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Corporate Governance

AIM-quoted companies are required to adopt a recognized corporate governance code with effect from their admission to trading on AIM. However, there is no prescribed corporate governance regime in the UK for AIM companies. The Directors recognize the importance of sound corporate governance commensurate with the size and nature of the Group and the interests of its Shareholders. The Quoted Companies Alliance has published the Quoted Companies Alliance’s Corporate Governance Code (the “QCA Code”), a set of corporate governance guidelines, which include a code of best practice, comprising principles intended as a minimum standard, and recommendations for reporting corporate governance matters.

The Directors have adopted the QCA Code with effect from Admission as set out below.

QCA Principles

  1. Establish a strategy and business model which promotes long-term value for shareholders

The Company’s objective is to be a driving force behind the achievement of a significant rise in the early detection of lung cancer.  According to the World Health Organisation, over 2.2 million new cases of lung cancer were diagnosed in 2020 and approximately 1.8 million deaths were recorded in 2020 globally.  Nearly 80% of all lung cancers in the United States are diagnosed in later stages when survival rates are low because the options for curative treatment are then limited. This is in part due to the lack of effective screening strategies and the fact that early lung cancer largely develops asymptomatically.

To achieve our objective, we are initially focussed on two areas: assisting the clinician when a CT scan results in the identification of indeterminant nodules which may or may not be indications of lung cancer; and providing on-going monitoring for patients’ post-surgery following the removal of the lung cancer.  In both cases our diagnostic test in based on the same simple blood draw.

The Company's revenues are expected to be derived from different sources including:

Prior to full-scale commercialisation, the Company intends to focus on getting its first revenues from early adopting institutions, potentially those identified through partnerships, including validation and utility sites.

The Company has implemented remuneration policies that reinforce this strategy, by rewarding Executive Directors and senior management in a manner that ensures that they are properly incentivised and motivated to perform in the best interests of shareholders.

  1. Seek to understand and meet shareholder needs and expectations

The Board is committed to maintaining good communication and having constructive dialogue with shareholders by providing effective communication through our Interim and Annual Reports along with Regulatory News Service announcements. We also use the Company’s website for both financial and general news relevant to shareholders. The Chairman will offer to meet with the largest shareholders during the year without management present.  The CEO intends to meet shareholders and other investors/potential investors at regular intervals during the year and host broker and analyst meetings from time to time.

The Board keeps in mind the proportions of direct, nominee and institutional shareholders, and distributes communications accordingly. The CEO will also meet major shareholders regularly within the results cycle, and the whole Board attends the AGM. The AGM is regarded as an opportunity to meet, listen and engage with shareholders, and shareholders are encouraged to attend and ask questions

The Company’s Nominated Adviser and Broker, Investec, is briefed regularly and updates the Board during the year on shareholder expectations.

  1. Take into account wider stakeholder and social responsibilities and their implications for long-term success

The Board recognises that the long-term success of the Company is reliant upon the efforts of employees of the Company and its contractors, suppliers, regulators and other stakeholders. The Board will implement an appropriate range of processes and systems that will guarantee close oversight and contact with its key resources and relationships.

LungLife seeks to be a socially responsible Company which has a positive impact on the communities in which it operates. By the nature of the business, the Company employs a diverse workforce, with different nationalities. No discrimination is tolerated, and the Company is keen to ensure all employees have the opportunity to develop their capabilities.

Everyone within the Company is a valued member of the team and our aim is to help every individual achieve their full potential. We offer equal opportunities regardless of race, gender, gender identity or assignment, age, disability, religion and sexual orientation.

The Company will engage in a collaborative way with all stakeholders.  We see that collaborative approach particularly with our scientific and clinical partners being key to be able to achieve our overall objective of achieving a significant rise in the early detection of lung cancer. The Company has no significant environmental or community impact but will continue to monitor and take action if this changes in the future.

  1. Embed effective risk management, considering both opportunities and threats, throughout the organisation

The Board recognises the need for an effective and well-defined risk management process and the status of the key risks will be shared regularly with the Board, and the Board will thoroughly review the Company’s risk register on an annual basis.

The review process involves the identification of risks, both standard industry-related risks and risks against related opportunities, assessment to determine the relative likelihood of them impacting the business and the potential severity of the impact, and determination of what needs to be done to manage them effectively. Risk management is integral to the ability of the Company to deliver on its strategic objectives.

