PYC Therapeutics Limited
Annual Report 2020

Plain-text annual report

Physiomics Plc Annual Report and Financial Statements For the Year Ended 30 June 2020 Company Registration No. 04225086  This page is intentionally blank 2 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 2020 STATEMENT OF COMPREHENSIVE INCOME STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2020 STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2020 CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE FINANCIAL STATEMENTS 4 5 6 8 16 24 28 29 30 31 32 33 3 Officers and Professional Advisors DIRECTORS Dr P B Harper Dr J S Millen Dr C D Chassagnole SECRETARY Strategic Finance Director Limited REGISTERED OFFICE The Magdalen Centre Robert Robinson Avenue Oxford Science Park Oxford OX4 4GA REGISTRAR Link Asset Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU 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 AUDITOR Shipleys LLP 10 Orange Street Haymarket London WC2H 7DQ BANKER Barclays Bank UK Plc Leicester LE87 2BB NOMINATED ADVISER Strand Hanson Limited 26 Mount Row Mayfair London W1K 3SQ BROKER Hybridan LLP 2 Jardine House The Harrovian Business Village Bessborough Road Harrow Middlesex, HA1 3EX Physiomics Plc is a limited liability company incorporated in England & Wales and domiciled in the United Kingdom. 4 Highlights Financial Highlights • • • • • • Total income (revenue and grant income) increased 7% to £841,649 (2019: £783,101), the highest in the Company’s history The operating loss decreased 33% to £134,385 (2019: £201,219) The loss after taxation decreased 38% to £64,424 (2019: £104,040) Placing and subscription in May 2020 raised £828,750 (gross) through the issue of 23,678,571 new ordinary shares at an issue price of 3.5 pence per share At 30 June 2020, the surplus of shareholders’ funds was £1,314,981 (30 June 2019: £607,914) Cash and cash equivalents at 30 June 2020 of £1,047,860 (30 June 2019: £405,366) Operational highlights • • • • • • Renewal of agreement with Merck KGaA in December 2019 Repeat contracts with clients CellCentric and Bicycle Therapeutics Award of NIHR grant to fund clinical study relating to Physiomics’ personalised dosing tool for prostate cancer and ongoing discussion relating to its commercialisation Post period end, award of contract by new big-pharma client, Astellas Pharma Inc Ongoing discussion with several large CROs relating to potential collaborations Strongest ever business development pipeline resulting from higher marketing spend “The Company continues to make good progress, with all key indicators of performance moving in the right direction. We are pleased to be working with Cancer Research UK (announced July 2019) and to have repeat contracts with both CellCentric and Bicycle Therapeutics, as well as our first contract with Astellas Pharma Inc. The team has also worked hard to ensure that our on-going relationship with Merck led to a renewal of the arrangement (first announced in December 2017). We believe that the Merck team recognises the quality and value of our modelling itself, coupled with the interpretation and guidance we are able to provide. The relationship with Merck represents an independent endorsement of the quality of the Physiomics® package, which has allowed Dr Millen and his team to create new relationships and to secure new contracts. This success has led to a healthy pipeline of new opportunities going forward. It is also my firm belief that the emerging personalised medicine package will add significantly to the Company’s portfolio, opening wholly new opportunities. Meanwhile the team has embarked on a more extensive business development strategy aimed at bringing in new business. I cannot stress too highly the quality of the team. They combine an extraordinary range of skills across many disciplines. They have evolved into an exceptional group, combining their skills, expertise and experience to provide clients with an outstanding service. This has enabled Dr Millen to orchestrate a major business development initiative which has achieved significant success.” Dr Paul Harper, Non-Executive Chairman 5 Chairman and Chief Executive Officer’s Statement Introduction The Company is pleased to report that it has continued to grow its top line and reduce its losses despite some challenges as a result of the COVID 19 epidemic. Encouragingly, key clients Merck, CellCentric and Bicycle Therapeutics each awarded the Company repeat contracts during the year. It was particularly pleasing that the announcement of a further contract with Bicycle Therapeutics on 30 June 2020 represented the fourth Bicycle asset that Physiomics has now supported. Just after the financial year end, on 31 July, the Company was also delighted to announce that it had been retained by a major new big pharma client, Astellas Pharma Inc., to conduct a project on an undisclosed asset utilising Physiomics’ Virtual Tumour immuno-oncology modelling platform. In order to capitalise on its current momentum, the Company completed an oversubscribed fundraise in May 2020, raising £829k (gross). Key uses of these funds are to increase the Company’s marketing capability, hire new technical staff and invest further in its personalised dosing technology initiative. In addition to achieving strong organic growth in its consulting business, the Company has also been engaging in discussions with several contract research organisations with regard to possible collaborations. Previously reported discussions relating to the potential commercialisation of the Company’s personalised dosing technology also remain ongoing. Overall, the year has been a productive one for Physiomics. The Company’s reputation amongst both investors and clients appears to be strengthening and we continue to focus on generating shareholder value. Financial Review The Company’s full year total income of £841,649 reflects these achievements, being the highest in its history, and a 7% increase on the previous full year to 30 June 2019. Total income grew to £499,037 in the second half compared with the first half unaudited total income of £342,612. This pattern is consistent with previous years and substantially due to both summer and Christmas holidays falling in the first half of the Company’s financial year. The operating loss decreased 33% to £134,385 (2019: £201,219). The loss after taxation decreased 38% to £64,424 (2019: £104,040). Following the Company’s fundraise in May 2020, which raised £829k (gross), the Company allocated funds to expand the in-house team, increase marketing spend and invest further in its personalised medicine initiative, all of which are expected to continue to help to generate and support the increased levels of business going forwards. Net assets at the year-end were £1,314,981 (2019: £607,914) of which £1,047,860 (2019: £405,366) comprised cash and cash equivalents. This is the highest net asset position in the Company’s history, combined with the lowest loss since 2009. The net cash outflow from operating activities fell by £27,402 (2019: £26,025) compared with the previous year. COVID 19 These results were achieved despite the ongoing COVID 19 crisis and the Company is pleased to say that there appears to be only very minimal effects of COVID 19 on its business so far. In