VERS.L Regulatory News (VERS)

Verseon Corporation

("Verseon" or the "Company" or the "Group")

Interim Results

Verseon (AIM:VSN), a technology-based pharmaceutical company, today announces its Interim Results for the six months ended 30 June 2016. 

Strategic and financial highlights

- Ends -

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Notes to editors:

Verseon is a pharmaceutical company that employs its proprietary, computational drug discovery platform to develop novel therapeutics for today's challenging diseases. The Company is applying its platform to a growing drug pipeline and has three active drug programs in the areas of anticoagulation, diabetic macular edema, and solid tumor cancers.

For more information, please visit: www.verseon.com

Chairman's statement

Verseon is progressing well toward its goal of growing into an innovative, world-class technology-based pharmaceutical company. During the first half of 2016, the Company achieved milestones in all three of its drug programs. The anticoagulation program is accelerating as the Company prepares its first drug development candidate for clinical trials.

The Company is investing in the infrastructure and human resources necessary to allow the Verseon platform to systematically design and develop new therapies.

The Board maintains confidence in the Executive Team's mission and their management of the Company's operations and risk exposure.

We appreciate the continued support of our investors.

Thomas A. Hecht, PhD

Chairman of the Board

Chief Executive Officer's statement

In the last six months, we have demonstrated that our anticoagulation drug candidates exhibit safety superior to existing therapies while maintaining comparable efficacy. Based on these preclinical results, we have chosen our first anticoagulation candidate to prepare for clinical trials.

At the same time, our diabetic macular edema and oncology programs are moving forward, and we continue to see promising preclinical test results.

As we build up our operations, we expect to produce drug program deliverables at an increased pace. To this end, we are growing our workforce with new talent, enlarging our computing infrastructure, and broadening our biology and chemistry capabilities.

We maintain a strong financial position and are committed to upholding our culture of innovation as we work toward fulfilling Verseon's mission to transform the process of drug discovery.

Adityo Prakash

Chief Executive Officer

Business and financial review

We are seeing solid progress in all three of our current drug programs.

The anticoagulation program has generated a new class of direct thrombin inhibitors that exhibit better preclinical safety characteristics than existing therapies. In a series of detailed in vivo studies for both arterial and venous thrombosis, our compounds exhibited lower bleeding risk than current market anticoagulants while maintaining comparable therapeutic potential and equal or superior bioavailability levels.

We have presented these results at several key scientific and industry conferences worldwide. Moreover, we have chosen the first clinical development candidate for our anticoagulation program and are working on the chemistry, manufacturing, and controls processes required for regulatory filings for clinical trials.

We have continued extensive testing and optimization of our growing compound collection and are seeing excellent potency in our small-molecule inhibitors for diabetic macular edema and solid tumors.

Currently, we are expanding our infrastructure in order to support Verseon's planned drug pipeline. The buildout of our new facility, which will house our research and development laboratory and corporate headquarters, is progressing. This facility will boost operational efficiency by consolidating the activities of various core groups, allowing for faster turnaround times and greater ease of data access and processing. These improvements will help us accelerate current drug programs, initiate new ones, and thereby enhance overall shareholder value.

To support Verseon's growth, we have recruited a number of biologists, chemists, and computational scientists with strong scientific credentials. We continue to attract professionals with extensive industry experience as well as outstanding young scientists.

For the six months ended June 30, 2016, total operating expenses increased by $4.3 million to $7.9 million as compared to the same period last year. This increase is primarily attributable to the scale-up in operations and personnel-related costs.

Research and development expenses were $5.1 million, an increase of $3.7 million from the same period in 2015. General and administrative expenses were $2.8 million, an increase of $0.6 million from the same period last year. The currency exchange loss resulting from fluctuations in the British pound exchange rate was $1.6 million in the six months ended June 30, 2016, as compared to a currency exchange gain of $3.0 million in the same period in 2015.

Net loss for the first six months of 2016 was $9.3 million, or $0.061 per share, compared to a net loss of $0.6 million, or $0.005 per share, for the same period in 2015.

As of June 30, 2016, cash and cash equivalents were $38.2 million and total investments were $25.8 million. Property and equipment totaled $11.9 million, and total assets stood at $76.3 million.

We have built a solid financial and operational foundation for the Company and will continue to invest in the efficient development of a diverse and valuable drug pipeline.

Condensed consolidated statement of operations and comprehensive loss

For the six months ended June 30, 2016 and 2015

See accompanying notes to condensed consolidated financial statements.

