Feedback Regulatory News (FDBK)

30 April 2014

Feedback plc

("Feedback" or the "Company")

Proposed acquisition of Cambridge Computed Imaging Limited, proposed acquisition of TexRAD Limited, Subscription to raise £300,000 and readmission to trading on AIM

Headlines

• Acquisition of highly complementary and synergistic Cambridge Computed Imaging Limited and TexRAD Ltd

• Subscription to raise £300,000, supported by the Company's directors and an existing shareholder, completed at a 62 per cent. premium to the closing middle-market price

• The Acquisitions offer an exciting growth opportunity for the Company and its shareholders to gain exposure to the medical imaging software market

• The cash raised from the subscription together with the existing cash resources of the Company will help fund future research and development efforts, sales and marketing initiatives, and regulatory approval processes

Proposed Acquisitions and Subscription

Feedback announces that it has entered into conditional agreements to acquire the issued share capital of CCI and TexRAD, both medical imaging software companies, and the underlying IP relating to TexRAD, for a total consideration of £473,900 to be satisfied by the issue of the Consideration Shares and £26,400 in cash.

The Company is proposing to raise £300,000 by way of a conditional subscription for 24,000,000 Ordinary Shares at 1.25p per share. It is intended that the proceeds of the Subscription will be used to help grow the CCI and TexRAD businesses, specifically to invest in sales, marketing, regulatory approval processes and to provide additional working capital for the Enlarged Group. Furthermore the Company will pay the professional fees incurred in respect of the Acquisitions and the Subscription.

The Acquisitions will constitute a reverse takeover under the AIM Rules. As a consequence, the Directors are seeking shareholder approval for the Acquisitions at a general meeting which is expected to be convened for 10.00 a.m. on 16 May 2014 at the offices of Stephenson Harwood LLP at 1 Finsbury Circus, London EC2M 7SH.

Irrevocable Undertakings to vote in favour of the Resolutions at the General Meeting have been obtained from the Directors and certain other Shareholders in respect of their shareholdings, amounting to in aggregate 78,273,919 Ordinary Shares representing 59.78 per cent of the Existing Ordinary Shares.

Application will be made to the London Stock Exchange for the Enlarged Issued Share Capital to be admitted to trading on AIM. The AIM Admission Document, which comprises a circular to Shareholders and notice of the General Meeting, will be posted to Shareholders and will be available from the Company's website, www.fbk.com, today.

It is expected that admission to AIM will become effective and that dealings in the Enlarged Issued Share Capital will commence on or before 19 May 2014.

Nick Shepheard, Chairman and Chief Executive of Feedback, commented: "Medical imaging plays an ever more important role in medical decision making and is fundamental to patient assessment and treatment in cardiology and oncology. The board of Feedback believe that there is a growing market for image analysis tools that aid the decision making process and help clinicians assess prognosis and evaluate the efficacy of existing and newly developed treatments. Working together, CCI and TexRAD combine image manipulation and processing expertise with a new technique for analysing cancer tumours that has shown significant advantages over other assessment techniques. Aided by the Enlarged Group's strengthened balance sheet and access to public markets via an AIM listing, we look forward to building on their successes to date by progressing towards regulatory approval, entering the market to help assess the effectiveness of drugs under development, and creating shareholder value growth in the medium and longer term."

Contacts:

Below are extracts from the Admission Document which has been sent to shareholders today. The full Admission Document is available on the Company's website: www.fbk.com.

Information on CCI

Background information on CCI

CCI specialises in providing software that helps doctors use medical images in diagnosis and treatment. Since its foundation, CCI has focused on supporting the needs of Papworth Hospital, the UK's largest specialist cardiothoracic hospital, and other facilities where its software is used to support diagnosis, treatment planning, treatment response and knowledge sharing within multi-disciplinary teams.

