking the sixth year of
collaboration with this company
Announced that it was in term sheet discussions with a major client on a deal that would, if
completed, secure a significant volume of work for the Company over a multi-year period
Dr Paul Harper
Non-Executive Chairman
5
Chairman and Chief Executive Officer’s Statement
Introduction
The Company has consolidated its position during the first year of Dr Jim Millen’s tenure as CEO and invested
in talent development, business development, extending the relationship with a major client and the
diversification into the personalised medicine space.
The Company has had significant success in maintaining and extending its relationship with a major pharma
client and established or re-established contact with more than fifty potential clients (in some cases past
clients) over the course of the year. The Directors believe that leveraging the Company’s capabilities and
technology into the related discipline of personalised medicine will, if successful, create significant
shareholder value.
The key areas of focus for the Company are outlined in this statement and explored further in the Strategic
Report.
Modelling and simulation utilising Virtual Tumour Clinical
The Company’s main commercial revenue driver continues to be the Virtual Tumour (“VT”) predictive
software and its development to allow predictions in the clinical space. This will remain the focus for
commercial pharmaceutical and biotech clients although other services continue to be sold
opportunistically. In particular, the Company has invested significant effort to deepen its relationship with
a major client and, as previously announced, is in an active term sheet discussion on a deal that would, if
successful, deliver substantial revenues over a multi-year period.
Exploration of collaborations with other service providers
Although the Directors believe the Company has a unique offering, it clearly has fewer opportunities to
develop new business than broader based companies (e.g. contract research organisations) which offer
services across a spectrum of R&D activity. On the other hand, we do not believe these companies have our
capability in the oncology predictive modelling space. As a result, the Company has explored the potential
for collaboration with other such service providers and will continue to do so in its next financial year.
Personalised medicine
The personalised medicine initiative is aimed at improving the successful treatment of cancer patients,
turning dosing and management from being an art form to being a science. Following the Company’s early
success in winning a competitive Innovate UK grant in this space and encouraging results from its feasibility
project (due to complete in January 2018), the Company has identified other non-dilutive funding
opportunities in this space and intends to pursue these where appropriate. There appears to be a significant
level of investor and government interest in developing technologies in this area.
Dr Jim Millen, Chief Executive Officer
Dr Paul Harper, Non-Executive Chairman
6
Strategic Report
Our strategy
Commercial Approach
Physiomics supports the development of client drugs primarily on a fee for service basis but is also open to
risk sharing approaches. The Company’s main revenue drivers are the Virtual Tumour Pre-Clinical and
(increasingly) Virtual Tumour Clinical models. However, we also offer modelling services in support of other
stages and activities of drug discovery and development (for example, the prediction of drug cardiotoxicity)
as well as bespoke modelling.
Modelling and simulation using Virtual Tumour Clinical
The Company has invested significantly in deepening its relationship with an existing major client this
financial year and a potential deal that was originally envisaged would close this financial year is now in
term sheet discussions with the objective of closing in calendar 2017. The Company believes that such a
deal, if concluded, would act as a material validation of its technology and support business development
efforts with other clients and potential clients.
Over the course of this calendar year to date the Company has been in contact with 58 potential clients
(biotech and pharma companies in the oncology space). It has achieved this through a number of marketing
channels as follows:
• Attendance at three major partnering conferences: Biotech Showcase (San Francisco, January),
BioTrinity (London, May), PAGE (Budapest, June)
• Marketing campaign utilising database of historical client contacts in Salesforce™
Leverage of senior management contacts via email, LinkedIn and other social media platforms
•
• Word of mouth and passive approaches via website or networking locally within the Oxford and
broader UK lifescience hub
The Company has made management presentations to many of these potential clients, and aims to sign a
contract with at least one within the next six months.
Within the important but challenging immune-oncology sub-segment of the oncology space, the Company
has had historical success in making pre-clinical predictions, having developed an extension module of
Virtual Tumour specifically for this purpose. Over the course of this year, a number of potential clients
have expressed an interest in exploring this further, with a view to testing Virtual Tumour’s ability to make
predictions in the clinical space. These discussions are ongoing and further progress will be reported when
made.
Exploration of collaborations with other service providers
In addition to the direct approaches to clients outlined above, the Company has engaged in discussions with
six other larger service provider companies with whom there are judged to be synergies, with a view to
business collaborations. These potential partners all provide services of various kinds to biotech and
pharmaceutical companies (including those focused on oncology) and could benefit from the ability to offer
their clients access to the Company’s Virtual Tumour technology. A number of these discussions are ongoing
and could, if successful, reach a conclusion in the next six months.
7
Strategic Report - continued
Personalised Medicine
As set out in our 2016 Annual Report, the Company sees a significant opportunity in the development of an
offering in the personalised medicine space. Many cancer medicines are used in combinations that have not
been formally tested in trials but rather have been developed over the years through the practice of doctors
expert in their field. Also, there are many forms of cancer and these can have different responses to
particular regimens of treatment. The effect of cancer medicines on individual patients can also vary
significantly and be different from the effect on the patients who were treated in the clinical trial which
led to the drug’s approval. There is a significant unmet need for doctors to have more information on the
effect of anti-cancer regimes on the patients they are treating to guide the selection and delivery of the
best treatment possible.
We announced in January 2017 that the Company had been awarded a substantial Innovate UK Biomedical
Catalyst Grant in this field. The objective of this 12 month project was to develop a prototype decision
support system (“DSS”) to improve cancer care by helping medical professionals make informed treatment
decisions based on patient specific data. Although potentially applicable to multiple cancer types, the
prototype DSS is being developed using a dataset from patients with oesophageal cancer. It is the 13th most
common cancer in the UK and the 6th in terms of mortality, due to late diagnosis and limited response to
treatment (which often involves a combination of chemotherapy and surgery). This indication was selected
because we were fortunate to be able to engage with a group of collaborators who had treated large
numbers of patients with oesophageal cancer.
Our collaborators on the project are Prof Mark Middleton (one of the country’s leading cancer specialists),
Oxford Universities NHS Foundation Trust and the Oxford Academic Health Sciences Network (whose role
includes supporting the commercialisation of tools such as the DSS with the UK National Health Service).
The project has made excellent progress and is on schedule, with positive feedback received from our
collaborators to date.
Examples of the potential applications of the DSS tool that are currently being explored with focus groups
of medical professionals include use of the tool:
• during discussions between doctors and patients about the likely outcomes of treatment
• during chemo to monitor tumour shrinkage and adjust duration or dose of treatment (“personalised
dosing”)
• by the doctor after chemotherapy to discuss with patient whether or not to proceed to surgery
Developing a commercialisable tool for any of these uses will require further work once the prototype has
been completed and to this end the Company has identified a number of substantial, non-dilutive funding
opportunities from government grants that it could apply for over the course of the next six months.