Condensed consolidated balance sheets

As of June 30, 2016 and December 31, 2015

See accompanying notes to condensed consolidated financial statements.

These financial statements were approved by the Board of Directors on September 5, 2016 and signed on its behalf by:

Adityo Prakash

Chief Executive Officer

Condensed consolidated statements of cash flows

For the six months ended June 30, 2016 and 2015

See accompanying notes to condensed consolidated financial statements.

Condensed consolidated statement of stockholders' equity

For the six months ended June 30, 2016 and the year ended December 31, 2015

Condensed consolidated statement of stockholders' equity

For the six months ended June 30, 2016 and the year ended December 31, 2015 (continued)

See accompanying notes to condensed consolidated financial statements.

Condensed consolidated statement of stockholders' equity

For the six months ended June 30, 2016 and the year ended December 31, 2015 (continued)

See accompanying notes to condensed consolidated financial statements.

Notes to condensed consolidated financial information

The condensed consolidated financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP") applicable to interim financial statements. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion of the management of the Company, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of financial position, operating results, and cash flows for the interim period have been included in these condensed consolidated financial statements. The interim results are not necessarily indicative of results that may be expected for the year ending December 31, 2016.

The condensed consolidated statement of cash flows for the six months ended June 30, 2015 has been restated for the presentation of currency exchange loss (gain) on cash and cash equivalents. The impact of the restatement is to reflect an increase in net cash used in operating activities by $2,982,000 together with an equal and opposite effect of currency exchange rate changes when reconciling between the beginning and end of period cash balances. The restatement has no impact on net loss or on net assets.

These condensed consolidated financial statements should be read in conjunction with the Company's consolidated financial statements for the year ended December 31, 2015.

The financial information is presented in United States Dollars ("US$"). All intercompany amounts have been eliminated in consolidation.

These condensed consolidated financial statements include financial position and performance of Nirog Therapeutics LLC ("Nirog"), a Delaware limited liability company, and VRH1 LLC ("VRH1"), a wholly-owned California limited liability company. VRH1 was established in August 2015 to acquire a property in Fremont, California to house the Company's drug-discovery and development operations as well as the corporate headquarters. Nirog was established in September 2009 as a vehicle to fund the research and development of the Company's anticoagulation program. The Company owned 32.2% of Nirog prior to the initial public offering ("IPO") in May 2015. Pursuant to share exchange agreements the Company had entered into during March and April 2015 with certain unitholders of Nirog, the Company issued, upon IPO, shares of common stock to Nirog unitholders in exchange for Nirog units held by such Nirog unitholders. As a result of the transactions, the Company increased its ownership of Nirog to 70.9% of the outstanding equity of Nirog. Subsequently, the Company acquired additional interest in Nirog and owned 73.6% of the outstanding equity of Nirog as of June 30, 2016 as compared to 72.6% as of December 31, 2015.

The Company has formed Verseon India Private Limited ("VIPL") together with a Mauritius based private equity investor. VIPL was incorporated in Andhra Pradesh, India in March 2006 to manage and maintain the Company's supercomputing cluster. The Company has since closed this operation in 2009 and is in the process of dissolving the legal entity.

The accounting policies applied are consistent with those that were applied to the consolidated financial statements for the year ended December 31, 2015.

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09 "Revenue from Contracts with Customers (Topic 606). The standard's core principle is that a reporting entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB decided to postpone the effective date of the new standard by one year. The standard will be effective for the Company in the first quarter of 2018. Early adoption is permitted in 2017. Entities will have the option of using either a full retrospective or a modified retrospective approach to adopt this new guidance. Since the Company has yet to report revenue, the Company does not expect that the adoption of this standard will have an impact on its consolidated financial statements.

In August 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-15, "Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern." The standard will explicitly require management to assess an entity's ability to continue as a going concern, and to provide related disclosures in certain circumstances. The new standard incorporates and expands upon certain principles that are currently in the auditing standards. Specifically, the new standard defines substantial doubt, requires assessments each annual and interim period, provides an assessment period of one year from the issuance date, and requires disclosures both when substantial doubt is alleviated by management's plans and when substantial doubt remains unalleviated. ASU 2014-15 will be effective for fiscal years ending after December 15, 2016. The adoption of this guidance does not have an impact on the Company's consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities", which eliminates the requirement for public companies to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet. Additionally, the standard requires public entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. Furthermore, the standard requires presentation of financial assets and liabilities by measurement category and form of financial asset on the balance sheet or accompanying notes to the financial statements. The standard will be effective for fiscal years beginning after December 15, 2017. The Company is currently evaluating the impact of adopting this guidance on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)", which establishes the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. It requires lessees to recognize the lease assets and lease liabilities that arise from leases on the balance sheet and to disclose qualitative and quantitative information about lease transactions, such as information about variable lease payments and options to renew and terminate leases. The new standard will be effective for fiscal years beginning after December 15, 2018. The Company is currently evaluating the impact of adopting of this guidance on its consolidated financial statements.