CCI's core product, the Cadran image platform, provides a comprehensive range of PACS services designed to offer both clinical and productivity benefits. Connecting with and accessing images from all types of digital imaging equipment, such as CT and PET scanners, Cadran enables connectivity with devices using the DICOM standard. Cadran is built around its Image Storage Manager which is a scalable system designed both to deliver images on demand and provide long-term and secure archiving of sensitive data. Images are served in an interface certified for clinical use that allows doctors to display, review and manipulate the images whilst using in-line measurement and analysis tools to assist with diagnosis and quantifying treatment responses. Relevant information can be accessed by users from any workstation connected to the platform. Web functions are added to enable access to static and dynamic images over an intranet or internet using standard web browsers. Advanced compression and transmission techniques typically mean bandwidth consumption is minimised and images load at a faster pace, particularly useful for remote reviewing and teaching applications.

CCI has worked with TexRAD since 2011 and has been responsible for developing the platform that can be installed on a single workstation, on a local server or on centrally hosted virtual machines.

CCI's products under development are designed to enable a multi-site multi-disciplinary team approach to using medical images, a feature of complex decision making in fields such as cardiothoracic and cancer care.

Competition

The PACS market grew rapidly in the early 2000s after small companies worked closely with major centres to produce integrated systems that offered clinical and workflow benefits. Following much consolidation, the Directors believe that CCI's competitors in the UK PACS market can generally be categorised into two groups: (i) large established global OEMs supplying imaging hardware to medical markets, such as GE Healthcare (USA), Siemens (Germany), Philips (The Netherlands), Toshiba Medical systems (Japan), and (ii) smaller software companies who have found their niche providing imaging services to regional hospitals or to specialist interests, such as CCI's focus on cardiothoracic and its development of the multi-client simultaneous rendering of images for collaborative working between locations.

Financial summary of CCI

The table below contains information extracted from the audited financial information for CCI for the three financial periods ended 31 January 2014.

Information on TexRAD

Background information on TexRAD

TexRAD offers an innovative quantitative tool to those researching the diagnosis, prognosis and treatment response of cancer. The technology enables quantitative textural analysis of heterogeneity to be found in routinely acquired clinical diagnostic images which could serve to risk stratify tumours and assist in response evaluation. Research customers have shown that using TexRAD's quantitative textural analysis, heterogeneity could further add value to existing markers of tumour size, density and perfusion as a quantitative imaging biomarker and potentially assist in clinical decision making by optimising care pathways for improved patient outcomes and provide cost-effective patient management.

Between 2004 and 2011, researchers from the University of Sussex's Department of Engineering collaborated with Brighton & Sussex Medical School to develop an innovative algorithm that quantified textures in medical images. Following early adoption and promising findings by research groups, TexRAD was incorporated in February 2011 in order to translate a novel research tool into commercial products.

Current treatment decisions for patients with cancer are primarily based on the extent of tumour spread (i.e. tumour stage). Diagnostic imaging, especially CT and PET are essential to determining the stage for many cancers. However, patients with the same tumour stage often follow differing clinical courses and may therefore require different treatments. This has resulted in a need for additional methods to assess cancer severity so that treatment can be selected to more closely match the likely clinical course. Medical images such as CT scans and MRI scans are used to make decisions on patient care and treatment but are limited to what the human eye can see. Diagnostic imaging systems have generally enhanced fine detail (i.e. high spatial frequency information) with the aim of optimising anatomical resolution. However, experience from the automated identification of military targets indicated that important discriminatory information is to be found within coarser variations in image brightness (i.e. lower spatial frequencies). If pronounced, these variations can be perceived as abnormalities of texture.

TexRAD's proprietary technology employs filters specifically to highlight these coarser features and uses histogram analysis to quantify and assess the distribution of grey-levels, coarseness and regularity within a lesion. By using filters that extract and enhance for image features at larger scales, the effect of photon noise is reduced whilst biological heterogeneity is enhanced. TexRAD allows heterogeneity parameters measured at different spatial scales to be compared and presented as 'texture ratios' or 'texture spectra' enabling quantitative assessment of imaging biomarkers within a tumour.

