Physiomics Plc
Annual Report and Financial Statements
For the Year Ended
30 June 2018
Company Registration No. 4225086
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Contents
OFFICERS AND PROFESSIONAL ADVISORS
HIGHLIGHTS
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 2018
STATEMENT OF COMPREHENSIVE INCOME
STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2018
CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2018
NOTES TO THE FINANCIAL STATEMENTS
APPENDIX – SAMPLE COMMITTEE REPORTS
4
5
6
8
14
23
27
28
29
30
31
32
50
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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
Link 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.
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Highlights
Financial Highlights
•
•
•
•
•
•
•
Total income (revenue and grant income) increased 90% to £512,899 (2017: £270,465)
Second half income (six months to 30 June 2018) increased 162% to £371,370 compared with the
first half (six months to 31 December 2017: £141,529)
The operating loss before exceptional costs decreased 47% to £260,391 (2017 £489,190);
exceptional costs were £nil (2017: £41,362)
The loss after taxation decreased 54% to £183,341 (2017: £400,526)
At 30 June 2018, the surplus of shareholders’ funds was £690,026 (30 June 2017: £328,254)
Successful placing of 13,125,000 ordinary shares of 0.4p each at 4.0p per share raising £525,000
gross to support expansion of the business
Cash and cash equivalents at 30 June 2018 of £571,869 (30 June 2017: £209,752)
Operational highlights:
•
•
•
•
•
•
•
Agreement signed with Merck KGaA for 500k Euro for consulting services in 2018
Signed contracts with two further undisclosed large pharmaceutical companies with total value
of £105k
Signed contracts with two biotech companies (one in Aug 2018, after the period end) with total
value £103k
Awarded a second Innovate UK Grant in as many years, in the field of personalised cancer
treatment
Recruited new scientific team member to expand capacity to deliver client projects
Marketing efforts increased including comprehensive update of the website and attendance and
participation at industry conferences
Presented at AACR, one of the world’s largest oncology focused conferences
“The company made considerable progress last year and there is a renewed sense of momentum in the
business. Following the landmark deal with Merck KGaA, the team led by Dr Jim Millen secured further
contracts in H2. This success is underpinned by acceptance of the use of modelling and simulation in the
R&D process and the evolution of our Virtual Tumour technology to take advantage of this. This performance
has continued into the new financial year with a healthy pipeline of new opportunities underpinned by
existing contracts.”
Dr Paul Harper, Non-Executive Chairman
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Chairman and Chief Executive Officer’s Statement
Introduction
We are very pleased to report on a year when we generated the highest total income in the Company’s
history. Having secured the agreement with Merck KGaA in November 2017, we were able to turn our
attention to our pipeline and, leveraging the publicity generated by the Merck deal we converted two large
pharmaceutical clients and a biotech client in the second half of the financial year, with a further biotech
client landing after the year end.
In addition, the Company won a second Innovate UK grant in consecutive years in the field of personalised
cancer treatment targeting prostate cancer.
The progress during the year was the result of increased marketing efforts and the pipeline of new business
that has been built up since Dr Millen joined the Company in 2016.
The key areas of focus for the Company are outlined in this statement and explored further in the Strategic
Report.
Financial Review
The Company’s full year total income of £512,899 reflects these achievements, being the highest in its
history as a quoted company, and a 90% increase on the previous full year to 30 June 2017. As expected,
income was weighted in the second half with total income of £371,370, 2.6x that of our unaudited first half.
The operating loss before exceptional costs decreased 47% to £260,391 (2017 £489,190); exceptional costs
for the full year £nil (2017: £41,362). The loss after taxation decreased 54% to £183,341 (2017: £400,526).
To support further expansion of the business, the Company raised £525,000 (before expenses) in May 2018
by way of a placing. The funds are being allocated towards expanding the in-house team, increasing
marketing spend, updating the IT infrastructure and potential match funding of new grant projects.
Net assets at the year-end were £690,026 (2017: £328,254) of which £571,869 (2017: £209,752) comprised
cash and cash equivalents.
Governance
The Group applies appropriate corporate governance standards throughout its operations, overseen by an
experienced Board. Following the recently revised AIM Rule 26 requirements, the Board has chosen to adhere
to the Quoted Companies Alliance (QCA) Corporate Governance Code and has recently updated its website
to reflect the QCA requirements (see https://www.physiomics-plc.com/investors/corporate-governance/).
This Annual Report also sets out the required Corporate Governance disclosures for an annual report.
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Staff
As a result of the significant volume of new business generated during the second half, the Company made
the decision to hire a new full-time employee to supplement its delivery team. It was a testament to the
raised profile of the Company that we were able to secure the services of a high-quality candidate who we
believe will not only expand our capacity to deliver for clients but help us to develop our service offering.
Further expansion will be considered over the course of the new financial year.
We would also like to thank our staff for their hard work and commitment during the year.
Outlook
We continue to make solid progress in executing our strategy and the efforts of the last 18 months
crystallised with the signing of the Merck contract and have continued through the second half and into the
new financial year. The Company has a healthy base of existing customers as well as a pipeline of potential
new business opportunities which we are working hard to convert. In addition, we are developing expertise
in the field of personalised medicine with the aim of building long term value for our customers and
shareholders. We expect further news flow in the coming year and look forward to updating investors on
our progress.
Dr Jim Millen, Chief Executive Officer
Dr Paul Harper, Non-Executive Chairman
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Strategic Report
Principle activities
Physiomics is engaged in providing services to pharmaceutical companies in the areas of outsourced
quantitative pharmacology and computational biology, using a combination of industry standard
technologies and its own proprietary technology platform, Virtual Tumour.
Modelling and simulation utilising Virtual Tumour
The Company’s focus is almost exclusively in the provision of modelling, simulation and data analysis services
covering the full range of oncology R&D. Its main commercial revenue driver is its proprietary Virtual Tumour
(“VT”) predictive software in the pre-clinical and clinical space. The Company has significant expertise and
experience in other approaches to quantitative pharmacological analysis which it has been able to leverage
effectively in parallel with VT, often with the same clients.
Personalised medicine
In addition to its core modelling and simulation business, the Company has continued to develop its
technology for use in the field of personalised medicine. To date this has been funded by two Innovate UK
Grants, with the most recent grant project building on the learnings from the previous grant project
completed in March 2018.
Business Model
Working in the preclinical and clinical phase of drug discovery, Physiomics adds value by enabling
pharmaceutical companies to predict and optimise likely outcomes of combination cancer drug treatments.
Although the Company continues to execute projects in the pre-clinical space, clients are increasingly
seeking us to inform their early clinical development programs. In the 2017/18 financial year, the Company
has been able to:
•
•
Support big pharma companies in making strategic decisions about which combinations of novel
agents and traditional agents they should progress to clinical development. As the costs of these
clinical trials run into the millions of pounds, picking the right combinations can potentially save
significant time and money
Support smaller biotechs by providing a full spectrum of PK/PD services as well as by helping them
to translate their pre-clinical data to clinical settings and enable them to respond more dynamically
to new data coming out of their first human studies. As small companies have more limited budgets
than big pharma, squeezing the most value out of every study is perhaps even more important to
them
The Company leverages the success of its predictive technology and consultancy to attract new clients and
extend the range of services it provides existing clients.
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Commercial Approach
The Company’s main commercial business is the provision of consulting services which rely substantially on
our Virtual Tumour Pre-Clinical and Clinical models that are proprietary to the Company. Physiomics works
primarily on a fee for service basis although we are open to other approaches including risk sharing and
collaboration such as:
• The incorporation of success based milestones in our consulting contracts
• The embedding of our technology as part of a broader offering in collaboration with another service
provider
• The creation of a version of Virtual Tumour that could be licensed to a client for its own use rather
than by the Company as part of a consulting service
The Company will continue to explore these alternative approaches but envisages that consulting will
continue to be the main driver of revenues in the short to medium term.
