TIDMPOLX
RNS Number : 5723D
Polarean Imaging PLC
27 June 2019
Polarean Imaging Plc
("Polarean" or the "Company")
Final Results
Polarean Imaging plc (AIM: POLX), the clinical stage
medical-imaging technology company, with a proprietary drug-device
combination product for the visualisation of pulmonary function in
the magnetic resonance imaging (MRI) market, announces its audited
final results for the year ended 31 December 2018.
In addition, Polarean confirms that the Annual Report and
Accounts for the year ended 31 December 2018, the Notice of the
Annual General Meeting ("AGM") and a Form of Proxy are now
available on the Company's website
(http://www.polarean-ir.com/content/investors/annual-reports.asp)
and will be posted to shareholders shortly.
Polarean's AGM will be held at the offices of Reed Smith LLP at
The Broadgate Tower, 20 Primrose Street, London EC2A 2RS at 2.00
p.m. on 25 July 2019.
Highlights
-- First patient enrolled in Phase III FDA clinical trial during
the period and trials nearing completion
-- New licensing agreement with Duke University
-- On track to file a New Drug Application with the FDA and to
deliver first commercial sales by end of 2020
-- Gross fundraise of US$1.064 million (c.GBP0.8 million) in
July 2018 via a placing in response to investor demand
-- Gross fundraise of US$4 million (c.GBP3.125 million) in
December 2018 to support the Company's ongoing Phase III Clinical
Trials and significantly strengthening the balance sheet
Post period end
-- Two new System Orders from the University of British Columbia
and The Hospital for Sick Children in Toronto respectively
-- Total number of systems in use or on order now at 24
-- Confirmed the third tranche of US$1 million from the US$3
million Small Business Innovation Research grant
-- Currently at least 42 clinical trials ongoing into the use of (129) Xe MRI on the FDA website
-- Appointment of new Chief Financial Officer
Richard Hullihen, CEO of Polarean, commented: "We are encouraged
with the progress of our Phase III clinical trials and enrolment
should conclude during the third quarter of this year. We have
continued to invest in our intellectual property portfolio as part
of our ongoing R&D and have added new key patent filings
involving gas exchange and pulmonary vascular disease. We remain
confident and excited for the future of Polarean and are grateful
to our investors for their continued support."
The Company recently held its second successful investor
symposium in London. Details can be found on the Company's website
at http://www.polarean-ir.com/content/investors/videos.asp
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) 596/2014.
Enquiries:
Polarean Imaging plc www.polarean.com / www.polarean-ir.com
Richard Hullihen, Chief Executive Officer Via Walbrook PR
Richard Morgan, Chairman
SP Angel Corporate Finance LLP Tel: +44 (0)20 3470
0470
David Hignell / Lindsay Mair / Jamie Spotswood
(Corporate Finance)
Vadim Alexandre / Rob Rees (Corporate Broking)
Walbrook PR Tel: +44 (0)20 7933 8780 or polarean@walbrookpr.com
Paul McManus / Anna Dunphy Mob: +44 (0)7980 541 893 / +44
(0)7879 741 001
Chairman's Statement
The most immediate challenge facing the Company upon completion
of the IPO in March 2018 was the start of the clinical trials.
Satisfactory completion of the clinical trials is a necessary
condition for successful commercial development as we go forward,
although it is far from being the only key to our success.
The trials are now nearing completion. No clinical trial is ever
straight forward and the team has worked closely with the several
advisors that have guided the design, launch and prosecution of the
trials, to ensure that they are proceeding to plan. As we announced
on 11 June 2019, we have elected to bring online a third trial site
and we are grateful to our valued collaborators at the University
of Cincinnati for their help with the initiation of this site,
which we believe should ensure the timely completion of enrolment
in both trials by the end of the third quarter of 2019. That should
allow us to file our New Drug Application ("NDA") with the FDA and,
assuming approval, is expected to enable us to make our first
commercial unit sales by the end of 2020.
While the clinical trials we are conducting are a critical part
of the business plan, they are not the only part. The Company has
continued to meet expectations in relation to sales of additional
pre-clinical units to existing and new institutional customers.
This has brought the total number of systems in use or on order to
24 and the majority of those are with leading medical institutions
who are conducting research and additional clinical trials into the
use of hyperpolarized 129 Xenon using MRI ((129) Xe MRI). At
present there are at least 42 clinical trials into the use of (129)
Xe MRI showing on the FDA website. We were particularly pleased to
be able to announce on 21 May 2019 receipt of the third year of
grant from the NIH / SBIR which is funding the work being done
jointly with Cincinnati Children's Hospital into the use of (129)
Xe MRI in paediatric populations. Alongside the work being done by
SickKids in Canada, and others, into paediatric populations we
believe we can look forward to (129) Xe MRI making a materially
positive medical contribution to the diagnosis and monitoring of
treatment of pulmonary health conditions in children, including
those suffering from cystic fibrosis.
During the year a number of key advances were made in
applications of the technology to gas exchange and beyond. Many of
the medical issues that arise in patients with compromised
pulmonary function occur as a result of deficiencies in the body's
ability to absorb oxygen out of air and into the bloodstream. Some
of these medical issues, like Idiopathic Pulmonary Fibrosis
("IPF"), cannot readily be diagnosed accurately using existing
techniques but they are serious conditions that are increasingly
being targeted by the pharmaceutical companies for drug
development. Accurate diagnosis and monitoring is one critical
aspect of the effective medication of these conditions and we
believe (129) Xe MRI can help to address this unmet medical need.
In late 2018, we extended our collaboration with Duke University by
securing the intellectual property rights to an entirely new
application, in pulmonary vascular disease, including pulmonary
arterial hypertension ("PAH"). We are already in discussion with
several companies that have developed medications for PAH and other
conditions (COPD and asthma for example) in the expectation that
(129) Xe MRI can make a significant difference in both the
development of new drugs and in the management of these conditions
in the clinic.
Our first nine months as a public company included the
completion of two additional financing rounds, the second of which
closed at the end of 2018. The capital market environment for small
medical technology companies was challenging throughout the year
and the Polarean IPO was one of very few successful public listings
in the sector on the AIM market in 2018. We were fortunate to be
able to complete those financing rounds, which provided additional
support for the clinical trials.
We believe that partnering with pharmaceutical and other
companies to facilitate the development and use of their products
is a key part of Polarean's future development. We already have
relationships with several companies that have expressed an
interest in partnering with us. Such relationships can help us
expand our development activities in the near term and, following
FDA approval, to expand access to and support a presence in
deployment of Polarean's technology as we reach into the clinical
setting and help expand the treatment options available to
patients. We have also consistently stated our intention to access
markets outside the United States through partnerships and we are
pleased to note a growing interest in partnering opportunities to
expand our geographical footprint in that way.
The team has done a great job in efficiently producing and
shipping new systems to our customers, while working closely with
our installed base to provide service and support to their existing
systems. As our installed base grows, this becomes a proportionally
larger challenge, in addition to the continuing work in hand to
improve the design and performance of our systems and to plan for
the future evolution of the product. The manufacture of the
equipment was successfully outsourced and the last five machines
have been built under the GMP standards which are required both for
pivotal clinical trials and the clinical use of this
technology.
We were delighted to be able to add Chuck Osborne to our team as
Chief Financial Officer in April 2019 and welcome his help in
addressing the many challenges that lie ahead as we grow the
Company.
We hope to be able to announce the completion of our clinical
trials in the next few months and look forward to working with the
FDA when we seek approval to allow marketing of the technology next
year. This will be another major and exciting phase change for the
Company which we will report on more fully in the coming months. We
continue to look forward with determination and high confidence in
the strength of the technology and the commitment of the team.
Richard Morgan
Non-Executive Chairman
26 June 2019
Chief Executive Officer's Statement
2018 - Year of Development and Accomplishment
Polarean and its subsidiaries (the 'Group') began their first
full year focused on preparation for the Phase III Clinical trials.
Having finalised contracts with Contract Research Organisations and
with the two university sites for the trial, we planned and
executed a Pilot Study which closely matched the trial protocol in
order to prove that the structure and specifications of the trials
were met in the "non-inferiority" structure of the trials. We
conducted that study at one of the two trial sites, using the same
equipment and methods of the Phase III trial protocol. That study
was successful and gave the Group the confidence to initiate the
trials.
The Opportunity
The US Healthcare system annual burden of pulmonary disease is
US$150 billion and the Directors still see a tremendous opportunity
to bring our technology's quantitative, reproducible, non-invasive
method for diagnostic and therapeutic guidance to medicine. We have
begun to develop the healthcare economic analyses to support the
adoption by providers of our technology, working with experts in
the field. Over the planning horizon of the first 48 months post
commercial launch, the Group intends to address the high end of US
academic and teaching hospital market segment, which comprises
approximately the top 1,000 institutions nationally. The combined
addressable market there for our products approaches US$500
million.
While working to achieve FDA approval for clinical use, Polarean
continues to serve the medical imaging research market by providing
xenon polarisers to enable functional MRI of the pulmonary system.