TexRAD has recently commenced the process necessary to achieve regulatory approval that will enable its use in clinical practice and add quantitative textural analysis to trials of pharmaceuticals under development. Revenues to date have primarily come from leading medical research centres where TexRAD is being applied in a wide range of studies including colorectal, breast, lung, prostrate, oesophageal, head and neck, and renal cancers. TexRAD has supported customers around the world including:

• University College London Hospitals, London, UK

• The Institute of Cancer Research Royal Marsden Hospital, Surrey, UK

• University of Cambridge, Cambridge, UK

• Aarhus University Hospitals, Aarhus, Denmark

• European Institute of Oncology, Milan, Italy

• Johns Hopkins University, Baltimore, Maryland, USA

• Massachusetts General Hospital, Boston, Massachusetts, USA

• Tata Memorial Hospital, Mumbai, India

Competition

As far as the Directors are aware, TexRAD is the only commercially available software offering analysis of image texture at user-defined spatial scales. TexRAD is protected by a patent (pending in EU and USA, granted in Canada) and the searches undertaken in taking out the patent have not identified any likely challenges. So far as the Directors are aware, other research groups have predominantly focused on segmenting and classifying lesion/organ/tissue as benign or malignant and have not focused as much on prognosis and treatment response markers. TexRAD's approach is to first establish the biological correlates and relevant image features and then show their association to patient outcome and disease-severity. TexRAD's comparison studies have either shown complementarity or superior prognostic performance for TexRAD compared to other imaging biomarkers such as CT perfusion and PET measurements of glucose uptake. Modelling studies have also indicated a complementary role for TexRAD alongside clinical biomarkers such as performance status.

Emerging competitor serum and tissue-based biomarkers such as the promising prognostic markers for CRC and NSCLC, microRNA analysis and microsatellite instability testing, are comparable in cost to TexRAD. Although not tested in the same cohorts, the reported prognostic performance measures for these biomarkers are comparable or lower than those for TexRAD. Tissue-based biomarkers are also constrained by their invasive nature and by tumour heterogeneity resulting in biopsy sampling error. By being image-based, TexRAD can non-invasively evaluate larger tumour volumes and exploit tumour heterogeneity rather than being constrained by this fundamental property of malignancy.

Financial summary of TexRAD

The table below contains information extracted from the audited financial information for TexRAD for the three financial periods ended 31 January 2014.

Current trading and prospects

CCI

Due to the high percentage of longstanding customer agreements which provide recurring revenue, trading in CCI has been in line with management's expectations during the first quarter of the financial year. CCI continues to undertake a programme of consultancy developments which lead to additional project based revenues. CCI has also commenced work on developing a multidisciplinary team toolkit, which it proposes to launch as a stand-alone product later this year. The Directors consider this product to be a milestone in the development of the business as it provides new opportunities in the cardiothoracic sector and expands the markets in which CCI operates.

TexRAD

TexRAD continues to make revenues working with its research customers. The Directors are encouraged by the current pipeline and by a number of recent sales that moved to an accelerated completion. TexRAD's current intention is, following regulatory approval, to launch an updated version of its product for the clinical trials market in late 2014 and to secure early adopter clinical customers looking to use quantitative textural analysis to measure treatment response. The Directors expect modest revenues from new markets in the first 12 months following such launch but consider adoption in clinical use as a strategic priority.

Corporate vision and strategy

In an environment with ever more powerful computing possibilities, new drugs under development, and the constant need to evaluate the effectiveness of complex treatment choices, medical imaging is an integral and growing part of medical practice.

The Directors' vision is to build on CCI's image processing and analysis expertise with TexRAD's novel quantification technique to position Feedback as a medical imaging tools company. The mission of the Enlarged Group is to extract every potential benefit from medical images. The Board proposes to develop innovative techniques and improved workflows for practitioners involved in medical research and treating patients. The Enlarged Group intends to build products that put new and more effective tools into the hands of clinical decision makers, with a view to improving patient care and reducing costs.

TexRAD has already proven its value in medical research and is now working towards regulatory approval when it can be used to enrich clinical trials and help understand the effects of new pharmaceuticals. It is intended that products will be developed to help medical decision makers evaluate the treatment choices on a patient-by-patient basis and which are intended to support industry moves towards a personalised approach to patient care. As its technologies are manufacturer neutral, and can be used with historical images, for example, on longitudinal research projects and to monitor disease progression, the addressable market will include all existing specialist imaging centres.