In March 2016, the FASB issued ASU N0. 2016-09, "Compensation- Stock Compensation (Topic 178): Improvements to Employee Share-Based Payment Account", which offers simplifications of several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The standard is effective for fiscal years beginning after December 15, 2016. The Company is currently evaluating the impact of adopting of this guidance on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", which aims to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. It replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The standard is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact of adopting this guidance on its consolidated financial statements.

During the first six months of 2016, there were many accounting standard updates issued by FASB. However, only the updates that are relevant to the Company have been included here.

On May 7, 2015, the Company completed its initial public offering ("IPO") by issuing 32,569,047 shares of common stock at a price of $3.07 (202p) per share on the Alternative Investment Market ("AIM") of the London Stock Exchange and raised net cash proceeds of approximately $92.5 million, after deducting underwriting discounts, commissions and offering expenses. Immediately prior to the IPO, all classes of preferred and common stock were converted to one class of common stock. All outstanding warrants and options were amended to be exercisable for shares of common stock.

A total of $2.0 million of convertible notes were converted into 635,418 share of common stock upon the completion of the IPO. Pursuant to these convertible note agreements, the Company also issued warrants to the noteholders to acquire a total of 75,655 shares of common stock.

In addition, upon the completion of the IPO and pursuant to the Placing agreements, the Company issued warrants to Cenkos Securities Plc ("Cenkos"), the Company's nominated adviser and broker, and Mr. Alastair Cade, one of the Company's directors who is also a director of Chaka Investments (UK) Limited. The warrants are exercisable for five years and entitle each of them to acquire 521,105 shares of common stock at an exercise price of $4.00 (263p) per share. The fair value of the warrants was calculated at the grant date using a Black-Scholes valuation model, the assumptions for which are set out in footnote E.

In accordance with the provisions of Accounting Standards Codification ("ASC") Topic 260, "Earnings per Share", basic net loss per share of common stock is computed by dividing net loss attributable to common stockholders by the weighted-average number shares of common stock outstanding during the period, without consideration of common stock equivalents.

Diluted net loss per share is computed by dividing net loss attributable to common stockholders by the sum of the weighted-average number shares of common stock outstanding and dilutive common stock equivalent shares outstanding for the period. Potentially dilutive common stock equivalent shares, which include incremental shares of common stock issuable upon (i) the exercise of outstanding stock options and warrants and (ii) vesting of restricted stock units (RSUs), are only included in the calculation of diluted net loss per share when their effect is dilutive.

For the six months ended June 30, 2016 and 2015, the following potentially dilutive securities were excluded from the calculation of diluted net loss per share due to their anti-dilutive effect:

During the six months ended June 30, 2016, the Company granted stock options and warrants to employees and consultants to purchase 269,000 shares of common stock, as compared to 2,030,873 shares of common stock during the same period in 2015. The weighted-average fair value of each option and warrant issued during the six months ended June 30, 2016 and 2015 was estimated at the date of grant using the Black-Scholes valuation model with the following assumptions:

Total stock-based compensation expense recognized associated with stock options, warrants and restricted stock units was as follows (in $ thousands) during the six months ended June 30, 2016 and 2015, respectively was as follows:

The amortized cost and fair value of cash equivalents and investments at June 30, 2016 and December 31, 2015 were as follows (in $ thousands):

*Cash and cash equivalents at June 30, 2016 of $38,227 thousand comprises cash of $23,937 thousand and cash equivalents of $14,290 thousand, as compared to cash and cash equivalents of $41,764 thousand comprises cash of $35,660 thousand and cash equivalents of $6,104 thousand at December 31, 2015

The Company invested the funds raised from the IPO in May 2015 into instruments with the goals of preservation of principal and sufficient liquidity to meet its operating and investment cash requirements. All available-for-sale securities held as of June 30, 2016 had contractual maturities of less than two years with high quality investment grade ratings. Realized gains on available-for-sale securities for the six months ended June 30, 2016 were $76 thousand, as compared to $48 thousand during the second half year of 2015.

As of June 30, 2016, there was no unrealized loss on available-for-sale investments and the Company has not recorded any impairment charges on marketable securities related to other-than temporary declines in market value.

