Deal FBDU

Flying Brands is pleased to announce that Peterhouse Capital has raised £500,000 (before expenses) pursuant to a placing (the “Placing”) of 20,000,000 Ordinary Shares (the “Placing Shares”) at a price of 2.5 pence per Placing Share. The monies raised from the Placing will be used, inter-alia, for:

  • Obtaining FDA clearance for StoneChecker Software;
  • To design and manufacture a commercial version of the cloud-based interface for StoneChecker software;
  • Commercial sales of StoneChecker Software in the UK; and
  • Launch both StoneChecker Software and Imaging Biometrics’ products commercially in the US, India and China.

The Placing is subject to shareholder approval at the forthcoming General Meeting and admission to the standard segment of the Official List (“Admission”). Accordingly, the Company also announces the publication of a Circular including notice of an annual general meeting (the “AGM”) and a general meeting (the “GM”) to be held at 3 p.m. and 3:15 p.m respectively on 31 July 2018 at Anglo Saxon Trust Limited, Forum 4, Grenville Street, St Helier, Jersey, Channel Islands JE4 8TQ. Teathers has secured an allocation of £75,000 in the Placing of 3,000,000 shares priced at 2.5p per share (the “Allocation”). Teathers will make its Allocation available on the App by way of a Live Market Bookbuild to onboarded users of the Teathers App. The Live Market Bookbuild will be conducted through the Teathers App and will involve the issue of up to 3,000,000 new Ordinary Shares at the Issue Price of 0.1 pence per share. The Live Market Bookbuild will commence at 9am on Monday 16 July 2018 and will close at 5pm on Thursday 19 July 2018. Settlement is dependent on the Company receiving shareholder approval for completion of the deal at the General Meeting to be held on Tuesday 31 July 2018. If shareholder approval is given, settlement is expected to occur on Wednesday 01 August 2018, on which date contract notes will be issued on completion of the deal. About Flying Brands The Company is the holding company of Stone Checker Software Ltd and Imaging Biometrics LLC and is operating AI medical imaging market. The Group has developed the following technology solutions;

  • The StoneChecker Software aims to be the standardised medical imaging software for urolithiasis by virtue of it analyzing and presenting relevant / important stone metrics including stone size, volume, density, skin to stone distance and novel stone architecture via TexRAD texture analysis in a seamless manner and integrated within healthcare IT systems. The StoneChecker Software will assist physicians in understanding kidney stone composition (eg uric-acid vs non-uric-acid stones) non-invasively and to make an informed decision about patient management and selection of optimal treatment (non-invasive shockwave lithotripsy), invasive procedures such as Ureteroscopy and Percutaneous NephroLithotomy (PCNL) respectively. PCNL is the preferred invasive technique for treating larger kidney stones (over 2cm in diameter) located within the kidney and involves keyhole surgery that is performed through a 1cm incision in the skin but physicians have no way of reliably identifying which patients are likely to be most successfully treated with Lithotripsy or surgery. Future applications could also be guiding surgical interventions on routinely acquired scans (e.g. delineating the collection-system to have an idea on the stone location in relation to the collection-system); and
  • Imaging Biometrics, LLC based in Wisconsin, specialises in the design and manufacture of advanced visualisation tools, the application of machine learning and AI software solutions and the invention, development and clinical testing of quantitative imaging endpoints and biomarkers. The Imaging Biometrics portfolio consists of FDA cleared and CE marked products such as IB Neuro and IB Diffusion that are being used clinically around the world to aide physicians in treating patients with brain tumors, stroke, and other soft tissue cancers and pathologies. Specific to brain tumours, Imaging Biometrics’ portfolio has evolved into, and is recognised as, a highly specialized platform for grading brain tumours, guiding biopsies, distinguishing actual tumour progression from pseudo – progression, and assessing treatment response and volumetric changes over time. The Board of Flying Brands has decided to focus on pure software products rather than software as part of our own clinical service provision (providing the testing kits and clinical reports) and therefore Stone Prevent, which was referred to in Flying Brands’ previous prospectus, is no longer a priority for it in the short term. The Directors believe that there is a synergy between the StoneChecker Software and the existing Imaging Biometrics product portfolio which will accelerate the growth of both trading companies. The Company expects consolidation in the radiology software market and the growing commercial strength of Flying Brands will enable it to acquire new software assets for merger or acquisition and generate opportunities for commercial co-marketing or other collaborative agreements. In due course, Flying Brands may itself become an acquisition target for large players in the radiology software market such as IBM Watson, GE Healthcare, Google Healthcare or one of the pharmaceutical or biotechnology companies interested in medical imaging.

