Annual Report

Transforming Radiology

Company information

Directors M A Evans

E M Cukierman

C Mclean

W Denman

S Small

Company Secretary C Blanshard

Registered Number 06857417

Registered Office Centre for Innovation and Enterprise Oxford University

Begbroke Science Park Woodstock Road Oxford OX5 1PF

Independent Auditor KPMG LLP

2 Forbury Place

33 Forbury Road Reading RG1 3AD

Chief Executive’s Statement

Our vision is that our technology will deliver low-dose 3D X-ray imaging to be more affordable, more widely available and truly portable, at the point of care, throughout the world’s clinics and hospitals and beyond.

At the heart of the Apaptix strategy are: Patients

We must enhance patient outcomes and patient comfort

Physicians

We must support physicians in delivering better patient care more quickly and more efficiently Payers

We must reduce the total cost of care delivery in order to extend access to care

Partners

We must work help our partners deliver innovative products and services profitably to extend access to our innovations

Planet

We must minimise our environmental impact and have an environmental impact that is less than the current standardof-care

People

We must attract, develop and retain a diverse work-force in order to realise our ambition

Chief Executive’s Statement continued

Achievements

This has been a productive and important year for Adaptix. There is excitement in our 3D diagnostic offer in the previously under-served markets in which we are now deploying our low-cost technology. There is significant interest in our future product roadmap.

The critical achievements of the Company in the reporting period were;

• the deployment of imaging systems with customers in the Veterinary market, using a recurring revenue business model

• the sale of imaging systems within the Non-Destructive Evaluation (‘NDE’) market

• the preparation of the 510(k) for the first medical product (point-of-care Orthopaedic), which was submitted shortly after the year-end.

On behalf of the Board, I thank the employees, stakeholders and shareholders for their support, without which none of this would have been possible.

Financial performance

Research & development (R&D) remains a priority with focus on bringing products to market and to continue to develop future products. The number of dedicated R&D employees has reached 33 (2021 in 26) and the costs in the year have increased to

£916k (£880k in 2021).

At the year end, the Company still maintained a strong net asset position of £9m, and a cash balance of £4.3m.

As products reached the market in the year, revenue totalled £270k, which included both product sales within the NDE market (£266k) and recurring revenue within the VET market (£4k). The 2021 comparatives of £854k included £758k of (nonrecurring) contractual revenue. Although the Company remains loss making, it is still in development phase and early growth. Forecasts predict that in future years revenues will increase and the Company will become profitable.

Veterinary imaging system

Applications

Current applications Veterinary

We allow 3D on the treatment bed to transform dental workflows (faster, better), and allow the clinician to perform procedures they would have to refer away otherwise (allowing them to retain revenue in their practice). We currently offer this in the UK on a ‘Pay-perStudy’ and we are preparing for the launch in the US during 2022. The target market is 4,000 UK and 28,000 US veterinary practices.

Non-Destructive Evaluation (NDE)

We allow 3D imaging on the benchtop (unshielded or fully shielded) to assist in identifying counterfeit electronic components or devices, and provide unique imaging capabilities. We offer this as a ‘fee-per-scan’. The target market is the 2,000 reputable electronics brokers globally. Other markets include the imaging of composite devices or parts made using metal additive manufacturing.

Future applications

Orthopaedic

We will offer truly-portable low-dose 3D in the treatment room to improve diagnostic certainty, accelerate workflow

WE ALLOW 3D IMAGING ON THE BENCHTOP (UNSHIELDED OR FULLY SHIELDED) TO ASSIST IN IDENTIFYING COUNTERFEIT ELECTRONIC COMPONENTS OR DEVICES, AND PROVIDE UNIQUE IMAGING CAPABILITIES. WE OFFER THIS AS A ‘FEE-PER-SCAN’.

and improve practice profitability. The FDA 510(k) for the Orthopaedic product was filed in June 2022. Our target market are the ~9,280 US Urgent Care Centres (‘UCCs’) and ~9,616 US Ambulatory Surgical Centres (‘ASCs’) which do not generally have 3D imaging.

Dental

We will disrupt the ~$2.8bn 2D intraoral imaging system market by offering 3D intraoral imaging at the chairside to provide enhanced diagnostic clarity, allow earlier identification and volumetric quantification of dental caries, and allow intraoperative 3D imaging during endodontic procedures. We will likely generate revenue through Original Equipment Manufacturers (‘OEMs’) or Distribution on a capital basis.

Chest Imaging

We will offer 3D at the pointof-care in the Emergency Departments (‘EDs’) and Intensive Care Units (‘ICUs’) and eventually Primary Care to allow better identification and characterisation of pulmonary oedema, consolidation and pneumothorax, and localisation of lines and drains in the ‘z’ dimension relative to organs.  We will sell through OEMs on a capital basis.

We have continued to grow as an employer, currently with 53 employees at 31 March 2022 (39 at 31 March 2021)

3D scan image of a bearded dragon

Strategic Report

31 March 2022.

Background

Adaptix was incorporated in 2009 in the belief that the future of diagnostic imaging lies increasingly with low-cost more-advanced (3D) systems deployed at the point-of-care or in the community. It will always be the case that the most serious of conditions warrant referral to the radiology suite within a major hospital, but many common and low-risk conditions will be diagnosed without referral to a Level 2 or 3 hospital, or without referral to the radiology suite hospital in order to reduce patient transit, accelerate workflows and reduce crowding. We have developed the core technology to enable this, and have deployed systems in to non-medical uses (Veterinary, Non-Destructive Evaluation) to test and prove our capabilities before addressing the medical market.