8
Strategic Report - continued
Business review
The Company is principally engaged in providing services to pharmaceutical companies in the areas of
outsourced systems and computational biology.
•
•
•
•
Total income (revenue and grant income) decreased 9% to £270,465 (2016: £297,120)
The operating loss before exceptional costs increased 20% to £489,190 (2016: £408,614)
The loss for the year attributable to equity shareholders increased 6% to £400,526 (2016:
£378,697)
On 30 June 2017, the surplus of shareholders’ funds was £328,254 (2016: £204,153)
Strategic and financial performance indicators
The Company is focused on the creation of long-term value for its shareholders.
The Directors consider that the key performance indicators are those that communicate the financial
performance and strength of the Company as a whole, these being revenue, profitability and shareholders’
funds.
The Company faces many risks on the way to building shareholder value. The process of winning major
contracts can be protracted and the Company operates in a competitive environment. This means the
Company often faces significant uncertainties in its cash flow.
Addressing the risks
The board addresses the financial uncertainties by monitoring of actual performance against internal
projections and responding to significant variances. Personnel resources are a combination of full-time and
contractors, many of the latter being ex-employees who are familiar with the models and the clients. We
can draw on this flexible resource as necessary.
Interest rate risk
The Company finances its operations by cash and short term deposits.
In the current low interest rate environment, interest rate risk management in respect of the Company’s
current cash balances is not a primary focus. Instead, the Company seeks to ensure cash availability for
working capital purposes and to reduce credit risk arising from cash and short term deposits with banks and
other financial institutions by holding deposits with an institution with a medium grade credit rating or
better.
Other creditors, accruals and deferred income values do not bear interest.
Interest rate profile
The Company had no bank borrowings at the 30 June 2017.
Liquidity risk
The Company seeks to manage financial risk by ensuring that sufficient liquidity is available to meet
foreseeable needs and to invest cash assets safely and profitably.
9
Strategic Report - continued
Fair values
There are no material differences between the fair value of financial instruments and the amount at which
they are stated in the financial statements.
Regulatory risk
There is a risk that the business model is impacted by future changes in regulations in the medical and
pharmaceutical industry. Major agencies such as the FDA are actively promoting the use of system modelling
and issue advisory papers which set out their thinking. The Company regularly reviews activity in this area
through proactive discussions with key industry officials, professional advisors and regulatory bodies where
appropriate. The Company’s customers are predominately pharmaceutical companies who require
outsourced systems and computational biology services.
Skills risk
The success and future growth of the Company is in part dependent on the continued performance and
delivery of certain Directors, managers and key staff and contractors.
The Company seeks to recruit, develop, and manage talent in order to meet the continuing demand for
innovative and leading edge developments in specialised modelling solutions within the pharmaceutical
industry. The ability of the Company to attract and retain highly skilled employees requires the Company
to offer and maintain competitive employment packages and personal development opportunities. The
Company therefore invests in the recruitment of highly skilled individuals and operates a proactive system
of training and performance management across the business. The Company has built a network of
contracted specialists who can contribute a unique combination of skills as required.
Systems & infrastructure
The Company is dependent on its IT technical infrastructure and systems for the management of its core
operations and research and development programmes. Continuity of access to data and integrity of data
is maintained through the implementation of a system of data storage, backup and monitoring of key coding
and modelling data.
By order of the board
Dr Paul Harper
Chairman
10
Directors’ Report
The Directors submit their report and the audited financial statements of Physiomics Plc for the year ended
30 June 2017.
Results
There was a loss for the year after taxation amounting to £400,526 (2016 loss: £378,697). In view of
accumulated losses, and given the stage of the Company’s development, the Directors are unable to
recommend the payment of a dividend.
Directors
The directors who served during the year were:
Dr P B Harper
Dr J S Millen
Dr C D Chassagnole
Dr M P Chadwick (resigned 25 October 2016)
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual 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
Reporting Standards as adopted by the European Union. Under company law the Directors must not approve
the financial statements unless they are satisfied that they give a true and fair view of the state of affairs
of the Company and the financial performance and cash flows of the Company for that year.
The financial statements are required by law, and IFRS as adopted by the EU, to give a true and fair view
of the state of affairs of the Company.
In preparing the Company financial statements, the Directors are required to:
a. select suitable accounting policies and then apply them consistently;
b. make judgements and estimates that are reasonable and prudent;
c. state whether in preparation of the financial statements the Company has complied with IFRS as adopted
by the EU, subject to any material departures disclosed and explained in the financial statements; and
d. prepare the financial statements on the going concern basis unless it is inappropriate to presume that
the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position
of the Company and enable them to ensure that the financial statements comply with the
Companies Act 2006.
They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
The Directors are also responsible for the maintenance and integrity of the Physiomics Plc website.
Legislation in the United Kingdom governing the preparation and dissemination of the financial statements
may differ from legislation in other jurisdictions.
11
Directors’ Report - continued
Substantial shareholdings
The Company has been informed that on 2nd October 2017 the following shareholders held substantial
holdings in the issued ordinary shares of the Company.
Number of Ordinary shares
Holding %
BARCLAYS DIRECT INVESTING NOMINEES
TD DIRECT INVESTING NOMINEES
HSDL NOMINEES LIMITED
W B NOMINEES LIMITED
HARGREAVES LANSDOWN (NOMINEES)
SVS (NOMINEES) LIMITED
PEEL HUNT HOLDINGS LIMITED
NOMURA CUSTODY NOMINEES LIMITED
SHARE NOMINEES LTD
13.4%
12.7%
11.5%
9.3%
8.2%
5.5%
5.4%
4.6%
3.3%
7,625,176
7,255,837
6,561,982
5,281,700
4,651,691
3,137,825
3,051,846
2,600,000
1,880,461
No other person has reported an interest of more than 3% in the ordinary shares.
On 2nd October 2017, Dr Paul Harper held 525,707 ordinary shares, Dr Mark Chadwick (resigned 25 October
2016) held 39,701 ordinary shares, Dr Jim Millen held 200,000 ordinary shares and Dr Christophe Chassagnole
held 151,897 ordinary shares. The holding percentages were 0.92%, 0.07%, 0.35% and 0.27% respectively.
Directors’ remuneration
Details of Directors’ remuneration in the year ended 30 June 2017 is set out below:
Emoluments
Benefits
£
35,000
£
-
130,000
1,277
62,114
3,125
687
122
Pension
Contributions
£
Total
2017
£
Total
2016
£
-
-
35,000
35,000
131,277
26,871
3,192
65,993
64,120
-
3,247
96,881
Dr P B Harper
Dr J S Millen
Dr C D Chassagnole
Dr M P Chadwick
Total
230,239
2,086
3,192
235,517
222,872
_________
______
________
_______
_______
_________
______
________
_______
_______
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Directors’ Report - continued
Post balance sheet events
No material post balance sheet events occurred after the end of the period.