About the General Meeting At the GM, shareholders are also being requested to approve inter-alia (1) the issue of 6,200,000 Ordinary Shares to the sellers of Imaging Biometrics LLC (“IB”) to satisfy the remaining consideration shares due under the Share Purchase Agreement between IB and the Company (“Further Consideration Shares”); (2) the conversion of £195,050 11 March 2015 convertible loan notes into 21,787,061 Ordinary Shares (the “Convertible Shares”). If the resolutions are approved at the GM and subject to Admission, Trevor Brown will be directly and indirectly (through Free Association Books) interested in 36,083,025 shares which is 29.98% of the enlarged share capital. In addition, the Company has posted to shareholders a draft Prospectus (subject to UKLA and Jersey FCA approval) to enable the issue of the Placing Shares, the Further Consideration Shares and the Convertible Shares. Further details of the Company’s General Meeting, the Resolutions to be voted on and the Prospectus can be found at the Company’s website www.flyingbrands.co.uk.

Risk Factors

If you are buying outside of market size this may prevent you from selling the shares at market price. Investment in the Group and the Ordinary Shares carries a significant degree of risk, including risks in relation to the Company’s business strategy, potential conflicts of interest, risks relating to taxation and risks relating to the Ordinary Shares. Investors and prospective investors should note that the risks relating to the Company, the Group, its industry and the Ordinary Shares summarised in the section of this document headed “Summary” are the risks that the Directors as at the date of this Prospectus believe to be the most essential to an assessment by a prospective investor of whether to consider an investment in the Ordinary Shares. However, as the risks which the Group faces relate to events and depend on circumstances that may or may not occur in the future, prospective investors should consider not only the information on the key risks summarised in the section of this document headed “Summary” but also, among other things, the risks and uncertainties described below. The risks referred to below are those risks the Company and the Directors consider to be the material risks relating to the Group. However, there may be additional risks that the Company and the Directors do not currently consider to be material or of which the Company and the Directors are not currently aware that may adversely affect the Group’s business, financial condition, results of operations or prospects. Investors should review this Document carefully and, in its entirety, and consult with their professional advisers before acquiring any Ordinary Shares. If any of the risks referred to in this Document were to occur, the results of operations, financial condition and prospects of the Group could be materially adversely affected. If that were to be the case, the trading price of the Ordinary Shares and/or the level of dividends or distributions (if any) received from the Ordinary Shares could decline significantly. Further, investors could lose all or part of their investment.

