Feedback PLC (LON:FDBK)

Feedback PLC (LON:FDBK)


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Feedback PLC RNS Release

Final Results


RNS Number : 9503I
Feedback PLC
29 November 2018
 

Feedback plc

 

Final Results for year ended 31 May 2018: Invoiced sales up 51% following significant contract, investment and restructuring

 

Cambridge, UK, 29 November 2018 - Feedback plc (AIM: FDBK, "Feedback" or the "Company"), the specialist medical imaging technology company, announces its full year results for the year to 31 May 2018.

 

Operational highlights (including post period end)

·      CE marked release of TexRAD® Lung in November 2017

·      Restructuring in April 2018 brought TexRAD Ltd and Cambridge Computed Imaging (CCI) subsidiaries together under Feedback Medical brand

·      Signed world-wide non-exclusive distributorship with GE Healthcare in April 2018

·      Two year contract renewal with Papworth Hospital, Cambridge, UK for Cadran archiving system agreed in April 2018

·      First order through GE Healthcare received in August 2018

·      Samsung Medical Centre order for TexRAD® received in September 2018, following distribution agreement with ISG Korea in June 2017

·      European customer expansion for TexRAD®, signing four university hospitals in Belgium, France, Italy and Portugal during September and October 2018

 

Financial summary (including post period end)

·      Equity fundraise in March 2018 raised £440k before expenses, from new and existing investors

·      Invoiced sales for the year up 51% to £771k (FY2017: £508k) due to a significant two-year contract with an existing major customer, as well as investment in recruitment and training

·      Recognised revenue of £458k (FY2017: £466k)

·      Operating loss of £750k (FY2017: £300k)

·      Invoiced sales in first quarter of current financial year up 100% to £236k (Q1 FY2018: £117k), driven by international sales

·      Equity fundraise in November 2018 raised £1.375m before expenses, from new and existing investors

 

Dr Alastair Riddell, Executive Chairman of Feedback, commented:

 

"The last year has been a period of transition and major growth for Feedback. The Board has been strengthened and the restructuring of our operating subsidiaries into one integrated unit under the Feedback Medical brand is already bringing benefits, demonstrated by the significant improvement in sales performance. During the year and post period end, we secured significant investment from new and existing shareholders, enabling us to invest further in the sales and marketing of both TexRAD® and Cadran, including pursuing US FDA approval.

 

"As the role of AI in assisting medical management decisions begins to be appreciated, our products sit at the heart of this, assisting radiologists to analyse and assess digital images from CT, MRI and PET scans. The existing broad international customer base for our TexRAD® research product will form the springboard for the clinical product following regulatory approval and validation in clinical trials.

 

"Our Cadran Picture Archive and Communication System has the potential to assist machine learning from image data of hundreds of thousands of patients, enabling better insight into disease associations. This has potential applications in the selection of patients most likely to benefit from particular treatments or clinical trials, ultimately improving patient outcomes.

 

"We are encouraged by the measurable progress so far, which is continuing into the current financial year. The potential for more significant growth will be enabled by the renewed investor support and our more integrated and collaborative operating company led by an able and supportive board." 

 

 

Enquiries:

 

Feedback plc

Alastair Riddell, Executive Chairman

Lindsay Melvin, CFO

 

+44 (0)1954 718072

[email protected]

Allenby Capital Limited (Nominated Adviser)

David Worlidge / Asha Chotai

 

+44 (0)20 3328 5656

Peterhouse Corporate Finance Ltd (Joint Broker)

Lucy Williams / Duncan Vasey

 

+44 (0)20 7469 0936

Stanford Capital Partners Limited (Joint Broker)

Patrick Claridge / John Howes

 

Instinctif Partners

Rozi Morris/ Deborah Bell/ Phillip Marriage

+44 20 3815 8880

 

 

+44 (0)20 7457 2020

[email protected]

 

 

About Feedback plc

Feedback plc (AIM: FDBK) is a specialist medical imaging technology company providing innovative software and systems, through its fully-owned trading subsidiary, Feedback Medical Limited. Its products advance the work of radiologists, clinicians and medical researchers by improving workflows and giving unique insights into diseases, particularly cancer. Feedback Medical works with customers globally from headquarters in the internationally renowned scientific hub of Cambridge, UK. Its proprietary technologies are TexRAD®, the quantitative texture analysis tool and Cadran, a picture archiving communication system (PACS). For more information, see www.fbk.com

 

 

Chairman's statement

 

I am pleased to report that Feedback saw good sales progress during the year to 31 May 2018 as a result of its investment in staff training and new hires, along with the benefits of its improved structure and strategic focus.

 

During the year, Feedback underwent a restructuring process, bringing its two operating subsidiaries, TexRAD Ltd and Cambridge Computed Imaging Limited (CCI Ltd), together under the Feedback Medical brand. This has already resulted in improved synergies and communication and enables the teams to maximise their expertise and know how.  Creating the right company structure and culture is a critical step in galvanising the workforce and delivering success.  With the new executive team in place, supported by strong non-executive directors, Feedback is well-positioned to grow into a stronger, more efficient, global company at the forefront of the medical imaging field. 

 

There has been a strong focus on unlocking and developing the potential of the Company's existing products and in building closer collaborations with its partners. Now operating as one company, Feedback is actively building on its existing strong customer base with new, high calibre distributorships broadening its reach into important international markets such as India, China and South Korea. The growth of these distributorship relationships will be a key driver for future sales growth.

 

In order to also address the huge potential in the US market, post period end, the Company initiated plans for regulatory approval of TexRAD® with the US FDA including 510(k) as a medical device and Title 21 CFR Part 11 compliance for use in clinical trials of drug candidates for FDA marketing approval.

 

Through strategic partnerships with existing customers Feedback is evaluating the potential for the use of Feedback's analysis and storage products beyond the research stage, as well as exploring applications within the pharmaceutical industry. Following the CE marking of TexRAD® Lung, Feedback's proprietary quantitative analysis software for the assessment of lung lesions, the Company is continuing to develop the evidence base for its use in clinical applications. It is undergoing clinical evaluation in pilot installations within three UK hospitals and the results of these pilots will inform the next stage of maximising this important technology for clinical use.

 

Feedback also recognises the potential in developing new products based on its existing technologies and expertise within software and machine learning. It is working closely with existing customers to identify unmet needs, including further TexRAD® derivatives for multiple clinical indications.

 

Feedback's Board of Directors has been strengthened during the year with the addition of Tim Irish and Simon Sturge as Non-Executive Directors and Lindsay Melvin as Chief Financial Officer. Following the departure of David Crabb as CEO in July 2018, I have stepped up to the role of Executive Chairman with much more involvement in company activities and I believe that with its reorganisation and renewed strategic focus, Feedback has the structure and expertise within the senior management team to enable it to maximise the opportunities and commercial momentum it is seeing. The current management arrangements are working well and have helped the Company keep costs under control. However, now that the funding of the Company has been secured for the foreseeable future, the Company has increased its efforts to recruit a new Chief Executive Officer. A further announcement will be made in due course.

 

Dr AJ Riddell

Executive Chairman

29 November 2018

 

 

Financial summary

 

In the year to 31 May 2018, Feedback invoiced sales of £771k, a 51% increase on the previous year (FY 2017: £508k), with recognised revenue in the year remaining fairly flat at £458k (FY 2017: £466k). The difference between sales and revenue is due to the contract structures which typically comprise installation costs, a contract for a year or more, followed by 20% annual maintenance fee thereafter. The increased level of sales will take time to work through into increased revenue.

 

The significant increase in invoiced sales in the period is a result of a significant two-year contact with an existing major customer and the Company's investment in its employees with training and recruitment of four new hires.  The associated recruitment, restructuring and other costs have meant that the Company's operating loss has risen to £750k (FY 2017: £300k).  However, the investment has led to significant improvement in sales performance and anticipated long term growth, with the momentum importantly continuing into the 2019 financial year. In line with International Financial Reporting Standards, Feedback's accounting policy is to spread the income from its software licence and support sales over the duration of the contract, usually one to two years. The Group's balance sheet contains a significant deferred revenue lability to reflect this.