This brings dynamic, high-resolution, regional, image-based
information to pulmonary physicians and researchers whose best
alternative tool is spirometry, a relatively inaccurate measurement
of expired breath. Current imaging technologies are not often used
for assessing lung function, despite the revolutionary effects of
MRI in other medical applications.
Our Clinical Trials
Our Phase III Clinical Trials are head-to-head, non-inferiority
trials which are comparing our technology to an existing nuclear
medicine technique using radioactive (133) Xe and gamma cameras.
The trials involve 80 patients in total and are being conducted at
three of our closest collaborative sites, the University of
Virginia Duke University ("Duke") and the University of Cincinnati.
We are characterising ventilation in two sets of patients being
evaluated for surgical procedures: those who are being evaluated
for lung lobar resection surgery and those being evaluated for lung
transplant. In each case their pre-operative expired vital capacity
is measured through spirometry. Our technology and the existing
nuclear medicine standard of care are used to assess the remaining
post-operative vital capacities. Our trial has focused entirely on
the pre-operative assessment and it makes no difference whether the
patient is chosen for surgery. We are at an advanced stage in the
trial and expect enrolment to conclude in the third quarter of
2019.
Our Operations
The Group completed the transition of manufacturing to a local
certified medical device manufacturer. In 2018, we built and
shipped five units and one upgrade. This is the largest production
volume we have achieved. This included the transition to GMP level
production for the Clinical Trial units and all units thereafter.
We will continue to improve the production capability of our
provider moving forward.
R&D
We continued to invest in our intellectual property portfolio
during the year. Key new patent filings involving gas exchange and
pulmonary vascular disease were added, and an expanded and enhanced
license agreement with Duke was achieved.
2018 Financial Results
Broadly speaking, our operating performance was as we expected
in 2018, with revenues slightly higher than expected at US$2.439
million and expenses slightly lower than expected. In addition, we
raised US$1 million (before expenses) in July 2018 in a placing
based on investor demand and US$4 million (before expenses) in
December 2018 (a significant majority of the proceeds from the
December 2018 placement were received by the Company in early 2019)
in a placing designed to fund the Company through our Clinical
Trial enrolment. During the period, we benefitted from the Year 2
proceeds of the NIH SBIR Grant which we have jointly with the
University of Cincinnati Children's Hospital. Our pricing and
margins have maintained throughout the year. It is still the case
that the majority of our research systems are procured via grant
mechanisms and while the outcomes are typically known with some
certainty, the ultimate fiscal timing of these projects is
difficult to predict with certainty.
2019 and Beyond
We plan to complete enrolment of our Phase III trials in the
third quarter of 2019 and look forward to the readout of both
indications with confidence, based on the results of our Pilot
Study. We will proceed with filing our NDA and continue to
cautiously plan to receive regulatory approval in the second half
of 2020. In the meantime, we continue to collaborate with
researchers in the US and abroad and look to expand our installed
base of research systems. The exciting new developments in
cardiology and pulmonary vascular disease are expanding and our
knowledge base about these conditions is expanding.
We have begun early discussions with potential strategic
partners in the pharmaceutical industry and in other geographic
markets that could lead to important developments in new
applications and uses for our technology, expansion into new
territories, and which may bring economic benefits to the Group
going forward.
Polarean is fortunate to have an outstanding collection of
world-class collaborators and customers in both the US and Europe.
Additionally, we support the "(129) Xe MRI Clinical Trials
Consortium" and the crucial work they do in collaborative research,
training investigators, providing infrastructure for evaluating new
techniques, and multi-institution sharing of magnetic resonance
(MR) techniques and image analysis methods. We would like to thank
the National Heart Lung and Blood Institute for their continued
support of our Small Business Innovation Research Program grant
with Cincinnati Children's Hospital Medical Center. In addition, we
have developed solid working relationships with MRI systems
manufacturers and exclusive relationships with global industrial
gas suppliers, all key to our future as we scale the business.
On behalf of the entire staff of Polarean Imaging, I would like
to thank you for your investment in and support of the Group and we
look forward to continuing to develop and deliver this critical
life-saving and life-improving technology to physicians and
patients everywhere.
Richard Hullihen
Chief Executive Officer
26 June 2019
Consolidated Statement of Comprehensive Income
2018 2017
Notes US$ US$
Revenue 4 2,439,139 1,237,163
Cost of sales (633,463) (297,215)
Gross profit 1,805,676 939,948
Administrative expenses (6,161,916) (4,051,000)
Depreciation 11 (10,140) (7,478)
Amortisation 12 (616,852) (361,746)
Selling and distribution expenses (31,766) (28,752)
Share-based payment expense 19 (251,790) (414,866)
Total administrative expenses (7,072,464) (4,863,842)
Operating loss 6 (5,266,788) (3,923,894)
Finance income 7 184 129
Finance expense 7 (188,055) (34,056)
Loss before tax (5,454,659) (3,957,821)
Taxation 10 - -
Loss for the year and total other comprehensive
expense (5,454,659) (3,957,821)
Loss per share
------------------------- ----- -------- --------
Basic and diluted (US$) 9 (0.078) (0.139)
------------------------- ----- -------- --------
The results reflected above relate to continuing activities.
There is no recognised income or expense for the year other than
the loss above and therefore no separate statement of other
comprehensive income has been presented.
Consolidated Statement of Financial Position
Notes 2018 2017
US$ US$
ASSETS
Non-current assets
Property, plant and equipment 11 17,752 21,341
Intangible assets 12 4,044,398 4,661,250
Trade and other receivables 14 12,539 12,539
4,074,689 4,695,130
---------------------------------------- ------ ------------- ------------
Current assets
Inventories 15 651,781 649,860
Trade and other receivables 14 4,226,585 488,861
Cash and cash equivalents 16 875,601 960,217
-------------
5,753,967 2,098,938
---------------------------------------- ------ ------------- ------------
TOTAL ASSETS 9,828,656 6,794,068
---------------------------------------- ------ ------------- ------------
EQUITY AND LIABILITIES
Equity attributable to holders
of the parent
Share capital 17 49,427 23,291
Share premium 18 11,063,075 1,448,037
Group re-organisation reserve 18 7,813,337 7,813,337
Other equity 18 - 87,305
Share-based payment reserve 19 1,078,335 826,545
Accumulated losses 18 (12,212,767) (6,758,108)
---------------------------------------- ------ ------------- ------------
7,791,407 3,440,407
---------------------------------------- ------ ------------- ------------
Non-current liabilities
Provision for contingent consideration 20 316,000 316,000
Deferred income 21 70,726 -
386,726 316,000
---------------------------------------- ------ ------------- ------------
Current liabilities
Trade and other payables 22 1,590,482 1,906,376
Borrowings 23 5,213 1,104,723
Deferred income 21 54,828 26,562
1,650,523 3,037,661
---------------------------------------- ------ ------------- ------------
TOTAL EQUITY AND LIABILITIES 9,828,656 6,794,068
---------------------------------------- ------ ------------- ------------
Company Statement of Financial Position
Notes 2018 2017
US$ US$
ASSETS
Non-current assets
Investment in subsidiary 13 4,342,848 4,342,848
4,342,848 4,342,848
-------------------------------- ------ ------------ ----------
Current assets
Trade and other receivables 14 9,370,611 1,891,495
Cash and cash equivalents 16 235,766 23,106
------------
9,606,377 1,914,601
-------------------------------- ------ ------------ ----------
TOTAL ASSETS 13,949,225 6,257,449
-------------------------------- ------ ------------ ----------
EQUITY AND LIABILITIES
Equity attributable to holders
of the parent
Share capital 17 49,427 23,291
Share premium 18 11,063,075 1,448,037
Merger reserve 18 4,322,527 4,322,527
Other equity 18 - 87,305
Share-based payment reserve 19 773,304 521,514
Accumulated losses 18 (2,287,282) (956,714)
-------------------------------- ------ ------------ ----------
13,921,051 5,445,960
-------------------------------- ------ ------------ ----------
Current liabilities
Trade and other payables 22 28,174 25,742
Borrowings 23 - 785,747
28,174 811,489
-------------------------------- ------ ------------ ----------
TOTAL EQUITY AND LIABILITIES 13,949,225 6,257,449
-------------------------------- ------ ------------ ----------
The loss for the financial year dealt with in the financial
statements of the parent Company was US$1,330,568 (2017:
US$956,714).