Risks Relating to the Company’s Business Strategy

The business of the Group is early-stage and the Group has yet to be profitable Following the acquisition of Imaging Biometrics, the Group is now revenue producing. However, the Group’s businesses are still early-stage and have yet to be profitable. There is no guarantee that the business of the Group will be successful or profitable in the future. The Group operates within the medical technology sector which will result in the Group being subject to risks which are specific to operators in the health care market It is the Directors’ intention that Imaging Biometrics and StoneChecker Software will be used by health care professionals working in the UK including the NHS and in private healthcare and other healthcare systems outside of the UK. NHS practices and other healthcare practices are subject to change. If practice changes such that health care professionals are not able to use the Products or funding is not available for the Products or overall budgetary spend on supporting medical imaging is reduced in favour of other resource use, this will result in a loss of customers and could have a material effect on the Group’s business, results of operations, financial condition and prospects. The Group may be competing against other companies in the medical imaging market, and increased competition in this market could reduce the Group’s market share and revenues. The Group expects the market for the supply of medical imaging software to become highly competitive. Some of the companies with which the Group may compete may be larger than the Group and have greater capital and other resources available to them. There is no assurance that the Group would be able to compete successfully against them. Increased competition could lead to a decrease in market share or revenues, which could have a material adverse effect on the Group’s business, financial condition, results of operations and/or prospects. The Group may be subject to medical regulatory compliance risk The medical sector is heavily regulated and the regulatory burden is likely to increase. Non-compliance with such regulations could lead to fines, public reprimands, damage to reputation, increased regulatory requirements, enforced suspension of operations or, in extreme cases, withdrawal of authorisations to operate. All medical imaging software is currently treated as medical devices under Classification 1 (medical software) in the UK and EU, which is the lowest level of classification requiring the least regulatory oversight as they are non-invasive and non-sterile, and as Class II in the US. The StoneChecker Software has obtained a CE Mark and US FDA market clearance has been applied for and a decision by the US FDA is pending. Any delay in or failure to obtain the required US FDA clearance could result in a delay in marketing the StoneChecker Software, which would have an adverse effect on the Group’s profitability. In addition, future regulatory changes within the medical technology sector may potentially restrict the operations of the Group and impose increased compliance and regulatory capital costs, restrict leverage/borrowing or dividend payments, reduce investment returns or increase associated fees, restrict the ability to hedge or off-set investment exposure, increase corporate governance/supervision costs, reduce the competitiveness of any business of the Group, reduce the ability of the Group to hire and retain key personnel or impose restrictions on whether individuals may be appointed or retained as directors of the Group and impose other restrictions and obligations which could adversely affect the Group’s profitability. Market factors Although the Company expects demand for the Group’s medical imaging products to increase, demand is subject to a variety of factors over which the Group has no control, including economic and regulatory developments in the United Kingdom, the United States, European Union, China and other jurisdictions in which the Company may seek to operate. A decrease in demand for its products could result in lower revenues which could have a material adverse effect on its business, results of operations, financial condition and prospects. Group Companies may be unable to hire or retain personnel required to support the Group The Company will evaluate the personnel requirements of the Group and may determine that it requires increased support to operate and manage its businesses in accordance with its overall business strategy. There can be no assurance that existing personnel of the Group will be adequate or qualified to carry out such strategy, or that the Group will be able to hire or retain experienced, qualified employees to carry out such strategy. The Company’s relationship with key individuals Stone Checker’s research and development team consists of Dr Balaji Ganeshan and Nick Stevens. Dr Ganeshan is a medical imaging inventor/scientist and the CEO of TexRAD Limited and Feedback Medical Limited. Nick Stevens has experience in start-up medical technology businesses involving the development and/or introduction of new medical technologies in the fields of