Feedback PLC (FDBK) – Full year results to May 31 and prospects for the current year

Feedback Plc (FDBK) – Final results for the year ended 31 May 2016 and notice of Annual General Meeting

Feedback plc is pleased to announce its final results for the year ended 31 May 2016. 

CHAIRMAN’S STATEMENT FOR THE YEAR ENDED 31 MAY 2016

We are pleased to present the results for the year ended 31 May 2016. Revenue for the year was £431,454 (2015: £381,970) and the loss after tax was £183,156 (2015: Loss £1,111,433). Cash as at 31 May 2016 was £105,673 (31 May 2015: £63,261). Cash as at 13 October 2016 was £94,629.

The results show growth in revenue and a substantial reduction in the loss after tax. Cash generation has been better than anticipated and reflects payments received from customers in respect of purchase orders before revenue is recognised. Cambridge Computed Imaging Limited (“CCI”) performed steadily during the year as it continued to serve its established customer base. Revenue recognised from TexRAD research version sales was higher than in the previous year. In line with management’s expectations, there was a reduction in new purchase orders for TexRAD research versions during the year although there remained a good deal of customer interest from research institutions which were looking to obtain grant funding. Dr Balaji Ganeshan continued to lead the sales effort and his hard work has led to a high level of orders received after the year end from world-renowned institutions carrying out oncology research. The Company has also signed collaborative agreements with companies in Japan and South Korea to explore further selling opportunities in these markets for TexRAD research versions which has had some success. In order to support our research customers we have been looking at ways to assist them in analysing and interpreting the results of their studies. We are working on one such project and this could prove to be a useful additional source of revenue in the future. Dr Ganeshan has been continuing his work supporting research into new potential applications of TexRAD. This has led to the publication of scientific papers on TexRAD’s use in assessing different types of carcinomas as well as a number of presentations at scientific conferences including the Beijing Society of Radiology in China and participation in Healthtech Week in Auckland, New Zealand. 

Alliance Medical Group MoU

In November 2015 the Company announced that it had signed a Memorandum of Understanding with Alliance Medical Group with the intention of integrating Feedback’s TexRAD texture analysis software into Alliance’s PET-CT lung cancer imaging service. The Company has made good progress on a technical solution that would allow the integration of TexRAD into Alliance’s network of PET/CT scanners in UK hospitals and a prototype version has been demonstrated to potential users. The next steps will include applying for a CE mark for a medical device which provides analysis of lung PET/CT images with added prognostication through TexRAD. An abstract has been accepted by the Radiological Society of North America (RSNA) for presentation at its annual conference in November 2016 which will highlight the results from the technical and clinical evaluation. Further abstracts publishing the research findings of our customers using TexRAD have also been accepted for presentation at RSNA. 

Stone Checker Software Ltd and Prostate Checker Ltd

During the financial year the Company formed two joint venture companies, Stone Checker Software Ltd and Prostate Checker Ltd. Both companies offer the prospect of developing innovative solutions where routine medical images can provide useful additional information for clinicians. The Company sold its 50% equity interest in Stone Checker Software Ltd to Free Association Books Ltd in May 2016 resulting in a gain of £45,000. 

Future Processing Sp collaboration

After the year end Feedback announced a large-scale collaboration with Future Processing Sp. z o.o., a software development service provider based in Gliwice, Poland to develop medical imaging software. The collaboration will entail a substantially increased development team working on new products and the sharing of intellectual property and future revenues. This collaboration has resulted from Feedback’s assistance with a successful EU grant application made by Future Processing. The directors of Feedback believe that by CCI working jointly with the Future Processing healthcare team, CCI’s existing product portfolio can be improved and new products developed more rapidly including further applications for TexRAD. Although at this stage only a non-binding letter of intent has been agreed, the intention is for the Company to agree formal licences for new software products to be brought to market in 2017/18 under a shared revenue arrangement.  In the current financial year, the Company expects to make substantial savings in software development costs and thereafter expects to benefit from its share of the revenue from sales of new products.

Dr Alastair J Riddell appointed as Chairman

On 1 June 2016, after the year end, the Company announced my appointment as its new chairman with Tom Charlton moving to non-executive deputy chairman. I have extensive experience of managing companies in the healthcare sector and I look forward to assisting the Company to the next stage of its development.