particular: 6 • There has been no reduction in the number of new business meetings achieved, if anything such meetings have increased; and • The Company’s employees achieved a smooth transition to remote working, without impacting on the quality of interactions with clients. This is currently being maintained and will be kept under review As previously disclosed, there has been the delay in the commencement of our NIHR funded trial at the Portsmouth Technology Trials Unit, as a result of which some grant income anticipated for the financial year ended 30 June 2020 will now fall into the current financial year ending 30 June 2021, though it is not anticipated that there will be any overall loss of income relating to the grant over its term. Staff The Company’s staff remain critical to a business which is essentially about delivering analysis to clients. This is derived from rigorous analysis by individuals experienced in oncology drug development, applied mathematics and from their ability to clearly communicate this analysis to the client. We believe our staff score highly on both these fronts and remain the key to our continuing success. The Company has publicly stated its intention to utilise some of the funds raised in its May 2020 fundraise to recruit a further full-time staff member and this process is ongoing. In addition, the Company has decided to retain an intern for a period of around four months starting in September 2020. For both the full-time and the intern position, the Company attracted a significant number of applications from well-qualified individuals, which is further validation of the Company’s reputation in the job market and of the profile it is achieving through its work. The board regularly reviews staff utilisation rates and anticipated workload and this will continue. The Company would like to thank all its staff for their continuing hard work and commitment during the year. Outlook The Company continues to develop its reputation amongst investors and clients as it moves ever closer to profitability and cashflow break-even. With additional funding from our May 2020 fundraise applied to marketing activities, the Company’s business development pipeline is the strongest it has ever been. The Company expects to continue to attract both repeat business and new clients of all sizes, to develop its personalised dosing technology and to explore innovative collaboration opportunities over the course of the current financial year. Dr Jim Millen, Chief Executive Officer Dr Paul Harper, Non-Executive Chairman 7 Strategic Report Principal activities Physiomics is engaged in providing consulting 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™. In simple terms, this means helping companies to put the right drugs together, at the right dose, in the right types of cancer to help achieve the best possible results at the most economic cost. Modelling and simulation using Virtual Tumour™ and other tools 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 and with a focus on quantitative pharmacology techniques. The Company’s main commercial revenue driver is its proprietary Virtual Tumour™ predictive software in the pre- clinical and clinical space, and in particular extensions to this software that have been developed over the last few years to address specialist areas such as immune-oncology, DNA damage repair, radiation therapy and others. The Company also utilises other industry standard tools, such as NONMEM and MATLAB as well as developing its own bespoke models using the R programming language. Projects often require a blend of several approaches to deliver the optimal insights to clients. Working in the late discovery, preclinical and clinical phases of pharmaceutical R&D, Physiomics adds value by helping companies to efficiently derive insights from their data. This is achieved in a variety of ways ranging from data analysis, visualisation and interpretation to mathematical modelling of pharmacokinetic and pharmacodynamic effects (i.e. how much drug is in the body and what effect it is having). The end result is that our clients are in a better position to optimise the treatments they are developing by selecting the right targets, drugs, dosages, timing and combinations. We believe that we add particular value in early development during the transition from pre-clinical to first-in-man studies where our experience and capabilities have been helpful in supporting clients such as UK-based CellCentric and Bicycle Therapeutics in identifying optimal clinical trial designs and justifying this to regulatory authorities. In the 2019/20 financial year, the Company has been able to: • • Support big pharma companies in making strategic decisions about how to optimise combinations of investigational and approved agents in mid-stage clinical development programs. The potential value of getting these decisions right first time and hitting a target profile is significant. Support small and medium sized biotechs by providing a full spectrum of pharmacokinetic and pharmacodynamic modelling, analysis and interpretation 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. The Company is beginning to see an increased willingness for clients to allow their name to be associated with Physiomics®, which we believe is an indication of the value that we are adding and the increased credibility and recognition of the Physiomics® brand. We believe that this in turn further improves our ability to attract and retain new business. The most recent example of this was the public announcement of a contract award by Astellas Pharma Inc. 8 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. The term “personalised medicine” is used in many ways but is most often associated with the use of genetic markers in the selection of drugs to treat a particular group of patients. Physiomics’ approach has been to use its expertise in interpreting pre-clinical and clinical cancer data to help predict when to treat patients and with what dose of drug. This approach relies more on advanced analytical techniques, many of which (such as machine learning and neural networks) are in the field of artificial intelligence (AI). To date this has been funded by two Innovate UK Grants and most recently by an NIHR grant awarded in March 2020. This latest grant is being used to fund an observational trial at Portsmouth’s Technology Trials Unit, which is intended to gather data to further validate and support the use of the Company’s personalised dosing technology. In parallel with these ongoing research activities, the Company is exploring how it can accelerate the commercialisation of its technology via collaboration with other companies that are more established in this field, especially in the USA. Business Model 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 and continue to explore other approaches including risk sharing and collaboration including: • The incorporation of success-based milestones in our consulting contracts. Examples of companies where Physiomics has historically entered into risk-sharing arrangements include Sareum Holdings plc and ValiRx plc; • The embedding of our technology as part of a broader offering in collaboration with another service provider. The Company is in several active discussions