diagnostic and therapeutic oncology and urology. Although the intellectual property required by Stone Checker to use the StoneChecker Software licenced from TexRAD Limited will subsist independently of these key individuals, the Products may not be capable of being brought to market as effectively without the support of such persons. The Imaging Biometrics management team consists of Michael Schmainda and Timothy Dondlinger, both of whom are key to the development of Imaging Biometrics products. In addition, they are both important to the software development and obtaining the required regulatory approvals of the StoneChecker Software in the US. Intellectual property –TexRAD Patents Licence Stone Checker’s ability to exploit the software product it has developed is reliant upon the terms of an exclusive licence from TexRAD Limited which grants Stone Checker the right to use the TexRAD Patents in the field of urolithiasis and to research, develop or have developed, make or have made, keep, use, import, export, sell and supply products based upon the TexRAD Plug-in pursuant to the terms of a licence agreement dated 20 August 2015 (the “TexRAD Patents Licence”). TexRAD Limited is entitled to terminate the TexRAD Patents Licence if: (1) it is determined by an expert that the Stone Checker has without legitimate reason failed to use diligent and reasonable efforts to develop and commercially exploit the TexRAD Plug-in; (2) Stone Checker is in material breach of the TexRAD Patents Licence and such breach is not remedied, if capable of remedy, within 30 days; or (3) Stone Checker becomes insolvent. The TexRAD Patents Licence requires Stone Checker to pay TexRAD Limited royalty payments. Accordingly, if Stone Checker failed to meet these payments and failed to remedy this breach within 30 days, and this was determined to be a material breach of the TexRAD Patents Licence, TexRAD Limited would be entitled to terminate the TexRAD Patents Licence. Accordingly, a key risk is that the TexRAD Patents Licence is terminated. Intellectual property – Imaging Biometrics’ two patent licences and own patent Imaging Biometrics licenses two technologies; an image-intensity “standardisation” patent from the University of Pennsylvania, which is incorporated into IB Neuro and IB Delta Suite, and a circular deconvolution patent from Massachusetts General Hospital (“MGH”). The termination of the University of Pennsylvania licence could have a material adverse impact on revenue generation. The termination of the MGH patent, however, is considered unlikely to have a material adverse revenue impact. Since obtaining exclusive rights to the standardisation patent, Imaging Biometrics has advanced the understanding of the technology as it relates to its own proprietary perfusion algorithm contained in IB Neuro. The application of this combined approach (standardisation and proprietary MR perfusion algorithm) has been used in studies that demonstrate its clinical utility including the correlation of the output to a patient’s overall survival. Thus, even when the standardisation patent ceases to be available, the Board considers that this risk is mitigated as its integration into Imaging Biometrics underlying product technology is considered a trade secret, and not easily replicated by a competitor. Imaging Biometrics also possesses a patent termed “dual-echo” (United States Patent and Trademark Organization 8,670,602 and European Patent EP 2157912 A4). This is a magnetic resonance (“MR”) acquisition and post-processing patent that has multiple benefits. The risks to this patent are that it requires a specialised MR acquisition sequence. GE Healthcare is committed and working on an appropriate sequence. Once available, further testing and validation will be required. There is a risk is that the major scanner vendors do not allocate the necessary resources necessary to develop the MR acquisition sequence and if they fail to do so commercial exploitation of the patent may not be feasible. Imaging Biometrics has to date met all agreement milestones related to integration of the licenced technologies, which includes obtaining regulatory clearance and the first commercial sale of the products in which the technologies were integrated. Going forward, however, if Imaging Biometrics fails to meet its obligations to pay royalties under a patent licence or otherwise breaches its terms then the licensor of the relevant patent could terminate the relevant patent licence. Intellectual property – Infringement of Patent Licences and Patents The Directors consider that the StoneChecker Software will be the first of its type on the market. Other companies may seek to develop products which are similar or the same as the StoneChecker Software and compete with Stone Checker’s business. If this happens outside of the UK, it may be difficult for Stone Checker together with TexRAD Limited to enforce the patents which are the subject of the TexRAD Patents Licence and which is required for the StoneChecker Software. Though Imaging Biometrics has worldwide and exclusive rights to the standardisation technology in the ‘neuro’ space, and world-wide non-exclusive rights