Development and performance during the period

The Company has sold units of its Nondestructive Evaluation systems to government users in the UK and, following the financial year

end, has deployed its veterinary systems to paying clinical customers in the UK and systems to paying customers in the EU on a recurring revenue business model.

We operate out of three facilities around the Oxford area including the University of Oxford Science Park and the Rutherford Appleton Laboratory. Research & Development continues to be based out of Oxford. During the year the Company set up a small scale manufacturing premises in Oxfordshire, and has following the year has received its ISO 13485 for Manufacture. The company is mobilising scale manufacturing in Scotland for its core Flat Panel Source (‘FPS’) technology.

Production of the Veterinary and Non-Destructive Evaluation (‘NDE’) systems have commenced at a partner location in Germany. This partner will provide scale production for our VET and NDE systems and will also integrate the Orthopaedic imaging system.

We have continued to grow as an employer, currently with 53 employees at 31 March 2022 (39 at 31 March 2021).

The Directors present their strategic report and audited financial statements for the Company for the year ended

Impairment of intangibles

During the year, management assessed the recoverability of it’s intangibles held on the balance sheet. As the Company has significantly matured and products are now reaching the market, intangibles can now easily be identified by product type, ensuring a more reliable measurement. As a result of the review, it was agreed that the intangibles should be impaired by £1,168,505, this adjustment has been put through the 2022 financial statements.

Technology

The core of our technology is the Flat Panel Source (‘FPS’) that allows a fast (~5 second) 2-dimensional sweep

without any moving parts. First versions of the veterinary systems used a moving source and consequently have a slow acquisition speed, but later versions will be based upon the FPS.

We have began to develop algorithmic and Machine Learning approaches to allow an automated diagnostic overlay that will highlight potential regions of clinical concern to during the first read by a first opinion clinician. Our first applications are automated fracture detection and automated quantification of dental caries. We intend to begin deploying these not before 2023.

We have been developing a

‘colour’ imaging approach using multispectral detectors. This is a long lead-time project.

Intellectual property

The Company has 26 patent families and over 280 filed patents that protect the system, the key component and the image reconstruction. There is an extensive backlog of patent disclosures that we intend to exploit for further patents.

Research and development (R&D)

The R&D effort continues with the following areas of focus:

• Integrating the FPS used in the current orthopaedic system with a dynamic intraoral detector to allow intraoral 3D imaging at the chairside;

• Increase flux output from the FPS to allow the orthopaedic imaging system to be extended to allow imaging of shoulders and hips;

• Developing machine learning approaches and deploying them as a diagnostic overlay, initially for automated detection of occult fractures in veterinary and orthopaedic applications; and

• Increasing the energy of

FPS technology

the FPS and developing a system using multiple FPS to allow chest imaging at the bedside.

Quality and regulatory

The Company previously secured ISO 13485 for Design and Development in 2020 and has, subsequent to the year end, secured ISO 13485 for Manufacture. The Veterinary and NDE systems that have been sold in the year have been shipped under a nonmedical CE Mark.

Subsequent to the financial year-end, the 510(k) for the first medical product was submitted in June 2022 by the Company’s manufacturing partner. Separately, the CE Mark for the first medical product is expected in Q3 2022. The Company intends to submit for a UL Mark for the FPS in Calendar Q1 2023.

The Company will need to continue to comply with extensive regulations regarding safety, quality and efficiency standards in order to market its future products. These regulations, including the time required for regulatory review, vary from country to country and can be lengthy, expensive and uncertain.

The Company has a fulltime Director of Quality &

Regulatory and utilises external specialists in regulatory affairs who consult with other experts to ensure that internal control processes and regulatory filings meet current regulatory requirements.

Business model

The next phase of the Company’s operations will be to validate the recurring revenue business model at scale in three markets (Veterinary, NDE, Orthopaedic), and specifically to ‘land-andexpand’ in the United States market, commencing initially in one state and then rolling out as operational processes are proven at scale.

Through this we will demonstrate the impact of the first two of our transformations:

• Low-dose truly portable 3D imaging at the point-of-care

• A pay-per-study business model

As a science-led company we will continue to advance our

technology and products to allow us to extend the verticals served to include dental and chest imaging, to extract value from the data we aggregate for the benefit of clinical users, and to deliver the long-term third transformation that:

• The future is colour

It is our long-term intent to make our technology available on a global basis to meet the healthcare needs of underserved populations.

Environmental, Social and Governance (‘ESG’) matters

Environmental Social Governance (‘ESG’) is important to us as a Company because:

• our people and future hires expect it of a mission-led company

• increasingly the partners with which we work will require it in order to do business with us

• we expect that increasingly there will be a lower cost of capital for companies with strong ESG credential

• it is the right thing to do. Currently, we are not required to undertake any external ESG reporting. We are currently developing corporate ESG reporting in line with mandatory and voluntary reporting frameworks.

THE COMPANY HAS 26 PATENT FAMILIES AND OVER 280 FILED PATENTS THAT PROTECT THE SYSTEM, THE KEY COMPONENT AND THE IMAGE RECONSTRUCTION.

Principal risks and uncertainties

The principal risks and uncertainties of the Company relate to the successful development of the technology, regulatory compliance and regulatory environment, liquidity, dependence on key personnel, management and protection of intellectual property, success in clinical trials, market interest in portable 3D radiology and the emergence of competitive technologies. The most significant risk remains funding risk until the business is cash generative.