As the market develops, the Directors intend to base the business model on the clinical use of its tools designed to identify imaging biomarkers that can be used in the early detection of cancer, in determining prognosis and predicted outcomes and in evaluating treatment response.

The Directors believe that Feedback can create shareholder value growth in the medium and longer term through CCI and TexRAD's expertise in cardiac imaging and oncology by further developing existing products whilst moving into the clinical trials market, and developing new tools to measure patients' treatment response. The Directors intend to fund these developments from existing revenue streams in the research market, the Company's cash resources and from grant funding (where available). There will be potential new sources of revenue when TexRAD has completed its regulatory approval process.

In addition to existing CCI and TexRAD products, the Company will look for opportunities to widen its offerings in its target markets through collaborations and corporate activity which may include mergers and acquisitions.

Reasons for the Proposals

The Directors believe that the Proposals offer an exciting growth opportunity for the Company and its Shareholders and that the Enlarged Group has the potential to benefit from:

• the fact that the CCI and TexRAD businesses are complementary to each other;

• an enhanced ability to attract and incentivise key management;

• an enhanced corporate profile as a public company;

• the availability of the Company's cash reserves and resources to CCI and TexRAD and the potential to provide CCI and TexRAD with an opportunity to access new capital for future research and development; and

• an ability to use quoted shares as consideration for strategic acquisitions.

Regulatory environment

In order to market its technologies as a medical device for use in clinical trials, TexRAD must undergo a process of regulatory approval. The Directors believe that TexRAD and CCI are working towards the necessary European and USA regulatory requirements including Medical Devices Directive 93/42/EEC, ISO13485:2003, and Code of Federal Regulations Title 21 Part 11 (which defines criteria under which FDA considers electronic records and electronic signatures to be trustworthy, reliable, and equivalent to paper records). A regulatory pathway for TexRAD's medical device products has been identified and it has selected a preferred supplier to assist in getting approval with the US Food and Drug Administration and the UK Medicines and Healthcare Products Regulatory Agency.

Principal terms of the Acquisitions

CCI

Under the terms of the CCI Acquisition Agreement, the Company has conditionally agreed to acquire the entire issued share capital of CCI from the CCI Vendors for a total consideration of £213,200, to be satisfied by £13,200 in cash and the balance by the issue of the CCI Consideration Shares (representing 8.39 per cent. of the Enlarged Issued Share Capital) on Admission.

During the period between the date of the execution of the CCI Acquisition Agreement and Completion, the CCI Vendors have undertaken to operate the business of CCI in the normal manner of such business. The CCI Acquisition Agreement contains certain warranties (subject to certain limitations of liability) and undertakings given by the CCI Vendors in favour of the Company.

TexRAD

Under the terms of the TexRAD Acquisition Agreement, the Company has conditionally agreed to acquire the entire issued share capital of TexRAD (other than a nine per cent. stake in TexRAD that is already held by CCI) from the TexRAD Vendors for a total consideration of £240,700. In addition, TexRAD has also reached agreement with the University of Sussex that, conditional on Admission, certain intellectual property rights held by the University of Sussex relating to TexRAD will also be transferred to TexRAD for a total consideration of £20,000. The aggregate total of £260,700 is to be satisfied by £13,200 in cash and the balance by the issue of the TexRAD Consideration Shares and the IP Consideration Shares (together representing 10.38 per cent. of the Enlarged Issued Share Capital) on Admission. As additional consideration, the TexRAD Vendors will also receive the TexRAD Warrants.

The TexRAD Warrants will be issued such that 4,550,000 warrants will have an exercise price of £0.0125 and a vesting period of between two and 10 years from the date of Admission; and 18,200,000 warrants will have an exercise price of £0.03 and a vesting period of between three and 10 years from the date of the Admission.

During the period between the date of the execution of the TexRAD Acquisition Agreement and Completion, the TexRAD Vendors have undertaken to operate the business of TexRAD in the normal manner of such business. The TexRAD Acquisition Agreement contains certain warranties (subject to certain limitations of liability) and undertakings given by the TexRAD Vendors in favour of the Company.