 

In late March 2018, the Company raised £440k, before expenses, by way of a placing and subscription of 35,200,000 new Ordinary Shares at a price of 1.25 pence per share, with new and existing investors, the proceeds of which were invested in product development, sales and marketing with the balance being used for general working capital purposes. Post year end, in November 2018, the Company raised £1.375m before expenses, by way of a placing and subscription of 91,666,666 new Ordinary Shares at a price of 1.5 pence per share with new and existing investors. The proceeds of this fundraise will be invested in growing Feedback's sales and marketing and product support capabilities as well as working towards US FDA 510(k) approval for TexRAD to open up the significant US market.

 

Operational cash generation has been satisfactory and reflects customer payments for new purchases and contracts before the periods in which the revenue is recognised. The March 2018 share issue, net of costs, also contributed to a healthy cash balance at the financial year end. 

 

 

Operational review

 

Feedback Medical

Feedback's former operating subsidiaries TexRAD Limited and Cambridge Computed Imaging Ltd (CCI Ltd) have now been united under the Feedback Medical brand - CCI Ltd has been renamed Feedback Medical Limited (FM Ltd) and TexRAD Ltd has ceased to trade but continues to hold intellectual property on behalf of FM Ltd. This has resulted in the streamlining and better integration of operations and an improved culture of sharing information, expertise and new business opportunities. FM Ltd develops and sells Group's proprietary technologies - TexRAD®, the quantitative texture analysis platform and Cadran, a Picture Archiving and Communication System (PACS).

 

TexRAD

TexRAD® technology is currently installed in over 50 of the world's leading research institutions across Europe, North America, Asia and Australasia. It has seen growing interest during the year, with nineteen new customers. These have been driven by international orders facilitated by new distributor agreements with Korea Computer Motion ISG in June 2017 and Boya Digital Technology (Beijing) Co. Ltd. in July 2017 for sales and distribution of TexRAD® in South Korea and the People's Republic of China. Furthermore a major, non-exclusive global distribution agreement was signed with GE Healthcare in April 2018 with the initial focus being on the Indian market. These agreements represent a significant step forward in expanding TexRAD® sales to meet the fast-growing demand in Asian markets.  

 

TexRAD® has traditionally been used as a research platform for image analysis in many disease areas, primarily oncology, including all major tumour types - head and neck, oesophagus, breast, lung, liver, renal, prostate, colorectal, soft tissue sarcoma, melanoma and lymphoma. Recent new applications are emerging in non-oncological areas such as cardiovascular and cerebrovascular diseases in the top UK academic university hospitals. Furthermore, TexRAD® also has potential as a clinical decision-making tool where the application of machine learning or AI to TexRAD® algorithms may assist radiologists in their image interpretation. This positions the Group within this exciting new modality as applied to health care decision making.

 

The Group received its first Class 1, software only, medical device CE certification, for use in the EU, in November 2017 for the particular application in lung cancer (TexRAD® Lung). This application provides additional image analysis beyond the capability of the human eye, for the interpretation of CT and PET scans of patients with lung cancer, giving clinicians a fuller picture of a patient's disease and enabling more informed clinical decision-making.

 

TexRAD® Lung's quantitative software integrates with existing medical imaging systems, providing an objective assessment of the architecture, evolution and prognosis of lung lesions based on texture analysis.  It is run on the Cadran imaging and retrieval system and it is capable of reviewing decades-worth of data extracting information of lesion size, density, heterogeneity and other features of clinical significance which can be missed by radiologists or nuclear-medicine physicians.  TexRAD® Lung's software algorithm provides the ability to rapidly assemble an accurate database, a key step in applying machine learning and AI to solving healthcare problems. 

 

To enable Feedback to also address the huge clinical potential for its technology within the US market, post period end it has initiated plans for the regulatory approval of TexRAD® Lung with the US FDA. This will include 510(k) approval as a medical device and Title 21 CFR part 11 compliance for use in clinical trials of drug candidates for FDA marketing approval.

 

During the year, Feedback initiated pilot installations of TexRAD® Lung at three UK university hospitals: University College Hospitals NHS Trust London, Royal Papworth Hospital Cambridge and Leeds Teaching Hospitals NHS Trust Leeds. Preliminary results from independent pilot studies seek to validate whether TexRAD® Lung has a prognostic ability in routinely acquired staging PET/CT images in lung cancer. An abstract of the results has been submitted for presentation at the European Congress of Radiology in Vienna in February 2019.

 

The outcomes from these pilot installations will guide the strategy on rolling out TexRAD® Lung across Feedback's global customer base and also on applying the platform technology to other clinical indications. The Company will continue to seek clinical guidance and input from qualified clinicians and key opinion leaders to ensure that future products are primed for adoption based on clinical need. 

 

Discussions with Alliance Medical for integrating TexRAD® Lung into its network of PET/CT scanners in UK hospitals continue. The Company recognises that there has been little announced progress on these discussions, but with the assistance of new Medical Director, Prof Rory Shaw, the Board believes that the improved company structure will result in progress on these discussions in the near term.

 

Cadran

TexRAD® is typically installed on the Cadran picture archiving platform. Cadran PACS technology provides storage and display of medical images throughout a hospital. It has been used successfully at the Royal Papworth Hospital for over 15 years and a further two-year contract renewal for the Cadran platform was announced in April 2018. Cadran is also installed in a number of NHS sites in the East of England. The Cadran platform has significant potential to bring a competitive product offering to new global markets especially in developing economies. Cadran products can support the storage and viewing needs of individual clinicians right up to mid-scale hospital departments and specialist centres. 

 

R&D progress

Feedback recognises the potential in developing new products from its existing technologies and expertise within software and machine learning. It is working closely with existing customers to identify unmet needs, including further TexRAD® derivatives for multiple clinical indications. To increase its software development capabilities the Company is continuing and expanding its collaboration with Future Processing to develop new imaging software products.

 

This year Feedback has started to capitalise development costs for writing off against income generated in future accounting periods. The Directors consider that that this development expenditure will generated future economic benefits. This is based upon customer feedback on required product enhancements.

 

 

Current trading and outlook

The increased sales momentum seen particularly towards the end of the last financial year is continuing into the current financial year, with significant traction coming from the Asian markets. With Feedback's first clinical product approved in the EU and pilot launches underway, there is additional sales growth potential to be addressed in the mid to long term.

 

On 7 June 2018, Feedback announced its revised strategy to build a global Company. This strategy, of operating as one company, building strategic partnerships with customers and distributors, developing the clinical evidence base for the TexRAD® platform and bringing new products to market, is already being implemented. 

 

The benefits of this strategy are evident from sales for the first quarter of the current financial year with a 100% increase in invoiced sales of both TexRAD® and Cadran product licences in the first quarter to £236k, compared to £117k in the first quarter of FY 2018. International sales accounted for most of this growth, increasing by over 200%.

 

With the most recent fundraising, Feedback is well positioned to be able to capitalise on the growing industry recognition and need for AI and machine learning. Ongoing investment in its sales and marketing, product development and in talented staff will continue to grow short to medium term sales whilst the Company's longer term strategy will be enabled by addressing the large opportunity within the US market.

 

 

 

PRINCIPAL RISKS AND UNCERTAINTIES

Economic and market risks

FM Ltd is in the medical imaging market. The market is fragmented and the future success of the business is dependent on the ability of Feedback Medical to secure new and renew current contracts. These contracts are often with Government supported organisations and the timing of these can be dependent on market conditions. The Company's dependence on the award or renewal of contracts means that its revenue stream is not constant and has the potential to be particularly irregular.

 

Regulatory approval

The development, evaluation and marketing of the Company's products and ongoing research and development activities are subject to regulation by governments and regulatory agencies in all territories within which the Company intends to market its products (whether itself or through a partner) and there can be no assurance that any of the Company's products will successfully complete the trial process or that regulatory approvals to market these products will ultimately be obtained. Failure to obtain regulatory approvals for its products could threaten the Company's ability to trade in the long term.

The time taken to obtain regulatory approval varies between territories and there can be no assurance that any of the Company's products will be approved in any territory within the timescale envisaged by the Board, or at all, and this may result in a delay, or make impossible, the commercial exploitation of the Company's products. Furthermore, each regulatory authority may impose its own requirements and may refuse to grant, or may require additional data before granting an approval, even though the relevant product may have been approved by another country's authority.

 

If regulatory approval is obtained, products will be subject to continual review and there can be no assurance that such approvals will not be withdrawn or restricted. Changes in applicable legislation or regulatory policies, or discovery of problems with products may result in the imposition of restrictions on sale, including withdrawal of the product from the market, or may otherwise have an adverse effect on the Company's business and/or revenue streams.