Financial risk management

The Company’s finance department has policies and procedures which are reviewed as operations change in size and nature to manage credit risk, foreign exchange risk and liquidity risk and circumstances where it would be appropriate to use financial instruments to manage these.

Future funding requirements

Potential impact

The Company will need to raise additional funding or enter into a strategic partnership with industry partners to undertake work beyond that being funded by the capital raised to date. There is no certainty that this will be possible at all or on acceptable terms.

Mitigation

The Company has proven a successful engagement with investors to generate significant cash resources to date. The Company’s management team expects that continued access to capital will be required to support the Company through commercialisation efforts in the United States and the

development of and regulatory filings for future products. Monthly cash flow forecasts are produced and cash runway discussed at the monthly Board meetings to predict when future funding will be required.

Liquidity risk

Potential impact

There is a risk that the Company cannot meet its short-term debt obligations.

Mitigation

The Directors review the treasury policy to ensure any significant cash balances are distributed across appropriate maturities to meet its requirements.

Foreign exchange risk

Potential impact

The Company does not have any material transactions in foreign currencies however it holds cash balances in appropriate currencies to meet obligations as they fall due.

Mitigation

This risk will be monitored to ensure when transactions in foreign currency increase, we have appropriate risk mitigation procedures in place.

Strategic risk management

Management discuss the business risks and uncertainties on a regular basis and assess the actions required to mitigate the level of uncertainty. The risk register helps coordinate the Company’s risk management process by identifying key business risks and documents policies and procedures in place to mitigate those risks.

The following constitute strategic risk:

Early stage of operations

Potential impact

The Company’s operations are at an early stage of development and there can be no guarantee that the Company will be able to, or that it will be commercially advantageous for the Company to, develop its proprietary technology. Further, the Company currently has no positive operating cash flow and its ultimate success will depend on the Directors’ ability to implement the Company’s strategy, generate cash flow and access capital.

Mitigation

The Company has successfully advanced the core technology for several years, including selling systems for the Veterinary and Non-Destructive Evaluation (‘NDE’) markets. The Company has been able to access capital required to continue to advance the technology.

Regulatory approvals and compliance

Potential impact

The Company will need to obtain various regulatory approvals (including FDA and CE Mark approvals) and otherwise comply with extensive regulations regarding safety, quality and efficacy standards in order to market its future products. These regulations, including the time required for regulatory review, vary from country to country and can be lengthy, expensive and uncertain.

Mitigation

The Company has a fulltime Director of Quality & Regulatory and utilises external specialists in regulatory affairs who consult with other experts to ensure that internal control processes and regulatory filings meet current regulatory requirements.

Dependence on key personnel

Potential impact

The success of the Company, in common with other businesses of a similar size, will be highly dependent on the expertise and experience of the Directors and key employees. However, the retention of such key personnel cannot be guaranteed. Should key personnel leave the Company’s business, prospects, financial condition or results of operations may be materially adversely affected.

Mitigation

The Company’s recruitment processes are designed to identify and attract the best candidates for specific roles. The Company aims to provide competitive rewards and incentives to staff and directors.

Intellectual property (‘IP’) and proprietary technology

Potential impact

No assurance can be given that any current or future patent applications will result in granted patents, that the scope of any patent protection will exclude competitors or provide competitive advantages to the Company, that any of the Company’s patents will be held valid if challenged, or that third parties will not claim rights in or ownership of the patents and other proprietary rights held by the Company.

Mitigation

The Company has a longstanding track record of patent generation and successful applications, and has a longstanding relationship with a patent attorney who has a deep understanding of our technology. The Company actively manages its IP, engaging with specialists to apply for and defend IP rights in appropriate territories.

Strategic Report continued

Technology and products

Potential impact

The development and commercialisation of proprietary technology and future products, such as the chest imaging product, are in early stages of development. There is a risk that safety and efficacy issues may arise when the products are tested. There is also a risk that there will be delays to the development of the products or that unforeseen technical problems arise as the Company’s technology becomes increasingly automated. These risks are common to all new medical products.

Mitigation

The Company has a depth of knowledge and experience in the area of medical devices development for the medical imaging market. The Company also utilises external experts to supplement their knowledge in critical areas such as safety and manufacturing.

Research and development risk

Potential impact

The Company operates in the medical imaging sector and will look to exploit opportunities within that market sector and adjacent vertical markets where our unique technology can offer a compelling economic advantage that is defensible. The Company is involved in complex scientific research and industry experience indicates that there may be a high incidence of delay or failure to produce results. The Company may not be able to develop new products or to identify specific market needs that can be addressed by technology solutions developed by the Company.

Mitigation

The Company has a depth of knowledge and experience in the area of medical devices development for the medical imaging market. The Company also utilises external experts to supplement their knowledge in critical areas such as research and regulatory affairs.

Competition

Potential impact

The Company notes that there are other companies operating in the portable X-ray and Digital Tomosynthesis markets. Some are established players

Mitigation

The Company believes that these competitive technologies, specifically that of our nearest competitor Nano-X, do not directly compete with our products as we do not require a shielded room, we do not require 3 phase power and our products can travel to the Point-ofCare. This allows us to focus on under-served markets where we have a defensible advantage. We also believe that we are ahead of Nano-X in terms of filing a viable 510(k) submission for a first medical (human) product.