Key strengths
The consulting business is the core of the Company’s commercial activity and we believe that it is unique
in a number of respects:
• We focus almost exclusively on oncology. Our team has decades of experience in the development
of cancer drugs and in particular of quantitative pharmacology (essentially analysing how much drug
to use and trying to predict what effect it will have). Over the Company’s lifetime it has completed
over 60 projects covering hundreds of targets, cell lines, drugs and cancer types
• We use a proprietary in-house platform called Virtual Tumour. Although the team can take
advantage of all commonly used modelling, simulation and data analysis techniques in the cancer
field, we also have access to an internally developed platform that is uniquely useful when
considering combinations of cancer drugs (and most anti-cancer regimes eventually involve using
multiple agents simultaneously)
• We provide a responsive and dedicated service. Many large companies offer services in the cancer
space but do not restrict themselves to cancer nor to quantitative pharmacology. As a result, we
believe, many of these companies cannot offer the sort of bespoke, responsive service that
Physiomics can and does.
Our strategy
Physiomics’ strategy is to grow its fee for service business model by leveraging its own proprietary modelling
and simulation technology to the benefit of its customers. Our main strategic aims are to:
Form close partnerships with customers, attract repeat business and grow alongside them
•
• Diversify the customer base by working with a variety of commercial and not-for-profit clients
• Broaden geographical presence in Europe and North America by leveraging its existing contact base
and increasing marketing efforts
• Work with a mix of early pre-clinical stage projects and high value clinical development phase of
oncology
• Develop new, complementary areas of business such as immune-oncology and personalised medicine
that can add long term value to the business
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Review of Business
The Company is principally engaged in providing services to pharmaceutical companies in the areas of
outsourced quantitative pharmacology and computational biology.
• Total income (revenue and grant income) increased 90% to £512,899 (2017: £270,465)
• The operating loss before exceptional costs decreased 47% to £260,391 (2017 £489,190); exceptional
costs were £nil (2017: £41,362)
• The loss after taxation decreased 54% to £183,341 (2017: £400,526)
• At 30 June 2018, the surplus of shareholders’ funds was £690,026 (30 June 2017: £328,254)
Consulting Business - Modelling and Simulation using Virtual Tumour
Following the signing of the deal with Merck KGaA in November 2017 the Company has had considerable
success in signing new clients. The Company has worked hard over the last two years to develop its business
development pipeline and was able to sign two further big pharma and two biotech clients between January
and July 2018, most of which had been the subject of multiple contacts and business development activities
over the preceding year. All of this was the result of the Company’s efforts to:
• Extend and deepen its relationship with existing clients;
• Convert pipeline opportunities to new contracts; and
• Add new companies to its pipeline of opportunities
The Company leveraged multiple marketing channels to achieve these goals, including:
• Attendance at major partnering and scientific conferences: Biotech Showcase (San Francisco,
January), AACR (Washington, April), BioTrinity (London, April), PAGE (Montreux, May)
• Marketing campaign prior to AACR utilising database of historical client contacts in Salesforce™ as
well as the official AACR attendee list
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 “golden
triangle” of Cambridge, London and Oxford and beyond within Europe and North America
As a result of these marketing efforts the Company now has clients in the USA as well as three European
countries (including the UK) and will seek to further diversity its geographical presence over the course of
the next financial year. In terms of the mix of work in which we are engaged, a higher proportion of projects
have been supporting companies moving into the higher value clinical development phase of oncology R&D,
and the Company expects to see this trend continue going forwards. In addition, the Company has started
two new projects in the immune-oncology space which remains one of the main focus areas for oncology
drug development and where there is a particular focus on combination treatment (e.g. immune checkpoint
inhibitors with other agents).
Personalised Medicine
As set out in previous Annual Reports, the Company sees a significant opportunity in the development of an
offering in the personalised medicine space. Most drugs are approved for a general population, in a limited
number of combination settings and used to treat particular forms of cancer. As a result there may be
opportunities such as the following:
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Identification of efficacious drug combinations that have not been formally tested in trials
•
Identification of cancer subtypes that may respond better to non-standard treatment regimes
•
• Optimisation of treatment regimes (either in terms of efficacy or toxicity) for individuals or groups
of patients
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.
In March 2018 the Company announced that it had successfully completed an Innovate UK grant funded
project focused on oesophageal cancer. This project acted as a proof of principle that analysis of real world
clinical data and the application of Virtual Tumour technology could provide useful learnings in the
treatment of this deadly disease. The findings of the project were presented in a poster at the AACR
conference in April 2018 and we believe that our success in this project was a key factor in our being
awarded a further Innovate UK grant almost immediately on completion of the first.
This second Innovate UK grant project has been carefully selected for its potential to be used in a real-world
setting and focuses on the optimisation of a treatment regime for prostate cancer. Prostate cancer is the
most common cancer amongst men in the UK and places a huge burden on the NHS in terms of healthcare
professional time and treatment costs. We believe that optimisation of treatment regimes could offer
material savings to the health system in the UK and beyond. Should the project be successful further
validation is likely to be required using other real-world data sets. There are also established pathways for
the regulatory approval of tools that assist clinicians in decision making which may require a formal trial.
As we progress in our development of this technology we will evaluate whether it makes sense for the
Company to undertake these activities itself or to engage with a commercialisation partner.
The Company assesses on an ongoing basis the opportunity for further grant funding either to progress
existing projects or start new ones where appropriate.
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.
Principal Risks
The Company faces a number of risks on the way to building shareholder value. The Company maintains a
risk register that identifies specific risks, their potential impact, their likelihood and mitigating actions.
This register is updated as required and on an annual basis as a minimum. Some selected key risks are
addressed below.
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Risk
Description
Mitigation
Loss of major
customer
Competition /
pricing
pressure
Currently the business has a high
dependence on a small number of
customers. This generates two risks
which could have a significant
impact on the business:
•
•
the failure to renew a major
customer
the failure to convert new
business into customers
Physiomics operates in a
competitive environment which
could lead to pricing pressure.
Whilst the business uses its own
proprietary technology a competitor
could attempt to replicate its
Virtual Tumour technology.
Personnel &
skills
The success and future growth of
the Company is in part dependent
on the continued performance and
delivery of certain Directors,
managers, key staff and contractors.
The Company operates in a highly
specialised field where there is
strong competition for required
skills and talent.
Key personnel leaving the Company
could lead to a short-term reduced
capacity to service client projects.
In the last two years the Company has
been successful in growing its pipeline of
business, broadening its customer base and
reducing its reliance on major customers
and has also secured an agreement with its
major customer Merck KGaA that envisages
a multi-year relationship
Our focus on oncology and the way in
which we employ Virtual Tumour requires
a combination of technology and
specialised skills which we believe is hard
to replicate.
We continually develop our model to
improve the scope and applicability of the
technology, adding further value to our
clients and differentiating our service from
our competitors.
The Company seeks to recruit, develop,
and manage talent on a continuous basis
and have built a network of contracted
specialists who can provide additional
resource when required.
In order to attract the best talent, the
Company offers competitive packages to
its staff which includes a share option
scheme, private medical insurance and
flexible working.
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Risk
Description
Mitigation
Financial
The financial risks faced by the
Company include the ability to cover
working capital needs, raise
sufficient funds to support the
Company through to profitability
and failure to secure further
contracts.
The Board addresses financial
uncertainties by monitoring actual
performance against internal projections
and responding to significant variances.
The Company also employs tight cost
controls across the business and has from
time to time raised funds from investors.
The process of winning major
contracts is typically protracted and
the Company operates in a
competitive environment. This
means the Company often faces
significant uncertainties in its cash
flow.
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.