 

Product Development Risk

The Group capitalises development costs where there is an expectation that commercially successful products will be developed. The products in development may cost more and/or take longer to develop than the current estimates. It is possible that commercially successful products may not be developed The Board monitors progress on product development on a regular basis and discusses with potential customers their requirements to mitigate this risk.

 

Liquidity
Management of liquidity risk concentrated on the maintenance of appropriate credit lines and funding sources to ensure adequate cash resources for the Company's operations. The Board regularly monitors the cash position of the Company and ongoing cash requirements. The Board believes the Company is likely to have access to adequate cash resources from a combination of operational cash generation and by obtaining further equity finance from the financial markets to support its corporate strategy.

Credit Risk

The Company's credit risk is primarily attributable to its cash and cash equivalents and trade receivables. The credit risk on other classes of financial assets is considered insignificant. Credit risk is managed through credit review and approval processes for new customers and ongoing review of each customer's credit history.

 

Other Risks

There is a risk that existing and new customer relationships will not lead to the income currently forecast (especially, as noted above, from new products currently in development). As with other technology businesses, the Company is reliant on a small number of highly skilled staff.

 

Post Balance Sheet Events

On 15 November 2018, the Company raised £1.375 million by the issue of 91,666,666 new ordinary shares at a price of 1.5 pence per share.

 

Key Performance Indicators

During the year the Company maintained its cash position as a key performance indicator. The cash balance at 31 May 2018 was £632,285 (2017 £696,811). The other key performance indicator being invoiced sales.

 

By Order of the Board on 29 November 2018

Dr A J Riddell

 

 

INDEPENDENT AUDITORS REPORT

 

Opinion

We have audited the financial statements of Feedback PLC ("Feedback") for the year ended 31 May 2018 which comprise the group statement of comprehensive income, the group and parent company balance sheets, the group and parent company statements of changes in equity, the group and parent company cash flow statements and the notes to the financial statements, including its 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 group's and of the parent company's affairs as at 31 May 2018 and of the group's loss for the year then ended;

• have been properly prepared in accordance with IFRSs as adopted by the European Union; and

• have been prepared in accordance with the requirements of the Companies Act 2006

 

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

 

Conclusions relating to going concern

We draw attention to the Note 3c in the financial statements, which indicates that the group incurred a net loss of £630,787 and had a net cash outflow of £357,585 from operating activities during the year ended 31 May 2018.  As stated in Note 3c, these facts, along with other matters may indicate that a material uncertainty exists that may cast significant doubt on the Group's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

 

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

 

Key audit matter

Our response

Fraud and error in revenue recognition

 

We reviewed the group's revenue streams to consider whether revenue is recognised and treated appropriately, and in accordance with IFRS.  Our review included an assessment of deferred revenue and substantive testing procedures.

 

In addition to our review of income recognised during the year we reviewed the recognition and recoverability of trade receivables at the year-end to assess the validity of their recognition and carrying values as at 31 May 2018.

 

Upon the completion of our work we did not note any unadjusted material misstatements of revenue.

 

Intangible assets - Capitalised development costs

 

 

We reviewed and agreed the amounts incurred through the use of third party developers to develop the group's products.  The rationale for recognition of these costs was discussed with management and the group's technical director, and the group's business plans reviewed.

 

Upon completion of our work we considered management's judgement in respect of the recognition of development costs and subsequent decision to recognise these costs as an intangible asset to be reasonable, however as noted in Note 3p of the financial statements there remains a risk that a project currently assessed as being likely to be successful may fail to reach the desired level of commercial or technological feasibility.  

 

Our application of materiality

The scope and focus of our audit was influenced by our assessment and application of materiality.  We define materiality as the magnitude of misstatement that could reasonably be expected to influence the readers and the economic decisions of the users of the financial statements. We use materiality to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and on the financial statements as a whole.

 

Due to the nature of the group and its operations we considered expenditure and related funding to be the main focus for the readers of the financial statements, accordingly this consideration influenced our judgement of materiality.  Based on our professional judgement, we determined materiality for the group to be £14,000, based on 2% of the pre tax net loss of the group.  For the parent company, £4,000 is used as materiality being approximately 1% of the loss for the year.  This lower level is considered appropriate given the status of the company and its role within the group which is that of a parent holding company bearing administrative expenses.

 

Based on our risk assessments and our assessment of the overall control environment, our judgement was that performance materiality (i.e. our tolerance for misstatement in an individual account or balance) for the group was 75% of materiality, namely £10,500.  The equivalent figure for the parent company was set at £3,000. 

 

We agreed to report to the Audit Committee all audit differences more than £700, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also reported 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

As Feedback is a group comprising three trading entities based in Cambridge the scope of our work was the audit of the financial statements of the group and the individual financial statements of the subsidiaries. Our audit strategy was developed by using our audit planning process to obtain an understanding of the group, its activities, developments in the year and its control environment.  Our audit testing was informed by this understanding of the group and accordingly was designed to focus on areas where we assessed there to be the most significant risks of material misstatement.

 

During the audit we performed specifically designed audit tests on significant transactions, balances and disclosures.  Our testing included a review of systems and controls relevant to our audit and our approach was primarily based around substantive audit tests and analytical review.

 

To maintain and reinforce our knowledge of the group and the risks it faces we met with management and Non-Executive directors prior to the audit planning process.  This information gathering process continued throughout the audit process, as we reassessed and re-evaluated audit risks where necessary and amended our approach accordingly.

 

Other information

The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

 

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

 

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

• the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.

 

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the group and parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

 

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 by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

• the parent company financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of directors' remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

 

Responsibilities of directors

As explained more fully in the directors' responsibilities statement set out in the annual report, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the financial statements, the directors are responsible for assessing the group and parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or parent company or to cease operations, or have no realistic alternative but to do so.

 

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

 

A further description of our responsibilities for the audit of the financial statements is located on the FRC's website at: www.frc.org.uk/auditorsresponsibilities. 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.

 

Laura Mott (Senior Statutory Auditor)      

29 November 2018

 

For and on behalf of

haysmacintyre, Statutory Auditors

10 Queen Street Place

London

EC4R 1AG

 

 

 

 

STATEMENT OF COMPREHENSIVE INCOME

 

 

 

 

Notes

2018

£

2017

£

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

4

458,389

465,885

 

 

 

 

 

 

Cost of sales

 

 

 

(16,083)

(11,007)

 

 

 

 

 

 

Gross profit

 

 

 

442,306

454,878

 

 

 

 

 

 

Other income

 

 

 

-

150

 

 

 

 

 

 

Other operating expenses

 

 

5

    (1,190,159)

(755,960)

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

 

6

(747,853)

(300,932)

 

 

 

 

 

 

Net finance income

 

 

7

59

5

 

 

 

 

 

 

Loss on ordinary activities before taxation

 

 

 

(747,794)

(300,927)

 

 

 

 

 

 

Tax credit

 

 

9

117,007

34,924

 

 

 

 

 

 

 

Loss on ordinary activities after tax

 

 

 

(630,787)

(266,003)

attributable to the equity shareholders of the Company

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive expense for the year

 

 

 

 

(630,787)

 

(266,003)

 

 

 

 

 

 

 

 

 

 

 

 

LOSS PER SHARE (pence)

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

11

(0.25)

(0.11)

 

 

 

 

 

 

 

 

 

 

 

 

               

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

GROUP

Share Capital

Share Premium

Capital Reserve

Retained Earnings

Translation Reserve

Convertible Debt Option Reserve

Total

 

£

£

£

£

£

£

£

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 June 2016

509,185

1,593,136

299,900

(2,251,476)

(209,996)

189,000

129,749

 

 

 

 

 

 

 

 

New shares issued

105,982

833,018

-

-

-

(189,000)

750,000

 

 

 

 

 

 

 

 

Costs associated with the

raising of funds

-

(50,121)

-

-

-

-

(50,121

 

 

 

 

 

 

 

 

Share option and warrant costs

-

-

-

5,726

-

-

5,726

 

 

 

 

 

 

 

 

Total comprehensive expense for the year

 

-

 

-

 

-

 

(266,003)

 

-

 

-

 

(266,003)

 

 

 

 

 

 

 

 

At 31 May 2017

615,167

2,376,033

299,900

(2,511,753)

(209,996)

-

569,351

 

 

 

 

 

 

 

 

New Shares issued

 

  88,875

355,500

-

-

-

 

444,375

Costs associated with the

raising of funds

 

-

(17,600)