Statement as to disclosure of information to auditors
The Directors in office on 13 October 2017 have confirmed that, as far as they are aware, there is no relevant
audit information of which the auditors are unaware. Each of the Directors have confirmed that they have
taken all the steps that they ought to have taken as Directors in order to make themselves aware of any
relevant audit information and to establish that it has been communicated to the auditors.
Corporate governance
The board of Directors is accountable to the Company’s shareholders for good corporate governance. The
Company takes corporate governance seriously and the statement below sets out how the board apply the
principles of good corporate governance.
Directors
The Company supports the concept of an effective board leading and controlling the Company. The board
is responsible for formulating and approving the strategy of the business and meets at least six times per
year. Various matters are specifically reserved for board decision, ensuring that the board maintains full
control over strategic, financial, organisational, risk and compliance issues. Management supply the board
with appropriate and timely information, while the Directors are encouraged to seek any further information
they consider necessary.
The board comprises two executive Directors, who fulfil the main operational roles in the Company, and a
non-executive Chairman. From 25 April 2016 until 25 October 2016, Dr Mark Chadwick also served as a non-
executive Director following his resignation as Chief Executive. Due to the size of the Company, the board
does not consider the appointment of a senior independent non-executive director to be necessary. A full
list of the Directors is shown above.
Accountability
The board endeavours to present a balanced and comprehensible assessment of the Company’s situation
and prospects in all of its published statements, including interim reports, price-sensitive announcements,
reports to regulators and information supplied to comply with statutory requirements.
The Audit Committee consists of the COO, the Company Secretary and is chaired by the Company Chairman.
The Committee meets at least twice per year to consider matters relating to the Company’s financial
position and reporting. The Committee reviews the independence and objectivity of the external auditors,
Shipleys LLP, as well as the amount of non-audit work undertaken by them, to satisfy itself that this will not
compromise their independence. Details of the fees paid to Shipleys LLP during the current accounting
period are given in note 3 to the accounts.
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Directors’ Report - continued
Remuneration Committee
The Remuneration Committee has been established primarily to determine the remuneration, terms and
conditions of employment of the executive Directors of the Company. The Committee comprises the CEO,
the Company Secretary and is chaired by the Company Chairman. It meets at least once a year. The primary
concern of the Committee is to establish a system of rewards and incentives that aim to align the interests
of the executive Directors with the long-term interests of the shareholders. These are based on the
achievement of both scientific and commercial milestones while taking into account the financial position
of the Company at this stage in its development. Any remuneration issues concerning non-executive
Directors are resolved by this Committee and no Director participates in decisions that concern his own
remuneration.
Going concern, responsibilities and disclosure
After making appropriate enquiries, the Directors have a reasonable expectation that the Company has
adequate resources to continue in operational existence for the foreseeable future. For this reason, they
continue to adopt the going concern basis in preparing the financial statements.
Internal controls and risk management
The board is responsible for the Company’s system of internal control and risk management and for
reviewing its effectiveness. The Directors have a reasonable expectation that the Company will safeguard
the Company’s assets. The risk management process and internal control systems are designed to manage
rather than eliminate the risk of failing to achieve business objectives and can only provide reasonable, but
not absolute, assurance against material misstatement or loss. The key features of the Company’s system
of internal control are as follows:
a clearly defined organisational structure and set of objectives.
the executive Directors play a significant role in the day to day operation of the business.
•
•
• detailed monthly management accounts are produced for the board to review and take appropriate
action.
Annual General Meeting
The Company values the views of its shareholders and recognises their interest in the Company’s strategy,
performance and the ability of the board. The AGM provides an opportunity for two-way communication and
all shareholders are encouraged to attend and participate. Separate resolutions will be put to shareholders
at the AGM, giving them the opportunity to discuss matters of interest. The Company counts all proxy votes
and will indicate the level of proxies lodged on each resolution, after each has been dealt with on a show
of hands.
The Company uses its website www.physiomics-plc.com as another means of providing information to
shareholders and other interested parties. The website displays the annual report and accounts, interim
results and other relevant announcements.
The Annual General Meeting of the Company will be held at the offices of Physiomics plc, The Magdalen
Centre, Oxford Science Park, Oxford OX4 4GA at 10.00 am on Wednesday 13 December 2017.
By order of the board
Dr Paul Harper, Chairman
14
Independent Auditors’ Report to the Members of Physiomics Plc
Opinion
We have audited the financial statements of Physiomics PLC (the “company”) for the year ended 30th June
2017 which comprise the income statement, the statement of comprehensive income, the statement of
financial position, the cash flow statement, the statement of changes in equity and the related notes. The
financial reporting framework that has been applied in their preparation is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union.
This report is made solely to the company's members, as a body, in accordance with chapter 3 of part 16 of
the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's
members those matters we are required to state to them in an auditor's report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
company and the company's members as a body, for our audit work, for this report, or for the opinions we
have formed.
In our opinion, the financial statements:
•
•
•
give a true and fair view of the state of the company’s affairs as at 30th June 2017 and of its
loss for the year then ended;
have been properly prepared in accordance with IFRSs as adopted by the European Union; and
have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our report. We are independent of the
company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied to listed entities and we have fulfilled
our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us
to report to you where:
•
•
the directors’ use of the going concern basis of accounting in the preparation of the financial
statements is not appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties
that may cast significant doubt about the 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.
15
Independent Auditors’ Report to the Members of Physiomics Plc (cont)
Emphasis of matter
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy
of the disclosure made in the notes to the financial statements page 24, concerning the Company's ability
to continue as a going concern. In this note the Directors set out a number of sources of revenue which
form the basis of their revenue projections for the next twelve months including a major client deal
currently under discussion, the conversion of at least one of a number of currently active discussions with
potential new clients into commercial contracts, the award of a new non-dilutive grant and (only if required)
a placing to cover working capital needs. However, there is uncertainty relating to each of these and should
several fail to happen there would be doubt about the Company's ability to continue as a going concern.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial statements of the current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) we identified, including those which had the greatest
effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of
the engagement team. These matters were addressed in the context of our audit of the financial statements
as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Risk
How the Scope of our audit responded to the risk
Management override of controls
Journals can be posted that significantly alter the
Financial Statements.
Going Concern
There is a risk that the company is not a going
concern.
Fraud in Revenue Recognition
There is a risk that revenue is materially
understated due to fraud.
Accounting Estimates
Potential risk of inappropriate accounting estimates
giving rise to misstatement in the accounts.
Misstatement of Grant Income
There is a risk that grant income has been
incorrectly accounted for.
Overstatement of Intangible Assets
Risk that the asset has no cash generating value.