of this nature and will report further once specific agreements have been reached; and • 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 already creates executable versions of a number of its models on request by clients. A further step would be to develop Virtual Tumour™ into a tool whose full functionality could be utilised by a client, either alongside a consulting project or possibly independently. The Company will continue to explore these alternative approaches, though 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 over 120 years of combined experience in the development of cancer drugs and computational biology, 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 85 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 9 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); and • We provide a responsive and dedicated service. Many large companies offer services in the cancer space though do not restrict themselves to cancer nor to quantitative pharmacology. As a result, we believe, many of these companies cannot offer the same level 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 (as evidenced by having now worked on four assets with Bicycle Therapeutics and by repeat business with Merck and CellCentric); • Diversify the customer base by working with a variety of commercial and not-for-profit clients (such as the NIHR grant to fund a personalised medicine study announced in March 2020); • Broaden our geographical presence in Europe and North America by leveraging the Company’s existing contact base and increasing marketing efforts (our most recent new client, Astellas Pharma is based in the US and Japan); • Work with a mix of early pre-clinical stage projects and high value clinical development phase of oncology (we have active translational stage projects with Merck, Bicycle Therapeutics, CellCentric and Astellas Pharma); and • Develop new, complementary areas of business such as immune-oncology and personalised medicine that can add long term value to the business. Obligations under s172 of the Companies Act The Directors are mindful of their obligations under s172(1) of the Companies Act 2006 to act in good faith to promote the success of the Company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to the following: Principle Company’s actions The likely consequences of any decision in the long term. The Company has a long term vision as set out in this report. The interests of the company's employees. The Company values its employees and implements training, offers development opportunities and has in place appropriate incentive programs to support their retention. 10 Principle Company’s actions The need to relationships with suppliers, customers and others. foster the company’s business The impact of the company’s operations on the community and the environment. The desirability of the company maintaining a reputation for high standards of business conduct. The need to act fairly as between members of the company. Review of Business The Company spends significant effort in reaching out to new and existing customers and in soliciting their feedback following engagements. The Company’s operations have minimal impact on the community and environment. As a result of COVID-19, home working has been implemented so the environmental costs of commuting have been further reduced. The Company maintains a high standard of business ethics, complying with the QCA code for corporate governance. The Company treats all members equitably and attempts to ensure a timely and accurate flow of information to all members. The Company is principally engaged in providing consulting services to pharmaceutical companies in the areas of outsourced quantitative pharmacology and computational biology. • Total income (revenue and grant income) increased 7% to £841,649 (2019: £783,101) • The operating loss decreased 33% to £134,385 (2019: £201,219) • The loss after taxation decreased 38% to £64,424 (2019: £104,040) • At 30 June 2020, the surplus of shareholders’ funds was £1,314,981 (30 June 2019: £607,914) • Cash and cash equivalents at 30 June 2020 of £1,047,860 (30 June 2019: £405,366) Consulting Business Physiomics’ consulting business is at the heart of its offering to clients. The Company uses its proprietary Virtual Tumour™ software platform but also develops mathematical models from scratch and leverages models in the public domain. It is a combination of our technology and the oncology experience of our team that enables us to be able to deliver clients both a targeted product offering that meets their needs whilst at the same time delivering value for money. We believe that we are unique in offering a combination of: • Deep experience and knowledge of oncology; • An exclusive focus on model-based approaches to supporting our clients’ R&D projects; and • A level of flexibility and responsiveness that is not typically found in larger organisations. We have continued to develop our brand through a variety of marketing and business development activities including: • Expansion of our digital marketing strategy with significantly increased social media activity focused 11 on areas of interest to our clients; • Use of a third-party marketing agency to conduct targeted calls to potential new clients, generating a significantly increased volume of potential new business discussions; • Despite the virtualisation of conferences this year due to the ongoing COVID pandemic, we have presented at BioTrinity and AACR; and • Development and dissemination of case studies based on actual client projects. The Company has been successful in attracting repeat business this year from clients such as Bicycle Therapeutics, CellCentric as well as long-standing client Merck KGaA. The Company has now worked with Merck for over eight years and is in the third year of the major collaboration announced in November 2017. The Company’s clients in this financial year have been located in the USA, UK and Europe. Recent marketing efforts have targeted further business in the USA, where there is a high level of company formation and funding and this has paid off in the form of the recently announced contract with Japan and US-based Astellas Pharma Inc. In terms of the mix of work, we continue to work across the full spectrum of R&D from discovery to development, though we continue to focus increasingly on translational projects involving assets entering clinical development for the first time. This is particularly exciting, as it raises our profile and can involve exposure to regulatory authorities. The Company continues to work in the immuno-oncology space with several of its clients, including the recently announced Astellas Pharma, and it is anticipated that the industry focus on this treatment approach is likely to continue for some time. Personalised Medicine The personalised medicine and digital health space continues to generate significant interest from both investors and healthcare systems. Many start-ups in this area focus on the use of genetic markers or the pattern-recognition capabilities of artificial intelligence applications. However, we believe that there is a significant opportunity in the analysis of existing clinical data to identify better ways to treat patient using existing drugs