-

         -

-

-

(17,600)

Total comprehensive expense for the year

-

 

-

 

-

 

(630,787)

 

              -

 

              -

 

(630,787)

 

 

 

 

 

 

 

 

 

At 31 May 2018

704,042

2,713,933

299,900

(3,142,540)

(209,996)

-

365,339

 

 

COMPANY

 

 

 

Share Capital

 

Share Premium

 

Retained Earnings

 

Convertible Debt Option Reserve

 

Total

 

 

 

£

£

£

£

£

 

 

 

 

 

 

 

 

At 1 June 2016

 

 

509,185

1,593,136

(2,263,153)

189,000

28,168

 

 

 

 

 

 

 

 

New shares issued

 

 

105,982

833,018

-

(189,000)

750,000

 

 

 

 

 

 

 

 

Costs associated with the raising of funds

 

 

-

(50,121)

-

-

(50,121)

 

 

 

 

 

 

 

 

Share option and warrant costs

 

 

-

-

5,726

-

5,726

 

 

 

 

 

 

 

 

Total comprehensive expense for the year

 

 

 

-

 

-

 

(123,357)

 

-

 

(123,357)

 

 

 

 

 

 

 

 

At 31 May 2017

 

 

615,167

2,376,033

(2,380,784)

-

610,416

 

 

 

 

 

 

 

 

New shares issued

 

 

 

88,875

355,500

-

-

444,375

Costs associated with the

raising of funds

 

 

 

-

(17,600)

-

-

(17,600)

Total comprehensive expense for the year

 

 

 

-

 

-

 

(931,379)

 

-

 

(931,379)

 

 

 

 

 

 

 

 

At 31 May 2018

 

 

704,042

2,713,933

(3,312,163)

-

105,812

 

 

 

CONSOLIDATED BALANCE SHEET

 

 

 

2018

2017

 

Notes

 

£

£

ASSETS

 

 

 

 

Non-current assets

 

 

 

 

Property, plant and equipment

13

 

6,560

4,109

Intangible assets

14

 

154,416

80,235

 

 

 

160,976

84,344

Current assets

 

 

 

 

Trade receivables

 

 

88,300

49,982

Other receivables

15

 

173,562

62,328

Cash and cash equivalents

 

 

632,285

696,811

 

 

 

894,147

809,121

 

 

 

 

 

Total assets

 

 

1,055,123

893,465

 

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

Capital and reserves attributable to the Company's equity shareholders

 

 

 

 

Called up share capital

18

 

704,042

615,167

Share premium account

18

 

2,713,933

2,376,033

Capital reserve

18

 

299,900

299,900

Translation reserve

18

 

(209,996)

(209,996)

Retained earnings

18

 

(3,142,540)

(2,511,753)

TOTAL EQUITY

 

 

365,339

569,351

 

 

 

 

 

LIABILITIES

 

 

 

 

Deferred tax liabilities

9

 

-

4,250

 

 

 

-

4,250

Current liabilities

 

 

 

 

Trade payables

 

 

57,400

68,948

Other payables

16

 

443,459

250,916

 

 

 

 

 

 

 

 

500,859

319,864

 

 

 

 

 

 

Liabilities due after more than one year

 

 

 

 

Other payables

16

 

188,925

-

 

 

 

 

 

Total liabilities

 

 

689,784

324,114

 

 

 

 

 

TOTAL EQUITY AND LIABILITIES

 

 

1,055,123

893,465

 

 

 

COMPANY BALANCE SHEET

 

 

 

2018

2017

 

Notes

 

£

£

ASSETS

 

 

 

 

Non-current assets

 

 

 

 

Investments

12

 

-

-

 

 

 

 

-

 

 

 

 

 

Current assets

 

 

 

 

Other receivables

15

 

32,426

39,733

Cash and cash equivalents

 

 

             181,883

654,413

 

 

 

 

 

 

 

 

214,309

694,146

 

 

 

 

 

Total assets

 

 

214,309

694,146

 

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

Capital and reserves attributable to the Company's equity shareholders

 

 

 

 

 

 

Called up share capital

18

 

704,042

615,167

Share premium account

18

 

          2,713,933

2,376,033

Retained earnings

18

 

(3,312,163)

(2,380,784)

 

 

 

 

 

 

 

 

105,812

610,416

 

 

 

 

 

 

 

 

 

 

TOTAL EQUITY

 

 

105,812

610,416

 

 

 

 

 

Current liabilities

 

 

 

 

Trade payables

 

 

38,000

49,508

Other payables

16

 

               70,497

34,222

 

 

 

 

 

Total current liabilities

 

 

108,497

83,730

 

 

 

 

 

Total Equity and Liabilities

 

 

214,309

694,146

 

The company loss for the year was £931,379 (2017: £123,357).

 

The financial statements were approved and authorised for issue by the Board of Directors on 29 November 2018 and were signed below on its behalf by:

Dr A J Riddell

Chairman

 

 

 

 

 

CONSOLIDATED CASHFLOW STATEMENT

 

2018

2017

 

£

£

 

 

 

Cash flows from operating activities

 

 

Loss before tax

(747,794)

(300,927)

Adjustments for:

 

 

Share option costs

 

5,726

Net finance income

(59)

(5)

Depreciation and amortisation

57,143

48,182

Impairment of investment

-

1,000

Increase in trade receivables

(38,318)

(9,087)

Decrease /(Increase) in other receivables

1,523

(36,246)

(Decrease)/Increase in trade payables

(11,546)

47,400

Increase in other payables

381,466

95,728

Corporation tax received

-

57,624

 

390,209

210,322

 

 

 

Net cash used in operating activities

(357,585)

(90,605)

 

 

 

Cash flows from investing activities

 

 

Purchase of tangible fixed assets

(6,250)

(2,941)

Purchase of intangible assets

(127,525)

(15,200)

Net finance income received

59

5

 

 

 

Net cash used in investing activities

(133,716)

(18,136)

 

 

 

Cash flows from financing activities

 

 

Net proceeds of share issue

426,775

699,879

 

 

 

Net cash generated from financing activities

426,775

699,879

 

 

 

Net (decrease)/increase in cash and cash equivalents

(64,526)

591,138

Cash and cash equivalents at beginning of year

696,811

105,673

 

 

 

Cash and cash equivalents at end of year

632,285

696,811

 

 

 

COMPANY CASH FLOW STATEMENT

 

2018

2017

 

£

£

 

 

 

Cash flows from operating activities

 

 

Loss before tax

(931,379)

(123,357)

Adjustments for:

 

 

Share options costs

-

5,726

Net finance income

(59)

(5)

Release of intercompany receivable

-

(100,886)

Decrease in other receivables

7,307

77,814

(Decrease)/Increase in trade payables

(11,508)

32,607

Increase in other payables

36,275

1,138

Impairment of investment

-

1,000

 

32,015

17,395

 

 

 

Net cash used in operating activities

(899,364)

(105,963)

 

 

 

Cash flows from investing activities

 

 

 

 

 

Net finance income

59

5

Net cash generated from investing activities

59

5

 

 

 

Cash flows from financing activities

 

 

 

 

 

Net proceeds of share issue

426,775

699,879

Net cash generated from financing activities

426,775

699,879

 

 

 

Net (decrease)/increase in cash and cash equivalents

(472,530)

593,921

Cash and cash equivalents at beginning of year

654,413

60,492

 

 

 

Cash and cash equivalents at end of year

181,883

654,413

 

 

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

1.         General information

The Company is a public limited company domiciled in the United Kingdom and incorporated under registered number 00598696 in England and Wales. The Company's registered office is Unit 5, Grange Park, Broadway, Bourn, Cambridgeshire, CB23 2TA.

The Company is listed on AIM of the London Stock Exchange. These Financial Statements were authorised for issue by the Board of Directors on the 29 November 2018.

2.         Adoption of new and revised International Financial Reporting Standards

                No new International Financial Reporting Standards ("IFRS"), amendments or interpretations became effective in the year ended 31 May 2018 which had a material effect on this financial information.