TexRAD – ongoing growth

We remain encouraged by the continued interest shown in TexRAD and the number of research papers being published which highlight its numerous potential applications. The high level of purchase orders for TexRAD research versions which have been received after the year end should lead to a substantial increase in revenue in the second half of the 2016/17 year and growth in revenue for the year as a whole. We believe there will be opportunities to make further sales of TexRAD research versions in China by partnering with a company with a strong local presence. We are also considering other business relationships which could increase sales of TexRAD research versions in other territories. In addition to the TexRAD sales, Feedback now has the opportunity to grow its revenues through the collaboration with Future Processing and the development of a CE marked product for analysis of lung PET/CT images. We will look at investing in product development, regulatory and marketing resource to support our very positive growth prospects. 

Dr A J Riddell

Chairman

18 October 2016

For further information, contact:

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MAY 2016

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MAY 2016

CONSOLIDATED BALANCE SHEET AT 31 MAY 2016

COMPANY BALANCE SHEET AT 31 MAY 2016

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MAY 2016

COMPANY CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MAY 2016

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MAY 2016

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 admitted to trading on the AIM market of the London Stock Exchange. These Financial Statements were authorised for issue by the Board of Directors on the 18 October 2016.

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 2016 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:

o  IFRS 9 Financial Instruments (effective periods beginning 1 January 2018)

o  IFRS 15 Revenue from Contracts with Customers (effective periods beginning 1 January 2018)

o  IFRS 16 Leases (effective periods beginning 1 January 2019)

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.          

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 2015 and 2016 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. Interests in joint ventures are accounted for using the equity method, after initially being recognised at cost within the consolidated balance sheet. The Group’s joint ventures did not trade in the year.

(c)  Going Concern

The Directors consider that the Group and the Company are likely to have access to adequate cash resources for at least the next twelve months from the date of this report from a combination of operational cash generation and by obtaining equity finance from the financial markets or by way of loans from the major shareholders. The Directors believe that the company is a going concern and have therefore prepared the financial statements on a going concern basis. 

4.         LOSS PER SHARE

.     Basic earnings per share is calculated by reference to the loss on ordinary activities after taxation of £195,631 (2015: £1,111,433) and on the weighted average of 203,514,709 (2015: 190,746,746) shares in issue.

.     

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

5.         INVESTMENTS

Following the prudent write down of the intangible assets under the requirements of IFRS in the subsidiaries, the subsidiaries’ financial statements show that they have net liabilities. 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:

6.         PROPERTY, PLANT AND EQUIPMENT

7.         INTANGIBLE ASSETS

In accordance with the accounting policies and IFRS the Directors have assessed the carrying value of the intangible assets. In the year ended 31 May 2015, 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. During the year ended 31 May 2016 all similar development costs have been expensed as incurred. However, the Directors believe the Group’s technology has great potential and this write down does not reflect their commercial assessment of the value of the Group’s intellectual property. Expenditure on software development is being written off as incurred until the provisions of IFRS are met. The customer lists and patents are deemed to have ongoing value to the Group.

8.         OTHER RECEIVABLES

9.         OTHER PAYABLES

10.        SHARE CAPITAL AND RESERVES

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:

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.

In June 2015 1,600,000 options were exercised at a price of 1.25p.

In March 2016 800,000 options lapsed.

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:

Reserves

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

11.        NOTICE OF ANNUAL GENERAL MEETING (“AGM”) AND AVAILABILITY OF REPORT AND FINANCIAL STATEMENTS 

The Company hereby announces that its AGM will be held at the offices of Allenby Capital Limited, 3 St Helen’s Place, London EC3A 6AB at 10.00 a.m. on 23 November 2016.  

The Company’s Annual Report and Financial Statements for the year ended 31 May 2016 are expected to be posted to shareholders, along with the Notice of AGM, on 26 October 2016 and will be available thereafter at the Company’s registered office, Unit 5 Grange Park, Broadway, Bourn, Cambridgeshire CB23 2TA and on its website: http://www.fbk.com/category/financial-reports/