Completion of the Acquisitions is conditional, inter alia, on the passing of the Resolutions and Admission becoming effective by not later than 16 May 2014. Subject to the conditions being satisfied, Completion is expected to take place upon Admission.

Reasons for the Subscription and use of funds

The proceeds of the Subscription will be used to help grow the CCI and TexRAD businesses, specifically to invest in sales, marketing, regulatory approval processes and to provide additional working capital for the Enlarged Group and to pay the various fees and expenses incurred by the Company in respect of the Proposals.

Details of the Subscription

Under the terms of the Subscription Letters, Tom Charlton, Trevor Brown and Roy Ruffler have conditionally agreed to subscribe for an aggregate of 24,000,000 Subscription Shares at the Subscription Price to raise £300,000 (before expenses) for the Company.

The Subscription is conditional, inter alia, upon Admission.

The Subscription Shares, the CCI Consideration Shares and the TexRAD Consideration Shares, when issued and fully paid, will rank equally in all respects with the issued Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid after Admission.

It is expected that Admission will become effective and dealings in the Enlarged Issued Share Capital will commence on 19 May 2014.

Following the Subscription and completion of the Acquisitions, the Company will have 190,746,746 Ordinary Shares in issue and admitted to trading on AIM.

Related party transaction

Trevor Brown and Tom Charlton, Non-executive Directors of the Company, have agreed to subscribe for 10,400,000 Subscription Shares each, as part of the Subscription. In addition, as one of the CCI Vendors, Tom Charlton will be receiving 2,232,600 CCI Consideration Shares pursuant to the CCI Acquisition. Following Admission their holding in the Enlarged Issued Share Capital will be as follows:

Trevor Brown and Tom Charlton are classified as related parties of the Company for the purposes of the AIM Rules by virtue of them having a substantial shareholding (as defined by the AIM Rules) in the Company and by virtue of them being Directors. The independent Directors for the purposes of the Subscription, being Nick Shepheard and Simon Barrell, consider, having consulted with the Company's Nominated Adviser, Sanlam Securities UK Limited, that the terms of the Subscription are fair and reasonable insofar as Shareholders are concerned.

The CCI Acquisition is also classified as a related party transaction for the purposes of the AIM Rules. This is due to the fact that Tom Charlton is a Director and major shareholder of the Company and a significant shareholder of CCI. The independent Directors for the purposes of the CCI Acquisition, being the Directors other than Tom Charlton, consider, having consulted with the Company's Nominated Adviser, Sanlam Securities UK Limited, that the terms of the CCI Acquisition are fair and reasonable insofar as the Shareholders are concerned.

As at the date of the Admission Document, CCI has outstanding debts owed to Tom Charlton amounting to £189,000. Conditional on Admission, CCI will repay these debts utilising funds from Feedback which will be made available to it pursuant to the Shareholder Loan from Tom Charlton. The Shareholder Loan is for £189,000, does not accrue interest and is repayable on the earlier of 1 December 2016 and the satisfaction of certain conditions, further details of which are set out in the Admission Document.

Entry into the Shareholder Loan is also classified as a related party transaction for the purposes of the AIM Rules. This is due to the fact that Tom Charlton is a Director and substantial shareholder in the Company. The independent Directors, being the Directors other than Tom Charlton, consider, having consulted with the Company's Nominated Adviser, Sanlam Securities UK Limited, that the terms of the Shareholder Loan are fair and reasonable insofar as the Shareholders are concerned.

In advising the independent directors, Sanlam Securities UK Limited has taken into account the commercial judgement of the independent directors.

Directors and Senior Management

Nick Shepheard (Chairman and Chief Executive) aged 48, has been the Executive Chairman of Feedback since February 2011. Prior to that, Mr Shepheard worked for eight years as an independent consultant to a number of hardware and software technology and service businesses enabled by technology. Earlier in his career Mr Shepheard was the General Manager of the London, Edinburgh and Belfast Gazettes.