 

At the date of approval of this financial information, the following IFRS Standards and Interpretations, which have not been applied in these Financial Statements, were in issue but not yet effective. These new Standards, Amendments and Interpretations are those in issue but not yet effective which are expected to apply to the Group and are effective for accounting periods beginning on or after the dates shown below:

 

IFRS Standards and Interpretations issued (and EU adopted) but not yet effective that are applicable to the Company are:

 

Mandatory for accounting periods commencing on or after 1 January 2018:

 

·      IFRS 9 - Financial Instruments

·      IFRS 15 - Revenue from Contracts with Customers

·      IFRIC Interpretation 22 - Foreign Currency Transactions and Advance Consideration

 

                Mandatory for accounting periods commencing on or after 1 January 2019:

 

·      IFRS 16 - Leases

 

Date of implementation in the European Union not yet known:

 

·      IFRS 14 - Regulatory Deferral Accounts

The Group has not early adopted these amended standards and interpretations. The Directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the reported results, but are currently reviewing their impact.      

 

3.         Significant accounting policies

(a)   Basis of preparation

These financial statements have been prepared in accordance with those IFRS standards and IFRIC interpretations issued and effective or issued and early adopted as at the time of preparing these statements. The policies set out below have been consistently applied to all the years presented.

 

No separate income statement is presented for the parent Company as provided by Section 408, Companies Act 2006.

 

(b)   Basis of consolidation

The Group financial statements consolidate the financial statements of Feedback plc and its subsidiaries (the "Group") for the years ended 31 May 2018 and 2017 using the acquisition method.

 

The financial statements of subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies.  All inter-company balances and transactions, including unrealised profits arising from them, are eliminated.  Subsidiaries are fully consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group.

 

(c)   Going Concern

 

The Group incurred a net loss of £630,787 and had a net cash outflow of £357,585 from operating activities for the year. Matters which may indicate a material uncertainty about the Group's ability to continue as a going concern. However, on 15 November 2018 the Company raised a total of £1.375m (before expenses) through a placing to both invest further in product development and in sales and marketing.

 

Therefore, having updated the Group's formal business plan the Directors consider that the Group and the Company are likely to have adequate cash resources for at least the next twelve months to 31 December 2019, from existing cash balances and resources generated from operating cash flows to enable continued product development and international expansion. Accordingly, the Directors believe that the Group and Company are a going concern and have therefore prepared the financial statements on a going concern basis.

 

(d)   Intangible assets

Intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses. An intangible asset acquired as part of a business combination is recognised outside goodwill if the asset is separable or arises from contractual or other legal rights and its fair value can be reliably measured.

 

The significant intangible asset cost related to software development of products which are integral to the trade of the Group's medical imaging products. Amortisation is recognised in other operating expenses in the income and expenditure account.

 

The carrying value of intangible assets is reviewed for impairment whenever events or changes in circumstance indicate that the carrying value may not be recoverable. Impairment losses are recognised in other operating expenses in the income and expenditure account. Impairment reviews are carried out annually.

 

Research expenditure is recognised as an expense as incurred. Costs incurred on development projects (relating to the design and testing of new or improved products) are recognised as intangible assets when it is probable that the project will be a success, considering its commercial and technological feasibility, and costs can be measured reliably. Other development expenditure is recognised as an expense as incurred. Development costs that have a finite useful life and that have been capitalised are amortised from the commencement of the commercial production of the product on a straight line basis as follows:

 

Intangible asset

Useful economic life

 

 

Patents

Over the life of the patent

Customer relationships

4 years

 

Development costs capitalised in the year relate to products and product improvements which are yet to be ready for use. They are not yet amortised and will be amortised from the date the products are ready.

 

(e)   Valuation of Investments

 

Investments held as non-current assets are stated at cost less provision for impairment.

 

(f)    Cash and cash equivalents

 

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. When used, bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

 

(g)   Goodwill

Business combinations on or after 1 April 2006 are accounted for under IFRS 3 using the acquisition method. Any excess of the cost of business combinations over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities is recognised in the balance sheet as goodwill and is not amortised.

 

After initial recognition, goodwill is not amortised but is stated at cost less accumulated impairment loss, with the carrying value being reviewed for impairment, at least annually and whenever events or changes in circumstance indicate that the carrying value may be impaired.

 

For the purposes of impairment testing, goodwill is allocated to the related cash generating units monitored by management. Where the recoverable amount of the cash generating unit is less than its carrying amount, including goodwill, an impairment loss is recognised in the income statement.

 

(h)   Property, plant and equipment

 

All property, plant and equipment is stated at historical cost less depreciation. Depreciation on other assets is provided on cost or valuation less estimated residual value in equal annual instalments over the estimated lives of the assets. The rates of depreciation are as follows:

 

                Plant and equipment                                                                                                                                  10 - 50% p.a.
                Motor vehicles                                                                                                                                          25 - 33% p.a.

 

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the income statement.

 

(i)    Leases

Rental costs under operating leases are charged to the income statement in equal annual amounts over the period of the lease.

 

(j)    Foreign currency

Transactions denominated in foreign currencies are translated into sterling at the rates ruling at the date of the transactions.  Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the rates ruling at that date. These translation differences are dealt with in the income statement.

 

(k)   Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in the normal course of business, net of VAT. The company recognises revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the company's activities, as described below.

 

Revenue relating to software development that is contracted on a time and materials basis is recognised as the services are performed.

 

Revenue relating to the sale of software licences is recognised over the period to which the licence relates.

 

Revenue from services provided is determined by management's assessment of the percentage completed of each contract. Management determine the percentage of completion by considering the work performed to date based upon internal reports and agreed project milestones.

 

(l)    Pension Costs

The Group operated a defined contribution pension scheme during the year.  The pension charge represents the amounts payable by the Group to the scheme in respect of that year.

 

(m)  Taxation

The tax credit represents the sum of the current tax credit and deferred tax credit.

 

The tax currently payable is based on taxable profit for the period.  Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated by using tax rates that have been enacted or substantively enacted by the balance sheet date.

 

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount 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 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 the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction which affects neither the tax profit nor the accounting profit.

 

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

 

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled based upon tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.

 

(n)   Financial instruments

In relation to the disclosures made in note 17:

·      short term debtors and creditors are not treated as financial assets or financial liabilities except for the currency disclosures.

·      the Group does not hold or issue derivative financial instruments for trading purposes.

(o)   Employee share options and warrants

The Group has applied the requirements of IFRS 2 Share-based Payment.

 

The Group has issued equity-settled share-based payment transactions to certain employees and has issued warrants to the vendors of the acquired subsidiary, TexRAD Limited.  Equity-settled share-based payment transactions are measured at fair value at the date of grant. The fair value determined at the grant date of equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest. Fair value is measured by use of the Black Scholes option pricing model. The expected life used in the model has been adjusted, based on management's best estimate, for the effect of non-transferability, exercise restrictions, and behavioural considerations.

 

(p)   Key sources of estimating uncertainty

The preparation of financial statements requires the Board of Directors to make estimates and judgments that affect reported amounts of assets, liabilities, revenues and expenses. These estimates are based on historical experience and various other assumptions that management and the Board of Directors believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. The key areas of judgement are:

 

·      Intangible assets - Patents are included at cost less amortisation and impairment. Customer lists are included at cost less amortisation. Other intangible assets and development costs are recognised only when it is probable that a project will be a success. There is a risk therefore that a project previously assessed as likely to be successful fails to reach the desired level of commercial or technological feasibility. Where there is no probable income to be generated from these assets an estimation of the carrying value and the impairment of the intangible assets and development costs, including goodwill, has been made.

 

·      Fair value measurement - share options and warrants issued included in the Group's and Company's financial statements require measurement at fair value. The calculation of fair values requires the use of estimates and judgements.

 

4.         Segmental reporting

The Directors have determined that the operating segments based on the management reports which are used to make strategic decisions are medical imaging and head office.