and procedures. In April 2019, we completed our second Innovate UK funded project in this field in which we developed a demonstration version of a tool to optimise dosing of docetaxel in castrate resistant, metastatic prostate cancer patients. The key outcomes of the project were presented in a poster at the prestigious American Association for Cancer Research Annual Meeting in March 2019. In parallel, working with the Oxford Academic Health Sciences Network, we were able to access some of the UK’s leading clinicians in this space which culminated in our being invited to present at an event jointly sponsored by the Royal Marsden Hospital NHS Trust, the Institute of Cancer Research and the National Institute for Health Research. In March 2020, the Company announced a further grant from the NIHR of up to £150k which is being used to fund an observational clinical trial at Portsmouth’s Technology Trials Unit. The purpose of this trial is to gather additional patient data to validate and further develop the Company’s personalised dosing tool. Subject to any restrictions imposed due to COVID 19, the trial is now expected to start in Q4 2020 and will last up to 12 months. In parallel, the Company is focused on finding an appropriate commercial partner to gain any required regulatory approvals to make the tool available in a real-world clinical environment and, to this end, the Company is also in discussion with a company with an established presence in this field. Strategic and financial performance indicators The Company is focused on the creation of long-term value for its shareholders. 12 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. In the last four financial years (from YE June 2017 to YE June 2020) revenues have increased 264%, losses after tax have decreased 84% and net assets increased 301%. 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. Risk Description Mitigation Loss of major customer Currently the business has a high dependence on a small number of customers. This leads to the risk that a large customer could significantly reduce or cancel its contracts with the Company. Competition / pricing pressure 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. 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 and is currently in its third year. Additionally, the Company has recently signed a further big pharma client, Astellas Pharma Inc., as well as securing repeat contracts with CellCentric and Bicycle. 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. In addition, in the last two years we have developed a personalised medicine offering that we are currently seeking to commercialise and which would help reduce dependency on our consulting business. 13 Risk Description Mitigation 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. 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 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 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. A collegiate working environment and opportunities for personal and professional development also help to maintain staff satisfaction. The Company recently took on an intern and is recruiting for a full time position. In both cases a high number of qualified applications have been received. 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 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. Following completion of the recent fundraise, the Company had cash and cash equivalents of over £1.0 million at the year end, which the board believes is sufficient for its current needs and to enable it to increase its marketing spend to expand its client base. 14 Risk Description Mitigation 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. COVID 19 The current COVID 19 pandemic has far- reaching consequences for many companies. By order of the board Dr Paul Harper Chairman 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. In the most recent financial year, the company invested further in a server dedicated to high speed computation which has significantly reduced the time required to complete complex simulations. Despite some clients experiencing delays in clinical trials, there has been no appreciable drop off in client commitments to new projects. The Company has also sought to mitigate direct risk of COVID 19 infection by implementing home working since March 2020. This has been achieved seamlessly with no discernible impact on business operations. The board reviews risks relating to COVID 19 on a monthly basis. The Directors have considered and assessed the impact of COVID-19 on the Company’s projections and cashflows. Taking into account COVID-19, the Directors believe that the Company has sufficient funds to operate for at least 12 months from the signing date of these financial statements. 15 Directors’ Report The Directors submit their report and the audited financial statements of Physiomics Plc for the year ended 30 June 2020. Results There was a loss for the year after taxation amounting to £64,424 (2019 loss: £104,040). 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 (IFRS) as adopted by the European Union (EU). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and the financial performance and cash flows of the Company for that year. The financial statements are required by law, and IFRS as adopted by the EU, to give a true and fair view of the state of affairs of the Company. In preparing the Company financial statements, the Directors are required to: a. select suitable accounting policies and then apply them consistently; b. make judgements and estimates that are reasonable and prudent; c. state whether in preparation of the financial statements the Company has complied with IFRS as adopted by the EU, subject to any material departures disclosed and explained in the financial statements; and d. prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are also responsible for the maintenance and integrity of the Physiomics Plc website. Legislation 16 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 as at 22 September 2020, the following shareholders had over 3% interests in the issued ordinary shares of the Company. Mr Zahid Ali* Mr Paul McKillen** Holding % 5.12% 3.08% * Mr Zahid Ali notified the Company on 10 September 2020 that he held 4,982,142 ordinary shares (which represents a current interest of 5.12% in the Company). ** Mr Paul McKillen notified the Company on the 19 July 2019 that he held 3,000,000 ordinary shares (which represents a current interest of 3.08% in the Company). On 22 September 2020, Dr Paul Harper held 668,564 ordinary shares, Dr Jim Millen held 1,386,747 ordinary shares and Dr Christophe Chassagnole held 602,723 ordinary shares. The holding percentages were 0.69%, 1.42% and 0.62% respectively. Directors’ remuneration Details of Directors’ remuneration in the year ended 30 June 2020 is set out below: Emoluments £ Bonus Benefits £ £ Pension Contributions £ Total 2020 £ Total 2019 £ Dr P B Harper 37,000 Dr J S Millen 123,500 Dr C D Chassagnole 65,697 Total 226,196 - - - - - - 37,000 35,500 1,647 10,400 135,547 142,388 1,432 9,062 76,191 76,142 3,079 19,462 248,738 254,030 Corporate governance Physiomics Plc has chosen to comply with the Quoted Companies Alliance (“QCA”) Corporate Governance Code published in April 2018. 