elsewhere, the risk of patent infringement remains a possibility and Imaging Biometrics may not be able to successfully enforce or defend its rights. Other patents or intellectual property rights owned or licenced by the Group may be infringed by third parties. If these patents or intellectual property rights are infringed, then the Group or the licensor may not be able to successfully defend them. This may materially reduce the value of the relevant rights and/or the revenues of the Company. Information Technology Information technology (“IT”) systems will be used extensively in order for the Products to be used, since the Products are software that run on computer systems. The Group’s operations therefore depend on the continued and uninterrupted performance of its IT systems and the IT systems of its customers. If the Group or its customers experience significant or recurring IT problems, the use of the Products will be disrupted, which could adversely affect the Group’s reputation, result in a loss of customers and could have a material adverse effect on its business, results of operations, financial condition and prospects. The Products require the use and transfer of patient related data in a secure environment. This type of information has been the subject to illegal hacking for misuse and sale. The Group will endeavour to safeguard patient data, but attacks or other data breaches are still possible and could lead to a loss in reputation if successfully carried out. Customers It is intended that StoneChecker Software will be marketed to lithotripsy clinicians (either urologists or radiologists) and the Imaging Biometrics product portfolio will be marketed to neurologists, neurosurgeons, neuroradiologists and interventional neuroradiologists. Imaging Biometrics and Stone Checker intend to enter research and sales contracts with, amongst others, private hospitals, academic institutions, imaging centres, hardware manufacturers and other software developing companies, software sharing platform, resellers, distributors. In order to commercialise the Products effectively, Imaging Biometrics and Stone Checker will need to develop customer relationships with physicians and other healthcare professionals. Failure to develop and then maintain such relationships and/or to sustain a professional reputation would result in a decrease in sales of the individual software platform, decrease in the number of patients referred and therefore a decrease in revenue. Both companies may be unable to successfully negotiate and agree contracts on terms which are favourable to the Group or at all. The Company will be a holding company whose principal source of operating cash will be income received from its operating subsidiaries Once the Net Proceeds have been exhausted, the Company will be dependent on the income generated by the Group and its business to meet the Company’s expenses and operating cash requirements. The amount of distributions and dividends, if any, which may be paid from any operating subsidiaries to the Company will depend on many factors, including operating subsidiaries’ results of operations and financial condition, limits on dividends under applicable law, its constitutional documents, documents governing any indebtedness of the Company, and other factors which may be outside the control of the Company. If Stone Checker or Imaging Biometrics is unable to generate sufficient cash flow, the Company may be unable to pay its expenses or make distributions and dividends on the Ordinary Shares. The Group’s risk management policies and procedures may prove inadequate The policies and procedure for managing market, regulatory and operational risk to be utilised by the Group may prove ineffective. Some of the methods used for managing risk may be based upon observations of historical market behaviour, and statistical techniques may be applied to these observations to arrive at quantifications of its potential risk exposures. However, these methods may not accurately quantify risk exposures, especially in situations that cannot be identified based on its historical data. In particular, if the Group enter into new lines of business, historical data may be incomplete. Following the global financial and economic crisis, models and techniques used to predict future conditions, behaviours and valuations have become less effective. As additional information becomes available, additional provisions may need to be made. If circumstances arise whereby the Group did not identify, anticipate or correctly evaluate certain risks in developing its statistical models, losses could be greater than the maximum losses envisaged under its risk management system. In addition, certain risks may not be accurately quantified by risk management systems. Material deficiencies in risk management or other internal control policies or procedures may result in significant market, regulatory or operational risk, which may in turn have a material adverse effect on the Group’s business, financial condition, results of operations and prospects. Other risks In addition, changes which could have an impact, other than those highlighted above, include:

  • the monetary, interest rate and other policies of central banks and regulatory authorities;
  • changes in government or regulatory policies that may significantly influence the regulatory landscape in particular markets in which the Company may have operations;
  • changes in competition and pricing environments;
  • developments in the financial reporting environment;
  • new financial transaction related or other taxes;
  • financial stability measures, fiscal budget controls, exchange controls and controls on the international movement of capital; and
  • expropriation, nationalisation, confiscation of assets and changes in legislation relating to foreign ownership.

Regulations to which the Group may be subject may also be interpreted or applied differently than in the past, which could have an adverse effect on the Group’s business, financial condition and results of operations and/or prospects.

Risks Relating to the Shares

The Standard Listing of the Ordinary Shares will afford investors a lower level of regulatory protection than a Premium Listing Application will be made for the Company’s entire issued share capital to be admitted to a Standard Listing on the Official List. A Standard Listing will afford investors in the Company a lower level of regulatory protection than that afforded to investors in a company with a Premium Listing, which is subject to additional obligations under the Listing Rules. Further details regarding the differences in the protections afforded by a Premium Listing as against a Standard Listing are set out in the section entitled “Consequences of a Standard Listing” on page 25. Investors may not be able to realise returns on their investment in Ordinary Shares within a period that they would consider to be reasonable Investments in Ordinary Shares may be relatively illiquid. There may be a limited number of Shareholders and this, together with the number of Shares to be issued pursuant to the Placing, may contribute both to infrequent trading in the Shares on the London Stock Exchange and/or to volatile Ordinary Share price movements. Investors should not expect that they will necessarily be able to realise their investment in Ordinary Shares within a period that they would regard as reasonable. Accordingly, the Shares may not be suitable for short-term investment. Admission should not be taken as implying that there will be an active trading market for the Shares. Even if an active trading market develops, the market price for the Ordinary Shares may fall below the Placing Price. Dividend payments on the Ordinary Shares are not guaranteed To the extent the Company intends to pay dividends on the Ordinary Shares, it will pay such dividends at such times (if any) and in such amounts (if any) as the Board determines appropriate and in accordance with applicable law but will be entirely reliant upon dividends received from its operating subsidiaries in order to do so. Payments of such dividends will be dependent on the availability of free cash from such subsidiaries. The Company can therefore give no assurance that it will be able to pay dividends going forward or as to the amount of such dividends, if any. Conversion of Convertible Loan Notes Following the issue of the Convertible Shares. the Company will have £18,750 convertible loan notes in issue made up of £18,750 loan notes convertible into Ordinary Shares at a price of £0.011 per Ordinary Share and £100,000 loan notes convertible into Ordinary Shares at a price of £0.015 per Ordinary Share. If the Convertible Loan Notes are redeemed and converted into Ordinary Shares each shareholder’s holding of Ordinary Shares will be diluted. In addition, if the market value of the shares at the time of conversion is higher than the conversion price then the share price of the Ordinary Shares may decrease.

Risks relating to Taxation

Changes in tax law and practice may reduce any net returns for investors The tax treatment of shareholders of the Company, the Group and any company which the Company may acquire are all subject to changes in tax laws or practices in England and Wales or any other relevant jurisdiction (including Jersey and the United States of America). Any change may reduce any net return derived by investors from a shareholding in the Company. There can be no assurance that the Company will be able to make returns for Shareholders in a tax-efficient manner It is intended that the Company will structure the Group, to maximise returns for Shareholders in as fiscally efficient a manner as is practicable. The Company has made certain assumptions regarding taxation. However, if these assumptions are not correct, taxes may be imposed with respect to the Group’s assets, or the members of the Group may be subject to tax on income, profits, gains or distributions (either on a liquidation and dissolution or otherwise) in a particular authority or jurisdictions in excess of taxes that were anticipated. This could alter the post-tax returns for Shareholders (or Shareholders in certain jurisdictions). The level of return for Shareholders may also be adversely affected. Any change in laws or tax authority practices could also adversely affect any post-tax returns of capital to Shareholders or payments of dividends (if any, which the Company does not envisage the payment of, at least in the short to medium term). In addition, the Company may incur costs in taking steps to mitigate any such adverse effect on the post-tax returns for Shareholders.

Consequences of a Standard Listing

Application will be made for the enlarged issued share capital to be admitted to listing on the Official List pursuant to Chapter 14 of the Listing Rules, which sets out the requirements for Standard Listings. Listing Principles 1 and 2 as set out in Chapter 7 of the Listing Rules also apply to the Company, and the Company will comply at all times with such Listing Principles. However, while the Company has a Standard Listing, it is not required to comply with the provisions of, among other things:

  • Chapter 8 of the Listing Rules regarding the appointment of a sponsor to guide the Company in understanding and meeting its responsibilities under the Listing Rules in connection with certain matters. The Company has not and does not intend to appoint such a sponsor in connection with the Acquisition, the Placing or Admission;
  • Chapter 10 of the Listing Rules relating to significant transactions;
  • Chapter 11 of the Listing Rules regarding related party transactions;
  • Chapter 12 of the Listing Rules regarding purchases by the Company of its Ordinary Shares; and
  • Chapter 13 of the Listing Rules regarding the form and content of circulars to be sent to Shareholders. It should be noted that the UK Listing Authority will not have the authority to (and will not) monitor the Company’s compliance with any of the Listing Rules which the Company has indicated herein that it intends to comply with on a voluntary basis, nor to impose sanctions in respect of any failure by the Company so to comply.

If you are buying outside of normal market size then this may prevent you from selling the shares at market price.

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