Consolidated Statement of Changes in Equity
Share-based Group
Share Share payment re-org Accumulated
capital premium Other equity reserve reserve losses Total equity
US$ US$ US$ US$ US$ US$ US$
----------------- ------------ ------------ ------------- ------------ ------------ ------------- -------------
As at 1 January
2017 1 - - 238,172 1,976,367 (2,800,287) (585,747)
----------------- ------------ ------------ ------------- ------------ ------------ ------------- -------------
Comprehensive
income
Loss for the
year - - - - - (3,957,821) (3,957,821)
Transactions
with owners
Issue of shares 2,970 1,982,094 - - - - 1,985,064
Share issue
costs - (534,057) - 173,507 - - (360,550)
Share-based
payment expense - - - 414,866 - - 414,866
Group
re-organisation 20,320 - - - 5,836,970 - 5,857,290
Convertible
loans - - 87,305 - - - 87,305
----------------- ------------ ------------ ------------- ------------ ------------ ------------- -------------
As at 31
December 2017 23,291 1,448,037 87,305 826,545 7,813,337 (6,758,108) 3,440,407
----------------- ------------ ------------ ------------- ------------ ------------ ------------- -------------
Comprehensive
income
Loss for the
year - - - - - (5,454,659) (5,454,659)
Transactions
with owners
Issue of shares 26,136 10,161,474 (87,305) - - - 10,100,305
Share issue
costs - (546,436) - - - - (546,436)
Share-based
payment expense - - - 251,790 - - 251,790
----------------- ------------ ------------ ------------- ------------ ------------ ------------- -------------
As at 31
December 2018 49,427 11,063,075 - 1,078,335 7,813,337 (12,212,767) 7,791,407
----------------- ------------ ------------ ------------- ------------ ------------ ------------- -------------
Company Statement of Changes in Equity
Share-based
Share Share payment Merger Accumulated
capital premium Other equity reserve reserve losses Total equity
US$ US$ US$ US$ US$ US$ US$
--------------- ------------- ------------- ------------- ------------ ------------- ------------ -------------
As at 1
January 2017 1 - - - - - 1
--------------- ------------- ------------- ------------- ------------ ------------- ------------ -------------
Comprehensive
income
Loss for the
year - - - - - (956,714) (956,714)
Transactions
with owners
Issue of
shares 23,290 1,982,094 - - 4,322,527 - 6,327,911
Share issue
costs - (534,057) - 173,507 - - (360,550)
Share-based
payment
expense - - - 348,007 - - 348,007
Convertible
loans - - 87,305 - - - 87,305
--------------- ------------- ------------- ------------- ------------ ------------- ------------ -------------
As at 31
December 2017 23,291 1,448,037 87,305 521,514 4,322,527 (956,714) 5,445,960
--------------- ------------- ------------- ------------- ------------ ------------- ------------ -------------
Comprehensive
income
Loss for the
year - - - - - (1,330,568) (1,330,568)
Transactions
with owners
Issue of
shares 26,136 10,161,474 (87,305) - - - 10,100,305
Share issue
costs - (546,436) - - - - (546,436)
Share-based
payment
expense - - - 251,790 - - 251,790
--------------- ------------- ------------- ------------- ------------ ------------- ------------ -------------
As at 31
December 2018 49,427 11,063,075 - 773,304 4,322,527 (2,287,282) 13,921,051
--------------- ------------- ------------- ------------- ------------ ------------- ------------ -------------
Consolidated Statement of Cash Flows
2018 2017
US$ US$
----------------------------------------------------- ----------- -----------
Cash flows from operating activities
Loss before tax (5,454,659) (3,957,821)
Adjustments for non-cash/non-operating items:
Depreciation of plant and equipment 10,140 7,478
Amortisation of intangible assets 616,852 361,746
Share-based payment expense 251,790 414,866
Interest paid 188,055 34,056
Interest received (184) (129)
Operating cash flows before movements in working
capital (4,388,006) (3,139,804)
----------------------------------------------------- ----------- -------------
Increase in inventories (1,921) (328,199)
Increase in trade and other receivables (69,517) (440,931)
(Decrease)/increase in trade and other payables (315,894) 1,343,861
Increase/(decrease) in deferred income 98,992 (50,618)
----------------------------------------------------- ----------- -------------
Net cash used in operations (4,676,346) (2,615,691)
----------------------------------------------------- ----------- -------------
Cash flows from investing activities
Purchase of plant and equipment (6,551) (16,834)
Interest received 184 129
Net cash used in investing activities (6,367) (16,705)
----------------------------------------------------- ----------- -------------
Cash flows from financing activities
Issue of shares 5,093,775 2,481,808
Interest paid (188,055) (34,056)
Issue of notes and loans 5,213 1,047,014
Repayment of notes and loans (312,836) -
Net cash generated by financing activities 4,598,097 3,494,766
----------------------------------------------------- ----------- -------------
Net (decrease)/increase in cash and cash equivalents (84,616) 862,370
----------------------------------------------------- ----------- -------------
Cash and cash equivalents at the beginning of
year 960,217 97,847
----------------------------------------------------- ----------- -------------
Cash and cash equivalents at end of year 875,601 960,217
----------------------------------------------------- ----------- -------------
Company Statement of Cash Flows
Year ended Year ended
31 December 31 December
2018 2017
US$ US$
----------------------------------------------- ------------- -------------
Cash flows from operating activities
Loss before tax (1,330,568) (956,714)
Adjustments for non-cash/non-operating items:
Share-based payment expense 251,790 348,007
----------------------------------------------- ------------- -------------
Operating cash flows before movements in
working capital (1,078,778) (608,707)
----------------------------------------------- ------------- -------------
Increase in trade and other payables 2,433 25,742
----------------------------------------------- ------------- -------------
Net cash used by operations (1,076,345) (582,965)
----------------------------------------------- ------------- -------------
Cash flows from financing activities
Issue of shares 5,099,914 1,624,514
Loans to intercompany (3,810,909) (1,851,022)
Issue of notes and loans - 832,579
Net cash generated by financing activities 1,289,005 606,071
----------------------------------------------- ------------- -------------
Increase in cash and cash equivalents 212,660 23,106
----------------------------------------------- ------------- -------------
Cash and cash equivalents at the beginning 23,106 -
of period
----------------------------------------------- ------------- -------------
Cash and cash equivalents at end of period 235,766 23,106
----------------------------------------------- ------------- -------------
These Financial Statements were approved and authorised for
issue by the Board of Directors on 26 June 2019 and were signed on
its behalf by:
Richard Morgan
Non-executive Chairman
Notes on Financial Statements
1 General information
The Company is incorporated in England and Wales under the
Companies Act 2006. The registered number is 10442853 and its
registered office is at 27-28 Eastcastle Street, London, W1W 8DH.
The Company is listed on AIM of the London Stock Exchange.
The Company is the parent company of Polarean, Inc (the
"Subsidiary", together the "Group"). The principal activity of the
Group is developing next generation medical imaging technology. The
Subsidiary is incorporated in the United States of America and has
a registered office of 2500 Meridian Parkway #175, Durham, NC
27713, USA.
2 Adoption of new and revised International Financial Reporting Standards
Standards and interpretations adopted during the year
Information on new standards, amendments and interpretations
that are relevant to the Group's annual report and accounts is
provided below.
IFRS 9 'Financial Instruments'
IFRS 9 uses a single approach to determine whether a financial
asset is measured at amortised cost or fair value, replacing the
many different rules in IAS 39. The approach in IFRS 9 is based on
how an entity manages its financial instruments (its business
model) and the contractual cash flow characteristics of the
financial assets. The Group has considered the implications of IFRS
9 to have an immaterial impact, as detailed in the financial assets
accounting policy.
IFRS 15 'Revenue from Contracts with Customers'
IFRS 15 is intended to clarify the principles of revenue
recognition and establish a single framework for revenue
recognition. This supersedes IAS 18 Revenue and the core principle
is that an entity should recognise revenue to depict the transfer
of promised goods or services to customers in an amount that
reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services. The Group has
considered the implications of IFRS 15 to have an immaterial
impact, as detailed in the revenue recognition accounting
policy.
Certain other new standards and interpretations have been issued
but are not expected to have a material impact on the Group's
annual report and accounts.
New and revised IFRS Standards in issue but not yet
effective
At the date of authorisation of these financial statements, The
Group has not applied the following new and revised IFRS Standards
that have been issued but are not yet effective.
IFRS 16 'Leases', effective 1 January 2019
The IASB has published IFRS 16 'Leases', completing its
long-running project on lease accounting. The new Standard, which
is effective for accounting periods beginning on or after 1 January
2019, requires lessees to account for leases 'on-balance sheet' by
recognising a 'right-of-use' asset and a lease liability. The date
of initial application of IFRS 16 for the Group will be 1 January
2019. It will affect most companies that report under IFRS and are
involved in leasing and will have a substantial impact on the
annual report and accounts of lessees of property and high value
equipment. This standard has been endorsed by the European
Union.
The Group's management has carried out an impact review of the
implementation of IFRS 16 and has decided it will apply the
modified retrospective adoption method in IFRS 16, and, therefore,
will only recognise leases on the Statement of Financial Position
as at 1 January 2019. In addition, it has decided to measure
right-of-use assets by reference to the measurement of the lease
liability on that date. This will ensure there is no immediate
impact to net assets on that date.
At 31 December 2018 operating lease commitments amounted to
US$183,421 (see note 24), which is expected to reduce to US$109,899
at 31 December 2019. Assuming the Group's lease commitments remain
at this level, the effect of discounting those commitments is
anticipated to result in right-of-use assets and lease liabilities
of approximately US$115,000 being recognised on 1 January 2019.
However, further work still needs to be carried out to determine
whether and when extension and termination options are likely to be
exercised, which will result in the actual liability recognised
being higher than this.
Instead of recognising an operating expense for its operating
lease payments, the group will instead recognise interest on its
lease liabilities and amortisation on its right-of-use assets. This
will increase reported EBITDA by the amount of its current
operating lease cost, which for the year ended 31 December 2018 was
approximately US$73,000.