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 17 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 (“AGM”) 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 the University of Oxford and the Oxford University Hospitals NHS Foundation 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. 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. 18 5. Maintain the board as a well-functioning, balanced team led by the Chairman The board of Physiomics Plc currently comprises two executive directors, one independent non-executive director (the 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 is re-elected to the board on a rotating basis by a vote of members at the Company’s AGM. Executive directors are full-time employees of the Company. Non-executive Directors’ contracts require that directors dedicate up to one additional day per month on request. In addition, non-executive directors may provide additional paid consulting services at rates specified in their contracts. However, no such services have been provided by any non-executive director in the financial year ended 30 June 2020. The Company notes that best practice under the QCA code, and for a company quoted on AIM is to have at least half of its board as independent, and specifically a minimum of two non-executive directors. The board is aware that Physiomics does not currently comply with this requirement, though the board believes 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 13 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 was a non-executive director of Reneuron Holdings Plc, an AIM quoted company. Paul has served as Chairman of Oval Medical Technologies and of Sareum Holdings 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. 19 • 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 21 years’ experience directing or advising over 40 high growth potential businesses of differing size and complexity and brings broad experience of strategic, operational, and financial matters. His career encompasses numerous 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. The Company holds annual briefings for the board covering regulations that are relevant to their role as directors of an AIM-quoted company. 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 board has historically been implemented in an informal manner. The board will formally review and consider the performance of each director at or around the time of the Company’s annual general meeting. 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 20 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; • 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; and • 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) and Christophe Chassagnole, with Strategic Finance Director Ltd (Company Secretary) attending as 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 21 participates in decisions that concern his own remuneration. The Remuneration Committee comprises Paul Harper (Chairman) and Jim Millen, with Strategic Finance Director Ltd (Company Secretary) attending as 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 Company also maintains email and phone contacts which shareholders can use to make enquiries or requests. Post balance sheet events The only material post-balance sheet event was the award of a contract by Astellas Pharma Inc. on 31 July 2020. Statement as to disclosure of information to auditors The Directors in office on 29 September 2020 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; and • detailed monthly management accounts are produced for the board to review and take appropriate action. 22 Annual General Meeting The Company is closely monitoring the COVID-19 situation, including UK Government guidance and will continue to do so in the lead up to the AGM. The health of our shareholders, employees and stakeholders remains extremely important to us and accordingly, the board has taken into consideration the current UK government stay at home measures as well as ICSA guidance. Should these directives remain in place up to the AGM, shareholders, advisors and other guests will not be allowed to attend the AGM in person and anyone seeking to attend the meeting will be refused entry. As such, shareholders should note they are not entitled to attend the AGM in person unless notified otherwise via the Company's website at www.physiomics.co.uk. Shareholders are requested to therefore submit their votes, in respect of the business to be discussed, via proxy as early as possible. Shareholders should appoint the Chair of the meeting as their proxy. If a shareholder appoints someone else as their proxy, that proxy will not be able to attend the meeting in person or cast the shareholder's vote. The business at the AGM will be curtailed to the formal business section only, with no wider presentations on business performance or Q&A. If any shareholder has a question they would like to pose to the board, this should be submitted to the Chair via info@physiomics.co.uk. In addition, as detailed in our announcement of 23 September 2020, the Company will be holding an investor presentation at 11.00 a.m. on 5 October 2020. Please see this announcement for details of how to register for this event. In the event that further disruption to the 2020 AGM becomes unavoidable, we will announce any changes to the meeting (such as timing or venue). The website also provides links to the annual report and accounts, interim results and other relevant announcements immediately after they have been made available via RNS. 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 a.m. on 17 November 2020. By order of the board Dr Paul Harper, Chairman 23 Independent Auditors’ Report to the Members of Physiomics Plc Opinion We have audited the financial statements of Physiomics Plc for the year ended 30 June 2020 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 notes to the financial statements, including significant accounting policies. 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. In our opinion: • • • the financial statements give a true and fair view of the state of the Company’s affairs as at 30 June 2020 and of its loss for the year then ended; the financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; and the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Conclusions relating to going concern We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where: • • the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue. Our assessment of risks of material misstatement The assessed risks of material misstatement described below are those that had the greatest effect on our audit strategy, the allocation of resources in the audit and directing the efforts of the engagement team. 24 Risk Management override of controls Journals can be posted that significantly alter the Financial Statements. How the Scope of our audit responded to the risk 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. Going Concern and COVID-19 There is a risk that the Company is not a going concern and have been impacted from COVID-19 materially. 