 

Year ended 31 May 2018

 

 

 

 

Medical Imaging

Head Office

Total

 

 

£

£

£

Revenue

 

 

 

 

External

 

458,389

-

458,389

Expenditure

 

 

 

 

External

 

(774,179)

(432,004)

(1,206,183)

 

 

 

 

 

Loss before tax

 

(315,790)

(432,004)

(747,794)

 

 

 

 

 

 

 

 

 

 

Balance sheet

 

 

 

 

External Assets

 

840,814

214,309

1,055,123

External Liabilities

 

(581,287)

(108,497)

(689,784)

 

 

 

 

 

 

 

259,527

105,812

365,339

 

 

 

 

 

Capital expenditure

 

            133,775

-

133,775

 

 

 

 

 

 

 

 

 

 

Year ended 31 May 2017

 

 

 

 

 

 

 

 

 

 

 

£

£

£

Revenue

 

 

 

 

External

 

465,885

-

465,885

Expenditure

 

 

 

 

External

 

(535,027)

(231,785)

(766,812)

 

 

 

 

 

Loss before tax

 

(69,142)

(231,785)

(300,927)

 

 

 

 

 

 

 

 

 

 

Balance sheet

 

 

 

 

External Assets

 

197,247

696,218

893,465

External Liabilities

 

(310,916)

(13,197)

(324,113)

 

 

 

 

 

 

 

(113,669)

683,021

569,352

 

 

 

 

 

Capital expenditure

 

18,141

-

18,141

 

 

 

 

 

Reported segments' assets are reconciled to total assets as follows:

 

 

 

 

 

 

External revenue by

Total assets by

Capital expenditure by

 

location of customer

location of assets

location of assets

 

2018

2017

2018

2017

2018

2017

 

£

£

£

£

£

£

 

 

 

 

 

 

 

United Kingdom

282,265

250,582

1,055,123

893,465

133,775

18,141

Europe

              15,875      

96,672

-

-

-

-

Rest of the world

160,249

118,631

-

-

-

-

Total

458,389

465,885

1055,123

893,465

133,775

18,141

 

 

 

 

 

 

 

                     

                  Revenue from one customer in the United Kingdom totalled £150,000 in the year to 31 May 2018.

 

5.         Other operating expenses

 

 

 

 

2018

2017

 

 

 

 

£

£

 

 

 

 

 

 

Administrative costs:

 

 

 

 

 

   Other

 

 

 

1,133,016

707,777

   Amortisation and depreciation costs

 

 

 

57,143

48,183

 

 

 

 

 

 

 

 

 

 

1,190,159

755,960

 

 

 

 

 

 

6.         Operating loss

 

 

 

 

2018

2017

 

 

 

 

£

£

This is stated after charging

 

 

 

 

 

Depreciation and amortisation

 

 

 

 

 

   Owned assets

 

 

 

3,799

2,471

   Amortisation of intangible assets

 

 

 

53,344

45,712

Development Expenditure

 

 

 

-

35,897

Foreign exchange differences

 

 

 

11,181

3,845

Auditors' remuneration

 

 

 

 

 

   Audit of parent company and group financial              statements

 

 

 

10,000

10,500

   Audit of subsidiaries

 

 

 

6,500

9,000

   Tax and other services

 

 

 

5,000

4,000

Operating lease rentals

 

 

 

 

 

   Land and buildings

 

 

 

9,417

8,643

 

 

 

 

 

 

             

7.         Net finance income

 

 

 

 

2018

2017

 

 

 

 

£

£

 

 

 

 

 

 

Interest received

 

 

 

59

5

 

 

 

 

 

 

 

 

 

 

59

5

 

 

 

 

 

 

8.         Directors and employees

 

 

 

2018

2017

 

 

 

Average

Year end

Average

Year end

Number of employees

 

 

 

 

 

 

Selling and distribution

 

 

5

5

5

5

Administration

 

 

2

4

2

2

Research and development

 

 

1

1

1

1

 

 

 

 

 

 

 

 

 

 

8

10

8

8

 

 

 

 

 

 

 

 

 

 

 

 

2018

2017

 

 

 

 

 

£

£

Staff costs

 

 

 

 

 

 

Wages and salaries

 

 

 

 

477,881

263,326

Social security costs

 

 

 

 

47,334

24,650

Payments to defined contribution pension scheme

 

 

61,563

30,238

 

 

 

 

 

 

 

 

 

 

 

 

586,778

318,214

 

The value of all elements of remuneration received by each Director in the year was as follows:

 

 

 

 

 

 

 

 

Salary

Fees

Pension

Total

 

 

£

£

£

£

Year ended 31 May 2018

 

 

 

 

 

 

Executive Directors

 

 

 

 

 

 

D Crabb

 

41,667

-

2,083

43,750

L Melvin

 

9,533

-

476

10,009

M P Hayball (to 14 April 2018)

 

78,750

-

4,500

83,250

B Ganeshan (to 14 April 2018)

                                                                           

 

70,000

 

-

-

70,000

Non-Executive Directors

                                                                                             

 

 

 

 

 

A H Menys   

 

20,075

-

-

20,075

T Irish**

 

-

24,514

-

24,514

S Sturge

 

-

-

-

-

A Riddell *

                                                        

 

 

-

45,417

-

45,417

 

 

 

 

 

 

Total

 

220,025

69,931

7,059

297,015

 

 

 

 

 

 

Year ended 31 May 2017

 

 

 

 

 

Executive Directors

 

 

 

 

 

M P Hayball

 

51,724

-

-

51,724

B Ganeshan

 

72,000

-

-

72,000

 

 

 

 

 

 

Non-executive Directors

 

 

 

 

 

S G Barrell

 

-

18,000

-

18,000

T E Brown

 

18,000

 

-

18,000

A H Menys

 

-

-

 

-

A Riddell*

 

-

48,750

-

48,750

 

 

 

 

 

 

Total

 

141,724

66,750

-

208,474

 

 

During the year, retirement benefits under money purchase pension schemes were accruing to 2 directors (2017: 2)

 

                * A Riddell was paid consultancy fees through an agreement with AJR & Associates.                                   

                ** T Irish was paid consultancy fees through an agreement with Pembrokeshire Retreats Limited.

                M P Hayball holds interests in share options over 5,200,000 ordinary shares (2017: 5,200,000)

                Dr B Ganeshan holds interests in 3,575,000 warrants exercisable into ordinary shares (2017: 3,575,000)

 

9.         Taxation on loss on ordinary activities

 

 

 

2018

2017

 

 

 

£

£

(a)

The tax credit for the year:

 

 

 

 

UK Corporation tax

 

(117,007)

(34,924)

 

 

 

 

 

 

 

 

 

 

 

Current tax credit

 

(73,232)

(16,319)

 

Under provision in prior year

 

(39,525)

(3,477)

 

Deferred tax charge

 

(4,250)

(15,128)

 

 

 

 

 

 

 

 

(117,007)

(34,924)

 

 

 

 

 

(b)

Tax reconciliation

 

 

 

 

Loss on ordinary activities before tax

 

(747,794)

(300,926)

 

 

 

 

 

 

Loss on ordinary activities at the standard rate of corporation tax in the UK of 19% (2017 - 19.83%)

 

 

(142,081)

 

(59,684)

 

 

 

 

 

 

Effects of:

 

 

 

 

Expenses non-deductible for tax purposes

 

2,155

7,506

 

Additional deduction for R&D expenditure

 

(54,238)

(14,908)

 

Surrender of tax losses for R & D tax credit refund

 

22,727

6,000

 

Income not taxable

 

    -

(29)

 

Adjustments to tax charge in respect of previous periods

 

(39,525)

(3,477)

 

Deferred tax not recognised

 

93,995

44,796

 

Other timing differences and goodwill amortisation

 

-

(15,128)

 

 

 

 

 

 

Tax charge for the year

 

(117,007)

(34,924)

 

 

 

 

 

(c)

Factors which may affect future tax charges

 

 

 

 

In view of the tax losses carried forward there is a deferred tax amount of approximately £422,587 (2017: £321,189) which has not been recognised in these Financial Statements. This contingent asset will be realised when the Group makes sufficient taxable profits in the relevant company.

 

 

 

 

 

(d)

Deferred tax - group

 

 

 

 

The deferred tax included in the balance sheet is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred tax liability

 

2018

2017

 

 

 

£

£

 

 

 

 

 

 

Deferred tax on development expenditure

 

 

 

 

As at 1 June 2017

 

4,250

19,378

 

Credit in the year

 

(4,250)

(15,128)

 

As at 31 May 2018

 

-

4,250

 

 

 

 

 

(e)

Deferred tax - company

 

 

 

 

 

 

 

 

 

In view of the tax losses carried forward there is a deferred tax amount of approximately £349,421 (2017: £280,486) which has not been recognised in these Financial Statements. This contingent asset will be realised when the Company makes sufficient taxable profits.

           

 

10.        Results of Feedback plc

As permitted by Section 408 of the Companies Act 2006, the income and expenditure account of the parent company is not presented as part of these financial statements.  The Company's loss for the financial year is £931,379 (2017: £123,357 loss)

11.        Loss per share

.       Basic earnings per share is calculated by reference to the loss on ordinary activities after taxation of £630,787 (2017: £266,003) and on the weighted average of 252,403,981 (2017: 232,879,771) shares in issue.