Overstatement of Administrative Expenses
There is a risk that the company’s administrative
expenses are overstated.
We examined journals posted around the year end,
specifically focusing on areas which are more easily
manipulated
such as accruals, prepayments,
investment valuation and the bank reconciliation.
We made enquires with the Directors regarding how
they have assessed going concern. We have
reviewed projections and disclosed accordingly.
Income was tested on a sample basis from contracts.
No evidence of fraud or other understatement was
identified.
All areas were examined to identify any potential
accounting estimates. These estimates were then
reviewed and tested for adequacy.
Grant income was tested and cut off agreed as
correct. No evidence of misstatement was
identified.
An impairment review of the asset was undertaken
and no evidence of such was identified.
A proof in total calculation and substantive testing
were both undertaken and no evidence of
overstatement was identified.
16
Independent Auditors’ Report to the Members of Physiomics Plc (cont)
Our application of materiality
We define materiality as the magnitude of misstatement in the Financial Statements that of materiality
makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or
influenced. We use materiality both in planning and in the scope of our audit work and in evaluating the
results of our work.
We determined materiality for the company to be £13,900. We agreed with the Audit Committee that we
would report to them all audit differences in excess of 10% of materiality, as well as differences below that
which would, in our view, warrant reporting on a qualitative basis. We also report to the Audit Committee
on disclosure matters that we identified when assessing the overall presentation of the Financial
Statements.
An overview of the scope of our audit
An audit involves obtaining evidence about the amounts and disclosures in the Financial Statements
sufficient to give reasonable assurance that the Financial Statements are free from material misstatement,
whether caused by fraud or error. This includes an assessment of: whether the accounting policies are
appropriate to the Company’s circumstances and have been consistently applied and adequately disclosed;
the reasonableness of significant accounting estimates made by the Directors; and the overall presentation
of the Financial Statements. In addition we read all the financial and non-financial information in the Annual
Report to identify material inconsistencies with the audited Financial Statements and to identify any
information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge
acquired by us in the course of performing the audit. If we become aware of any apparent material
misstatement or inconsistencies we consider the implications for our report.
Other information
The directors are responsible for the other information. The other information comprises the information
included in the annual report other than the financial statements and our auditor’s report thereon. Our
opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material misstatements, we are required to determine
whether there is a material misstatement in the financial statements or a material misstatement of the
other information. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact. We have nothing to report in
this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and the directors’ report for the financial year for
which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable
legal requirements.
17
Independent Auditors’ Report to the Members of Physiomics Plc (cont)
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its environment obtained in the course
of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
•
•
•
•
adequate accounting records have not been kept, or returns adequate for our audit have not
been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 11, 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 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 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 in located on the
Financial Reporting Council’s website at www.frc.org.uk. This description forms part of our auditor’s report.
Joseph Kinton (Senior Statutory Auditor)
For and on behalf of Shipleys LLP,
Chartered Accountants and Statutory Auditor
10 Orange Street
Haymarket
London
WC2H 7DQ
Date:
18
Income Statement for the year ended 30 June 2017
Revenue
1, 2
219,647
297,120
Year ended
Year ended
Notes
30-Jun-17
30-Jun-16
£
£
Other operating income
Total income
Net operating expenses
Operating exceptional costs
Operating loss
Presented as:
Loss before exceptional costs
Operating exceptional costs
Operating loss
Finance income
Finance costs
4
3
3
3
3
5
50,818
-
270,465
297,120
(759,655)
(705,734)
(41,362)
(22,947)
(530,552)
(431,561)
(489,190)
(408,614)
(41,362)
(22,947)
(530,552)
(431,561)
153
-
143
(8)
Loss before taxation
(530,399)
(431,426)
UK corporation tax
7
129,873
52,729
for
Loss
shareholders
the year attributable
to equity
(400,526)
(378,697)
Loss per share (pence)
Basic and diluted - restated
8
(0.78p) p
(1.3) p
19
Statement of Comprehensive Income
Net loss for the year
Other comprehensive income
Total comprehensive (expense) for the year
Attributable to:
Equity shareholders
30-Jun-17
30-Jun-16
£
£
(400,526)
(378,697)
-
-
(400,526)
(378,697)
(400,526)
(378,697)
20
Statement of Financial Position as at 30 June 2017
Non-current assets
Intangible assets
Property, plant and equipment
Investments
Current assets
Trade and other receivables
Taxation recoverable
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Total liabilities
Net assets
Capital and reserves
Share capital
Capital reserves
Retained earnings
Equity shareholders' funds
Notes
10
11
12
Year ended
30-Jun-17
£
-
5,830
1
5,831
119,552
80,040
209,752
409,344
Year ended
30-Jun-16
£
2,381
1,557
1
3,939
107,856
52,606
138,910
299,372
415,175
303,311
12,13
(86,921)
(99,158)
(86,921)
(99,158)
328,254
204,153
1,121,463
4,912,448
(5,705,657)
328,254
1,032,663
4,476,621
(5,305,131)
204,153
14
15
16
The financial statements were approved by the Board of Directors and authorised for issue on 13 October
2017 and are signed on its behalf by:
Dr Paul Harper
Chairman
21
Statement of Changes in Equity for the year ended 30 June 2017
Share
Share
premium
Share-based
compensation
capital
account
£
£
reserve
£
Retained
earnings
£
Total
shareholders'
funds
£
At 1 July 2015
992,663
4,147,573
111,815
(4,926,434) 325,617
Share issue (net of costs)
40,000
180,000
Loss for the year
Share-based compensation
-
-
-
-
-
-
- 220,000
(378,697) (378,697)
37,233
-
37,233
At 30 June 2016
1,032,663
4,327,573
149,048
(5,305,131)
204,153
Share issue (net of costs)
88,800
425,965
Loss for the year
Share-based compensation
-
-
-
-
-
-
- 514,765
(400,526)
(400,526)
9,862
-
9,862
At 30 June 2017
1,121,463
4,753,538
158,910
(5,705,657)
328,254
22
Cash Flow Statement for the year ended 30 June 2017
Cash flows from operating activities:
Operating loss
Amortisation and depreciation
Share-based compensation
Decrease in receivables
Decrease in payables
Cash generated from operations
UK corporation tax received
Interest paid
Year ended
30-Jun-17
£
Year ended
30-Jun-16
£
(530,552)
(431,561)
4,910
9,862
(11,696)
(12,237)
6,439
37,233
(60,005)
45,910
(539,713)
(401,984)
102,439
55,123
-
(8)
Net cash generated from operating activities
(437,274)
(346,869)
Cash flows from investing activities:
Interest received
Sale of non-current assets
Purchase of non-current assets
153
-
(6,802)
143
725
(1,835)
Net cash received by investing activities
(6,649)
(967)
Cash outflow before financing
(443,923)
(347,836)
Cash flows from financing activities:
Issue of ordinary share capital (net of expenses)
514,765
220,000
Net cash from financing activities
514,765
220,000
Net increase / (decrease) cash and cash equivalents
70,842
(127,836)
Cash and cash equivalents at beginning of year
138,910
266,746
Cash and cash equivalents at end of year
209,752
138,910
23
Notes to the Financial Statements
Basis of preparation
The financial statements of Physiomics Plc have been prepared in accordance with applicable law and
International Financial Reporting Standards incorporating International Accounting Standards and
Interpretations (collectively “IFRS”) as endorsed by the European Union.