Regulation
Changes
The Company’s customers are
predominately pharmaceutical
companies who require outsourced
quantitative pharmacology and
computational biology services.
There is a risk that the business
model is impacted by future changes
in regulations in the medical and
pharmaceutical industry.
The Company regularly reviews regulations
changes through proactive discussions with
key industry officials, professional advisors
and regulatory bodies where appropriate.
Major agencies such as the FDA are
actively promoting the use of modelling
and simulation and issue advisory papers
which set out their thinking.
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, offsite backup and monitoring of
key coding and modelling data.
Additionally, the Company invested in a
significant refresh of its IT infrastructure
in 2016 and will make further investments
in the financial year 2018-19.
By order of the board
Dr Paul Harper
Chairman
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Directors’ Report
The Directors submit their report and the audited financial statements of Physiomics Plc for the year ended
30 June 2018.
Results
There was a loss for the year after taxation amounting to £183,341 (2017 loss: £400,526). 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
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.
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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.
Substantial shareholdings
The Company has been informed that on 10th September 2018 the following shareholders held substantial
holdings in the issued ordinary shares of the Company.
INTERACTIVE INVESTOR SERVICES
HARGREAVES LANSDOWN (NOMINEES)
BARCLAYS DIRECT INVESTING NOMINEES
HSDL NOMINEES LIMITED
PEEL HUNT HOLDINGS LIMITED
VIDACOS NOMINEES LIMITED
HSBC CLIENT HOLDINGS NOMINEE (UK)
Number of Ordinary shares
Holding %
19,856,068
12,916,306
8,551,186
7,406,363
2,781,591
2,517,486
2,401,777
27.61%
17.96%
11.89%
10.30%
3.87%
3.50%
3.34%
No other person has reported an interest of more than 3% in the ordinary shares.
On 10th September 2018, Dr Paul Harper held 525,707 ordinary shares, Dr Jim Millen held 444,641 ordinary
shares and Dr Christophe Chassagnole held 417,008 ordinary shares. The holding percentages were 0.73%,
0.62% and 0.58% respectively.
Directors’ remuneration
Details of Directors’ remuneration in the year ended 30 June 2018 is set out below:
Dr P B Harper
Dr J S Millen
Emoluments
Benefits
£
35,049
£
-
130,049
1,457
Pension
Contributions
£
Total
2018
£
Total
2017
£
-
-
35,049
35,000
131,506
131,277
Dr C D Chassagnole
62,374
717
4,130
67,221
65,993
Total
227,472
2,174
4,131
235,526
232,270
_________
______
________
_______
_______
_________
______
________
_______
_______
Note: for comparability 2017 totals have been adjusted to remove the remuneration of Mark Chadwick who
left the Company in November 2016.
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Corporate governance
Since September 2018 all AIM companies have been required to comply with a recognised corporate
governance code. Physiomics plc has chosen the Quoted Companies Alliance (“QCA”) Corporate Governance
Code published in April 2018 for this purpose. High standards of corporate governance are a priority for the
Board, and details of how Physiomics addresses key governance principles defined in the QCA code are set
out below.
1. Establish a strategy and business model which promote long-term value for shareholders
The Company’s business model is focused on helping big pharma and biotech clients to reduce costs and
optimise outcomes of their oncology R&D though modelling and analysis of client and other data. In
particular, the Company leverages its own in-house technology “Virtual Tumour” which is specifically
focused on predicting the effects of combination drug treatments. The Company operates mainly on a fee
for service basis but is also open to other arrangements such as risk-based milestones and licensing although
these have not formed a material part of the Company’s revenues historically. In addition to its commercial
business the Company engages in grant driven projects which do not generate profit but which provide
valuable “paid for” R&D which can then be leveraged through the Company’s commercial activities. The
Company aims to deliver shareholder value by increasing the number and value of its commercial clients
and by increasing the amount and value of grant projects and by investigating the commercial potential of
new areas such as personalised medicine. The Company believes that its strategy will be effective in helping
it to meet challenges such as competitive pressure and the rapid pace of technological change in the
pharmaceutical industry.
2. Seek to understand and meet shareholder expectations
The Company maintains a dedicated email address which investors can use to contact the Company which
is prominently displayed on its website together with the Company’s address and phone number. The
Company holds an annual general meeting to which all members are invited and during the AGM, time is set
aside specifically to allow questions from attending members to any board member. As the Company is too
small to have a dedicated investor relations department, the CEO is responsible for reviewing all
communications received from members and determining the most appropriate response. In addition to
these passive measures, the CEO typically engages with members through a roadshow once or twice each
year. The Company does not take any measures beyond those outlined in this paragraph to seek to
understand shareholder voting decisions.
3. Take into account wider stakeholder and social responsibilities and their implications for long-term
success
In addition to members, the Company believes its main stakeholder groups are its employees and
clients. The Company dedicates significant time to understanding and acting on the needs and requirements
of each of these groups via meetings dedicated to obtaining feedback (see principle 2 above).
In addition, the Company has a close relationship with Oxford University and the Oxford Foundation Hospitals
NHS Trust. Prof Mark Middleton, who leads oncology research at these institutions is on the Company’s
advisory board and has been a collaborator on several grant projects. The relationship with the Company
is mutually beneficial as the University and NHS Trust also has a mandate to encourage and collaborate with
local businesses.
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With regards corporate social responsibility, there is little direct impact of the Company’s day to day
activities however the Company is proud that its overarching goal is to support the treatment of cancer, a
disease that has a profound impact on society.
4. Embed effective risk management, considering both opportunities and threats, throughout the
organisation
The Company maintains a register of risks across several categories including personnel, clients,
competition, finance, technical and legal. For each risk we estimate the impact, likelihood as well as
identify mitigating strategies. This register is reviewed periodically as the Company’s situation changes and
as a minimum annually. During such reviews, each risk category is considered by the Directors with a view
to understanding (i) whether the nature, impact or likelihood of any risks has changed, (ii) whether the
mitigating actions taken by the Company should change as a result and (iii) whether any new risks or
categories of risk have arisen since the last review. The Company’s risk register is reviewed by its auditor
as part of its annual audit process, providing a degree of external assurance as to the suitability of its risk
management strategy.
5. Maintain the board as a well-functioning, balanced team led by the chair
The board of Physiomics plc currently comprises two executive directors, one independent non-executive
Chairman and a secretary (non-director). The board meets monthly for one day (except August) and all
current board members have attended all board meetings in the current financial year. Each director or
non-executive is re-elected to the board on a rotating basis by a vote of members at the Company’s Annual
General Meeting.
Executive directors are full-time employees of the Company. Non-executive contracts require that they
dedicate up to one additional day per month on request. In addition, non-executives may provide additional
paid consulting services at rates specified in their contracts however no such services have been provided
by non-executives in the current financial year.
The Company notes that best practice under the QCA code, and for a company quoted on AIM is to have half
of its board be independent, and specifically a minimum of two non-executive directors. The board is aware
that Physiomics does not currently comply with this requirement, but the directors are reviewing the
appointment of an additional Non-Executive Director to address this. In the meantime, the Board are
comfortable that the current board composition does enable it to fulfil its obligations. The Company also
notes that its Chairman Paul Harper has been in post for 11 years however the Company is satisfied as to his
independence, especially considering his periodic re-election that offers shareholders an opportunity to
vote on his suitability.
6. Ensure that between them the directors have the necessary up-to-date experience, skills and
capabilities
The directors of the Company during the current financial year, together with their experience, skills and
personal qualities relevant to the Company’s business is outlined below:
• Dr Paul Harper (Non-Executive Chairman) has over 35 years' experience in the life sciences industry
covering both drug development and medical devices. He is a non-executive director of Reneuron
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Holdings plc, an AIM quoted company. In addition, he is an adviser to the Board of CamStent Ltd.