Reliance on third parties

Potential impact

The business model for the Company anticipates that it will have limited internal resources over the next few years and that it will use third party providers wherever possible to conduct the research, development, registration, manufacture, marketing and sales of its proposed products. The commercial success of the Company’s products will depend upon the performance of these third parties.

Mitigation

The Company seeks experts in the areas where it utilises outsourcing. Wherever possible, the Company seeks to have duplicate suppliers to lessen the reliance on a particular vendor.

Manufacturing Potential impact

There can be no assurance that the Company’s FPS technology will be capable of being manufactured in commercial quantities, in compliance with regulatory requirements and at an acceptable cost. In addition, where the Company is dependent upon third parties for manufacture of imaging systems, its ability to procure the manufacture of the systems in a manner which complies with regulatory requirements may be constrained, and its ability to develop and deliver such products on a timely and competitive basis may be adversely affected.

Mitigation

The Company has designed the semiconductor manufacturing process to be scalable in existing foundries. The Company has established relationships with a Development Foundry and a Manufacturing Foundry, and is securing access to a manufacturing facility that is geographically near to the foundries.

Product development timelines

Potential impact

Product development timelines are at risk of delay, particularly since it is not always possible to predict what the FDA will require for approval of the 510(k). There is a risk therefore that product development could take longer than presently expected by the Directors. If such delays occur the Company may require further working capital.

Mitigation

The Directors shall seek to minimise the risk of delays by careful management of projects. The Company utilises consultants who are experts in preparing and filing 510(k) submissions in the United States. The Company will continue to utilise these experts as the FDA reviews the 510(k).

Strategic Report continued

General legal and regulatory issues

Potential impact

The Company’s operations are subject to laws, regulatory restrictions and certain governmental directives, recommendations and guidelines relating to, amongst other things, occupational safety, laboratory practice, the use and handling of hazardous materials, prevention of illness and injury, environmental protection and animal and human testing. There can be no assurance that future legislation will not impose further government regulation, which may adversely affect the business or financial condition of the Company. Furthermore, as the Company already has some exposure to the UK market, there is a risk that possible changes resulting from the Brexit negotiations could lead to additional barriers to trade and regulatory divergence which could adversely affect the Company.

Mitigation

The Company consults experts for advice in areas such as occupational safety, laboratory practice and clinical testing. The Company’s initial focus is on the US market, so Brexit negotiations should not impact the development pathway for the Company’s products. The Company will continue to monitor the Brexit situation and assess the impact on the Company’s ability to access capital in the UK.

Healthcare pricing environment

Potential impact

In common with other healthcare products companies, the ability of the Company and any of its partners to market its products successfully depends in part on the extent to which reimbursement for the cost of such products and related treatment will be available from government health administration authorities, private health coverage insurers and other organisations.

Mitigation

The first products launched (veterinary and NDE) do not require such reimbursement approvals. The Company will consult with experts in the field of reimbursement for healthcare products in the US to determine the best strategy for accessing adequate reimbursement for its Orthopaedic product, but is confident that reimbursement would be available using the same CPT codes recommended by GE Healthcare for its VolumeRAD product (a fixed Digital Tomosynthesis System).

Veterinary imaging system

Coronavirus risk Potential impact

The ongoing risks faced due to Covid-19 relates to the ability to meet customer demands due to restrictions resulting from components that have been in constraint.

Mitigation

The Company is monitoring the evolving impact of COVID-19 on the business and has put in place appropriate plans to mitigate disruption to research and development activity and ensuring the safety of its employees. We expect the lead-times on such components to diminish as COVID effects reduce. The Company’s operations are proving resilient and flexible with limited long-term impact anticipated as a result of COVID-19.

The Strategic Report was approved by the Board on

20 October 2022

By order of the board

Mark Evans Director

3D scan image of a mobile phone using the Adaptix NDE System

Directors’ Report

As permitted by the Companies Act 2016, the Company’s business review and principal risks and uncertainties are contained with the

The Company’s results for the financial year are shown in the profit and loss account on page 39. The Directors do not recommend the payment of a dividend for the year ended 31 March 2022

£9,112,827 including cash of £4,399,943. The Company’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic and Directors’ Reports above. The financial position of the Company, its cash flows and liquidity position and borrowing facilities are described in the primary statements and notes to these sets of financial statements.

As outlined above in the strategic report, the Company is in the stages of mobilising plans to product manufacture and to move to profitability.

The principal activity of the Company is the development of highly novel Flat Panel X-ray Source (‘FPS’) to allow low-dose 3D imaging that

The directors who held office during the year and up to the date of signing the financial statements

As part of their going concern assessment, the Directors have prepared budgets and cash flow forecasts for a period of 12 months (“the going concern period”) from the date of these accounts, taking into account their ability to manage cash flows. These indicate that additional funding will be required to ensure the Company can continue to grow and develop in line with its business plans and meet its liabilities as they fall due. The Company has a past history of obtaining funding and advanced discussions are in place with a number of parties to obtain this funding.

The Company incurred a net loss of £3,447,696 during the year ended 31 March 2022 and as of that date the Company had net assets of

It is anticipated that a further equity investment will be made in 2022 which will provide the cash required by the business, however the exact timing of when the investment will be completed, and the cash received, remains difficult to predict with certainty. Therefore, the company’s ability to continue as a going concern is dependent on the successful completion of a funding round.

The Directors present their report and the audited financial statements of the Company for the year ended 31 March 2022.