The financial statements have been prepared on the historical cost basis. The significant accounting policies
are set out below.
Accounting policies
Revenue recognition
The revenue shown in the income statement relates to amounts received or receivable from the provision
of services associated with outsourced systems and computational biology services to pharmaceutical
companies.
Revenue from the provision of the principal activities is recognised by reference to the stage of completion
of the transaction at the balance sheet date where the amount of revenue can be measured reliably and
sufficient work has been completed with certainty to ensure that the economic benefit will flow to the
Company.
Segment reporting
A business segment is a group of assets and operations engaged in providing products or services that are
subject to risks and returns that are different from those of other business segments. A geographical
segment is engaged in providing products or services within a particular economic environment that are
subject to risks and return that are different from those of segments operating in other economic
environments.
Going concern
The accounts have been prepared on the going concern basis. The Company primarily operates in the
relatively defensive pharmaceutical industry which we expect to be less affected by current economic
conditions, including the potential consequences of Brexit, compared to other industries.
The Company had £209,752 of cash and cash equivalents as at 30 June 2017 (2016 £138,910).
The board operates an investment policy under which the primary objective is to invest in low-risk cash or
cash equivalent investments to safeguard the principal.
The Company’s projections, taking into account anticipated revenue streams, show that the Company has
sufficient funds to operate for the next twelve months. In coming to this conclusion, the Company assumes
but cannot guarantee that in addition to currently contracted revenue streams, it will receive revenue from
some combination of a major client deal currently under discussion (as announced on 2nd October 2017), the
conversion of at least one of a number of currently active discussions with potential new clients into
commercial contracts, the award of a new non-dilutive grant and (only if required) a placing to cover
working capital needs. Until one or more of these events happens, the Company’s cash position will remain
constrained, however the Directors are keeping this under regular review and have implemented cost control
measures.
After reviewing the Company’s projections, the Directors believe that the Company is adequately placed to
24
Notes to the Financial Statements - continued
manage its business and financing risks for the next twelve months. Accordingly, they continue to adopt the
going concern basis in preparing the annual report and accounts.
Intangible assets
Intangible assets acquired separately from third parties are recognised as assets and measured at cost.
Following initial recognition, intangible assets are measured at cost or fair value at the date of acquisition
less any amortisation and any impairment losses. Amortisation costs are included within the net operating
expenses disclosed in the income statement.
Intangible assets are amortised over their useful lives as follows:
Useful Life
Software
15 years
Method
Straight line
Useful lives are also examined on an annual basis and adjustments, where applicable are made on a
prospective basis. The Company does not have any intangible assets with indefinite lives.
Property, plant and equipment
All items are initially recorded at cost.
Impairment of assets
Property, plant and equipment and intangible 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 purposes of
assessing impairment, assets that do not individually generate cash flows are assessed as part of the cash
generating unit to which they belong. Cash generating units are the lowest levels for which there are cash
flows that are largely independent of the cash flows from other assets or groups of assets.
Depreciation
Depreciation is calculated to write off the cost of an asset over its useful economic life as follows:
Leasehold improvements - the remaining life of the lease
Fixtures and computers - three years, straight-line basis
Research and development expenditure
Expenditure on research activity is recognised as an expense in the period in which it is incurred.
Trade and other receivables
Trade receivables are recognised and carried at the lower of their original invoiced value and recoverable
amount. Balances are written off when the probability of recovery is considered to be remote.
25
Notes to the Financial Statements - continued
Financial liability and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual
arrangements entered into. An equity instrument is any contract that evidences a residual interest in the
assets of the Company after deducting all of its liabilities.
Cash and cash equivalents
Cash and cash equivalents in the statement of financial position comprise cash at bank and in hand and
short-term deposits with an original maturity of three months or less.
Foreign currency
Assets and liabilities denominated in foreign currencies are translated into sterling at the rates of exchange
ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate
of exchange ruling at the date of the transaction. Exchange differences are taken into account in arriving
at the operating result.
Government Grants
Government grants of a revenue nature are credited to the profit and loss account in the same period as
the related expenditure.
Share based payments
The Company issues equity settled share based payments to certain employees. Equity settled share based
payments are measured at fair value at the date of grant. The fair value determined at the grant date is
expensed on a straight-line basis over the vesting period. Fair value is measured by use of a Black-Scholes
model.
Investments
Participating interests are stated at cost less amounts written off in the Company balance sheet.
Taxation
Tax currently payable is based on the taxable profit for the period which may differ from net profit reported
in the income statement.
Deferred taxation is recognised in respect of all temporary differences that have originated but not
reversed at the balance sheet date where transactions or events have occurred at that date that will
result in an obligation to pay further tax, or a right to pay less tax in future. Temporary differences are
differences between the Company’s taxable profits and its results as stated in the financial statements
that arise from the gains or losses in tax assessments in period different from those in which they are
recognised in the financial statements. Deferred tax assets are recognised only to the extent that the
Directors consider that it is more likely than not that there will be sufficient taxable profits from which the
future reversal of the underlying temporary differences can be deducted. Deferred tax is measured at the
average tax rates that are expected to apply in the periods in which the temporary differences are expected
to reverse.
26
Notes to the Financial Statements - continued
Adoption of international accounting standards
No Standards or Interpretations adopted in the year had any material impact on the financial statements of
the Company.
The following Standards and Interpretations were issued with an effective date after the date of these
financial statements. These have not been applied as they are not yet effective or endorsed.
IFRS 9
IFRS 15
IFRS 16
Effective for
accounting periods
starting on or after
1 January 2018
1 January 2018
Financial Instruments
IFRS 9 replaces the existing guidance in IAS 39
Financial Instruments Recognition and Measurement.
It includes revised guidance on the classification and
measurement of financial instruments.
Revenue from contracts with customers
IFRS 15 establishes a comprehensive framework for
determining whether, how much and when revenue
is
revenue
recognition guidance, including IAS 18 Revenue, IAS
11 Construction Contracts and IFRIC 13 Customer
Loyalty Programmes.
replaces existing
recognised.