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. Overstatement of Administrative Expenses There administrative expenses are overstated. the Company’s is a that risk We reviewed the Directors’ assessment of the risks and impacts of COVID-19 on the business. We compared this assessment to our own understanding of the risks, and the nature of the Company’s operations and customer base. We then conducted a review of going concern in respect of COVID-19, which included reviewing forecasts and current trading performance, and carrying out stress testing. The work undertaken considered a period of at least 12 months from the date of approving these financial statements. The disclosures in the financial statements adequately reflect the Directors’ conclusions around the uncertainties and impact of COVID-19 and, that the going concern assumption remains appropriate. 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. A proof in total calculation and substantive testing were both undertaken and no evidence of overstatement was identified. Grant Income There is a risk that grant income may be materially misstated. Grant income was reviewed and a sample basis from contracts. No evidence of misstatement was identified. Our audit procedures relating to these matters were designed 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. 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. 25 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 £16,560. We agreed with the Audit Committee that we would report to them all audit differences in excess of 5% of materiality, as well as differences below that which would, in our view, warrant reporting on a qualitative basis. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the Financial Statements. An overview of the scope of our audit An audit involves obtaining evidence about the amounts and disclosures in the Financial Statements sufficient to give reasonable assurance that the Financial Statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the Financial Statements. In addition we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited Financial Statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatement or inconsistencies we consider the implications for our report. Other information The directors are responsible for the other information. The other information comprises the information included in the annual report other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: • • the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements 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. 26 We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: • • • • adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or the financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors’ remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit. Responsibilities of directors As explained more fully in the directors’ responsibilities statement set out on page 16, 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. Our 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/auditorsreponsibilities. This description forms part of our auditor’s report. Use of our report This report is made solely to the Company's members, as a body, in accordance with chapter 3 of part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed. Benjamin Bidnell (Senior Statutory Auditor) For and on behalf of Shipleys LLP, Chartered Accountants and Statutory Auditor 10 Orange Street Haymarket London WC2H 7DQ 27 Income Statement for the year ended 30 June 2020 Revenue Other operating income Total income Net operating expenses Operating loss Finance Income Loss before taxation Income tax income Year ended 30 June 2020 £ 799,055 42,594 841,649 (976,034) (134,385) 679 Year ended 30 June 2019 £ 718,965 64,136 783,101 (984,320) (201,219) 470 (133,706) (200,749) 69,282 96,709 Notes 3 3 4 7 9 for the year attributable to equity Loss shareholders 26 (64,424) (104,040) Earnings per share (shown in pence) 10 Basic Diluted (0.09)p (0.09)p (0.14)p (0.14)p 28 Statement of Comprehensive Income Loss for the year Other comprehensive income Year ended 30 June 2020 £ (64,424) Year ended 30 June 2019 £ (104,040) - - Total comprehensive income/ (expense) for the year (64,424) (104,040) Attributable to: Equity holders (64,424) (104,040) 29 Statement of Financial Position as at 30 June 2020 Non-current assets - Intangible assets Property, plant and equipment Investments Current assets Trade and other receivables Cash and cash equivalents Total assets Current liabilities Trade and other payables Deferred revenue Net current assets Net assets Equity Called up share capital Share premium account Other reserves Retained earnings Total equity Notes 12 13 14 15 19 20 23 24 25 26 2020 £ 3,864 11,536 - 15,400 2019 £ 1,373 18,438 - 19,811 383,238 1,047,860 269,110 405,366 1,431,098 674,476 1,446,498 694,287 123,819 7,698 131,517 1,299,581 1,314,981 1,275,752 5,896,737 199,954 (6,057,462) 85,123 1,250 86,373 588,103 607,914 1,181,038 5,228,172 191,742 (5,993,038) 1,314,981 607,914 The financial statements were approved by the board of directors and authorised for issue on 30 September 2020. Signed on its behalf by: Dr P B Harper - Chairman Company Registration No. 04225086 30 Statement of Changes in Equity for the year ended 30 June 2020 Share capital Share premium account Share-based com- pensation on reserve Retained earnings Total Balance at 1 July 2018 1,181,038 5,228,172 169,814 (5,888,998) 690,026 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 2019 Loss and total comprehensive income/ (expense) for the year Issue of share capital (net of costs) Transfer to other reserves 23 25 23 25 - - - - - - - - 21,928 (104,040) - - (104,040) - 21,928 1,181,038 5,228,172 191,742 (5,993,038) 607,914 - 94,714 - - 668,565 - - - 8,212 (64,424) - - (64,424) 763,279 8,212 Balance at 30 June 2020 1,275,752 5,896,737 199,954 (6,057,462) 1,314,981 31 Cash Flow Statement for the year ended 30 June 2020 Notes £ £ £ £ 2020 2019 Cash flows from operating activities Cash absorbed by operations 33 Tax refunded Net cash outflow from operating activities Investing activities Purchase of intangible assets Purchase of tangible fixed assets Interest received (200,008) 83,638 (226,244) 82,472 (116,370) (143,772) (2,913) (2,181) 679 (1,385) (21,816) 470 Net cash used in investing activities (4,415) (22,731) 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 828,750 (65,471) - - 763,279 - 642,494 (166,503) 405,366 1,047,860 571,869 405,366 32 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. The Company’s ordinary shares of 0.4p each are admitted to trading on the AIM market of the London Stock Exchange plc. 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. 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 the board expects to be less affected by current economic conditions, including the potential consequences of Brexit, compared to other industries. The Company had £1,047,860 of cash and cash equivalents as at 30 June 2020 (2019 £405,366). 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 at least the next 12 months. In coming to this conclusion, the board notes that current cash and currently contracted projects are projected to more than cover budgeted expenses for this period. 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. 