 

 

As at 31 May 2018

 

As at 31 May 2017

 

 

 

£

£

 

 

 

 

Net loss attributable to ordinary equity holders

 

(630,787)

(266,003)

 

 

 

 

 

 

As at 31 May 2018

 

As at 31 May 2017

Weighted average number of ordinary shares for basic earnings per share

 

252,403,981

232,879,771

Effect of dilution:

 

 

 

Share Options

 

-

-

       Warrants

 

-

-

Weighted average number of ordinary shares adjusted for the effect of dilution

 

252,403,981

232,879,771

 

 

 

 

Loss per share (pence)

 

 

 

Basic

 

(0.25)

(0.11)

Diluted

 

(0.25)

(0.11)

 

 

 

 

There is no dilutive effect of the share options and warrants as the dilution would be negative.

12.        Investments

 

Share in group undertakings

Shares in   joint venture

Total

 

£

£

£

COMPANY

 

 

 

 

 

 

 

Cost

 

 

 

 

 

 

 

At 1 June 2016

2,334,455

1,000

2,335,455

 

 

 

 

 

 

 

 

At 31 May 2017

2,334,455

1,000

2,335,455

 

 

 

 

As at 31 May 2018

2,334,455

1,000

2,335,455

 

 

 

 

Provisions

 

 

 

At 1 June 2016

1,867,000

-

1,867,000

Provided in the year

467,455

-

467,455

At 31 May 2016

2,334,455

-

2,334,455

Provided in the year

-

-

-

At 31 May 2017

2,334,455

1,000

2,335,455

Provided in the year

-

-

-

At 31 May 2018

2,334,455

1,000

2,335,455

 

 

 

 

Net Book Value

 

 

 

At 31 May 2018

-

-

-

 

At 31 May 2017

 

-

 

-

 

-

 

 

 

 

At 31 May 2016

-

1,000

1,000

 

All of the above investments are unlisted

 

 

 

           

The directors have made full provision against the cost of investment in the subsidiaries due to the net liabilities shown in the subsidiary financial statements.

Particulars of principal subsidiary and joint venture companies during the year, all the shares of which being beneficially held by Feedback PLC, were as follows:

Company

Activity

Country of incorporation and operation

Proportion of Shares held

 

 

 

 

Feedback Black Box Company Limited

Non trading

England

 

100%

Ordinary £1

 

 

 

 

 

 

 

 

Brickshield Limited

Non trading

England

100%
Ordinary £1

 

 

 

 

Cambridge Computed Imaging Limited

Medical Imaging

England

100%

A Ordinary £1

 

 

 

100% B Ordinary 1p

 

 

 

 

TexRAD Limited

Medical Imaging

England

100%

Ordinary 1p
 

TexRAD Limited is owned 100% by virtue of a direct holding by Feedback plc of 91% and an indirect holding via Feedback Medical Ltd of 9%.

 

All the subsidiary companies have been included in these consolidated financial statements. Each subsidiary has a registered office of Unit 5, Grange Park, Broadway, Bourn, Cambridgeshire CB23 2TA

 

13.        Property, plant and equipment

 

 

 

Computer

 

 

 

Equipment

Total

GROUP

 

£

£

 

 

 

 

Cost or valuation

 

 

 

At 31 May 2016

 

10,877

10,877

Additions

 

2,941

2,941

 

 

 

At 31 May 2017

 

13,818

13,818

Additions

 

             6,250

6,250

 

 

 

 

As 31 May 2018

 

20,068

20,068

 

 

 

 

 

 

 

 

Depreciation

 

 

 

At 31 May 2016

 

7,238

7,238

 

 

 

 

Charge for the year

 

2,471

2,471

 

 

 

 

At 31 May 2017

 

9,709

9,709

 

 

 

 

Charge for the year

 

3,799

3,799

 

 

 

 

At 31 May 2018

 

13,508

13,508

 

 

 

 

 

Net Book Value

 

 

 

At 31 May 2018

 

6,560

6,560

 

 

 

 

At 31 May 2017

 

4,109

4,109

 

 

 

 

At 31 May 2016

 

3,639

3,639

 

14.        Intangible assets

 

Software

development

Customer relationships

Patents

Goodwill

Total

GROUP

£

£

£

£

£

Cost

 

 

 

 

 

 

 

 

 

 

 

At 31 May 2016

563,099

100,000

88,358

271,415

1,022,872

Additions

 

-

-

15,200

-

15,200

At 31 May 2017

563,099

100,000

103,558

271,415

1,038,072

Additions

89,363

-

38,162

-

127,525

 

 

 

 

 

 

At 31 May 2018

652,462

100,000

141,720

     271,415

1,165,597

 

 

 

 

 

 

Amortisation

 

 

 

 

 

At 31 May 2016

563,099

50,000

27,611

271,415

912,125

Charge for the year

-

25,000

20,712

-

45,712

At 31 May 2017

563,099

75,000

48,323

271,415

957,837

Charge for the year

-

25,000

28,344

-

53,344

 

 

 

 

 

 

At 31 May 2018

563,099

100,000

76,667

271,415

1,011,181

 

 

 

 

 

 

Net Book Value

 

 

 

 

 

At 31 May 2018

89,363

-

65,053

-

154,416

 

 

 

 

 

 

At 31 May 2017

-

25,000

55,235

-

80,235

 

 

 

 

 

 

At 31 May 2016

-

50,000

60,747

-

110,747

 

 

 

 

 

 

In accordance with IIn accIn accordance with the accounting policies and IFRS, the Directors have assessed the carrying value of the intangible assets. In the year ended 31 May 2016 and 31 May 2017, the Directors took the prudent decision to write down the carrying value of the software development costs in the balance sheet in order to meet the requirements of IFRS. However the Directors believe the Group's technology has great potential and this write down did not reflect their commercial assessment of the value of the Group's intellectual property. This is especially true in relation to the TexRAD Lung CE Mark and other product enhancements. The Directors have in the year to 31 May 2018, capitalised some of this spend and will write it off against revenue generated from this investment. The customer lists and patents are deemed to have ongoing value to the Group.

15         Other receivables

 

Group

Company

 

2018

2017

2018

2017

 

£

£

£

£

Amounts falling due within one year

 

 

 

 

Other receivables

19,718

18,396

15,744

14,878

Corporation tax recoverable

129,075

16,318

-

-

Prepayments

24,769

27,614

16,682

24,855

 

 

 

 

 

 

173,562

62,328

32,426

39,733

 

 

 

 

 

16.        Other payables

 

Group

Company

 

2018

2017

2018

2017

 

£

£

£

£

Amounts falling due within one year

 

 

 

 

Other payables

-

5,534

-

-

Other taxes and social security

77,892

7,033

6,817

292

Accruals

73,579

69,827

63,680

33,930

Deferred income

291,988

168,522

-

-

 

443,459

250,916

70,497

34,222

Amounts falling due after one year

 

 

 

 

Deferred income

188,925

-

-

-

 

 

 

 

 

17.        Financial instruments

The Group's overall risk management programme seeks to minimise potential adverse effects on the Group's
financial performance.

The Group's financial instruments comprise cash and cash equivalents and various items such as trade payables and receivables that arise directly from its operations. The Group is exposed through its operations to the following financial risks:

·      Credit risk

·      Foreign currency risk

·      Liquidity risk

·      Cash flow interest rate risk

Fair value Hierarchy

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

-       Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities

-       Level 2: other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly

-       Level 3: techniques that use inputs that have a significant effect on the recorded fair value that are not based on observable market data

The share options and warrants issued by the group during prior years were valued under level three above as noted in note 18 below.

In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments.  This note describes the Group's objectives, policies and processes for managing those risks. Further quantitative information in respect of these risks is presented throughout these financial statements.

There have been no substantive changes in the Group's exposure to financial instrument risks and consequently the objectives, policies and processes are unchanged from the previous period.

The Board has overall responsibility for the determination of the Group's risk management policies.  The objective of the Board is to set policies that seek to reduce the risk as far as possible without unduly affecting the Group's competitiveness and effectiveness.  Further details of these policies are set out below:

Credit risk

The Group is exposed to credit risk primarily on its trade receivables, which are spread over a range of countries, a factor that helps to dilute the concentration of the risk.

Group policy, implemented locally, is to assess the credit risk of each new customer before entering into binding contracts.  Each customer account is then reviewed on an ongoing basis (at least once a year) based on available information and payment history.