It
Leases
IFRS 16 replaces IAS 17 Leases. It eliminates the
classification of leases as either operating leases or
finance leases. Any leases with more than 12 months’
term are to be recognised as a lease asset on the
lease
balance sheet and the related
obligations as a liability.
future
1 January 2019
The Directors anticipate that the adoption of these Standards and Interpretations in future period will have
no material impact on the Company’s financial statements.
27
Notes to the Financial Statements - continued
1. CRITICAL ACCOUNTING ESTIMATES AND AREAS OF JUDGEMENT
Revenue for projects started and completed during the financial year is recognised in full during the year.
Revenue from a project which commences in one financial year and is completed in a subsequent financial
year is recognised over the life of the project based on the expected period to completion as anticipated at
each balance sheet date less what has already been recognised during a previous financial period or periods.
There were no other material accounting estimates or areas of judgements required.
2. REVENUE AND SEGMENTAL REPORTING
The principal activities are the provision of outsourced systems and computational biology services to
pharmaceutical companies.
This activity comprises a single segment of operation of a sole UK base and entirely UK based assets. Revenue
was derived in the UK and European Union from its principal activity.
3. OPERATING LOSS
Operating loss is stated after charging:
2017
£
2016
£
Research and development - Current year expenditure
211,220
165,516
Depreciation charge for the year - Owned assets
Amortisation charge for the year
2,529
1,795
2,381
4,644
Difference on foreign exchange
38
(118)
Fees paid to the Company’s auditor, refer to below
20,250
13,500
Operating exceptional costs, refer to below
41,362
22,947
===========
==========
Amounts payable for audit and non-audit
services
Payable to:
For the audit of the Company’s financial
statements
Shipleys LLP
Taxation compliance services
Audit-related assurance services
Taxation advisory services
Shipleys LLP
Shipleys LLP
Shipleys LLP
10,000
10,000
2,750
6,000
1,500
--------------
20,250
===========
-
3,500
-
-------------
13,500
==========
28
Notes to the Financial Statements - continued
3. OPERATING LOSS (CONTINUED)
Operating exceptional costs in both years comprised due diligence and other legal and professional costs in
relation to the anticipated acquisition of Biomoti Limited. During the year the Board decided not to proceed
with this acquisition.
4. OTHER OPERATING INCOME
Grant income
5. FINANCE INCOME
Bank interest receivable
6. STAFF COSTS
Staff costs, including Directors’ remuneration during the year:
Fees, wages and salaries
Social security costs
Other pension and insurance benefit costs
Average number of employees including Directors
2017
£
50,818
2016
£
-
================= ================
=
2017
£
153
2016
£
143
================= ================
=
2017
£
2016
£
342,527
52,172
8,111
------------------
402,810
============
344,095
32,889
3,030
---------------------
380,014
============
6
6
============
============
Details of the remuneration of Directors are included in the Directors Report on page 12.
29
Notes to the Financial Statements - continued
7.
TAXATION
(a) Analysis of charge in the year
Research and Development tax credit: current year
Research and Development tax credit: prior year
Total current tax
(b) Factors affecting current tax charge
2017
£
2016
£
80,040
52,606
49,834
123
--------------
---------------
129,873
52,729
=========== ===========
The tax assessed for the period is lower than the standard rate of corporation tax in the UK.
The temporary differences are explained below:
2017
2016
Loss on ordinary activities before taxation
Tax on loss on ordinary activities at standard corporation tax rate of 19%
(2016: 20%)
Research and Development enhancement
Adjustment to prior year Research and Development credit
Research and development expenditure credit
Expenses not deductible for tax purposes
(Accelerated)/ deferred capital allowances
Unrelieved tax loss carried forward
Total current tax
£
(530,399)
£
(431,426)
=========== ===========
(86,285)
(100,766)
(34,941)
(21,880)
(31,861)
(123)
(5,167)
9,839
(871)
-
7,748
260
33,904
47,551
--------------
---------------
(129,873)
(52,729)
============ ============
At 30 June 2017 tax losses of approximately £3,796,626 (2016: £3,636,770) remained available to carry
forward against future taxable trading profits. These amounts are in addition to any amounts surrendered
for Research and Development tax credits. There is an unrecognised deferred tax asset of £721,359 (2016:
£727,354).
30
Notes to the Financial Statements - continued
8. LOSS PER SHARE
Calculations are based on the losses and number of shares below:
Loss on ordinary activities after tax
Weighted average no of ordinary shares:
At 1 July
Effect of Shares issued in the year
2017
£
2016
£
(400,527)
(378,697)
==============
No.
==============
No.
34,816,579
16,726,027
------------------
24,816,579
5,327,869
------------------
Weighted average number of ordinary shares in the year for
basic and diluted loss per share
Basic and diluted loss per share
51,542,606
================
(0.78) p
30,144,448
==============
(1.3) p
The loss attributable to equity holders (holders of ordinary shares) of the Company for the purpose of
calculating the fully diluted loss per share is identical to that used for calculating the loss per share. The
exercise of share options would have the effect of reducing the loss per share and is therefore anti- dilutive
under the terms of IAS 33 ‘Earnings per Share’.
The loss for the prior year has been restated to reflect the share consolidation on 16 December 2016.
9. FINANCIAL INSTRUMENTS RECOGNISED IN THE STATEMENT OF FINANCIAL POSITION
Current financial assets
Trade and other receivables
Cash and cash equivalents
Current financial liabilities
Trade and other payables
Held for trading
2017
£
2016
£
199,592
160,462
209,752
--------------
409,344
============
138,910
--------------
299,372
============
86,921
99,158
--------------
86,921
=============
--------------
99,158
============
31
Notes to the Financial Statements - continued
10. INTANGIBLE FIXED ASSETS
Patents, trademarks and software
£
75,646
-
-----------
75,646
-
-----------
75,646
-----------
68,621
4,644
------------
73,265
2,381
------------
75,646
------------
-
------------
2,381
------------
Cost
At 1 July 2015
Additions
At 30 June 2016
Additions
At 30 June 2017
Amortisation
At 1 July 2015
Provided in the year
At 30 June 2016
Provided in the year
At 30 June 2017
Net book value
30 June 2017
30 June 2016
32
Notes to the Financial Statements - continued
11. PROPERTY PLANT AND EQUIPMENT
Fixtures and computers
£
Cost
At 1 July 2015
Additions
Disposals
53,655
1,835
(19,012)
-------------
36,478
At 30 June 2016
Additions 6,802
Disposals
-
------------------------
As at 30 June 2017 43,280
36,478
-------------
--------------------------
At 1 July 2016
-------------- -----------------
Depreciation
At 1 July 2015
Provided in the year
Disposals
At 30 June 2016
Provided in the year
Disposals
51,413
1,795
(18,287)
-------------
34,921
2,529
-
--------------
----
37,450
--------------
1,795
As at 30 June 2017
As at 30 June 2017 43,281
------------------------------------------------
Net book value
30 June 2017
30 June 2016
12. OTHER FINANCIAL ASSETS AND LIABILITIES
Trade and other receivables are as follows:
Trade receivables
Prepayments and accrued income
Other receivables
Trade and other payables are as follows:
Amounts payable relating to the purchase of goods and services
Other payables
Accruals and deferred income
5,830
--------------
1,557
--------------
2017
£
2016
£
37,296 2,563
74,398
30,895
------------
107,856
===========
60,967
21,289
-----------
119,552
===========
23,227
29,883
33,811
------------
86,921
==========
38,581
11,604
48,973
-------------
99,158
==========
33
Notes to the Financial Statements - continued
13. LOANS
There were no loans with Directors at 30 June 2017 and 30 June 2016.