There are no other standards issued which are expected to have a
material impact on the financial statements.
3 Significant accounting policies
Basis of preparation
These financial statements have been prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union ("IFRS") and under the historical cost convention,
as modified by the use of fair value for financial instruments
measured at fair value. The financial statements are presented in
United States Dollars ("US$") except where otherwise indicated.
The principal accounting policies adopted in the preparation of
the financial statements are set out below. The policies have been
consistently applied to all the years presented, unless otherwise
stated.
Going concern
The Directors consider the going concern basis of preparation to
be appropriate in preparing the financial statements.
The Group is in its development stage and has not yet moved to
full commercial exploitation of its IP. During the year ended 31
December 2018 the Group recorded a loss after tax of US$5,454,659
(2017: loss of US$3,957,821) and a net cash outflow from operating
activities of US$4,676,346 (2017: US$2,615,691).
On 28 December 2018 the Group raised proceeds of US$4.0 million
(excluding expenses) from investors by the issue of shares of which
US$3.7 million remain outstanding at year-end.
In considering the appropriateness of this basis of preparation,
the Directors have reviewed the Group's working capital forecasts
for a minimum of 12 months from the date of the approval of this
financial information. Based on their consideration the Directors
have reasonable expectation that the Group has adequate resources
to continue for the foreseeable future and that carrying values of
intangible assets are supported. Thus, they continue to adopt the
going concern basis of accounting in preparing this financial
information.
Share capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares are shown in share
premium as a deduction from the proceeds.
Government and other grants
Grants are not recognised until there is a reasonable assurance
that the Group will comply with the conditions attaching to them
and that the grants will be received. Grants are treated as
deferred income and released to the income statement on the
achievement of the relevant performance criteria.
Inventory
Inventories are measured at the lower of cost and net realisable
value. The cost of inventories is based on the weighted average
cost principle and includes expenditure incurred in inventories,
adjusted for rebates, and other costs incurred in bringing them to
their existing location.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call
deposits with an original maturity of three months or less.
Basis of consolidation
The consolidated financial statements are for the year ended 31
December 2018. They have been prepared in accordance with the
requirements of International Financial Reporting Standards (IFRS)
as adopted by the European Union (EU) and with those parts of the
Companies Act 2006 applicable to companies reporting under
IFRS.
The measurement bases and principal accounting policies of the
Group are set out below. On 30 May 2017 Polarean Merger-Sub, Inc.,
a Subsidiary of the Subsidiary, completed a merger process under
which it acquired substantially all of the assets of m2m Imaging
Corp ("m2m"), a portfolio company of Amphion Innovations plc
engaged in the development of high-performance MRI RF coils for the
global research market, primarily in micro-imaging. By 2016 m2m had
been inactive for several years due to an inability to raise funds.
At the date of the merger the assets of m2m were its technology and
patents. The merger was effected by way of court sanction in the
process of which the Subsidiary acquired, through a special purpose
entity, Polarean Merger Sub, Inc. the assets of another special
purpose entity, m2m Merger Sub, Inc., with m2m Merger Sub, Inc.
being the surviving entity. After the reporting date, on 1
September 2017, m2m Merger Sub, Inc. was merged into the Subsidiary
with the Subsidiary being the surviving entity, the effect being
that m2m Merger Sub, Inc. was collapsed, and the Subsidiary had
acquired the m2m assets.
As part of the arrangements for the merger 576,430 shares in the
Subsidiary were issued to the former shareholders in m2m with the
intention that all parties would exchange their stock in Polarean,
Inc. for shares in the Group on a pro rata basis as soon as
practicable.
The Directors consider the merger between the Subsidiary and m2m
Acquisition, Inc. as a consequence of which the group acquired the
exclusive worldwide rights to m2m's technology and patents does not
meet the definition of an acquisition of a business as set out in
IFRS3 and has therefore been accounted for as the acquisition of an
asset or a group of assets that does not constitute a business.
IFRS3 requires that in such cases the acquirer shall identify
and recognise the individual identifiable assets acquired
(including those assets that meet the definition of, and
recognition criteria for, intangible assets in IAS 38 Intangible
assets) and to allocate the cost of the individual identifiable
assets and liabilities on the basis of their relative fair values
at the date of purchase. Such a transaction or event does not give
rise to goodwill.
The provisional estimate of the fair value of the assets
acquired under the merger arrangement of US$4,999,996 represents
the aggregate estimated value of the financial obligations of the
former m2m shareholders which were converted into equity in m2m
prior to the merger agreement
The Directors consider the acquisition of the entire issued
common stock of the Subsidiary by the Company in exchange for
equivalent equity participation in the Company to be a group
re-organisation and not a business combination and to fall outside
the scope of IFRS3. Having considered the requirements of IAS 8 and
the relevant UK and US guidance, the transaction has been accounted
for on a merger or pooling of interest basis as if both entities
had always been combined, using book values, with no fair value
adjustments made nor goodwill recognised.
Revenue recognition
Revenue comprises the fair value of the sale of goods and
rendering of services to external customers, net of applicable
sales tax, rebates, promotions and returns.
Contracts and obligation
The majority of customer contracts have three main elements that
the Group provides to the customer:
- Sale of polarisers;
- Sale of parts and upgrades; and
- Provision of service.
The sale of polarisers is seen as a distinct performance
obligation and revenue is recognised at a point in time. The
customer can benefit from the use of the polarisers when supplied
and is not reliant on the Group to provide the parts and upgrades
or service, and therefore revenue from the sale of polarisers is
recognised in full when supplied to the customer.
The second performance obligation is the sale of parts and
upgrades. The customer can benefit from the use of the parts and
upgrade when supplied and is not reliant on the Group to provide
the service, and therefore revenue from the sale of parts and
upgrades is recognised in full when supplied to the customer.
The third performance obligation is the provision of preventive
maintenance service. Revenue from the provision of preventive
maintenance service is recognised in the period in which the
services are provided over the life of the contract.
Determining the transaction price
The transaction price is determined as the fair value of the
Group expects to receive over the course of the contract.
There are no incentives given to customers that would have a
material effect on the financial statements.
Allocate the transaction price to the performance obligations in
the contract
The allocation of the transaction price to the performance
obligations in the contract is non-complex for the Group. There is
a fixed unit price for each product or service sold. Therefore,
there is limited judgement involved in allocating the contract
price to each unit ordered.
Recognise revenue when or as the entity satisfies its
performance obligations
The overarching terms are consistent in each contract.
The sale of polarisers is seen as a distinct performance
obligation and revenue is recognised at a point in time, when
supplied to the customer, as the customer can benefit from the use
of the polarisers when supplied.
The sale of parts and upgrades is seen as a distinct performance
obligation and revenue is recognised at a point in time, when
supplied to the customer, as the customer can benefit from the use
of the parts and upgrade when supplied.
The provision of service is seen a as distinct performance
obligation and revenue us recognised as the Group provides these
services for the duration of the contract, i.e. over time. Any
unexpired portion of a service contract or payment received in
advance in respect of service contracts either partially completed
or not started, are included in deferred income and released over
their remaining term.
Property, plant and equipment
Owned assets
Items of property, plant and equipment are stated at cost or
deemed cost less accumulated depreciation and impairment losses.
Cost includes the original purchase price of the asset and the
costs attributable to bringing the asset to its working condition
for its intended use. When parts of an item of property, plant and
equipment have different useful lives, those components are
accounted for as separate items of property, plant and
equipment.
Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured
reliably.
Depreciation
Depreciation is charged to profit or loss on a straight-line
basis over the estimated useful lives of each part of an item of
property, plant and equipment. The estimated useful lives are as
follows:
-- Computer and IT equipment - 33% straight line
-- Leasehold improvements - 20% straight line
-- Laboratory equipment - 20% straight line
The residual values, useful lives and depreciation methods are
reviewed, and adjusted if appropriate, or if there is an indication
of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the
proceeds with the carrying amount and are recognised within "other
operating income" in the statement of comprehensive income.
Intangible Assets
Patents and related rights which are acquired through a business
combination, are assessed by reviewing their net present value of
future cash flows. Patents are currently amortised over their
useful life, not exceeding 10 years.
Internally generated intangible assets - research costs are
costs incurred in research activities and are recognised as an
expense in the period in which they are incurred. An internally
generated intangible asset arising from the development of
commercial technologies is recognised only if all of the following
conditions are met:
-- it is probable that the asset will create future economic benefits;
-- the development costs can be measured reliably;
-- technical feasibility of completing the intangible asset can be demonstrated;
-- there is the intention to complete the asset and use or sell it;
-- there is the ability to use or sell the asset; and
-- adequate technical, financial and other resources to complete
the development and to use or sell the asset are available.
At this time the Directors consider that the Group does not meet
all of those conditions and development costs are therefore
recorded as expense in the period in which the cost is
incurred.
Impairment of non-financial assets
Non-financial assets are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount may
not be recoverable. An impairment loss is recognised for the amount
by which the asset's carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset's fair
value less costs to sell and value in use. For the purposes of
assessing impairment, assets are reviewed at the lowest levels for
which there are separately identifiable cash flows (cash-generating
units).