The maximum exposure to credit risk is represented by the carrying value in the balance sheet.

The carrying amount of financial assets represents the maximum credit exposure.  The maximum exposure to credit risk at the reporting date is:

 

 

Cash, loans and receivables

 

 

 

2018

2017

 

 

 

£

£

Current financial assets

 

 

 

 

Trade and other receivables

 

 

149,105

112,310

Cash and cash equivalents

 

 

627,910

696,811

 

 

 

 

 

 

 

 

777,015

809,121

 

 

 

 

 

 

 

 

 

 

 

Analysis of trade receivables

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

Current

30 days past due

60 days past due

90 days past due

 

£

£

£

£

£

 

 

 

 

 

 

2018

88,300

56,758

28,676

-

2,865

 

 

 

 

 

 

2017

49,982

16,908

33,074

-

-

 

 

 

 

 

 

 

 

 

 

 

 

                 

The Group policy is to make provisions against those debts that are overdue, unless there are grounds for believing that the debts will be collected.  During the year the value of provisions made in respect of bad and doubtful debts was £Nil (2017: £Nil).  

Foreign currency risk

Foreign exchange transaction risk arises when the Group enters into transactions denominated in a currency other than the functional currency. Foreign currency amounts generated from trading are converted back to sterling and required foreign currency amounts for suppliers will be converted from sterling and the use of forward currency contracts is considered. However the Group does not currently use any forward contracts.

The Group's main foreign currency risk is the short-term risk associated with accounts receivable and payable denominated in currencies that are not the subsidiaries' functional currency.  The risk arises on the difference in the exchange rate between the time invoices were raised/received and the time invoices were settled/paid.

The following table shows the net assets, stated in pounds sterling, exposed to exchange rate risk that the Group has at 31 May 2018

 

 

 

2018

2017

 

 

 

£

£

 

 

 

 

 

Trade receivables

 

 

86,140

44,524

Cash and cash equivalents

 

 

 

-

 

 

 

 

 

 

 

 

 

86,140

44,524

 

 

 

 

 

A 5% increase/fall in exchange rates at 31 May 2018 would had created a profit/loss of £4,307. The Group is exposed to currency risk because of the subsidiaries undertaking trading transactions in US dollars and Euros.  The Directors do not generally consider it necessary to enter into derivative financial instruments to manage the exchange risk arising from its operations, but from time to time where the Directors consider foreign currencies are weak and it is known that there would be a requirement to purchase those currencies, forward arrangements may be entered into. There were no outstanding forward currency arrangements as at 31 May 2018 or at 31 May 2017.

Liquidity risk

Cash flow forecasting is performed for both the Group and in the operating entities of the Group. Rolling forecasts of the Group's liquidity requirements are monitored to ensure it has sufficient cash to meet operational needs.

 

 

Financial liabilities measured at amortised cost

 

 

 

2018

2017

 

 

 

£

£

Current financial liabilities

 

 

 

 

Trade and other payables

 

 

208,746

82,393

 

 

 

 

 

           

The following are maturities of financial liabilities, including estimated contracted interest payments.

 

Carrying amount

£

Contractual cash flow

£

6 months or less

£

6-12 months

£

1 or more years

£

 

 

 

 

 

 

2018

 

 

 

 

 

Trade and other payables

208,746

208,746

208,746

-

-

 

 

 

 

 

 

2017

 

 

 

 

 

Trade and other payables

82,393

82,393

82,393

-

-

 

Cash flow interest rate risk

The Group presently has no substantial interest rate risk exposure.

Capital under management

The Group considers its capital to comprise its ordinary share capital, share premium, capital reserve, convertible debt option reserve and accumulated retained earnings.

                The group's objectives when managing the capital are:

·      To safeguard the group's ability to remain a going concern.

·      To maximise returns for shareholders in order to meet capital requirements and appropriately adjust the capital structure, the group may issue new shares, dispose of assets to pay down debt, return capital to shareholders and vary dividend payments.

There have been no changes to the group's capital management objectives in the year, and there have been no changes to the group's exposure to financial instrument risk in the year.

18.        Share capital and reserves

 

 

 

 

 

 

2018

2017

 

 

 

£

£

Authorised and issued share capital

 

 

 

 

Ordinary shares of 0.25 pence each

 

 

704,042

615,167

 

 

 

 

 

Allotted, called up and fully paid share capital:

 

 

 

 

 

Number

Number

As at 1 June 2017

246,066,584

203,673,857

Issued

35,550,000

42,392,727

As at 31 May 2018

281,616,584

246,066,584

 

 

 

Share Options

Share options are granted to directors and employees. Options are conditional on the employee completing a specific length of service (the vesting period). The options are exercisable from the end of the vesting period and lapse after ten years after the grant date. The Group has no legal or constructive obligation to repurchase or settle the options in cash.

Share options are valued using the Black-Scholes option pricing model and no performance conditions are included in the fair value calculations. The risk free rate was 1.64%. The expected volatility is based on historical volatility over the last two years and is estimated to be 25%. The average share price during the year was 1.85 pence. During the year the Company had the following share options in issue:

Number of options

 

 

At 1 June 2017

Lapsed

Exercised

At 31 May 2018

Exercise price (pence)

Exercise date

 

 

 

 

 

 

2,400,000

-

-

2,400,000

1.25

21/05/14 to19/05/24

4,000,000

-

-

4,000,000

3.00

21/05/15 to19/05/24

4,000,000

-

-

4,000,000

5.00

21/05/15 to19/05/24

10,400,000

-

-

10,400,000

 

 

 

 

 

 

 

 

All share options vest one year after the grant date. Each option can only be exercised from one year after the grant date to ten years after the date of grant.

Warrants

Warrants were issued to the vendors of TexRAD Limited at the time of acquisition. The warrants are exercisable from the end of the vesting period and lapse ten years after the grant date. The Group has no legal or constructive obligation to repurchase or settle the warrants in cash.

Warrants are valued using the Black-Scholes pricing model and no performance conditions are included in the fair value calculations. The risk free rate was 1.64%. The expected volatility is based on historical volatility over the last two years and is estimated to be 25%. The average share price during the year was 1.85 pence. During the year the Company had in existence the following warrants:

Number of warrants

 

 

At 1 June 2017

Granted

Exercised

At 31 May 2018

Exercise price (pence)

Exercise date

 

 

 

 

 

 

4,550,000

-

(350,000)

4,200,000

1.25

19/05/16 to 19/05/24

18,200,000

-

-

18,200,000

3.00

19/05/17 to 19/05/24

22,750,000

-

(350,000)

22,400,000

 

 

 

 

 

 

 

 

Reserves

The nature and purpose of each reserve within equity is as follows:

Share premium                                        Amount subscribed for share capital in excess of nominal value.

Capital reserve                                        Reserve on consolidation of subsidiaries

Translation reserve                                 Gains and losses on the translation of overseas operations into GBP

              Retained earnings                                  All other net gains and losses and transactions with owners not   recognised elsewhere 

 

Convertible debt option reserve              Amount of proceeds on issue of convertible debt relating to the equity component of the debt.

19.        Financial commitments

Total future minimum lease payments under non-cancellable operating leases for the Group's business purposes.

 

 

 

 

 

 

2018

2017

 

 

 

£

£

 

 

 

 

 

In less than one year

11,088

-

Later than one year and less than five years

37,884

-

Later than five years

-

-

20.        Pensions

The Company operated a defined contribution scheme during the year and the assets of the scheme are held separately from those of the Group in an independently administered fund. The pension cost represents contributions payable and amounted to £61,563 (2017: £30,238). A balance of £5,431 was payable at the year end.

21.        Related party transactions

Key management personnel

Refer to note 8 for detail on directors' remuneration.

 

The Directors interests in shares of the Company are contained in the Directors' Report

 

22.        Post balance sheet events

On 15 November 2018, the Company issued 91,666,666 new ordinary shares raising £1.375m (before expenses).

23.        Ultimate controlling party

                There is no ultimate controlling party.

24.        Notice of Annual General Meeting (AGM) and availability of report and financial statements     

The Company's AGM will be held at the offices of Allenby Capital Limited at 5 St Helen's Place, London EC3A 6AB at 1.00 p.m. on 23 January 2019.

The Company's Annual Report and Financial Statements for the year ended 31 May 2018 will be posted to shareholders, along with the Notice of AGM, later today and will be available on the Company website: https://fbkmed.com/plc-landing-page/, shortly.

 

 

 


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