14. SHARE CAPITAL
The Ordinary share capital of the Company comprises:
Allotted, called up and fully
paid:
Ordinary shares of 0.004p each
as at 1 July
Effect of share split on 14
December 2015 to deferred
shares of 0.036p each
Ordinary shares of 0.004p each
Issue of ordinary share capital of
0.004p each
100:1 share consolidation of
ordinary share capital from
0.004p each to 0.4p each
2017
Number
2017
£
2016
Number
2016
£
3,481,657,918
139,266
2,481,657,918
992,663
-
-
(893,397)
2,481,657,918
99,266
2,220,000,000
88,800
1,000,000,000
40,000
(5,644,641,339)
-
-
-
As at 30 June
57,016,579
228,066
3,481,657,918
139,266
--------------------- -------------------- -------------------- --------------------
================= ================= ================ ================
Current year changes to Ordinary share capital
On 21 September 2016 the Company issued 2,220,000,000 ordinary shares of 0.004p at a price of 0.025p per
ordinary share for working capital purposes.
On 16 December 2016, the Company consolidated its ordinary shares in a ratio of 100:1. Following this, the
issued share capital of the Company reduced from 5,701,657,918 ordinary shares of 0.004p each to
57,016,579 ordinary shares of 0.4p each. The 2,481,657,918 Deferred Shares of 0.036p each remained
unchanged.
The ordinary shares carry no right to fixed income.
34
Notes to the Financial Statements - continued
14. SHARE CAPITAL (CONTINUED)
Prior year changes to Ordinary share capital
On 14 December 2015 the Company split each ordinary share of 0.04p each into one ordinary share of 0.004p
each and one deferred share of 0.036p each.
On 18 December 2015 the Company issued 1,000,000,000 ordinary shares of 0.004p at a price of 0.025p per
ordinary share for working capital purposes.
The deferred share capital of the Company comprises:
Allotted, called up and fully
paid:
Deferred shares of 0.036p each
as at 1 July
Effect of share split on 14
December 2015 from ordinary
shares
2017
Number
2017
£
2016
Number
2,481,657,918
893,397
-
2016
£
-
-
-
2,481,657,919
893,397
As at 30 June
2,481,657,918
893,397
2,481,657,918
893,397
--------------------
------------------- --------------------
-------------------
================ ================ ================ ================
The deferred shares have no voting rights and have no rights to receive dividends or other income.
35
Notes to the Financial Statements - continued
15. CAPITAL RESERVES
Share premium
account
£
Share-based
compensation
reserve
£
Total
£
Balance at 1 July 2015
4,147,573
111,815
4,259,388
Issue of share capital
Share issue costs
210,000
(30,000)
-
-
210,000
(30,000)
Share-based compensation
-
37,233
37,233
Balance at 30 June 2016
Issue of share capital
----------------------
---------------------- ----------------------
4,327,573
466,200
149,048
4,476,621
-
425,966
Share issue costs
(40,234)
-
-
Share-based compensation
40,234
-
9,862
9,862
Balance at 30 June 2017
----------------------
----------------------
------------------
4,753,539
================
158,910
===================
4,912,449
=============
The share premium account consists of proceeds from the issue of shares in excess of their par value (which
is included in the share capital account).
The share-based compensation reserve represents the credit arising on the charge for share options
calculated in accordance with IFRS 2.
16. RETAINED EARNINGS
Balance at 1 July 2015
Loss for the year
Balance at 30 June 2016
Loss for the year
Balance at 30 June 2017
£
(4,926,434)
(378,697)
----------------------
(5,305,131)
(400,527)
----------------------
(5,705,658)
====================
Retained earnings includes an amount of £237,889 (2016: £237,889) in relation to the Equity Swap
Agreement in 2014 which under the Companies Act is not distributable.
36
Notes to the Financial Statements - continued
17. CAPITAL COMMITMENTS
At 30 June 2017 and 30 June 2016 the Company had no capital commitments.
18. SHARE BASED PAYMENT TRANSACTIONS
The Company operates two share option schemes: (1) under the Enterprise Management Initiative Scheme
(“EMI”) and (2) an unapproved share option scheme. Both are equity settled. Options are granted with a
fixed exercise price equal to the market price of the shares under option at the date of grant. The
contractual life of the options is 10 years.