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 33 expenses disclosed in the income statement. Intangible assets are amortised over their useful lives as follows: Patents and licenses Trademarks Useful life 15 years 10 years Method Straight line 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 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. 1.8 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. 1.9 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. 34 1.10 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. 1.11 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. Derecognition of financial liabilities Financial liabilities are derecognised when, and only when, the Company’s obligations are discharged, cancelled, or they expire. 1.12 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. 1.13 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 35 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. 1.14 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. 1.15 Retirement benefits Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due. 1.16 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. 1.17 Leases At inception, the Company assesses whether a contract is, or contains, a lease within the scope of IFRS 16. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Where a tangible asset is acquired through a lease, the Company recognises a right-of-use asset and a lease liability at the lease commencement date. Right-of- use assets are included within tangible fixed assets, apart from those that meet the definition of investment 36 property. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date plus any initial direct costs and an estimate of the cost of obligations to dismantle, remove, refurbish, or restore the underlying asset and the site on which it is located, less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of other tangible fixed assets. The right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. The lease liability is initially measured at the present value of the lease payments that are unpaid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the company's incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise fixed payments, variable lease payments that depend on an index or a rate, amounts expected to be payable under a residual value guarantee, and the cost of any options that the company is reasonably certain to exercise, such as the exercise price under a purchase option, lease payments in an optional renewal period, or penalties for early termination of a lease. The company has elected not to recognise right-of-use assets and lease liabilities for short-term leases of machinery that have a lease term of 12 months or less, or for leases of low-value assets including IT equipment. The payments associated with these leases are recognised in profit or loss on a straight-line basis over the lease term. In the comparative period, as a lessee applying IAS 17, the company classified leases as finance leases whenever the terms of the lease transferred substantially all the risks and rewards of ownership to the lessees. All other leases were classified as operating leases. Assets held under finance leases were recognised as assets at the lower of the assets’ fair value at the date of inception and the present value of the minimum lease payments. The related liability was included in the balance sheet as a finance lease obligation. Lease payments were treated as consisting of capital and interest elements and the interest was charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability. Rentals payable under operating leases, less any lease incentives received, were charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis was more representative of the time pattern in which economic benefits from the leased asset were consumed. 1.18 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. 1.19 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 37 and losses arising on translation are included in the income statement for the period. 1.20 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. 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 2020 £ 2019 £ 799,055 718,965 42,594 42,594 64,137 64,137 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 (2019: UK, European Union and USA) from its principal activity. 38 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 Share-based payments 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 Other taxation services Innovate UK grant related services Total fees 2020 £ 169 - (42,594) 14,000 9,083 422 8,212 2019 £ (276) - (64,137) 14,433 8,381 12 21,928 2020 £ 2019 £ 10,000 10,000 2,000 - 2,000 - 2,000 - 1,183 1,250 14,000 14,433 39 6 Employees 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. 7 Finance income Interest income Bank deposits 8 Finance costs 2020 Number 2019 Number 7 7 2020 £ 408,051 44,785 35,636 2019 £ 420,315 48,361 22,662 488,472 491,338 2020 £ 2019 £ 679 470 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 2020 and 30 June 2019. 40 9 Income tax expense Current tax Research and development tax credit: current year Adjustment in respect of prior years’ research and development The charge for the year can be reconciled to the loss per the income statement as follows: Loss before taxation Continuing operations 2019 £ 2020 £ (81,786) (96,142) 12,504 (567) (69,282) (96,709) 2020 £ 2019 £ (133,706) (200,749) Expected tax charge based on a corporation tax rate of 19.00% (25,404) (38,142) 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 Research and development enhancement Tax charge for the period 1,271 - 12,504 (81,786) 1,562 (48,254) 70,825 4,645 - (567) (7,280) (2,613) (52,752) - (69,282) (96,709) At 30 June 2020 tax losses of £3,846,025, (2019: £3,811,775) 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 £729,527, (2019: £648,002). 10 Earnings per share Number of shares Weighted average number of ordinary shares for basic earnings per share Earnings - Continuing operations 2020 £ 2019 £ 73,721,869 71,910,394 Loss for the period from continued operations (64,424) (104,040) Earnings for basic and diluted earnings per share being net profit attributable to equity shareholders of the Company for continued operations (64,424) (104,040) 41 Earnings per share for continuing operations Basic and diluted earnings per share (shown in pence) Basic and diluted earnings per share From continuing operations (shown in pence) (0.09) (0.14) (0.09) (0.09) (0.14) (0.14) 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 2020 £ 2019 £ 78,863 107,622 1,047,860 1,126,723 405,366 512,988 109,029 70,626 7,698 116,727 1,250 71,876 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 periodically 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. 