Paul has served as Chairman of Oval Medical Technologies and of Sareum plc, Chief Executive of
Cambridge Antibody Technology Limited, and founded Provensis Limited. He has also served as
Corporate Development Director of Unipath Limited, then the medical diagnostics business of
Unilever PLC, and as Director of Research and Development for Johnson & Johnson Limited. Formerly
head of Antimicrobial Chemotherapy for Glaxo PLC, Paul has a PhD in Molecular Virology and is the
author of over 50 publications. Paul’s experience in the pharmaceutical R&D process, roles as
executive, non-executive and Chairman of both private and public companies and the contacts he
has developed over his career remain highly relevant in discharging his role as Chairman of
Physiomics.
• Dr Jim Millen (CEO) joined Physiomics in April 2016, bringing over 15 years’ experience in
pharmaceuticals and biotechnology gained at a number of blue chip global companies as well as
smaller UK-based organisations. At Allergan, Jim was responsible for corporate development in its
Europe, Africa and Middle East region where he was pivotal in expanding the Company’s
geographical footprint before moving to a senior role responsible for commercial strategy and
market access. Prior to that, at GSK, Jim held business development roles of increasing responsibility
including within the Company’s innovative Centre of Excellence for External Drug Discovery. Jim
has also supported a number of smaller companies in fund raising and strategic partnering activities.
Over the course of his career he has completed an array of deals worth many hundreds of millions
of dollars, spanning licencing, acquisition, divestment, development and commercialisation. Jim
studied medicine at Queens’ College, Cambridge University and qualified as a doctor from the
London Medical School. He holds an MBA from INSEAD. Jim’s ability to develop and grow businesses
and drive towards ambitious goals is of great value in his role as CEO
• Dr Christophe Chassagnole (COO) has been involved in systems biology and bio-computing projects
since the mid-nineties, with experience in both academic and industrial environments. His Doctorate
was achieved at the Victor Segalen-Bordeaux II University, and then he held a post doctorate position
with IBVT at Stuttgart University. Before Joining Physiomics Dr Chassagnole worked in France as a
senior researcher for CRITT Bio-Industries (Toulouse) for 3 years. He joined Physiomics in May 2004
as project leader to develop the model portfolio of the Company. He was appointed Chief Operating
Officer of Physiomics in May 2007, in this capacity he has initiated and supervised the development
of the Virtual Tumour technology. Christophe remains the main source of scientific knowledge on
the biology of cancer and modelling/ simulation as it relates to drug development. Christophe
maintains his knowledge through regular literature reviews and is highly valued by clients for this
reason. Christophe is also responsible for managing the Company’s R&D activities and in particular
of our initiative in personalized medicine
• Anthony Clayden, of Strategic Finance Director Ltd (Secretary) is Head of Finance and Company
Secretary with over 19 years’ experience directing or advising over 30 high growth potential
businesses of differing size and complexity and brings broad experience of strategic, operational
and financial matters. His career encompasses a number of businesses in the life sciences and
healthcare sector including 6 years as Chief Financial Officer of AIM quoted Futura Medical plc where
he was involved in its IPO and a series of placings. Previously, Anthony worked with KPMG and PwC
on a range of corporate finance matters including fundraisings, company sales and acquisition
advice. Anthony has a B.Sc. (Hons) in Natural Sciences from Durham University and is a Qualified
Chartered Accountant. Although Anthony is not a director of the Company, he provides invaluable
advice on all matters financial.
18
The Company has periodically held briefings for the directors covering regulations that are relevant to their
role as directors of an AIM-quoted company. Historically these briefings have coincided with significant
changes in regulations however going forward the Company proposes that such briefings should be held at
a minimum on an annual basis.
The Company has not to date sought external advice on keeping directors skills up to date but believes that
their blend of past and ongoing experience provides them with the relevant up to date skills needed to act
as board members for a small company.
7. Evaluate board performance based on clear and relevant objectives, seeking continuous
improvement
Evaluation of the performance of the Company’s board has historically been implemented in an informal
manner. From 2018 however, the board will formally review and consider the performance of each director
at or around the time of the Company’s annual general meeting using a process which is currently under
development. The process and its results and recommendations will be published at a future date.
On an ongoing basis, board members maintain a watching brief to identify relevant internal and external
candidates who may be suitable additions to or backup for current board members, however the directors
consider that the Company is too small to have either an internal succession plan and that it would not be
cost effective to maintain an external candidate list prior to the need arising.
8. Promote a corporate culture that is based on ethical values and behaviours
The board believes that the promotion of a corporate culture based on sound ethical values and behaviours
is essential to maximise shareholder value. The Company maintains and annually reviews a handbook that
includes clear guidance on what is expected of every employee and officer of the Company. Adherence of
these standards is a key factor in the evaluation of performance within the Company, including during annual
performance reviews. In addition, staff matters are a standing topic at every board meeting and the CEO
reports on any notable examples of behaviours that either align with or are at odds with the Company’s
stated values. The directors believe that the Company culture encourages collaborative, ethical behaviour
which benefits employees, clients and shareholders. The directors further believe that all employees and
consultants have worked in line with the Company’s values during this financial year.
9. Maintain governance structures and processes that are fit for purpose and support good decision-
making by the board
The board of the Company, together with its sub-committees, is responsible for the following:
• The setting of and execution of the overall strategy of the Company
• The setting of financial targets and monitoring of the Company’s performance vs these targets on a
monthly basis
• The preparation and approval of interim and final results for the Company
• The commissioning and oversight of the audit of the Company’s full year results
• The preparation and approval of the Company’s annual report
• The preparation of resolutions to be voted upon in the Company’s Annual General Meeting
• Approval of regulatory communications
• The setting of guidelines for remuneration of employees, directors and consultants, including where
appropriate long term incentives such as share option schemes
19
• The approval and oversight of any changes to the capital structure of the Company such as the
raising of capital through placings
• The identification, evaluation and monitoring of key strategic risks to the Company’s business
• The employment of key officers and directors of the Company (the latter as recommendations to be
voted on at the Company’s AGM)
The key board roles are as follows:
• Chairman: The primary responsibility of the chair is to lead the board effectively and to oversee the
adoption, delivery and communication of the Company’s corporate governance model. The chair
has sufficient separation from the day-to-day business to be able to make independent decisions.
The chair is also responsible for making sure that the board agenda concentrates on the key issues,
both operational and financial, with regular reviews of the Company’s strategy and its overall
implementation
• CEO: Charged with the delivery of the business model within the strategy set by the board. Works
with the chair in an open and transparent way. Keeps the chair and board up-to-date with
operational performance, risks and other issues to ensure that the business remains aligned with
the strategy
The board has two sub-committees appointed by the board of directors. They are as follows:
• Audit Committee: The Committee meets to consider matters relating to the Company's financial
position and financial 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 the notes to the accounts. The Audit
Committee currently comprises Paul Harper (Chairman), Christophe Chassagnole and Strategic
Finance Director Ltd (Company Secretary)
• 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. Any remuneration issues concerning non-executive directors are resolved by this
Committee and no director participates in decisions that concern his own remuneration. The
Remuneration Committee comprises Paul Harper (Chairman), Jim Millen and Strategic Finance
Director Ltd (Company Secretary)
The Company will give regular consideration to how best to evolve its governance framework as it grows.
Such evolution could include, for example, increase in the size of the board and in particular the number of
non-executive members and external review of board members performance.
10. Communicate how the Company is governed and is performing by maintaining a dialogue with
shareholders and other relevant stakeholders
On the Company’s website shareholders can find all historical RNS announcements, interim reports and
annual reports. Annual Reports and Annual General Meeting Circulars are posted directly to all registered
shareholders or nominees and results of Annual General Meeting votes are also published on the Company’s
website. The Company’s website allows shareholders and other interested parties to sign up to a mailing
list to enable them to directly receive regulatory and other company releases. As described earlier, the
20
Company also maintains email and phone contacts which shareholders can use to make enquiries or requests.