Non-financial assets other than goodwill that suffered
impairment are reviewed for possible reversal of the impairment at
each reporting date.
Provisions
A provision is recognised in the statement of financial position
when the Group has a present legal or constructive obligation as a
result of a past event, and it is probable that an outflow of
economic benefits will be required to settle the obligation. If the
effect is material, provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects current
market assessments of the time value of money and, when
appropriate, the risks specific to the liability. The increase in
the provision due to the passage of time is recognised in finance
costs.
Financial assets
The Group classifies all of its financial assets at amortised
cost. Financial assets do not comprise prepayments. Management
determines the classification of its financial assets at initial
recognition.
Amortised costs
The Group's financial assets held at amortised cost comprise
trade and other receivables and cash and cash equivalents in the
consolidated statement of financial position.
These assets are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They
arise principally through the provision of goods and services to
customers (e.g. trade receivables), but also incorporate other
types of contractual monetary asset. They are initially recognised
at fair value plus transaction costs that are directly attributable
to their acquisition or issue and are subsequently carried at
amortised cost using the effective interest rate method, less
provision for impairment.
Impairment provisions for trade receivables are recognised based
on the simplified approach within IFRS 9 using the lifetime
expected credit losses. During this process the probability of the
non-payment of the trade receivables is assessed. This probability
is then multiplied by the amount of the expected loss arising from
default to determine the lifetime expected credit loss for the
trade receivables. For trade receivables, which are reported net;
such provisions are recorded in a separate provision account with
the loss being recognised within administrative expenses in the
consolidated statement of comprehensive income. On confirmation
that the trade receivable will not be collectable, the gross
carrying value of the asset is written off against the associated
provision.
These assets arise principally from the provision of goods and
services to customers (e.g. trade receivables), but also
incorporate other types of financial assets where the objective is
to hold their assets in order to collect contractual cash flows and
the contractual cash flows are solely payments of the principal and
interest. They are initially recognised at fair value plus
transaction costs that are directly attributable to their
acquisition or issue and are subsequently carried at amortised cost
using the effective interest rate method, less provision for
impairment.
Impairment provisions for other receivables are recognised based
on the general impairment model within IFRS 9. In doing so, the
Company follows the 3-stage approach to expected credit losses.
Step 1 is to estimate the probability that the debtor will default
over the next 12 months. Step 2 considers if the credit risk has
increased significantly since initial recognition of the debtor.
Finally, Step 3 considers if the debtor is credit impaired,
following the criteria under IAS 39.
Financial liabilities
The Group classifies its financial liabilities in the category
of financial liabilities at amortised cost. All financial
liabilities are recognised in the statement of financial position
when the Group becomes a party to the contractual provision of the
instrument.
Financial liabilities measured at amortised cost include:
-- Trade payables and other short-dated monetary liabilities,
which are initially recognised at fair value and subsequently
carried at amortised cost using the effective interest rate
method.
-- Bank and other borrowings are initially recognised at fair
value net of any transaction costs directly attributable to the
issue of the instrument. Such interest-bearing liabilities are
subsequently measured at amortised cost using the effective
interest rate method, which ensures that any interest expense over
the period to repayment is at a constant rate on the balance of the
liability carried in the consolidated statement of financial
position. For the purposes of each financial liability, interest
expense includes initial transaction costs and any premium payable
on redemption, as well as any interest or coupon payable while the
liability is outstanding.
Unless otherwise indicated, the carrying values of the Group's
financial liabilities measured at amortised cost represents a
reasonable approximation of their fair values.
Employee benefits: pension obligations
The Group operates a defined contribution plan. A defined
contribution plan is a pension plan under which the Group pays
fixed contributions into a separate entity. The Group has no legal
or constructive obligations to pay further contributions if the
fund does not hold sufficient assets to pay all employees the
benefits relating to employee service in the current and prior
periods.
The Group has no further payment obligations once the
contributions have been paid. The contributions are recognised as
employee benefit expense when they are due. Prepaid contributions
are recognised as an asset to the extent that a cash refund or a
reduction in the future payments is available.
Net finance costs
Finance costs
Finance costs comprise interest payable on borrowings, direct
issue costs, dividends on preference shares and foreign exchange
losses; and are expensed in the period in which they are
incurred.
Finance income
Finance income comprises interest receivable on funds invested,
and foreign exchange gains.
Interest income is recognised in the income statement as it
accrues using the effective interest method.
Leases
Leases are classified as finance leases whenever the terms of
the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as
operating leases.
Leases in which a significant portion of the risks and rewards
of ownership are retained by the lessor are classified as operating
leases. The costs associated with operating leases are taken to the
income statement on an accruals basis over the period of the
lease.
Income tax
Income tax for the years presented comprises current and
deferred tax. Income tax is recognised in the income statement
except to the extent that it relates to items recognised directly
in equity, in which case it is recognised in equity. Current tax is
the expected tax payable on the taxable income for the year, using
tax rates enacted or substantively enacted at the statement of
financial position date, and any adjustment to tax payable in
respect of previous years.
Deferred tax is recognised on temporary differences arsing
between the tax bases of assets and liabilities and their carrying
amounts.
The following temporary differences are not recognised if they
arise from a) the initial recognition of goodwill, and b) for the
initial recognition of other assets or liabilities in a transaction
other than a business combination that at the time of the
transaction affects neither accounting nor taxable profit or loss.
Deferred tax is determined using tax rates and laws that have been
enacted or substantially enacted by the balance sheet date and are
expected to apply when the related deferred tax asset is realised
or the deferred income tax liability is settled.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised. Deferred tax assets are reduced to
the extent that it is no longer probable that the related tax
benefit will be realised.
Deferred income tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income taxes assets
and liabilities relate to income taxes levied by the same taxation
authority on either the taxable entity or different taxable
entities where there is an intention to settle the balances on a
net basis.
Critical accounting estimates and judgements
The preparation of the Group's financial statements under IFRS
as endorsed by the EU requires the directors to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and
liabilities. Estimates and judgements are continually evaluated and
are based on historical experience and other factors including
expectations of future events that are believed to be reasonable
under the circumstances. Actual results may differ from these
estimates.
The directors consider that the following estimates and
judgements are likely to have the most significant effect on the
amounts recognised in the financial statements.
Carrying value of intangible assets
In determining whether there are indicators of impairment of the
Group's intangible assets, the directors take into consideration
various factors including the economic viability and expected
future financial performance of the asset and when it relates to
the intangible assets arising on a business combination, the
expected future performance of the business acquired.
4 Segmental Information
IFRS 8 requires operating segments to be identified on the basis
of internal reports about components of the Group that are
regularly reviewed by the chief operating decision maker (which
takes the form of the Board of Directors) as defined in IFRS 8, in
order to allocate resources to the segment and to assess its
performance.
The chief operating decision maker has determined that the Group
has one operating segment, the development and commercialisation of
gas polariser devices and ancillary instruments. Revenues are
reviewed based on the products and services provided: Polarisers,
Parts and Upgrades, Service and Other revenue.
The Group operates in Canada, Germany, the United Kingdom and
the United States of America. Revenue by origin of geographical
segment for all entities in the Group is as follows:
Revenue
2018 2017
US$ US$
-------------------------- ---------- ----------
Canada 163,677 340,113
Germany 15,117 24,617
United Kingdom 38,661 111,765
United States of America 2,221,684 760,668
-------------------------- ---------- ----------
Total 2,439,139 1,237,163
-------------------------- ---------- ----------
Non-current assets
2018 2017
US$ US$
-------------------------- ---------- ----------
United States of America 4,074,689 4,695,130
Total 4,074,689 4,695,130
-------------------------- ---------- ----------
Product and services revenue analysis
Revenue
2018 2017
US$ US$
-------------------- ---------- ----------
Polarisers 1,056,728 340,113
Parts and Upgrades 56,610 91,529
Service 117,220 154,528
Grants 1,208,581 650,993
-------------------- ---------- ----------
Total 2,439,139 1,237,163
-------------------- ---------- ----------
Management measures revenues by reference to the Group's core
services and products and related services, which underpin such
income.
5 Employees and Directors
Staff costs for the Group and the Company during the year:
2018 2017
US$ US$
---------------------- --------- ---------
Wages and salaries 1,667,233 837,619
Social security costs 367,748 321,009
2,034,981 1,158,628
---------------------- --------- ---------
Average monthly number of people (including directors) employed
by activity:
2018 2017
No. No.
Senior management including directors 9 5
R&D and clinical trial 7 7
Administration 1 1
---------------------------------------------------------- ---- ------
Total 17 13
---------------------------------------------------------- ---- ------
Key management compensation:
The following table details the aggregate compensation paid to
key management personnel.
2018 2017
US$ US$
---------------------- --------- -------
Salaries and fees 873,229 512,636
Social security costs 331,771 196,462
1,205,000 709,098
---------------------- --------- -------
Key management personnel include all directors who together have
authority and responsibility for planning, directing, and
controlling the activities of the Group and senior divisional
managers.