Directors’ Report continued

Based on the above indications the Directors believe that it remains appropriate to prepare the financial statements on a going concern basis. However, these circumstances represent a material uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern and, therefore, to continue realising its assets and discharging its liabilities in the normal course of business. The financial statements do not include any adjustments that would result from the basis of preparation being inappropriate.

Research design & development

Research and development (“R&D”) is performed by employees of the company and through collaborative efforts with academic researchers. The Company is committed to increasing its R&D budget to meet anticipated market opportunities for extensions of its technology. Details of R&D carried out during the year are contained in the Strategic Report.

Political contributions

The Company made no political donations or incurred any political expenditure during the year.

Financial risk management

Financial risk management policies and objectives for capital management are outlined in the principal risk and uncertainties section of the Strategic Report to the financial statements.

Directors’ indemnities

The Company has made qualifying third-party indemnity provisions for the benefit of its Directors, which were made during the year and remain in force at the date of this report.

Disclosure of information to auditor

The Directors who held office at the date of approval of this directors’ report confirm that, so

COMPANY IS

far as they are each aware, there is no relevant audit information of which the Company’s auditor is unaware; and each Director has taken all the steps that he or she ought to have taken as a director to make himself or herself aware of any relevant audit information and to establish that the company’s auditor is aware of that information.

Directors’ responsibilities

A director of a company must act in the way they consider, in good faith, would likely promote the success of the company for the benefit of the shareholders. In doing so, the director must have regard, amongst other matters, to the following issues:

• the likely consequences of any decisions in the long term;

• the interests of the company’s employees;

• the need to foster the company’s business relationships with suppliers/customers and others;

• the impact of the company’s operations on the community and environment;

• the company’s reputation for high standards of business conduct; and

• the need to act fairly between members of the company.

THE

COMMITTED TO INCREASING ITS R&D BUDGET TO MEET ANTICIPATED MARKET OPPORTUNITIES FOR EXTENSIONS OF ITS TECHNOLOGY.

Statement of directors’ responsibilities in respect of the annual report and the financial statements

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and applicable law.

Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable, relevant and reliable;

• state whether they have been prepared in

accordance with international accounting standards in conformity with the requirements of the Companies Act 2006;

• assess the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

• use the going concern basis of accounting unless they either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the company and to prevent and detect fraud and other irregularities.

Auditor

KPMG LLP has expressed its willingness to continue in office and a resolution to re-appoint the firm as Auditor and authorising the Directors to set their remuneration will be proposed at the forthcoming Annual General Meeting.

The Directors Report was approved by the Board on 20 October 2022

By order of the board

Mark Evans Director Centre for Innovation and Enterprise Oxford University, Begbroke Science Park Woodstock Road, Oxford OX5 1PF

Desktop 3D ortho imaging system

3D scan image of a rabbit head

The Directors of Adaptix recognise the value of good corporate governance in every part of its business.

As CEO of Adaptix Limited (“Adaptix”, or the “Company/Company”), it is my responsibility to ensure that Adaptix has both sound corporate governance and an effective board of directors (“Board”).

IT IS THE BOARD’S ROLE TO ENSURE THAT ADAPTIX IS MANAGED FOR THE LONG-TERM BENEFIT OF ALL SHAREHOLDERS, WITH EFFECTIVE AND EFFICIENT DECISION-MAKING.

CORPORATE GOVERNANCE IS AN IMPORTANT PART OF THAT ROLE, REDUCING RISK AND ADDING VALUE TO OUR BUSINESS.

Corporate governance is an important part of that role, reducing risk and adding value to our business. receive adequate time and attention at Board meetings.

It is the Board’s role to ensure that Adaptix is managed for the long-term benefit of all shareholders, with effective and efficient decision-making. Corporate governance is an important part of that role, reducing risk and adding value to our business.

The Directors of Adaptix recognise the value of good corporate governance in every part of its business and seeks to constantly improve its corporate governance practices. Subsequent to the year-ended 31 March 2022, the Company plan to

implement certain governance related measures including the formation of the Company’s Audit Committee.

Strategy, Risk Management and Responsibility

The Board is responsible for the monitoring of financial performance against budget and forecast and the formulation of the Company’s risk appetite including the identification, assessment and monitoring of Adaptix’s principal risks. The Board recognises the need for an effective and well-defined risk management process and it oversees and regularly reviews the current risk management and internal control mechanisms.

THE OVERALL OBJECTIVE OF THE BOARD IS TO SET POLICIES THAT SEEK TO REDUCE RISK AS FAR AS POSSIBLE WITHOUT UNDULY AFFECTING THE COMPANY’S COMPETITIVENESS AND FLEXIBILITY.

The Board has overall responsibility for identifying, monitoring and reviewing the Company’s risks, and assessing the systems of external control for effectiveness. The Executive Directors report any new or changed risks, and any changes in risk management or control to the Board. The Board discusses all business matters having regard to the risks for the Company and to the extent that risks inherent in a particular activity are considered significant, appropriate action is taken and steps taken to mitigate the issue. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Company’s competitiveness and flexibility. The Board is satisfied that the procedures in place meet the particular needs of the Company in managing the risks to which it is exposed. The Board is satisfied with the The Board takes responsibility for ensuring that the Company’s management reviews, monitors and reports on the integrity of the financial statements of the

Company and related financial information and monitors the effectiveness of internal control processes.