In accordance with the guidance of Accounting Standards Codification ("ASC") Top 820, "Fair Value Measurement", fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Inputs that are generally unobservable and typically reflect management's estimate of assumptions that market participants would use in pricing the asset or liability.

The Company's financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used in such measurements are as follows as of June 30, 2016 and December 31, 2015 (in $ thousands):

ASC Topic 280 "Segment reporting" establishes standards for the way that public business enterprises report information about business segments and related disclosures about products and services, geographical areas and major customers.

The Chief Executive Officer ("CEO") of the Company has been identified as the Chief Operating Decision Maker as defined by ASC Topic 280. The CEO of the Company allocates resources based upon information related to its one operating segment, pharmaceutical research. Accordingly, the Company has concluded it has one reportable segment.

As the Company continues to incur pre-tax losses through operations, it has determined that it is more likely than not that the benefit of deferred tax assets will not be realized and therefore, the Company continues to maintain a full valuation allowance offsetting any change in deferred taxes.

In March 2014, convertible notes previously issued to the founders of the Company, Godrej Industries, a stockholder of the Company, and Mr. Sabeer Bhatia, one of Nirog Therapeutics Board members, were converted into Class B preferred stock which was then converted into shares of Common Stock at IPO in May 2015. All of the preferred class B warrants associated with the convertible notes from Godrej Industries and Mr. Bhatia were exercised in April and June 2015 to acquire a total of 423,617 shares of common stock. Warrants issued to Mr. Bhatia previously to acquire a total of 42,104 shares of common stock were outstanding at June 30, 2016.

In January 2015, two of the founders of the Company exercised warrants to acquire a total of 1,324,921 shares of common stock for $0.1 million. These warrant exercises were financed through secured promissory notes issued by the Company as further described at Note J Stockholders' Equity herein and were recorded within "Loan receivable from stockholders." Loan receivable from stockholders refers to employees and consultants who purchased the Company's stock through the issuance of promissory notes by the Company. As of June 30, 2016, total loan receivable from stockholders was $14.7 million as compared to $14.5 million as of December 31, 2015.

Also in January 2015, the Company issued $0.3 million of convertible promissory notes to Mr. Alastair Cade, one of the Company's directors, and $0.2 million of convertible promissory notes to Chaka Investments (UK) Limited ("Chaka"), where Mr. Cade is the director. In connection with the IPO, the notes were converted into 162,845 shares of common stock and warrants to acquire 16,283 shares of common stock. In addition, Mr. Cade also received additional warrants to acquire shares of common stock as further described in Note C Initial Public Offering herein. Warrants issued to Mr. Cade and Chaka to acquire a total of 537,388 shares of common stock were outstanding at June 30, 2016. The Company also engaged Chaka to provide consulting services that totaled to $0.1 million in each of the six-month periods ended June 30, 2016 and 2015.

In February 2016, the Company settled the $0.2 million debt originally issued in December 2008. In March and April 2015, the Company entered into modifications of certain agreements to adjust repayment terms and extend the repayment date to March 2016. The Company settled $1.3 million of the debt during the year ended December 31, 2015 and the remaining $0.2 million in February 2016. There was no outstanding debt as of June 30, 2016.

Rental expense for operating leases amounted to $0.4 million and $0.1 million for the six-month periods ended June 30, 2016 and 2015, respectively. Other than the operating leases disclosed in the annual report for the year ended December 31, 2015, there were no other commitments and contingencies for the six months ended June 30, 2016.

In April 2015, the Company's stockholders approved changes to the Company's share capitalization. The following is a list of the key changes to the Company's authorized share capital:

· All outstanding shares of Classes A, B, Y and Z were converted into 111,509,706 shares of one class of the Company's common stock and all outstanding warrants and options were amended to be exercisable for 2,902,401 shares of the Company's common stock.

· The Company's share capitalization has been changed such that the Company is authorized to issue one class of stock to be designated Common Stock and one class of stock to be designated Preferred Stock. The total number of shares of Common Stock that the Company is authorized to issue is 300,000,000 shares at a par value of $0.001 per share, and the total number of shares of Preferred Stock that is authorized to issue is 30,000,000 shares at a par value of $0.001 per share.