The Directors are currently considering a switch to electronic shareholder communications which, if
recommended, would be implemented prior to the 2019 AGM.
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 5th October 2018 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.
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.
21
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 20 November 2018.
By order of the board
Dr Paul Harper, Chairman
22
Independent Auditors’ Report to the Members of Physiomics Plc
Opinion
We have audited the financial statements of Physiomics PLC for the year ended 30th June 2018 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 2018 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.
23
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.
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 £17,775. 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.
24
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
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
25
•
•
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 14, 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:
26
Income Statement for the year ended 30 June 2018
Revenue
Other operating income
Total income
Net operating expenses
Exceptional items
Operating loss
Investment revenues
Finance costs
Loss before taxation
Income tax income
Year
ended
30 June
2018
£
428,277
84,622
512,899
(773,290)
-
(260,391)
31
(41)
Year
ended
30 June
2017
£
219,647
50,818
270,465
(759,655)
(41,362)
(530,552)
153
-
(260,401)
(530,399)
77,060
129,873
Notes
3
3
4
4
7
8
9
for the year attributable to equity
Loss
shareholders
27
(183,341)
(400,526)
Presented as:
Loss before exceptional costs
Operating exceptional costs
Operating loss
Earnings per share
10
Basic
Diluted
(260,391)
-
(260,391)
(489,190)
(41,362)
(530,552)
(0.31)
(0.31)
(0.78)
(0.78)
27
Statement of Comprehensive Income
Loss for the year
Other comprehensive income
Year ended
30th June
2018
£
(183,341)
Year ended
30th June
2017
£
(400,526)
-
-
Total comprehensive income/ (expense) for the year
(183,341)
(400,526)
Attributable to:
Equity holders
(183,341)
(400,526)
28
Statement of Financial Position as at 30 June 2018
Non-current assets -
Property, plant and equipment
Investments
Notes
13
14
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Deferred revenue
Net current assets
Total liabilities
Net assets
Equity
Called up share capital
Share premium account
Other reserves
Retained earnings
Total equity
16
20
21
24
25
26
27
2018
£
5,003
1
5,004
2017
£
5,830
1
5,831
241,358
571,869
199,592
209,752
813,227
409,344
818,231
415,175
59,765
68,440
128,205
685,022
128,205
690,026
86,921
-
86,921
322,423
86,921
328,254
1,181,038
5,228,172
169,814
(5,888,998)
1,121,463
4,753,538
158,910
(5,705,657)
690,026
328,254
The financial statements were approved by the Board of directors and authorised for issue on .........................
Signed on its behalf by:
Dr P B Harper - Chairman
Company Registration No. 04225086
29
Statement of Changes in Equity for the year ended 30 June 2018
Share
capital
Share
premium
account
Share-based
com-
pensation
on reserve
Retained
earnings
Total
Balance at 1 July 2016
1,032,663
4,327,573
149,048
(5,305,131)
204,153
Notes
£
£
£
£
£
Loss and total comprehensive
Income/(expense) for the year
Issue of share capital (net of costs)
Transfer to other reserves
Balance at 30 June 2017
Loss and total comprehensive
income/ (expense) for the year
Issue of share capital (net of costs)
Transfer to other reserves
24
26
24
26
-
88,800
-
-
425,965
-
-
-
9,862
(400,526)
-
-
(400,526)
514,765
9,862
1,121,463
4,753,538
158,910 (5,705,657)
328,254
-
59,575
-
-
474,634
-
-
-
10,904
(183,341)
-
-
(183,341)
534,209
10,904
Balance at 30 June 2018
1,181,038
5,228,172
169,814 (5,888,998)
690,026
30
Cash Flow Statement for the year ended 30 June 2018
Cash flows from operating activities
Cash absorbed by operations
Interest paid
Tax refunded
Net cash outflow from operating
activities
Investing activities
Purchase of tangible fixed assets
Interest received
Notes
£
£
£
£
2018
2017
35
(244,951)
(539,713)
(41)
75,195
-
102,439
(169,797)
(437,274)
(2,326)
31
(6,802)
153
Net cash used in investing activities
(2,295)
(6,649)
Financing activities
Proceeds from issue of shares
Share issue costs
Net cash generated from financing
activities
Net increase in cash and cash
equivalents
Cash and cash equivalents at beginning of
year
Cash and cash equivalents at end of year
578,899
(44,690)
514,765
-
534,209
514,765
362,117
70,842
209,752
571,869
138,910
209,752
31
Notes to the Financial Statements
1
Accounting policies
Company information
Physiomics PLC is a company limited by shares incorporated in England and Wales. The registered office
is The Magdalen Centre, Oxford Science Park, Robert Robinson Avenue, Oxford, OX4 4GA.
1.1 Accounting convention
The financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted for use in the European Union and with those parts of the Companies Act
2006 applicable to companies reporting under IFRS, (except as otherwise stated).
The financial statements have been prepared on the historical cost basis. The principal accounting
policies adopted are set out below.
The Company has taken advantage of the exemption under section 402 of the Companies Act 2006 not
to prepare consolidated accounts. The financial statements present information about the Company as an
individual entity and not about its group.
1.2 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 £571,869 of cash and cash equivalents as at 30 June 2018 (2017 £209,752).
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
notes that current cash and currently contracted projects are projected to cover all budgeted expenses
during this period. In addition to currently contracted projects the Company anticipates a number of
new clients as well as repeat business from some existing clients.
After reviewing the Company’s projections, the Directors believe that the Company is adequately placed
to 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.
1.3 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.
32
1.4
Intangible assets other than goodwill
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:
Software
Useful life
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.
1.5 Tangible fixed assets
Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net
of depreciation and any impairment losses.
Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over
their useful lives on the following bases:
Fixtures and fittings
IT Equipment
3 years straight line
3 years straight line
The gain or loss arising on the disposal of an asset is determined as the difference between the sale
proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
1.6 Research and development expenditure
Expenditure on research activity is recognised as an expense in the period in which it is incurred.
1.7 Fixed asset investments
A subsidiary is an entity controlled by the Company. Control is the power to govern the financial and
operating policies of the entity so as to obtain benefits from its activities.
Participating interests are stated at cost less amounts written off in the Company balance sheet.
1.8
Impairment of tangible and intangible 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.
33
1.9 Fair value measurement
IFRS 13 establishes a single source of guidance for all fair value measurements. IFRS 13 does not change
when an entity is required to use fair value, but rather provides guidance on how to measure fair value
under IFRS when fair value is required or permitted. The resulting calculations under IFRS 13 affected
the principles that the Company uses to assess the fair value, but the assessment of fair value under
IFRS 13 has not materially changed the fair values recognised or disclosed. IFRS 13 mainly impacts the
disclosures of the Company. It requires specific disclosures about fair value measurements and
disclosures of fair values, some of which replace existing disclosure requirements in other standards.
1.10 Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term liquid
investments with original maturities of three months or less.
1.11 Financial assets
Financial assets are recognised in the Company's statement of financial position when the Company
becomes party to the contractual provisions of the instrument.
Financial assets are classified into specified categories. The classification depends on the nature and
purpose of the financial assets and is determined at the time of recognition.
Financial assets are initially measured at fair value plus transaction costs, other than those classified as
fair value through the income statement, which are measured at fair value.
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.
Impairment of financial assets
Financial assets, other than those at fair value through the income statement, are assessed for indicators
of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events
that occurred after the initial recognition of the financial asset, the estimated future cash flows of the
investment have been affected.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset
expire, or when it transfers the financial asset and substantially all the risks and rewards
of ownership to another entity.