6 Operating loss
2018 2017
US$ US$
---------------------------------------- -------- --------
Depreciation
* Owned plant and equipment 9,601 6,939
* Leased plant and equipment 539 539
Amortisation of intangible assets 616,852 361,746
Research expenses 672,633 167,655
Operating lease costs 77,971 68,335
Auditors remuneration (note 8) 42,938 143,792
7 Net finance expense
2018 2017
US$ US$
Interest income 184 129
------------------------ -------- -------
Total finance income 184 129
------------------------ -------- -------
Finance expense 188,055 34,056
------------------------ -------- -------
Total finance expense 188,055 34,056
------------------------ -------- -------
8 Auditor remuneration
2018 2017
US$ US$
-------------------------------------- ------- -------
Auditors remuneration
Fees payable to the Group's auditor
for audit of Parent Company and
Consolidated Financial Statements 42,938 45,237
--------------------------------------- ------- -------
Fees payables to the Group's auditor
for other services (assurance
related services) - 98,555
--------------------------------------- ------- -------
9 Loss per share
The loss per share has been calculated using the loss for the
year and the weighted average number of ordinary shares outstanding
during the year, as follows:
2018 2017
US$ US$
------------------------------------ ------------------ -----------
Loss for the year attributable to
shareholders of the Group (US$) (5,454,659) (3,957,821)
Weighted average number of ordinary
shares* 69,940,338 28,460,390
------------------------------------ ------------------ -----------
Basic and diluted loss per share (0.078) (0.139)
------------------------------------ ------------------ -----------
For diluted loss per share, the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all
potential dilutive warrants, options and convertible loans over
ordinary shares. Potential ordinary shares resulting from the
exercise of warrants, options and the conversion of convertible
loans have an anti-dilutive effect due to the Group being in a loss
position. As a result, diluted loss per share is disclosed as the
same value as basic loss per share.
The Group sub-divided its share capital on the basis of
26.71999:1 in February 2018. The weighted average for the year
ended 31 December 2017 reflects this.
10 Taxation
There were no charges to current corporate taxation due to the
losses incurred by the Group in the period. No deferred tax assets
have been recognised due to the uncertainty of reversal being
dependant on future taxable profits.
Income taxes computed at the statutory federal income tax of 21%
(2017: 35%) and the state income tax of 3.30% (2017: 3.30%). UK
corporation tax is calculated at 19% of the estimated assessable
profits for the year.
2018 2017
US$ US$
---------------------------------------- ------------ ------------
Loss on ordinary activities before tax (5,454,659) (3,957,821)
---------------------------------------- ------------ ------------
Loss on ordinary activities multiplied
by the rate of corporation tax in the
US as above (1,145,478) (1,385,237)
Effects of:
Adjustments for rate of tax in other
jurisdictions 26,611 226,518
Unrelieved tax losses carried forward 1,118,867 1,158,719
Total taxation charge - -
---------------------------------------- ------------ ------------
The tax reform act of 1986 contains provisions which limit the
ability to utilise the net operating loss carryforwards in the case
of certain events including significant changes in ownership
interests. If the Group's net operating loss carryforward, the
Group would incur a federal income tax liability even though net
operating loss carryforwards would be available in future
years.
11 Property, plant and equipment
Leasehold Furniture Computers
improvements and equipment and IT equipment Total
US$ US$ US$ US$
--------------------------
Cost
At 1 January 2017 2,695 27,671 8,232 38,598
Additions - - 16,834 16,834
At 31 December 2017 2,695 27,671 25,066 55,432
-------------------------- -------------- --------------- ------------------ -------
Additions - 4,952 1,599 6,551
At 31 December 2018 2,695 32,623 26,665 61,983
-------------------------- -------------- --------------- ------------------ -------
Accumulated depreciation
At 1 January 2017 360 19,516 6,737 26,613
Depreciation expense 539 2,775 4,164 7,478
At 31 December 2017 899 22,291 10,901 34,091
-------------------------- -------------- --------------- ------------------ -------
Depreciation expense 539 3,380 6,221 10,140
At 31 December 2018 1,438 25,671 17,122 44,231
-------------------------- -------------- --------------- ------------------ -------
Carrying amount
At 31 December 2017 1,796 5,380 14,165 21,341
-------------------------- -------------- --------------- ------------------ -------
At 31 December 2018 1,257 6,952 9,543 17,752
-------------------------- -------------- --------------- ------------------ -------
12 Intangible assets
Patents Total
US$ US$
---------------------------------------- ---------- ----------
Cost
At 1 January 2017 46,000 46,000
Additions - m2m (see note 3 - basis of
consolidation) 4,999,996 4,999,996
At 31 December 2017 5,045,996 5,045,996
---------------------------------------- ---------- ----------
Additions - -
---------------------------------------- ---------- ----------
At 31 December 2018 5,045,996 5,045,996
---------------------------------------- ---------- ----------
Accumulated amortisation
At 1 January 2017 23,000 23,000
Amortisation expense 361,746 361,746
At 31 December 2017 384,746 384,746
---------------------------------------- ---------- ----------
Amortisation expense 616,852 616,852
At 31 December 2018 1,001,598 1,001,598
---------------------------------------- ---------- ----------
Carrying amount
At 31 December 2017 4,661,250 4,661,250
---------------------------------------- ---------- ----------
At 31 December 2018 4,044,398 4,044,398
---------------------------------------- ---------- ----------
13 Investment in subsidiary undertakings
Subsidiary Undertakings
Company US$
--------------------- ------------------------
Cost
At 31 December 2017 4,342,848
Additions -
At 31 December 2018 4,342,848
--------------------- ------------------------
Carrying amount
At 31 December 2017 4,342,848
At 31 December 2018 4,342,848
--------------------- ------------------------
The Directors annually assess the carrying value of the
investment in the Subsidiary and in their opinion no impairment
provision is currently necessary.
The net carrying amounts noted above relates to the Subsidiary.
The subsidiary undertakings during the year were as follows:
Interest
Country of held
Registered office address incorporation %
Polarean 2500 Meridian Parkway #175, Durham,
Inc. NC 27713, USA USA 100
---------- ------------------------------------- ---------------- ---------
14 Trade and other receivables
Group Company
Amounts falling due 2018 2017 2018 2017
after one year US$ US$ US$ US$
--------------------- ----------- ----------- ------------ ------------
Rental deposit 12,539 12,539 - -
---------------------- ----------- ----------- ------------ ------------
Group Company
Amounts falling due within 2018 2017 2018 2017
one year US$ US$ US$ US$
------------------------------ ---------- -------- ---------- ----------
Trade receivables 166,277 750 - -
Other receivables 3,972,321 415,331 3,708,681 -
Prepayments 87,367 31,686 - -
Due from Group undertakings - - 5,661,930 1,851,021
Called up share capital
not fully paid 620 620 - -
Due from borrowings - 40,474 - 40,474
------------------------------ ---------- -------- ---------- ----------
4,226,585 488,861 9,370,611 1,891,495
------------------------------ ---------- -------- ---------- ----------
The Company's other receivable of US$3.7 million relates to the
funds outstanding from the share issue on 28 December 2018.
Analysis of trade receivables based on age of invoices
< 30 31 - 60 61 -90 > 90 Total Gross ECL Total Net
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----- -------- -------- -------- -------- ----------- -------- ---------
2018 163,677 2,600 - - 166,277 - 166,277
2017 750 - - - 750 - 750
----- -------- -------- -------- -------- ----------- -------- ---------
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses (ECL) which uses a lifetime expected loss
allowance for all trade receivables. The ECL balance has been
determined based on historical data available to management in
addition to forward looking information utilising management
knowledge. Based on the analyses performed there is no material
impact on the transition to ECL. The Company applies a similar
approach to measuring ECL for the amounts due from Group
Undertakings.
Trade receivables are amounts due from customers for goods sold
or services performed in the ordinary course of business. They are
generally due for settlement within 30 days and therefore are all
classified as current. The majority of trade and other receivables
are non-interest bearing. Where the effect is material, trade and
other receivables are discounted using discount rates which reflect
the relevant costs of financing. The carrying amount of trade and
other receivables approximates fair value.
15 Inventory
Group
2018 2017
US$ US$
Component parts 651,781 649,860
------------------ --------- --------
16 Cash and cash equivalents
Group Company
2018 2017 2018 2017
US$ US$ US$ US$
Cash at bank and in hand 875,601 960,217 235,766 23,106
--------------------------- -------- -------- -------- -------
17 Share capital
The issued share capital of the Company was as follows:
Allotted and called up
- Ordinary shares of 0.037p 2018 2018 2017 2017
each No. US$ No. US$
--------------------------------- ------------ ------- ----------- -------
At beginning of period 48,470,142 23,291 2,672 1
Issue of shares on group
reorganisation - - 42,286,709 20,320
Issue of shares to investors 47,321,448 23,540 6,180,761 2,970
Issue of shares upon converting
loans 4,939,303 2,596 - -
--------------------------------- ------------ ------- ----------- -------
At end of year 100,730,893 49,427 48,470,142 23,291
--------------------------------- ------------ ------- ----------- -------
The Company was incorporated on 24 October 2016 with issued
share capital of GBP1 comprising 1 ordinary share of GBP1 each. On
30 May 2017 the share capital of the Group was divided into 100
ordinary shares of 1p each.