The system of internal control is structured around an assessment of the various risks to the business and is designed to address those risks that the Board considers to be material. It acts to safeguard assets against unauthorised use or disposition and to maintain proper accounting records which produce reliable financial and management information. The Board has established appropriate reporting and control mechanisms to ensure the effectiveness of its control systems. These continue to evolve as the Company develops and expands.

The Board regularly reviews the mechanisms of internal control it has implemented, assessing for effectiveness.

  1. Maintain the board as a well-functioning, balanced team led by the Chair

The Board comprises of the CEO, Paul Pagano, the CFO, David Anderson, and 4 Non-Executives, Roy Davis, Andy Boteler, James McCullough and Sara Barrington. Andy Boteler is the Company’s Senior Independent Director (SID), and Roy Davis is the Company’s Chairman. Biographical details of the Directors can be found on this website. All the Non-Executive Directors are expected to dedicate at least 1 day a month to the Company, rising to 1 - 2 days if they also chair a Committee, and the Chair is expected to dedicate 2 - 3 days per month. In practice many Non-Executives spend more than the minimum number of days on Company business.

The Board meets a minimum of 6 times in the year and a calendar of meetings and principal matters to be discussed is agreed at the beginning of each year. In order to be efficient, the Directors will meet formally and informally both in person and by telephone. Board and Committee document authors are made aware of proposed monthly deadlines through the calendar of meetings assembled at the beginning of the year. Board papers are collated by the relevant personnel (Chair, Company Secretary, CFO, Committee Chair), compiled into a Board/Committee Pack, and circulated at least one week before meetings, allowing time for full consideration and necessary clarifications before the meetings.

Management supplies the Board with appropriate and timely information and the Directors are free to seek any further information they consider necessary.

The Company has Audit, Remuneration, Nomination and Disclosure Committees. Terms of reference for the each of the Company’s Committees are published on the Company’s website.  The Committees have the necessary skills and knowledge to discharge their duties effectively.

  1. Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities

The Directors have both a breadth and depth of skills and experience to fulfil their roles. The Company believes that the current balance of skills in the Board as a whole reflects a very broad range of commercial and professional skills across geographies and industries and each of the Directors has experience in public markets. The Non-Executive Directors will meet without the presence of the Executive Directors during the year, and also maintain ongoing communications with Executives between formal Board meetings.

The Company has employed the services of ONE Advisory Limited to provide assistance to the Company Secretary, responsible for ensuring that Board procedures are followed, as well as helping the Chairman maintain excellent standards of corporate governance.

If required, the Directors are entitled to take independent legal advice and if the Board is informed in advance, the cost of the advice will be reimbursed by the Company. The Board shall review annually the appropriateness and opportunity for continuing professional development whether formal or informal.

  1. Evaluate board performance based on clear and relevant objectives, seeking continuous improvement

The Board has implemented a formal annual internal Board and Committee evaluation exercise. The evaluation process will comprise of one-on-one meetings between the Chair and individual Board members. For the Committee evaluation exercise, objective criteria evaluating behaviour, e.g. quality of interaction and processes, and timely provision of relevant information and decision making, have been established and are assessed through use of plc standard questionnaires. For the Board evaluation exercise, the Company Secretary and Chairman have developed bespoke questionnaires for the Board and individual Director review. Responses are received, recorded and circulated in a timely fashion, identifying positive areas and areas for improvement, and the Board utilises this feedback to identify steps to ensure that it is operating at its full potential. The results and recommendations that come out of the appraisals for the Directors identify the key corporate and financial targets that are relevant to each Director and their personal targets in terms of career development and training.

The Nominations Committee, comprised of the Chairman and two Non-Executive Directors, regularly reviews the structure, size and composition required of the Board compared to its current position, makes recommendations to the Board, considers succession planning and oversees the process to fill Board vacancies. The Nominations Committee also keeps key positions outside the main board and other personnel considered critical to the business under review. Findings from the Company’s annual evaluation exercise and one-on-one reviews are utilised in the Nominations Committee’s succession planning discussions.