1.12 Financial liabilities
Financial liabilities are classified as either financial liabilities at fair value through the income statement or
other financial liabilities.
Financial liabilities are classified according to the substance of the contractual arrangements entered
into.
34
Derecognition of financial liabilities
Financial liabilities are derecognised when, and only when, the Company’s obligations are discharged,
cancelled, or they expire.
1.13 Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue
costs. An equity instrument is any contract that evidences a residual interest in the assets of the
Company after deducting all of its liabilities.
1.14 Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit
as reported in the income statement because it excludes items of income or expense that are taxable
or deductible in other years and it further excludes items that are never taxable or deductible. The
Company’s liability for current tax is calculated using tax rates that have been enacted or substantively
enacted by the reporting end date.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying
amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the
computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary
difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction
that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the
extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of
the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the
income statement, except when it relates to items charged or credited directly to equity, in which case
the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the
Company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax
assets and liabilities relate to taxes levied by the same tax authority.
1.15 Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services
are received.
Termination benefits are recognised immediately as an expense when the Company is demonstrably
committed to terminate the employment of an employee or to provide termination benefits.
35
1.16 Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as
they fall due.
1.17 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.
1.18 Leases
Rentals payable under operating leases, less any lease incentives received, are charged to income on a
straight line basis over the term of the relevant lease except where another more systematic basis is
more representative of the time pattern in which economic benefits from the lease asset are consumed.
1.19 Government grants
Government grants are recognised when there is reasonable assurance that the grant conditions will be
met and the grants will be received.
Government grants of a revenue nature are credited to the profit and loss account in the same period as
the related expenditure.
1.20 Foreign exchange
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at
the dates of the transactions. At each reporting end date, monetary assets and liabilities that are
denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date.
Gains and losses arising on translation are included in the income statement for the period.
1.21 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.
1.22 Adoption of international accounting standards
At the date of authorisation of these financial statements, the following standards and interpretations
which have not been applied in these financial statements were in issue but not yet effective:
•
IFRS 9 “financial instruments” will be effective for the year ending June 2019 onwards, the main
impact being the impairment assessments methodology used to value our trade receivables.
IFRS 15 “Revenue from contracts with customers” will be effective from the year ending 30th June
2019 onwards, and is not expected to have a significant impact on the Company’s revenues.
IFRS 16 “leases” will be effective for the year ending June 2020 onwards and the impact is not
expected to be significant. IFRS16 requires lessees to recognise the future liability reflecting the
future lease payments and a right-of-use asset for all lease contracts.
•
•
36
2
Critical accounting estimates and judgements
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.
3
Revenue & segmental reporting
An analysis of the Company's revenue is as follows:
Revenue
Other operating income
Grant income
2018
£
2017
£
428,277
219,647
84,622
84,622
50,818
50,818
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, European Union and USA from its principal activity.
4
Operating loss
Operating loss for the period is stated after charging/(crediting):
Net foreign exchange losses/(gains)
Research and development costs
Government grants
Fees paid to the Company's auditor, refer to below
Depreciation of property, plant and equipment
Amortisation of intangible assets
Operating exceptional costs, refer to below
Share-based payments
2018
£
(2,328)
-
(84,622)
15,250
3,153
-
-
10,904
Operating exceptional costs in the prior year comprised due diligence and other legal and professional
costs in relation to the anticipated acquisition of Biomoti Limited. During the prior year the Board decided
not to proceed with this acquisition.
2017
£
38
211,220
(50,818)
20,250
2,529
2,381
41,362
9,862
37
5
Auditors remuneration
Fees payable to the Company's auditor and associates:
For audit services
Audit of the Company's financial statements
For other services
Taxation compliance services
Audit-related assurance services
Innovate UK grant related services
Total fees
6
Employees
2018
£
2017
£
10,000
10,000
2,000
750
2,500
2,750
6,000
1,500
15,250
20,250
The average monthly number of persons (including directors) employed by the Company during the
year was:
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Other pension and insurance benefit costs
Details of the remuneration of Directors are included in the Directors Report on page 15.
7
Finance income
Interest income
Bank deposits
38
2018
Number
2017
Number
6
6
2018
£
342,918
37,681
10,728
2017
£
342,527
52,172
8,111
391,327
402,810
2018
£
2017
£
31
153
8
Finance costs
Other interest payable
2018
£
41
2017
£
-
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 revenue values do not bear interest.
Interest rate profile
The Company had no bank borrowings at the 30 June 2018 and 30 June 2017.
9
Income tax expense
Current tax
Research and development tax credit: current year
Research and development tax credit: prior year
The charge for the year can be reconciled to the loss per the income statement as follows:
Loss before taxation
Expected tax charge based on a corporation tax rate of 19.00%
Expenses not deductible in determining taxable profit
Unutilised tax losses carried forward
Adjustment in respect of prior years research and development
Research and development expenditure tax credit
Deferred / (accelerated) capital allowances
Research and development enhancement
Tax charge for the period
Continuing operations
2018
£
2017
£
(81,905)
4,845
(80,039)
(49,834)
(77,060)
(129,873)
2018
£
2017
£
(260,401)
(530,399)
(49,476)
2,072
(2,878)
4,845
(9,588)
83
(22,118)
(100,776)
9,839
33,904
(31,861)
(5,167)
(871)
(34,941)
(77,060)
(129,873)
39
At 30 June 2018 tax losses of £3,811,775 (2017: £3,796,626) remained available to carry forward against
future taxable trading profits. These amounts are in addition to any amounts surrendered for Research
and Developments tax credits. There is an unrecognised deferred tax asset of £724,237 (2017:
£721,359).
10 Earnings per share
Number of shares
Weighted average number of ordinary shares for basic earnings per share
Earnings - Continuing operations
2018
£
2017
£
59,095,673
51,542,606
Loss for the period from continued operations
(183,341)
(400,528)
Earnings for basic and diluted earnings per share being net profit attributable to equity
shareholders of the Company for continued operations
(183,341)
(400,526)
Earnings per share for continuing operations
Basic and diluted earnings per share
Basic and diluted earnings per share
From continuing operations
(0.31)
(0.78)
(0.31)
(0.31)
(0.78)
(0.78)
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’.
11 Financial instruments recognised in the statement of financial position
Held for trading:
Current financial assets
Trade and other receivables
Cash and cash equivalents
Current financial liabilities
Trade and other payables
Deferred revenue
40
2018
£
2017
£
54,160
42,034
571,869
626,029
209,752
251,786
41,799
68,440
75,890
-
110,239
75,890
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.
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
12
Intangible assets
Cost
At 1 July 2016
At 30 June 2017
At 30 June 2018
Amortisation and impairment
At 1 July 2016
Charge for the year
At 30 June 2017
At 30 June 2018
Carrying amount
At 30 June 2018
At 30 June 2017
Software
£
75,646
75,646
75,646
73,265
2,381
75,646
75,646
-
-
41
13 Tangible fixed assets
Cost
At 1 July 2016
Additions
At 30 June 2017
Additions
At 30 June 2018
Accumulated depreciation and impairment
At 1 July 2016
Charge for the year
At 30 June 2017
Charge for the year
At 30 June 2018
Carrying amount
At 30 June 2018
At 30 June 2017
14
Investments
Investment in subsidiaries
Fixtures and
fittings
£
2,206
-
2,206
-
2,206
IT
equipment
£
34,272
6,802
41,074
2,326
43,400
2,076
130
2,206
-
2,206
-
-
32,845
2,399
35,244
3,153
38,397
5,003
5,830
Total
£
36,478
6,802
43,280
2,326
45,606
34,921
2,529
37,450
3,153
40,603
5,003
5,830
Current
2018
£
-
Non-current
2018
£
1
2017
£
-
2017
£
1
The Company has not designated any financial assets that are not classified as held for trading as
financial assets at fair value through profit or loss.