The independence and effectiveness of the external auditor is reviewed annually. The possibility of undertaking an audit tender process is considered on a regular basis. In addition members of the Board meet at least once year with the auditor to discuss the Annual Report, any audit issues arising, internal control processes, appointment and fee levels and any other appropriate matters.

The Board currently takes the view that an internal audit function is not considered necessary or practical due to the size of the Company, its business and assets, and the close day-to-day control exercised by the executive directors. The Board is satisfied that the systems and

procedures currently employed provide sufficient assurance that a sound system of internal controls are in place, which safeguards the shareholders’ investment and the Company’s assets.

The Board is responsible for the Company’s system of internal control and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate risk of failure to achieve the business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. The Company’s current system of internal financial control comprises those controls established to provide reasonable assurance of:

• The safeguarding of assets against unauthorised use or disposal; and

• The maintenance of proper

accounting records and the reliability of financial information used within the business and for publication.

The key procedures of internal financial control of the Company are as follows:

• The Board reviews and approves budgets and monitors performance against those budgets on a monthly basis; and

• The Company has clearly defined reporting and authorisation on procedures relating to the key financial areas.

The economy remains uncertain due to environmental factors, including but not exclusive to the global COVID-19 pandemic. Factors increase risks within the global economy. The Company continues to monitor to ensure we are prepared to the best of our ability.

[L] Hand 3D scan image

[R] Elbow 3D scan image

The Executive Directors are responsible for these areas at Board level, ensuring that the Company’s policies are upheld and providing the necessary resources.

Diversity and inclusion

The Company is committed to achieving equal opportunities and to complying with relevant anti-discrimination legislation. It has an established Company policy to offer employees and job applicants the opportunity to benefit from fair employment, and are encouraged to train and develop their careers, without regard to their sex, gender reassignment, sexual orientation, marital or civil partnership status, race, religion or belief, pregnancy and maternity, age or disability.

The Company has continued its policy of informing all employees of matters of

concern to them as employees, both in their immediate work situation and in the wider context of the Company’s wellbeing.

Communication with employees is affected through the Board, the Company’s management briefing’s structure, formal and informal meetings and through the Company’s information systems.

Directors responsibility

The Directors are responsible for preparing the Strategic Report, the Directors’ Report and the Financial Statements in accordance with applicable law and regulations.

The Act requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with International Financial

The Board recognises its employment, environmental and health and safety responsibilities. It devotes appropriate resources towards monitoring and improving compliance with existing standards.

Reporting Standards (IFRS) as adopted by the EU and applicable law.

In accordance with the Act, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and accounting estimates that are reasonable and prudent;

• state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Act. They are also responsible for safeguarding the assets of

COMMUNICATION WITH EMPLOYEES IS AFFECTED THROUGH THE BOARD, THE COMPANY’S MANAGEMENT BRIEFING’S STRUCTURE, FORMAL AND INFORMAL MEETINGS AND THROUGH THE COMPANY’S INFORMATION SYSTEMS.

the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. They are further responsible for ensuring that the Strategic Report and the Directors’ Report and other information included in the Annual Report and Financial Statements is prepared in accordance with applicable law in the United Kingdom.

The maintenance and integrity of the Adaptix Limited website is the responsibility of the Directors.

Anti-Bribery Policy

The Company takes a zero-tolerance approach to bribery and corruption and is committed to acting professionally, fairly and with integrity in all business dealings and relationships wherever they occur. The Company is implementing effective systems to counter bribery and corruption and as part of this it has adopted an anti-bribery and anticorruption policy. The policy provides guidance to those working for the Company on how to recognise and deal with bribery and corruption issues and the potential consequences and applies to all persons working for the Company or on its behalf in any capacity, including employees at all levels, directors, officers, consultants and agents.

The Board and Committees

The biographical details of the Directors of the Company are set out on the Company’s website: www.adaptix.com. The Board is supported by the Company Secretary.

The Board meets regularly and is responsible for the Company’s corporate strategy, monitoring financial performance, approval of capital expenditure and risk management policies. Board papers are sent out to all Directors in advance of each Board meeting including management accounts and accompanying reports.

The Directors believe that the Board, as a whole, has a broad range of commercial and professional skills, enabling it to discharge its duties and responsibilities effectively and that the Non-Executive Directors, together, have a sufficient range of experience and skills to enable them to provide the necessary guidance, oversight and advice for the Board to operate effectively. All Directors are encouraged to use their independent judgement and to

challenge all matters, whether strategic or operational.

The Company acknowledges that the guidance in the QCA Code is for a company to have at least two independent NonExecutive Directors. As such, the Directors shall keep the position under regular review and to the extent additional independence is felt to be required on the Board, it shall be sought.

The Board will seek to take into account any Board imbalances for future nominations. The Company is committed to a culture of equal opportunities for all employees, as noted above in our diversity and inclusion section. It is the Board’s intention as the size and complexity of the Company grows, to set and aim to achieve diversity objectives pursuant to a defined diversity policy.

The Board, as a whole, is

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responsible for the overall management of the Company and for its strategic direction, including approval of the Company’s strategy, its annual business plans and budgets, the financial statements and reports, the accounting policies, major capital projects, any investments or disposals, its succession plans and the monitoring of financial performance against budget and forecast and the formulation of the Company’s risk appetite including the identification, assessment and monitoring of the Company’s principal risks.

