Governance

The directors recognise the importance of sound corporate governance and intend that the group complies with the main provisions of the Quoted Companies Alliance (QCA) Guidelines on Corporate Governance insofar as they are appropriate given the group's size and stage of development.

The board is responsible for formulating, reviewing and approving the group's strategy, budgets and corporate actions. The directors hold board meetings at least quarterly and at other times as and when required.

The company has established audit and remuneration committees of the board with formally delegated duties and responsibilities.

Independence

Michael Bretherton is considered to be able to act as an independent non-executive director by the board (other than in matters pertaining to ORA Capital Partners Limited, where he is not entitled to vote) notwithstanding his 0.32% shareholding.

Dr David Bott is considered to be able to act as an independent non-executive director by the board, notwithstanding his 0.02% shareholding.

The Board

The board currently comprises two executive and two non-executive directors.

Audit Committee

The audit committee comprises the two non-executive directors with Michael Bretherton as Chairman.

It meets as required and at least biannually to consider all aspects of the planning and completion of the annual external audit.

Remuneration Committee

The remuneration committee comprises the two non-executive directors with Dr David Bott as Chairman. It meets as required and at least biannually to consider all aspects of the remuneration of the executive directors of the group.

The policy of the remuneration committee is to reward executive directors in line with the current development of the group and with the current remuneration of directors in comparable businesses in order to recruit, motivate and retain high quality executives in a competitive marketplace.

There are three main elements of the remuneration packages for executive directors and senior management:

• Basic annual salary (including directors' fees):
  The base salary is reviewed annually at the beginning of each year. The review process is undertaken by the remuneration committee and takes into account several factors, including the current position and development of the group, individual contribution and market salaries for comparable organisations.
• Discretionary annual bonus:
  All executive directors and senior managers are eligible for a discretionary annual bonus which is paid in accordance with a bonus scheme developed by the remuneration committee. This takes into account individual contribution, business performance and technical and commercial progress, along with financial results.
• Discretionary share option scheme:
  All executive directors and senior managers are eligible for discretional share option awards to be paid in accordance with the option scheme, as amended on 16 December 2008. This takes into account the need to motivate and retain key individuals, along with similar performance criteria to the discretionary bonus scheme.
• Other benefits:
  The group does not currently operate a group pension scheme. It does however offer a salary sacrifice scheme, which is open to all executive directors and employees. There are no other benefits currently offered by the group.

Remuneration Policy for Non-executive Directors

Remuneration for non-executive directors is set by the board as a whole. Non-executives do not receive any pension payments or other benefits, nor do they participate in bonus schemes. Fees are based on a fixed fee.

Nominations Committee

The directors do not consider that, given the size of the board and the stage of development of the group, it is appropriate at this time to have a nominations committee. However, this will be kept under regular review by the board.

Internal Control

The board is responsible for maintaining a sound system of internal control. The board's measures are designed to manage, not eliminate risk and such a system provides reasonable but not absolute assurance against material misstatement or loss.

Some key features of the internal control system are:

• Management accounts information and business risk issues are regularly reviewed by the Board who meet at least quarterly;
• The group has operational, accounting and employment policies in place;
• There is a clearly defined organisational structure and there are well-established financial reporting and control systems;
• Accounting systems and procedures will be reviewed at least annually as the business grows in order to ensure that they are appropriate to the size and complexity of the business;
• The board actively identifies and evaluates risks inherent in the business and ensures that appropriate controls and procedures are in place to manage these risks; and
• The precise accounting controls and procedures to be adopted by the group following an acquisition of a subsidiary business will be determined at the time an acquisition is made.