15
Subsidiaries
Details of the Company's subsidiaries at 30 June 2018 are as follows:
Country of
incorporation (or
residence)
Proportion of
ownership interest
(%)
Proportion of voting
power held (%)
Nature of business
E-Phen Limited
United Kingdom
100.00%
100.00%
Dormant
The above subsidiary is currently in the process of being liquidated.
42
16 Trade and other receivables
Trade debtors
Other receivables
Corporation tax recoverable
VAT recoverable
Prepayments and accrued income
17
Fair value of trade receivables
Due within one year
2018
£
50,382
3,778
81,905
15,040
90,253
2017
£
37,296
4,738
80,040
16,551
60,967
241,358
199,592
There are no material differences between the fair value of financial assets and the amount at which they are stated in the
financial statements.
18
Fair value of financial liabilities
There are no material differences between the fair value of financial liabilities and the amount at which they are stated in the
financial statements.
19
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.
20
Trade and other payables
Trade creditors
Accruals and deferred income
Social security and other taxation
Other creditors
Due within one year
2018
£
15,497
25,469
17,965
834
59,765
2017
£
23,227
33,811
11,031
18,852
86,921
43
21 Deferred revenue
Arising from invoices in advance
2018
£
68,440
Analysis of deferred revenue
Deferred revenues are classified based on the amounts that are expected to be settled within the next 12 months
and after more than 12 months from the reporting date, as follows:
Current liabilities
22 Retirement benefit schemes
Defined contribution schemes
2018
£
68,440
2017
£
-
2017
£
-
The Company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held
separately from those of the Company in an independently administered fund.
The total costs charged to income in respect of defined contribution plans is £6,164 (2017: £3,439).
As at the statement of financial position date the Company had unpaid pension contributions totalling £834 (2017: £631).
23
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. Some options are subject to performance criteria relating to either share
price performance or the achievement of certain corporate milestones. The contractual life of the options is 10 years from
the date of issue.
A summary of the options at the start and end of period for directors and all other employees is presented in the following
table:
44
Holder
Christophe Chassagnole
Christophe Chassagnole
Christophe Chassagnole
Christophe Chassagnole
Christophe Chassagnole
Christophe Chassagnole
Christophe Chassagnole
Christophe Chassagnole
Christophe Chassagnole
Jim Millen
Jim Millen
Paul Harper
Paul Harper
Paul Harper
Paul Harper
Paul Harper
Paul Harper
Paul Harper
Other staff
Other staff
Other staff
Other staff
Other staff
Other staff
Other staff
Other staff
Other staff
Total
Outstanding
at start of
period
74,994
Granted
during period
Forfeited
during period
Exercised during
period
Outstanding at
end of period
Exercisable at
end of period
Exercise
price (p)
Date of
grant
Date of
expiry
-
74,994
-
-
-
38.30
07-Sep-07
07-Sep-17
56,245
-
-
-
56,245
56,245
15.00
18-Dec-08
18-Dec-18
118,565
-
-
-
118,565
118,565
40.00
28-Feb-10
28-Feb-20
32,331
-
-
-
32,331
16,166
34.00
09-Nov-11
09-Nov-21
129,381
-
-
-
129,381
129,381
13.20
11-Feb-13
11-Feb-23
322,615
-
-
-
322,615
322,615
6.20
24-Mar-15
24-Mar-25
645,231
-
-
645,231
-
-
3.50
21-Dec-15
21-Dec-25
879,521
-
-
219,880
659,641
659,641
2.50
28-Feb-17
27-Feb-27
-
350,000
-
-
350,000
-
5.35
27-Mar-18
26-Mar-28
1,938,564
-
-
484,641
1,453,923
1,453,923
2.50
28-Feb-17
27-Feb-27
-
520,000
-
-
520,000
-
5.35
27-Mar-18
26-Mar-28
23,277
76,645
12,932
51,752
-
-
-
23,277
23,277
15.00
18-Dec-08
18-Dec-18
-
-
-
76,645
76,645
40.00
28-Feb-10
28-Feb-20
-
-
-
12,932
6,466
34.00
09-Nov-11
09-Nov-21
-
-
-
51,752
51,752
13.20
11-Feb-13
11-Feb-23
129,046
-
-
-
129,046
129,046
6.20
24-Mar-15
24-Mar-25
258,092
-
-
-
258,092
258,092
3.50
21-Dec-15
21-Dec-25
-
140,000
-
-
140,000
-
5.35
27-Mar-18
26-Mar-28
34,900
34,488
105,476
107,272
142,318
349,912
699,826
500,229
-
-
34,900
-
-
-
38.30
07-Sep-07
07-Sep-17
-
26,175
-
8,313
8,313
15.00
18-Dec-08
18-Dec-18
-
63,828
-
41,648
41,648
40.00
28-Feb-10
28-Feb-20
-
16,165
-
91,107
45,554
34.00
09-Nov-11
09-Nov-21
-
64,690
-
77,628
77,628
13.20
11-Feb-13
11-Feb-23
-
161,307
-
188,605
188,605
6.20
24-Mar-15
24-Mar-25
-
322,615
322,615
54,596
54,596
3.50
21-Dec-15
21-Dec-25
-
490,000
-
96,448
403,781
403,781
2.50
28-Feb-17
27-Feb-27
-
-
490,000
-
5.35
27-Mar-18
26-Mar-28
6,723,612
1,500,000
764,674
1,768,815
5,690,123
4,121,938
The weighted average share price at the date of grant for share options granted in the year was £0.0535, (2017: £0.019).
The options outstanding at 30 June 2018 had an exercise price ranging from £0.025 to £0.40, and a remaining contractual life
of 10 years.
During 2018, options were granted on 27 March 2018. The weighted average fair value of the options on the measurement
date was £0.00727. Options vest according to time and performance based criteria.
The options were granted with an exercise price of £0.054.
During 2017, options were granted on 19 December 2016. The weighted average fair values of the options on the
measurement date was £0.002972.
The options were granted with an exercise price of £0.025.
Fair value was measured using Black-Scholes share option pricing model. Inputs were as follows:
Expected volatility
Expected life
Risk free rate
2018
62.97%
2.3 years
0.91%
2017
40.08%
2.5 years
0.15%
45
The expected volatility is based on the sixty day average historical volatility of the Company over 3 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 and 3 years.
Total expenses of £10,904 related to equity settled share-based payment transactions were recognised in the year. (2017:
£9,862).
24
Share capital
Ordinary share capital, issued and fully paid
71,910,394 Ordinary of 0.4p each
2,481,657,918 Deferred of 0.036p each
2018
£
2017
£
287,641
893,397
228,066
893,397
1,181,038
1,121,463
The ordinary shares carry no rights to fixed income. The deferred shares have no voting rights and have no rights to receive
dividends or other income.
Reconciliation of movements during the year:
Ordinary Number
Deferred Number
At 1 July 2017
Issue of fully paid shares
At 30 June 2018
57,016,579
2,481,657,918
14,893,815
-
71,910,394
2,481,657,918
Current year changes to Ordinary share capital
On 14 December 2017 the Company issued 800,969 ordinary shares of 0.4p at a price of 2.5p per ordinary share, as well as
967,846 ordinary shares of 0.4p at a price of 3.5p per ordinary share following the exercise of employee share options, the
proceeds of which were used for working capital purposes.
On 31 May 2018 the Company issued 13,125,000 ordinary shares of 0.4p at a price of 4p per ordinary share for working capital
purposes.
Prior 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.
46
25
Share premium account
At 1 July 2016
Issue of new shares
Share issue expenses
At 30 June 2017
Issue of new shares
Share issue expenses
At 30 June 2018
£
4,327,573
466,199
(40,234)
4,753,538
519,324
(44,690)
5,228,172
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).