In order to discharge their duties effectively, the Board uses third parties to advise the Directors of their responsibilities including receiving advice from the Company’s external lawyers. In addition to their general Board responsibilities, Non-Executive Directors are encouraged to be involved in specific workshops or meetings, in line with their individual areas of expertise. Adaptix’s Company Secretary, is responsible for ensuring that Board procedures

DIRECTORS ARE ENCOURAGED TO BE INVOLVED IN SPECIFIC WORKSHOPS OR MEETINGS, IN LINE WITH THEIR INDIVIDUAL AREAS OF EXPERTISE.

are followed and that the Company complies with all applicable rules, regulations and obligations governing its operation, as well as helping the Chairman maintain appropriate standards of corporate governance. There are processes in place enabling Directors to take independent advice at the Company’s expense in the furtherance of their duties, and to have access to the advice and services of the Company Secretary.

Board Committees

Certain Board responsibilities are delegated to committees who fulfil these functions in line with the terms of references established by the Board.

Audit Committee

As noted in the Corporate Governance statement, the company plans to establish an Audit Committee in the coming year.

Remuneration Committee

The remuneration committee comprises of three

The Board and Committees continued

Non-Executive Directors. The purpose of the Remuneration Committee is to ensure that the Executive Directors and other employees are fairly rewarded for their individual contribution to the overall performance of the Company. The Committee considers and recommends to the Board the remuneration of the Executive Directors and is kept informed of the remuneration packages of senior staff and invited to comment on these. The Board retains responsibility for overall remuneration policy. Executive remuneration packages are designed to attract and retain executives of the necessary skill and calibre to run the Company. The Remuneration Committee recommends to the Board the remuneration packages by reference to individual performance and uses the knowledge and experience of the Committee members, published surveys relating to AIM companies, the

medical device industry and market changes generally.

Nomination Committee

The Company does not currently have a separate Nomination Committee, as the Board does not consider it appropriate to establish such a committee at this stage of the Company’s development. Decisions which would usually be taken by the nomination committee, such as appointments to the Board, will be taken by the Board as a whole. The Board will monitor on an ongoing basis the need for a formal Nominations Committee. The Chairman and the Board continue to monitor and evolve the Company’s corporate governance structures and processes, and maintain that these will evolve over time, in line with the Company’s growth and development.

Advisors

The Board has regular contact

with its advisors to ensure that it is aware of changes to generally accepted corporate governance procedures and requirements and that the Company remains, at all times, compliant with applicable rules and regulations. The Company holds appropriate insurance cover in respect of possible legal action against its Directors. All Directors may receive independent professional advice at the Company’s expense, if necessary, for the performance of their duties.

Culture

The Board recognises that their decisions regarding strategy and risk will impact the corporate culture of the Company as a whole and that this will impact the performance of the Company. The Board is very aware that the tone and culture set by the Board will greatly impact all aspects of the Company

as a whole and the way that employees behave. A large part of the Company’s activities are centred upon addressing customer and market needs. Therefore, the importance of sound ethical values and behaviour is crucial to the ability of the Company to successfully achieve its corporate objectives.

The Board places great importance on this aspect of corporate life and seeks to ensure that this flows through all that the Company does. The Board assessment of the culture within the Company at the present time is one where there is respect for all individuals, there is open dialogue within the Company and there is a commitment to provide the best service possible to the Company’s customers.

The Company operates in a manner that encourages an open and respectful dialogue with employees, customers

and other stakeholders and the Board considers that sound ethical values and behaviour are crucial to the ability of the Company to achieve its corporate objectives. The Company is committed to the highest standards of personal and professional ethical behaviour, and this must be reflected in every aspect of the way in which the Company operates. The Board places great importance on this aspect of corporate life and seeks to ensure that this flows through all that the Company does. The Directors consider that at present the Company has an open culture facilitating comprehensive dialogue and feedback and enabling positive and constructive challenge

Board Performance Evaluation

Formal internal evaluation of the Board, its Committees and individual directors is seen as an important next step in the development of the board.

The purpose of such an evaluation would be to ensure that its members collectively function in an efficient manner, focusing more closely on defined objectives and targets for improving performance, as well as reviewing the effectiveness of each Committee.

During frequent Board meetings/calls, the Directors discuss areas where they feel a change would be beneficial for the Company, and the Company Secretary remains on hand to provide advice.

Communication with Shareholders

The Board is committed to maintaining good communication and having constructive dialogue with its shareholders in order to maintain good investor relations and seeks, wherever possible to attain a relationship of mutual understanding with both institutional and private client investors.

Independent Auditor’s Report to the Members of Adaptix Limited

Opinion

We have audited the financial statements of Adaptix Limited (“the company”) for the year ended March 31, 2022 which comprise the Statement of Profit and Loss and Other Comprehensive Income, Balance Sheet, Statement of Changes in Equity, Cash flow statement, and related notes, including the accounting policies in note 1.

In our opinion the financial statements:

• give a true and fair view of the state of the company’s affairs as at March 31, 2022 and of its loss for the year then ended;

• have been properly prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006; and

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

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are

independent of the company in accordance with, UK ethical requirements including the FRC Ethical Standard. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion.

Material uncertainty related to going concern

We draw attention to note 1.4 of the financial statements which indicates that the company’s ability to continue as a going concern is dependent on the successful completion of a funding round. These events and conditions, along with the other matters explained in note 1.4, constitute a material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern.

Our opinion is not modified in respect of this matter.

Going concern basis of preparation

The directors have prepared the financial statements on the going concern basis. As stated above, they have concluded that a material uncertainty related to going concern exists.