Simon Barrell (Non-executive Director) aged 55, qualified as a chartered accountant with Arthur Young in 1983. He then joined an accountancy practice in Nairobi, Kenya as a Senior Manager. On his return to the UK in 1987, he joined Binder Hamlyn. In 1994 Mr Barrell was appointed finance director of Napier Brown & Company Limited and subsequently was appointed finance director of Napier Brown Foods Plc in December 2003. Since leaving Napier Brown Foods Plc in 2005 Mr Barrell has been finance director in an executive and non-executive capacity for a number of public companies and continues to act as an adviser to listed and non-listed companies. Mr Barrell joined the Board of Feedback in November 2012.

Trevor Brown (Non-Executive Director) aged 67, joined the board of Feedback in January 2014. Mr Brown has been a strategic investor in real estate and equities for more than 30 years. He was most recently a director of Advanced Oncotherapy plc where he was involved in the strategy of transition to the provision of advanced cancer treatment services.

Tom Charlton (Non-Executive Director) aged 56, joined the board of Feedback in January 2014. Mr Charlton previously served as a director of Feedback between January 2003 and November 2004 and has been a significant shareholder in the company since December 1997. He acted as Chairman of Pinnacle Staffing Group plc from September 2008 until April 2011. Earlier in his career he was a managing director of Merrill Lynch Investment Managers and a director of Mercury Asset Management Ltd.

Senior Management

Dr Balaji Ganeshan (Scientific Director, TexRAD) aged 32, has been the Scientific Director of TexRAD since incorporation and before that was instrumental in the invention, research and development of the original IP in his various capacities as a PhD researcher, post-doctorate researcher, principal investigator and project manager. He now takes the lead in sales and marketing of TexRAD in the clinical research market and is also a Senior Research Associate at the Institute of Nuclear Medicine at the University College London, UK and is a Visiting Research Fellow with the Brighton & Sussex Medical School, University of Sussex.

Mike Hayball (Technical Director, CCI) aged 47, is the architect of the TexRAD software and has been instrumental in its development as a commercial system. He started his career as a medical physicist at Addenbrooke's Hospital in Cambridge where he took his MSc in Radiation Physics. At Addenbrooke's he worked on the first CT perfusion implementation for modern CT scanners, leading to publication in The Lancet in 1991. From there he went on to work on cardiac imaging at Papworth Hospital, working with Stephen Brown and Richard Coulden on ECG-triggered spiral CT. In 2001, Mr Hayball and Stephen Brown formed CCI, with Mr Hayball as Managing Director where as well as working on CCI and TexRAD products, he has led projects to develop software for a number of other medical imaging companies.

Dr Stephen Brown (Operations Director, CCI) aged 44, is CCI's systems architect and regulatory lead. He completed an industry sponsored Solid State Physics PhD at the University of Cambridge, before going on to work for a number of years in industry. In 1997, Dr Brown joined the Papworth Radiology Development Group where he was involved in a number of research projects looking at ECG triggered CT, CT coronary calcium measurement and analysis of MR and nuclear medicine images. In 2001, Dr Brown and Mr Hayball formed CCI, where he is also involved in software development and customer liaison.

Options

The Board believes that the recruitment, motivation and retention of key employees is vital for the successful growth of the Enlarged Group. The Board considers that an important element in achieving these objectives is the ability to incentivise and reward staff by reference to the market performance of the Company in a manner which aligns the interests of those staff with the interest of Shareholders generally. The Company will utilise its Existing Share Option Plan pursuant to which Options have been and will be granted to directors and employees of the Enlarged Group.

It has been agreed that, for tax reasons, Options to acquire 4,000,000 Ordinary Shares that were granted prior to the date of the Admission Document be surrendered and replaced with new Options over the same number of Ordinary Shares. In addition, further Options over 13,800,000 Ordinary Shares have been granted, conditional on Admission. The table below sets out details of all such Options.

* Issued in replacement of existing options

The total number of Ordinary Shares that may be committed under the Existing Share Option Plan will not exceed 10 per cent. of the Enlarged Group's issued ordinary share capital from time to time.