26 Other reserves: share-based compensation reserve
At 30 June 2016
Additions
At 30 June 2017
Additions
At 30 June 2018
£
149,048
9,862
158,910
10,904
169,814
The share-based compensation reserve represents the credit arising on the charge for share options calculated in accordance
with IFRS 2.
27 Retained earnings
At 1 July 2016
Loss for the period
At 30 June 2017
Loss for the period
At 30 June 2018
£
(5,305,131)
(400,526)
(5,705,657)
(183,341)
(5,888,998)
Retained earnings includes an amount of £237,889 (2017: £237,889) in relation to the Equity Swap Agreement in 2014 which
under the Companies Act is not distributable.
47
28 Operating lease commitments
Lessee
Amounts recognised in the income statement as an expense during the period in respect of operating lease arrangements are
as follows:
Minimum lease payments under operating leases
2018
£
55,151
2017
£
52,903
At the reporting end date the Company had outstanding commitments for future minimum lease payments under non-
cancellable operating leases, which fall due as follows:
Within one year
2018
£
2017
£
4,625
4,375
4,625
4,375
29 Capital commitments
At 30 June 2018 and 30 June 2017 the Company had no capital commitments.
30 Capital risk 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 24 to 27.
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.
31 Events after the reporting date
No material post balance sheet events occurred after the end of the period.
48
32 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 15.
In the prior year, there was an outstanding Directors Loan to Christophe Chassagnole of £960 relating to a historical share
purchase. This loan has been repaid during 2018.
33 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.
34 Cash generated from operations
Loss for the year after tax
Adjustments for:
Taxation credited
Finance costs
Investment income
Amortisation and impairment of intangible assets
Depreciation and impairment of tangible fixed assets
Equity settled share based payment expense
Movements in working capital:
Increase in debtors
Decrease in creditors
Increase/(decrease) in deferred revenue
2018
£
2017
£
(183,341)
(400,526)
(77,060)
41
(31)
-
3,153
10,904
(39,901)
(27,157)
68,440
(129,873)
-
(153)
2,381
2,529
9,862
(11,696)
(12,237)
-
Cash absorbed by operations
(244,951)
(539,713)
49
Appendix – Sample Committee Reports
As required under the QCA code there follow two sample reports based on recent remuneration and audit
committee meetings of Physiomics plc. These reports have been edited to exclude commercially
confidential information. They are intended to provide an overview of the types of matters discussed at
these meetings.
MINUTES OF THE REMUNERATION COMMITTEE MEETING OF
PHYSIOMICS PLC (THE COMPANY)
held on 20th March 2018 at 2.00p.m.
at The Magdalen Centre, Robert Robinson Avenue, Oxford Science Park, Oxford, OX4 4GA
Present:
Paul Harper (PH)
Jim Millen (JM)
Chairman
CEO
Anthony Clayden (AC)
Company Secretary and Secretary to the Remuneration Committee
By invitation:
Christophe Chassagnole (CC)
COO
1. Presented documents
PYC employee share option scheme rules.
2. Share Option Scheme
2.1.An updated version of the Physiomics Share Option Scheme was approved as the term of the
previous scheme had expired in September 2017
2.2.Approval was also given that the scheme, originally framed as a single document, be split into
three separate schemes as follows:
• Employees EMI scheme
• Employees non-EMI scheme
• Non-employees scheme (to allow award of options e.g. to consultants if desired)
This was done based on legal advice that the EMI and employee schemes be clearly ring-fenced.
50
2.3.The long-term incentives of individual employees were discussed and it was agreed that a new
award of options would be made in March 2018. The number of options and the terms of their
vesting for each employee was agreed [see RNS of 27 March 2018 for details in public domain]
3. Staff salaries
3.1.Staff salaries were reviewed in light of their individual contributions and expectations and annual
increments agreed.
4. Any other business
4.1.It was agreed that the recommendations of the Remuneration Committee be put to the Board of
directors for their ratification.
4.2.No other business was proposed.
5. Date of next Remuneration Committee meeting:
5.1.The date of the next Remuneration Committee meeting would be set as required.
There being no other business the meeting terminated at 2.50pm.
MINUTES OF THE AUDIT COMMITTEE MEETING OF
PHYSIOMICS PLC (THE COMPANY)
held on 18th September 2018 at 12.09p.m.
by conference telephone call
Present:
Paul Harper (PH)
Christophe Chassagnole (CC)
Chairman
COO
Anthony Clayden (AC)
Company Secretary and Secretary to the Audit Committee
By invitation:
Jim Millen (JM)
By telephone:
Joe Kinton (JK)
CEO
Auditor, Shipleys LLP
Terry Bourne (TB)
Auditor, Shipleys LLP
51
1. Presented documents
The following documents had been circulated before the Audit Committee meeting:
• Annual Report 2018 Draft 1
• Shipleys LLP’s Report to the Audit Committee dated 18th September 2018
2. Audit progress
2.1.Report to the Audit Committee: JK presented the Report to the Audit Committee and the key
points were discussed during the meeting as follows.
2.2.Progress: PH enquired as to the progress of the audit. TB explained that the audit was progressing
well and would be completed on 21st September by which point he would provide feedback and
amendments to the Annual Report draft 1.
2.3.Payroll information: TB advised that some payroll information was still outstanding from Clark
Howes and that TB would follow this up.
2.4.Post Balance Sheet Events: TB enquired as to whether there were any Post Balance Sheet Events
that those present were aware of. The Board and AC confirmed that there were not aware of any
adjusting or non-adjusting Post Balance Sheet Events other than in relation to Revenue.
2.5.Revenue recognisable: AC explained the changes in revenue arising in the July 2018 and August
2018 Finance Reports and the implications for project durations used in the June 2018 Finance
Report and the implications for the draft Finance Report. It was noted that these reports had
previously been sent to TB explaining that there was a change in revenue recognisable at 30 June
2018 as a result of updates to project durations. In response to queries by JK, CC confirmed that
timesheets are recorded for all work and that project durations to completion are assessed by CC
and JM monthly as part of calculation of revenue for each month. JM confirmed that all projects
were anticipated to make a gross profit when considering the time costs of staff or consultants
used on each project compared with overall revenue. JK reminded the Committee that if a project
running as at 30 June 2018 has a foreseeable loss, that any such loss be accrued at 30 June 2018.
JM advised that there was no such anticipated loss.
2.6.Going concern: The projections to 31 December 2019 were discussed. In the light of the current
balance sheet and the anticipated contracted and other income and tax credits relative to costs,
JK advised that the prior year note regarding going concern should be amended to reflect the
changed situation and confirmed that there was no requirement for an Emphasis of Matter in the
Audit Report for the year ended 30 June 2018.
2.7.Adjustments: Other than the potential adjustment for revenue which remained to be considered
by JK and TB, no other adjustments had been identified in relation to income or costs – although
payroll information was still awaited from Clark Howes. In addition, corporation tax credit
calculations remained to be checked.
2.8.Timetable: The timetable to conclusion of the audit and signing of the Annual Report was
discussed. It was agreed that Shipleys provide their feedback by close of business on Friday 21st
September 2018 to enable amending the Annual Report by Physiomics and Clark Howes by 26th
September 2018 to target sign off by exchange of scanned signed documents by close of play on
52
Friday 28th September 2018 (or other date as agreed by the directors).
2.9.Risk Register: Noting the point from the prior year regarding establishing a risk register, JM
advisedthat he would circulate the latest Company risk register to the auditors.
2.10.
Circulation of documents: Rather than having passwords on documents in future, it was
agreed that secure access controlled folders be established to share documents between
Physiomics, Clark Howes and Shipleys to avoid the need in future to email documents.
3. Any other business
3.1. No other business was proposed.
There being no other business the meeting terminated at 12.42pm.
53