In addition, the Company adopted the Verseon Corporation 2015 Equity Incentive Plan (the "2015 Plan") in April 2015. The 2015 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance units, performance shares, cash-based awards and other stock-based awards to non-employee directors, officers, employees, advisors, consultants and independent contractors. An aggregate of 15,000,000 shares of common stock is available for delivery pursuant to awards under the 2015 Plan. The 2015 Plan contains a provision that provides annual increases in the number of common stock available for delivery pursuant to awards on each January 1st beginning January 1, 2016, and ending on (and including) January 1, 2025. Such annual increase equals to 2% of the total shares of common stock outstanding on December 31st of the preceding calendar year; provided, that the Board has the authority to decide, prior to the first day of any calendar year, that there will be no increase or a lesser increase for such calendar year. In September 2015, the plan was amended to limit the annual increase of number shares of incentive stock options ("ISO") available for grant to a maximum of 3,000,000 shares. Accordingly, total number shares of common stock available for grant under the 2015 Plan increased on January 1, 2016 by 3,017,576 shares, including 3,000,000 shares available for ISO grants as in accordance with the September 2015 plan amendment. As of June 30, 2016, a total of 16,694,522 shares of common stock were available for grant under the 2015 Plan compared to 13,927,334 shares available for grant as of December 31, 2015.

Also in April 2015, the Company and a VIPL investor, Peepul Capital Fund II LLC, entered into an agreement pursuant to which the Company issued 3,157,894 shares of Class Z common stock to the investor in exchange for the termination of certain past obligations of the Company and the waiver of certain rights held by such investor.

In January and February 2015, the Company issued 1,369,421 shares of Class Z common stock, of which 1,324,921 shares related to the exercise of previously granted warrants. The Company accepted promissory notes in an aggregate principal amount of $0.1 million from certain of its employees, officers, and directors in exchange for a loan, each of which was full recourse and secured by a pledge of shares of Class Z common stock purchased by the promissory note issuer with the proceeds of the loan under a pledge and security agreement. Each promissory note was issued in the same form, the principal sum of which is payable by the issuer at a rate of 2.1% per annum, compounded annually, on the unpaid balance of the principal sum. Principal and interest are due on the earlier of the (i) nine-year anniversary of the date of issuance and (ii) the sale, transfer or assignment of the pledged collateral. The residual 44,500 shares of Class Z common stock related to the exercise of previously granted options were issued for an aggregate cash consideration of $7 thousand. Total loan receivable from stockholders at June 30, 2016 were $14.7 million.

In May and June 2015, 730,906 shares of common stock were issued from exercises of warrants in connection with long-term convertible notes. In addition, 197,568 shares of common stock were issued from exercises of previously granted stock options.

In June 2015, the Company issued to certain employees and consultants options to purchase an aggregate of 151,275 shares of common stock. In addition, the Company issued to certain consultants warrants to purchase an aggregate of 791,105 shares of common stock. There were no RSUs granted or vested in the first six months of 2015.

In January and February 2016, 456,116 shares of common stock were issued from exercises of certain warrants in connection with long-term convertible notes. During the same period, 20,050 shares of common stock were issued from exercises of previously granted stock options. During March through June 2016, 31,910 shares of common stock were issued from the vesting of restricted stock units (RSUs).

During the first six months of 2016, the Company granted certain employees and consultants options to purchase an aggregate of 269,000 shares of common stock. The Company also issued a consultant fully vested RSUs for 13,888 shares of common stock included in the 31,910 share issuance listed above for the period of March through June 2016.

As of June 30, 2016, the Company had 151,386,891 shares of common stock outstanding and no shares of preferred stock outstanding compared to 150,878,815 shares of common stock outstanding and no shares of preferred stock outstanding as of December 31, 2015.

Independent review report to Verseon Corporation

We have been engaged by the company to review the condensed set of financial statements in the interim report and accounts for the six months ended 30 June 2016 which comprises the Condensed consolidated balance sheets, the Condensed consolidated statements of operations and comprehensive loss, the Condensed consolidated statements of cash flows, the Condensed consolidated statements of stockholders' equity, and the related notes A to K. We have read the other information contained in the interim report and accounts and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review 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, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The interim report and accounts is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report and accounts in accordance with the AIM Rules of the London Stock Exchange.

As disclosed in note A, the annual financial statements of the company are prepared in accordance with accounting principles generally accepted in the United States of America. The condensed set of financial statements included in this interim report and accounts have been prepared in accordance with the accounting policies the company intends to use in preparing its next annual financial statements.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim report and accounts based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim report and accounts for the six months ended 30 June 2016 is not prepared, in all material respects, in accordance with accounting policies the company intends to use in preparing its next annual financial statements and the AIM Rules of the London Stock Exchange.

Deloitte LLP

Chartered Accountants and Statutory Auditor

Southampton, United Kingdom

September 5, 2016