Granted
during
period
Outstanding at
beginning of
period
Outstanding
at end of
period
Exercisable
at end of
period
Forfeited
during
period
Exercise
price
(p)
Date of grant
Date of expiry
Holder
Dr. C Chassagnole1
Dr. C Chassagnole1
Dr. C Chassagnole1
Dr. C Chassagnole1
Dr. C Chassagnole1
Dr. C Chassagnole1
Dr. C Chassagnole1
Dr. C Chassagnole1
Dr. J. Millen1
Dr. M. Chadwick1
Dr. M. Chadwick1
Dr. M. Chadwick1
Dr. M. Chadwick1
Dr. M. Chadwick1
Dr. M. Chadwick1
Dr. P. Harper2
Dr. P. Harper2
Dr. P. Harper2
Dr. P. Harper2
Dr. P. Harper2
Dr. P. Harper2
Other staff1
Other staff1
Other staff1
Other staff1
Other staff1
Other staff1
Other staff1
Other staff1
7,499,453
5,624,590
11,856,584
3,233,125
12,938,121
32,261,553
64,523,106
-
-
19,984,500
3,233,127
4,996,125
12,938,121
32,261,553
64,523,106
2,327,710
7,664,541
1,293,250
5,175,248
12,904,621
25,809,242
3,490,000
3,448,824
10,547,614
10,727,314
14,231,932
34,991,376
69,982,752
Outstanding at
beginning of
period
adjusted*
74,994
56,245
118,565
32,331
129,381
322,615
645,231
199,845
32,331
49,961
129,381
322,615
645,231
23,277
76,645
12,932
51,752
129,046
258,092
34,900
34,488
105,476
107,272
142,318
349,912
699,826
-
-
-
-
-
-
879,521
1,938,564
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
500,229
74,994
-
56,245
-
118,565
-
32,331
-
129,381
-
322,615
-
645,231
-
-
879,521
- 1,938,564
-
-
-
-
-
-
23,277
76,645
12,932
51,752
129,046
258,092
34.900
34,488
105,476
107,272
142,318
349,912
699,826
500,229
199,845
32,331
49,961
129,381
322,615
645,231
-
-
-
-
-
-
-
-
-
-
-
-
-
74,994
56,245
118,565
16,166
129,381
322,615
645,231
439,761
969,282
-
-
-
-
-
-
23,277
76,645
6,466
51,752
129,046
258,092
34,900
34,488
105,476
53,636
142,318
349,912
699,826
250,115
38.30
15.00
40.00
34.00
13.20
6.20
3.50
2.50
2.50
27.00
34.00
29.30
13.20
6.20
3.50
15.00
40.00
34.00
13.20
6.20
3.50
38.30
15.00
40.00
34.00
13.20
6.20
3.50
2.50
07 Sep 2007
18 Dec 2008
28 Feb 2010
09 Nov 2011
11 Feb 2013
24 Mar 2015
21 Dec 2015
28 Feb 2017
28 Feb 2017
06 Dec 2010
09 Nov 2011
19 Dec 2011
11 Feb 2013
24 Mar 2015
21 Dec 2015
18 Dec 2008
28 Feb 2010
09 Nov 2011
11 Feb 2013
24 Mar 2015
21 Dec 2015
07 Sep 2007
18 Dec 2008
28 Feb 2010
09 Nov 2011
11 Feb 2013
24 Mar 2015
21 Dec 2015
28 Feb 2017
07 Sep 2017
18 Dec 2018
28 Feb 2020
09 Nov 2021
11 Feb 2023
24 Mar 2025
21 Dec 2025
27 Feb 2027
27 Feb 2027
06 Dec 2020
09 Nov 2021
19 Dec 2021
11 Feb 2023
24 Mar 2025
21 Dec 2025
18 Dec 2018
28 Feb 2020
09 Nov 2021
11 Feb 2023
24 Mar 2025
21 Dec 2025
07 Sep 2017
18 Dec 2018
28 Feb 2020
09 Nov 2021
11 Feb 2023
24 Mar 2025
21 Dec 2025
27 Feb 2027
Total
478,467,488
4,784,662
3,318,314
1,379,364
6,723,612
4,988,188
*Adjusted for 100:1 share consolidation effective 19 Dec 2016
No options were exercised during the year, however 1,379,364 options attributable to Mark Chadwick
expired on the 25th January 2017, following his resignation on the 25th October 2016. Some of the options
granted are subject to performance criteria relating to either share price performance or the achievement
of certain corporate milestones.
Options have been valued at grant date using the Black-Scholes option pricing model. The options granted
during the current year vest three months after grant (prior year vesting period was six months) with no
additional performance criteria attached. There were no market vesting conditions within the terms of the
grant of the share options.
The expected volatility is based on historical volatility of the Company over 2.5 years. The expected life of
options is now based on the share option exercise history with the company. The risk free rate of return is
derived from UK treasury yields at 2.5 years.
37
Notes to the Financial Statements - continued
18. SHARE BASED PAYMENT TRANSACTIONS (CONTINUED)
Inputs to Black-Scholes share option pricing model
2017
2016
Grant date
19 December 2016 21 December 2015
Number of shares under option
Share price at date of grant
Option exercise price
Expected life of options
Expected volatility
Dividend yield: no dividends assumed
Risk-free rate
3,318,312 224,838,206
0.035 pence
1.9 pence
0.035 pence
2.5 pence
2.5 years
2.5 years
40.08%
40.08%
0%
0%
0.15% p.a. 0.72% p.a.
Outputs from Black-Scholes share option pricing model
2017
2016
Fair value per share under option
0.2972 pence 0.0089 pence
Total expected charge over the vesting period
Analysis of share based payment charge for year
Share options granted in current year
Share options granted in prior year
Total share-based payments charge in the year
£9,862 £20,011
2017 2016
9,862 £20,011
---------------------
- £17,233
--------------------
£9,862 £37,233
==================
==================
Note that the 2016 valuation calculation has not been restated to reflect the share consolidation on 16
December 2016.
38
Notes to the Financial Statements - continued
19. FINANCIAL INSTRUMENTS
The Company’s financial instruments comprise cash and short-term deposits. The Company has various other
financial instruments, such as trade debtors and creditors that arise directly from its operations, which have
been excluded from the disclosures other than the currency disclosures.
The main risks arising from the Company’s financial instruments are interest rate risk, liquidity risk and
foreign currency risk. The policies for managing these are regularly reviewed and agreed by the board.
It is and has been throughout the year under review, the Company’s policy that no trading in financial
instruments shall be undertaken.
Interest rate risk
The Company finances its operations by cash and short-term deposits. The Company’s policy on interest
rate management is agreed at board level and is reviewed on an ongoing basis. Other creditors, accruals
and deferred income values do not bear interest.
Capital management
The capital structure of the Company consists of cash and cash equivalents and equity attributable to equity
holders of the Company, comprising issued capital, reserves and retained earnings as disclosed in notes 14
to 16.
The board’s policy is to maintain an appropriate capital base so as to maintain investor and creditor
confidence and to sustain future development of the business. The Company’s objectives when managing
capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for
shareholders and benefits for stakeholders and to maintain an optimal capital structure to reduce the cost
of capital.
The Company has a record of managing the timing and extent of discretionary expenditure in the business.
In order to maintain or adjust the capital structure the Company may issue new shares.
Interest rate profile
The Company had no bank borrowings at the 30 June 2017.
Liquidity risk
The Company seeks to manage financial risk by ensuring that sufficient liquidity is available to meet
foreseeable needs and to invest cash assets safely and profitably.
Fair values
There are no material differences between the fair value of financial instruments and the amount at which
they are stated in the financial statements.
39
Notes to the Financial Statements - continued
20. POST BALANCE SHEET EVENTS
No material post balance sheet events occurred after the end of the period.
21. INTEREST IN OTHER ENTITIES
The Company has a wholly owned subsidiary E-PHEN Limited, a company incorporated in England. The
Company is dormant and has not traded in the period.
22. RELATED PARTY TRANSACTIONS
Remuneration of key management personnel
The remuneration of the Directors, who are the key management personnel of the Company, is set out on
page 12.
There is an outstanding Directors Loan to Christophe Chassagnole of £960 relating to an historical share
purchase. This loan is unchanged since 2016 when it also stood at £960.
23. ULTIMATE CONTROLLING PARTY
The Company does not currently have an ultimate controlling party and did not have one in this reporting
year or the preceding reporting year.
40