On 30 May 2017 the Company issued 1,582,587 new ordinary shares
as consideration for the acquisition of 100% of the issued share
capital of the Subsidiary.
On 31 May 2017, the Company raised US$2 million of pre-IPO
funding by way of the issue of 231,316 new ordinary shares at a
price of GBP6.68 per share.
On 16 February 2018 the Company sub-divided its share capital on
the basis of 26.71999:1. The number of ordinary shares in issue in
the Company at 31 December 2017 reflects the sub-division.
On 28 March 2018 the Company issued 20,000,000 new ordinary
shares at a price of GBP0.15 each.
On 16 July 2018 the Company issued 5,000,000 new ordinary shares
at a price of GBP0.16 each.
On 28 December 2018, the Company issued 22,321,448 new ordinary
shares at a price of GBP0.14 each. Of the US$4.0 million (excluding
expenses) raised from investors, US$3.7 million remain outstanding
at year-end.
18 Reserves
Share premium
Share premium represents the excess of subscription amounts for
the issue of shares over nominal value of shares issued, less any
attributable share issue costs.
Group re-organisation reserve
The group re-organisation reserve arose on the transaction under
which the Group acquired the Subsidiary by way of a group
re-organisation.
Other equity
Includes the value of conversion rights on convertible
loans.
Share based payment reserve
Cumulative fair value of options charged to the consolidated
income statement net of transfers to the profit or loss reserve on
exercised and cancelled/lapsed options.
Accumulated losses
Includes all current and prior year retained profits and
losses.
Merger reserve
The balance on the merger reserve represents the fair value of
the consideration given in excess of the nominal value of the
ordinary shares issued in an acquisition made by the issue of
shares where the transaction qualifies for merger relief under the
Companies Act 2006.
19 Share based payments
Share options
The Company grants share options at its discretion to Directors,
management and employees. These are accounted for as equity settled
transactions. Should the options remain unexercised after a period
of ten years from the date of grant the options will expire unless
an extension is agreed to by the board. Options are exercisable at
a price equal to the Company's quoted market price on the date of
grant or an exercise price to be determined by the board.
Details of share options granted, exercised, lapsed and
outstanding at the year-end are as follows:
Number
of share
Weighted average Weighted
exercise price average exercise
(US$) options price (GBP)
Number of share
options 2018 2018 2017 2017
------------------------ ------------------------------- ---------------------- ---------- -----------------------
Outstanding at
beginning
of year 5,156,960 0.02 5,156,960 0.02
Granted during the year 10,403,600 0.20 - -
Forfeited/lapsed during - - - -
the year
Outstanding at end of
the year 15,560,560 0.13 5,156,960 0.02
------------------------ ------------------------------- ---------------------- ---------- -----------------------
Exercisable at end of
the year 6,590,282 0.07 4,304,619 0.01
------------------------ ------------------------------- ---------------------- ---------- -----------------------
During the year ended 31 December 2018, 10,403,600 options were
granted (2017: Nil). The options will vest in equal portions on an
annual basis on the anniversary of Admission, over the four year
period from the date of Admission. The options outstanding as at 31
December 2018 have an exercise price in the range of US$0.0041 to
US$0.20 (2017: US$0.0041 to US$0.0337).
The fair value of options granted has been calculated using the
Black Scholes model which has given rise to fair values per share
of US$0.09. This is based on risk-free rates of 1.41% and
volatility of 40.84%.
The Black Scholes calculations for the options granted resulted
in a charge of US$211,015 (2017: US$66,859) which has been expensed
in the year.
The weighted average remaining contractual life of the share
options is 7.91 years (2017: 6.2 years).
All share options are equity settled on exercise.
On 23 May 2019, the Company granted 1.2 million share options to
Chuck Osborne with an exercise price of 15 pence per share. 25% of
the options shall vest on 29 April 2020 with the remaining 75%
vesting in equal portions on the last day of each calendar month
over the period of 36 months, starting on 31 May 2020.
Share warrants
The Company grants share warrants at its discretion to
Directors, management, employees, advisors and lenders. These are
accounted for as equity settled transactions. Terms of warrants
very from agreement to agreement.
Details for the warrants granted, exercised, lapsed and
outstanding at the year-end are as follows:
Weighted average Weighted
exercise price Number of average exercise
(US$) share warrants price (US$)
Number of
share warrants
2018 2018 2017 2017
-------------------------- ---------------- ------------------ ---------------- -------------------
Outstanding at beginning
of year 9,065,428 0.15 5,081,449 0.01
Granted during the year 866,236 0.20 3,983,979 0.33
Forfeited/lapsed during
the year (2,908,125) 0.30 - -
Outstanding at end of
the year 7,023,539 0.09 9,065,428 0.15
-------------------------- ---------------- ------------------ ---------------- -------------------
Exercisable at end of
the year 7,023,539 0.09 4,371,841 0.00
-------------------------- ---------------- ------------------ ---------------- -------------------
On 30 May 2017, by way of a Warrant Substitution Agreement the
outstanding warrants in the Subsidiary were substituted into
warrants over shares in the Company. The Warrant Substitution
Agreement did not vary or amend any of the terms and conditions of
the warrants granted.
On completion of the m2m merger the Company granted a warrant of
5% of the issued share capital of the Subsidiary following the
merger to Amphion Innovations Plc, Robert Bertoldi and Richard
Morgan. A total of 2,618,373 warrants were issued pursuant to the
Amphion Warrant Instrument.
On 31 May 2017 the Company granted 1,236,174 warrants to
subscribers as part of the pre-merger fundraise on 31 May 2017
(Subscriber Warrants). These warrants can be exercised at any time
from Admission to 25 May 2021.
As part of the pre-Admission fundraising which was completed in
December 2017 the Company granted 129,432 warrants to subscribers
(Pre-Admission Fundraise Warrants). These warrants can be exercised
at any time from Admission to 25 May 2021.
On 11 January 2018 the Company granted 866,236 warrants to
subscribers with an exercise price of 15 pence per share which
vested immediately and expiry on 31 March 2019.
On 16 February 2018 the Company sub-divided its share capital on
the basis of 26.71999:1. The warrants above reflect this event.
The fair value of options granted during the year have been
calculated using the Black Scholes model which has given rise to
fair values per share of US$0.04. This is based on risk-free rates
of 1.41% and volatility of 40.84%.
The Black Scholes calculations for warrants resulted in a charge
of US$40,775 (2017: US$348,007) which has been expensed in the
year.
The weighted average remaining contractual life of the share
warrants is 4.1 years (2017: 3.6 years).
On 2 April 2019 the Company issued 705,040 new ordinary shares
of GBP0.00037 each in the capital of the Company at the exercise
price of 15 pence per share, following the exercise of warrants
from certain investors that subscribed in January 2018. The total
consideration received by the Company pursuant to the warrant
exercise will be GBP105,756. The remaining 157,796 warrants issued
in January 2018 lapsed on 1 April 2019.
20 Provision for contingent consideration
Group Company
2018 2017 2018 2017
US$ US$ US$ US$
Provision for contingent
consideration 316,000 316,000 - -
-------------------------- -------- -------- ----- -----
On 19 December 2011, the Subsidiary entered into an agreement
with a third party to purchase various assets, including patents,
trademarks, a license agreement and physical inventory. As
consideration for this transaction, the Subsidiary agreed to pay 5
per cent. of gross revenue on clinical sales of products that are
sold related to the patents purchased, for seven years from the
date of the commercial sale. As of 31 December 2018, the fair value
of this contingent consideration was US$316,000 (2017: US$316,000).
This liability is valued based on a probability weighted expected
return method using projected future cash flows. There were no
significant events in the year ended 31 December 2018 necessitating
revision of the probability weighted expected value of the
contingent consideration.
There was therefore no profit or loss arising on revaluation of
contingent consideration during the year ended 31 December 2018
(2017: nil).
21 Deferred income
Group Company
2018 2017 2018 2017
US$ US$ US$ US$
---------------------- -------- ------- ----- -----
Arising from service
contracts
Current 54,829 26,562 - -
Non-current 70,726 - - -
---------------------- -------- ------- ----- -----
125,555 26,562 - -
---------------------- -------- ------- ----- -----
22 Trade and other payables
Group Company
2018 2017 2018 2017
US$ US$ US$ US$
----------------------------- ---------- ---------- ------- -------
Trade payables 417,356 711,363 - -
Accruals and other payables 923,126 945,013 28,174 25,742
Royalties 250,000 250,000 - -
----------------------------- ---------- ---------- ------- -------
1,590,482 1,906,376 28,174 25,742
----------------------------- ---------- ---------- ------- -------
Trade payables and accruals principally comprise amounts
outstanding for trade purchases and ongoing costs and are payable
within 1 year.
Royalties comprise a fixed payment of US$250,000 in relation to
an agreement entered into by the Subsidiary for the use of patents,
see note 24 - Royalty commitments.
The Directors consider the carrying value of all financial
liabilities to be equivalent to their fair value.