Based on our financial statements audit work,

we consider that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Fraud and breaches of laws and regulations – ability to detect

Identifying and responding to risks of material misstatement due to fraud

To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included:

• Enquiring of directors and inspection of policy documentation as to the Company’s high-level policies and procedures to prevent and detect fraud, as well as whether they have knowledge of any actual, suspected or alleged fraud.

• Reading Board minutes.

• Using analytical procedures to identify any unusual or unexpected relationships.

We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout the audit.

As required by auditing standards, we perform procedures to address the risk of management override of controls, in particular the risk that management may be in a position to make inappropriate accounting entries and the risk of bias in accounting estimates and judgements such as provision for loss contract. On this audit

we do not believe there is a fraud risk related to revenue recognition because there are few revenue transactions given the entity is in the early phase of its lifecycle.

We did not identify any additional fraud risks. We performed procedures including identifying journal entries to test based on risk criteria and comparing the identified entries to supporting documentation. These included those posted to unusual or unexpected accounts.

Identifying and responding to risks of material misstatement due to noncompliance with laws and regulations

We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector experience and through discussion with the directors and other management (as required by auditing standards) and discussed with the directors and other management the policies and procedures regarding compliance with laws and regulations.

We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit.

The potential effect of these laws and regulations on the financial statements varies considerably.

The Company is subject to laws and regulations that directly affect the financial statements including financial reporting legislation (including related companies legislation),

Independent Auditor’s Report to the Members of Adaptix Limited continued

distributable

profits legislation

and

taxation legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.

Whilst the Company is subject to many other laws and regulations we did not identify any others where the consequences of noncompliance alone could have a material effect on amounts or disclosures in the financial statements. Auditing standards limit the required audit procedures to identify noncompliance with these laws and regulations to enquiry of the directors and other management and inspection of regulatory and legal correspondence, if any. Therefore, if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach.

Context of the ability of the audit to detect fraud or breaches of law or regulation

Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it.

In addition, as with any audit, there remained a higher risk of non-detection of fraud, as these may involve collusion, forgery, intentional

omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing noncompliance or fraud and cannot be expected to detect non-compliance with all laws and regulations.

Strategic report and directors’ report

The directors are responsible for the strategic report and the directors’ report. Our opinion on the financial statements does not cover those reports and we do not express an audit opinion thereon.

Our responsibility is to read the strategic report and the directors’ report and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work:

• we have not identified material misstatements in the strategic report and the directors’ report;

• in our opinion the information given in those reports for the financial year is consistent with the financial statements;

• and in our opinion those reports have been prepared in accordance with the Companies Act 2006.

Matters on which we are required to report by exception

Under the Companies Act 2006, we are required to report to you if, in our opinion:

• adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

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

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

• we have not received all the information and explanations we require for our audit; or We have nothing to report in these respects.

Directors’ responsibilities

As explained more fully in their statement set out in page 23, the directors are responsible for: the preparation of the financial statements and for being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level

of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org. uk/auditorsresponsibilities.

The purpose of our audit work and to whom we owe our responsibilities

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.

Michael Crowson (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants

2 Forbury Place

33 Forbury Road

Reading RG1 3AD

20 October 2022

Statement of Profit and Loss and Other Comprehensive Income

for year ended 31 March 2022

The accompanying notes form part of these financial statements.

Balance Sheet

These financial statements were approved by the board of directors on 20 October 2022 and were signed on its behalf by:

Mark Evans Director

Company registered number: 6857417

The accompanying notes form part of these financial statements.

Statement of Changes in Equity

for year ended 31 March 2022

Statement of Changes in Equity

The accompanying notes form part of these financial statements.

Cash Flow Statement

for year ended 31 March 2022

Cash flows from operating activities

Cash Flow Statement

The accompanying notes form part of these financial statements.

Notes (forming part of the Financial Statements)

1 Accounting policies

1.1 General Information

Adaptix Limited is a private company incorporated and registered in England in the UK. The registered number is 06857417 and the registered address is Centre for Innovation and Enterprise, Oxford University, Begbroke Science Park, Woodstock Road, Oxford, OX5 1PF.

1.2 Basis of preparation

The company financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 (Adopted IFRSs).

The financial statements are prepared on the historical cost basis, as modified by the recognition of certain financial instruments measured at fair value.

1.3 Estimates and judgements

The preparation of the financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions. These judgments, estimates and assumptions affect the reported assets and liabilities as well as income and expenses in the financial period.

The estimated and associated assumptions are based on historical experience and various other factors which are believed to be reasonable under the circumstances, the results of which for the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. The actual outcomes are not expected to differ significantly from the estimates and assumptions made.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or the period of revision and future periods if this revision affects both current and future periods.

The key assumption concerning the future and key source of estimation uncertainty at the balance sheet date that may cause material adjustment to the carrying amounts of assets or liabilities within the next financial year is the recoverability of intangible assets. The assumption is the forecast sales of the new product will be generated but are not currently contracted. The forecast has been developed from discussions with potential customers and the expected costs of production.

1.4 Going concern

The Company incurred a net loss of £3,447,696 during the year ended 31 March 2022 and as of that date the Company had net assets of £9,112,827 including cash of £4,399,943.

The Company’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic and Directors’ Reports

Centre for Innovation And Enterprise

Oxford University

Begbroke Science Park OX5 1PF

www.adaptix.com