42 12 Intangible assets Cost At 1 July 2018 At 30 June 2019 Additions - purchased Disposals At 30 June 2020 Amortisation and impairment At 1 July 2018 At 30 June 2019 Charge for the year Eliminated on disposals At 30 June 2020 Carrying amount At 30 June 2020 At 30 June 2019 Trademarks £ - Patents & Licenses £ Total £ 75,646 75,646 1,385 2,913 - 4,298 - 12 422 - 434 3,864 1,373 - - - - 1,385 2,913 - 4,298 75,646 75,646 - - - - - - 12 422 - 434 3,864 1,373 43 13 Tangible fixed assets Cost At 1 July 2018 Additions Disposals At 30 June 2019 Additions Disposals At 30 June 2020 Accumulated depreciation and impairment At 1 July 2018 Charge for the year Eliminated on disposal At 30 June 2019 Charge for the year Eliminated on disposal At 30 June 2020 Carrying amount At 30 June 2020 At 30 June 2019 At 30 June 2018 14 Investments Investment in subsidiaries Impairment of investment Fixtures and fittings £ 2,206 1,154 (411) 2,949 79 - 3,028 2,206 96 (411) 1,891 408 - 2,300 728 1,058 - IT equipment £ 43,400 20,662 (7,525) 56,537 2,102 - 58,640 38,397 8,285 (7,525) 39,157 8,675 - 47,832 10,808 17,380 5,003 Total £ 45,606 21,816 (7,936) 59,486 2,181 - 61,668 40,603 8,381 (7,936) 41,048 9,083 - 50,132 11,536 18,438 5,003 Current Non-current 2020 £ - - - 2019 £ - - - 2020 £ - - - 2019 £ 1 (1) - The Company owned 100% of E-Phen Limited, a dormant company incorporated in the England and Wales. E-Phen Limited was dissolved on 7 September 2019. 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. 44 15 Trade and other receivables Trade debtors Other receivables Corporation tax recoverable VAT recoverable Prepayments and accrued income 16 Fair value of trade receivables Due within one year 2020 £ 75,085 3,778 81,786 10,475 212,114 2019 £ 103,844 3,778 96,142 22,518 42,828 383,238 269,110 There are no material differences between the fair value of financial assets and the amount at which they are stated in the financial statements. 17 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. 18 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. 19 Trade and other payables Trade creditors Accruals and deferred income Social security and other taxation Other creditors Due within one year 2020 £ 27,932 78,618 14,790 2,479 123,819 2019 £ 26,479 41,712 14,497 2,435 85,123 45 20 Deferred revenue Arising from invoices in advance 2020 £ 7,698 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 21 Retirement benefit schemes Defined contribution schemes 2020 £ 7,698 2019 £ 1,250 2019 £ 1,250 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 £29,719 (2019: £16,334). As at the statement of financial position date the Company had unpaid pension contributions totalling £2,479 (2019: £2,435). 46 22 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: 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 Holder Dr. C. Chassagnole Dr. C. Chassagnole Dr. C. Chassagnole Dr. C. Chassagnole Dr. C. Chassagnole Dr. C. Chassagnole Dr. C. Chassagnole Dr. J. Millen Dr. J. Millen Dr. J. Millen Dr. P. Harper Dr. P. Harper Dr. P. Harper Dr. P. Harper Dr. P. Harper Dr. P. Harper Other staff Other staff Other staff Other staff Other staff Other staff Other staff Other staff Total Outstanding at start of period 118,565 32,331 129,381 322,615 659,641 350,000 267,000 1,453,923 520,000 400,000 76,645 12,932 51,752 129,046 258,092 140,000 41,648 91,107 77,628 188,605 54,596 403,781 490,000 533,000 - - - - - - - - - - - - - - - - - - - - - - - - 118,565 - - - - - - - - - 76,645 - - - - - 41,648 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 32,331 129,381 322,615 659,641 350,000 - 40.00 28-Feb-10 28-Feb-20 16,166 34.00 09-Nov-11 09-Nov-21 129,381 13.20 11-Feb-13 11-Feb-23 322,615 6.20 24-Mar-15 24-Mar-25 659,641 2.50 28-Feb-17 28-Feb-27 350,000 5.35 26-Mar-18 26-Mar-28 267,000 267,000 3.16 26-Mar-19 26-Mar-29 1,453,923 1,453,923 2.50 28-Feb-17 28-Feb-27 520,000 400,000 - 12,932 51,752 129,046 258,092 140,000 - 91,107 77,628 520,000 5.35 26-Mar-18 26-Mar-28 400,000 3.16 26-Mar-19 26-Mar-29 - 40.00 28-Feb-10 28-Feb-20 6,466 34.00 09-Nov-11 09-Nov-21 51,752 13.20 11-Feb-13 11-Feb-23 129,046 6.20 24-Mar-15 24-Mar-25 258,092 3.50 21-Dec-15 21-Dec-25 140,000 5.35 26-Mar-18 27-Mar-28 - 40.00 28-Feb-10 28-Feb-20 45,554 34.00 09-Nov-11 09-Nov-21 77,628 13.20 11-Feb-13 11-Feb-23 188,605 188,605 6.20 24-Mar-15 24-Mar-25 54,596 403,781 490,000 533,000 54,596 3.50 21-Dec-15 21-Dec-25 403,781 2.50 28-Feb-17 28-Feb-27 490,000 5.35 26-Mar-18 26-Mar-28 533,000 3.16 26-Mar-19 26-Mar-29 6,565,430 5,297,245 6,802,288 - 236,858 The weighted average share price at the date of the grant for share options granted in the year was £Nil as no share options were granted during the current year (2019: £0.0316). The options outstanding at 30 June 2020 had an exercise price ranging from £0.025 to £0.40, and a remaining contractual life of 8 years. During 2020, no options were granted. Options vest according to time and performance-based criteria. During 2019, options were granted on 26 March 2019. The weighted average fair value of the options on the measurement date was £0.011366. Options vest according to time and performance-based criteria. The options were granted with an exercise price of £0.032. 47 Fair value was measured using Black-Scholes share option pricing model. Inputs were as follows: Expected volatility Expected life Risk free rate 2020 2019 60.18% 2.34 years 0.664% 60.18% 2.34 years 0.664% 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 £8,212 related to equity settled share-based payment transactions were recognised in the year. (2019 -£21,928). 23 Share capital Ordinary share capital, issued and fully paid 95,588,965 Ordinary of 0.4p each (2019: 71,910,394) 2,481,657,918 Deferred of 0.036p each 2020 £ 2019 £ 382,355 287,641 893,397 893,397 1,275,752 1,181,038 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 2019 Issue of fully paid shares At 30 June 2020 71,910,394 2,481,657,918 23,678,571 - 95,588,965 2,481,657,918 Current year changes to Ordinary share capital On 3 June 2020, the Company issued 23,678,571 ordinary shares of 0.4p at a price of 3.5p per ordinary share for working capital purposes. 48 24 Share premium account At 30 June 2018 & at 30 June 2019 Issue of new shares Share issue expenses At 30 June 2020 £ 5,228,172 734,036 (65,471) 5,896,737 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). 25 Other reserves: share-based compensation reserve At 30 June 2018 Additions At 30 June 2019 Additions At 30 June 2020 £ 169,814 21,928 191,742 8,212 199,954 The share-based compensation reserve represents the credit arising on the charge for share options calculated in accordance with IFRS 2. 26 Retained earnings At 1 July 2018 Loss for the period At 30 June 2019 Loss for the period At 30 June 2020 £ (5,888,998) (104,040) (5,993,038) (64,424) (6,057,462) Retained earnings includes an amount of £237,889 (2019: £237,889) in relation to the Equity Swap Agreement in 2014 which under the Companies Act is not distributable. 49 27 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 2020 £ 59,293 2019 £ 57,331 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 28 Capital commitments At 30 June 2020 and 30 June 2019 the Company had no capital commitments. 2020 £ 6,013 2019 £ 4,818 6,013 4,818 29 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 23 to 26. 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. 30 Events after the reporting date The only material post-balance sheet event was the award of a contract by Astellas Pharma Inc. on 31 July 2020. 31 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 17. 50 32 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. 33 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 2020 £ 2019 £ (64,424) (104,040) (69,282) - (679) 422 9,083 8,212 (128,484) 38,696 6,448 (96,709) - (470) 13 8,381 21,928 (13,515) 25,358 (67,190) Cash absorbed by operations (200,008) (226,244) 51 

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