23 Borrowings and loans
Group Company
2018 2017 2018 2017
US$ US$ US$ US$
------------------------ ------ ---------- ----- --------
Related party loans - 47,086 - -
Overdraft 5,213 - - -
Note payable - 265,750 - -
Convertible loan notes - 791,887 - 785,747
------------------------ ------ ---------- ----- --------
5,213 1,104,723 - 785,747
------------------------ ------ ---------- ----- --------
In June 2013, an unsecured subordinated promissory note was
issued to a related party for a principal amount of US$8,000 per
month for 18 months for a total of US$144,000. The note bears
interest at 3 per cent. per annum. All principal and outstanding
interest on the note is was repaid in December 2018.
In April 2017, an unsecured loan note was issued for a principal
amount of US250,000. The note bears interest at 6.75 per cent. per
annum. All principal and outstanding interest on the note was
repaid in April 2018.
An unsecured promissory note that was issued in June 2017 for a
principal amount of US$150,000, with an interest rate of 6 per cent
per annum, was settled in full including all outstanding interest
in April 2018.
In December 2017, an unsecured convertible loan note was issued
for a principal amount of US$903,000 (GBP647,147) was converted
with accrued interest, into 4,939,303 ordinary shares in the
Company at a conversion price equal to 90 per cent of the issue
price of the ordinary shares upon admission.
Net debt reconciliation
2018 2017
US$ US$
Cash and cash equivalents 875,601 960,217
Current borrowings (5,213) (1,104,723)
---------------------------- ------------------ --------------------- ----------------
Net debt 870,388 (144,506)
------------------------------- ------------------ --------------------- ----------------
Cash and Current
cash equivalents borrowings Total
US$ US$ US$
Net debt at 1 January
2017 97,847 (104,541) (6,694)
Cash flows 862,370 (1,047,014) (184,644)
Other non-cash movements - 46,832 46,832
Net debt at 31 December
2017 960,217 (1,104,723) (144,506)
------------------ --------------------- ----------------
Cash flows (84,616) 307,623 223,007
Other non-cash movements - 791,887 791,887
Net debt at 31 December
2018 875,601 (5,213) 870,388
------------------ --------------------- ----------------
24 Commitments
Royalty commitments
The Subsidiary has entered into three agreements requiring
royalty payments. One agreement is conditional and requires a
payment of 5 per cent. of gross revenue on clinical sales during
the payment period beginning on the date a product is first
commercially sold, contingent on receiving FDA approval, and ending
seven years from that date. A separate agreement requires payments
of 0.25 per cent of net sales of machines, and 20 per cent of any
sublicensing income for a specific method of use of patent
beginning in 2016. Additionally, beginning five years after the
effective date of 1 February 2021, there are minimum yearly
royalties of US$5,000. The third agreement requires a fixed payment
of US$250,000 for use of patents.
Operating lease commitments
At 31 December 2018, the Company was committed to making the
following payments under non-cancellable operating leases:
Land & Buildings
2018 2017
US$ US$
----------------------------------------- --------------------- ---------------------
No later than one year 73,522 72,205
Later than one year, and not later than
five years 109,899 183,421
Total 183,421 255,626
----------------------------------------- --------------------- ---------------------
The operating lease commitments for the rental of the property
is calculated on a straight-line basis over the length of the
lease.
25 Financial instruments
The Group has exposure to the following key risks related to
financial instruments:
i. Market risk
ii. Credit risk
iii. Liquidity risk
This note presents information about the Group's exposure to
each of the above risks, the Group's objectives, policies and
processes for measuring and managing risk, and the Group's
management of capital. Further quantitative disclosures are
included throughout these consolidated Financial Statements.
The Group uses financial instruments including cash, loans, as
well as trade receivables and payables that arise directly from
operations.
Due to the simple nature of these financial instruments, there
is no material difference between book and fair values, discounting
would not give a material difference to the results of the Group
and the Directors believe that there are no material sensitivities
that require additional disclosure.
(a) Credit risk
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to the
Subsidiary. In order to minimise the risk, the Subsidiary
endeavours only to deal with companies which are demonstrably
creditworthy and this, together with the aggregate financial
exposure, is continuously monitored. The maximum exposure to credit
risk is the value of the outstanding amount.
The Directors do not consider that there is any concentration of
risk within either trade or other receivables. There are no
impairments to trade or other receivables in each of the years
presented.
The Company has made unsecured interest-free loan to its
Subsidiary and is repayable on demand and is expected to be repaid
in the future as the Subsidiary is revenue generative.
Categories of financial instruments
Group Company
2018 2017 2018 2017
US$ US$ US$ US$
-------------------------------- ---------- ---------- ---------- ----------
Cash and cash equivalents 875,601 960,217 235,766 23,106
Loans and receivables
Trade and other receivables
- current 4,226,585 488,861 9,370,611 1,891,495
Trade and other receivables
- non-current 12,539 12,539 - -
-------------------------------- ---------- ---------- ---------- ----------
Financial Liabilities measured
at amortised cost
Trade and other payables 1,590,482 1,906,376 28,174 25,742
Borrowings - current 5,213 1,104,723 - 785,747
Borrowings
Group Company
2018 2017 2018 2017
Financial Instruments US$ US$ US$ US$
Related Party Loans - 47,086 - -
Overdraft 5,213 - - -
Note payable - 265,750 - -
Convertible Loan Notes - 791,887 - 785,747
------------------------ ------ ---------- ----- --------
Total 5,213 1,104,723 - 785,747
------------------------ ------ ---------- ----- --------
In June 2013, an unsecured subordinated promissory note was
issued to Technology Commercialization Group, for whom Kenneth West
was a retained consultant, for a principal amount of US$8,000 per
month for 18 months for a total of US$144,000. The note bears
interest at 3 per cent. per annum. This was repaid in full in
December 2018.
In December 2017, an unsecured convertible loan note was issued
for a principal amount of US$903,000 (GBP647,147) was converted
with accrued interest, into 4,939,303 ordinary shares in the
Company at a conversion price equal to 90 per cent of the issue
price of the ordinary shares upon admission.
Capital risk management
The Group manages its capital to ensure that it will be able to
continue as a going concern while maximising returns to
shareholders through the optimisation of debt and equity balances.
The Group is both equity and debt funded, and these two elements
combine to make up the capital structure of the business. Equity
comprises share capital, share premium and retained losses and is
equal to the amount shown as 'Equity' in the statement of financial
position. Debt comprises various items which are set out in further
detail above and in note 23.
The Group manages the capital structure and makes adjustments to
it in the light of changes to economic conditions and risks.
(b) Market risk
The interest rate profile of the Subsidiary's borrowings is
shown below:
Interest rate profile of interest-bearing borrowings:
2018 2017
Debt Interest Debt Interest
US$ rate US$ rate
-------------------------- ------ ---------- ------- ---------
Fixed rate borrowings
Related party loans - -% 24,852 6-10%
-------------------------- ------ ---------- ------- ---------
Weighted average cost of
fixed rate borrowings - -% 24,852 8%
-------------------------- ------ ---------- ------- ---------
Details of the above borrowings can be found in note 23
above.
Interest rate sensitivity analysis
As the interest rates on shareholders loans are fixed, interest
rate risk is considered to be very low.
(c) Liquidity risk
A maturity analysis of the Group's borrowings is shown
below:
2018 2017
US$ US$
------------------------------- ------ --------
Less than one year 5,213 49,631
One to two years - -
Two to five years - -
------------------------------- ------ --------
Total including interest cash
flows 5,213 49,631
Less: interest cash flows - (2,545)
-------------------------------- ------ --------
Total principal cash flows 5,213 47,086
-------------------------------- ------ --------
Derivatives
The Group and Company have no derivative financial
instruments.
26 Contingent liabilities
The Directors are not aware of any material contingent
liabilities, except for the contingent consideration detailed in
note 20.
27 Related party transactions
In June 2013, an unsecured subordinated promissory note was
issued to Technology Commercialization Group, for whom Ken West was
a retained consultant, for a principal amount of US$8,000 per month
for 18 months for a total of US$144,000. The note bears interest at
3 per cent per annum. All principal and outstanding interest on the
note was due 3 June 2016. This was repaid in full in December
2018.
28 Events after the reporting period
On the 2 April 2019, the Company issued 705,040 new ordinary
shares of GBP0.00037 each at an exercise price of 15 pence per
share in relation to the warrants exercised by certain investors
that subscribed for Convertible Loan Notes the Group undertook in a
pre-Admission fundraise in December 2017. The Company received
GBP105,756.
On 23 May 2019, the Company granted 1.2 million share options to
Chuck Osborne with an exercise price of 15 pence per share. 25% of
the options shall vest on 29 April 2020 with the remaining 75%
shall vest in equal portions on the last day of each calendar month
over the period of 36 months, starting on 31 May 2020.
Notice of Annual General Meeting
The Annual General Meeting of Polarean Imaging plc will be held
at the offices of Reed Smith LLP at The Broadgate Tower, 20
Primrose Street, London EC2A 2RS at 2.00 p.m. on 25 July 2019.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SEEEFMFUSEEM
(END) Dow Jones Newswires
June 27, 2019 02:01 ET (06:01 GMT)
Polarean Imaging (LSE:POLX)
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