In addition, the Remuneration Committee reviews the performance of the Executive Directors and makes recommendations to the Board on matters relating to their terms of employment and remuneration, including short term bonus and long-term incentives (with targets consistent with the corporate strategy). The findings from annual evaluations and the achievement of financial and non-financial targets/goals discussed thereat are taken into account by the Remuneration Committee in relation to recommendations to be made in respect of adjustments to executive remuneration.

  1. Promote a corporate culture that is based on ethical values and behaviours

The Board recognises that its decisions regarding strategy and risk will impact the corporate culture of the Company as a whole and that this will impact the performance of the Company. The Board is very aware that the tone and culture set by the Board will greatly impact all aspects of the Company as a whole and the way that employees behave. The corporate governance arrangements that the Board has adopted are designed to ensure that the Company delivers long term value to its shareholders, and that shareholders have the opportunity to express their views and expectations for the Company in a manner that encourages open dialogue with the Board.

A large part LungLife’s activities are centred upon what needs to be an open and respectful dialogue with employees, clinicians and other stakeholders. Therefore, the importance of sound ethical values and behaviours is crucial to the ability of the Company to successfully achieve its corporate objectives. The Board places great importance on this aspect of corporate life and seeks to ensure that this flows through all that the Company does. The Directors consider that at present the Company has an open culture facilitating comprehensive dialogue and feedback and enabling positive and constructive challenge. This has brought us valuable insights and perspectives which we are using to guide a framework of actions that will facilitate the change process.

The Company operates a whistleblowing policy to facilitate the reporting by employees of suspected misconduct, illegal acts or failure to act within the Company. The aim of this policy is to encourage employees and others who have serious concerns about any aspect of the Company's work to come forward and voice those concerns.

  1. Maintain governance structures and processes that are fit for purpose and support good decision-making by the board

The Board will review our corporate governance arrangements regularly and expects these to evolve over time, in line with the Company’s growth. The Board delegates responsibilities to Committees and individuals as it sees fit, with the Chairman being responsible for the effectiveness of the Board, and the Executive Directors being accountable for the management of the Company’s business and being the primary contact with shareholders.

The Chairman is responsible for the leadership of the Board and ensuring its effectiveness in all aspects of its role. The Chairman is also responsible for the Company’s Corporate Governance framework. He is also responsible for creating the right Board dynamic and ensuring that all important matters, in particular strategic decisions, receive adequate time and attention at Board meetings. The Executive Directors are responsible for the day-to-day running of the business and developing corporate strategy; while the Non-Executive Directors are tasked with constructively challenging the decisions of executive management and satisfying themselves that the systems of business risk management and internal financial controls are robust.

The role of the SID is to serve as a sounding board for the Chairman and act as an intermediary for other Directors. The SID is also available to shareholders if they have reason for concern that contact through the normal channels of the Executive Directors has failed. The SID is responsible for holding annual meetings with Non-Executives, without the Chairman present, to appraise the Chairman’s performance.

The Board has adopted appropriate delegations of authority which sets out matters which are reserved to the Board. A schedule of specific matters reserved for the Board can be found on this website, with matters including:

The Board delegates authority to four Committees to assist in meeting its business objectives whilst ensuring a sound system of internal control and risk management. The Committees meet independently of Board meetings.

Audit Committee

The Audit Committee has four members, Andy Boteler (Chair) and Non-Executives Roy Davis, James McCullough and Sara Barrington. The CEO, CFO and external auditors attend meetings by invitation. The Audit Committee is responsible for assisting the Board in fulfilling its financial and risk responsibilities. The Audit Committee oversees the financial reporting, risk management and internal control procedures. The Audit Committee advises the Board on the appointment and removal of the external auditor and discusses the nature, scope and results of the audit with the auditors. The Audit Committee reviews the extent of non-audit services provided by the auditors and reviews with them their independence and objectivity.

Remuneration Committee

The Remuneration Committee has three members, Andy Boteler (Chair) and Non-Executives Roy Davis and James McCullough. Other members of the Board may attend the Committee’s meetings at the request of the Committee Chairman. The remit of the Committee is primarily to determine and agree with the Board the framework or broad policy for the remuneration of the Company’s Executive Directors and the Senior Management of the Company. The Remuneration Committee reviews the performance of the Executive Directors and makes recommendations to the Board on matters relating to their terms of employment and remuneration, including short term bonus and long-term incentives. The Remuneration Committee also considers the granting of long-term incentives and share options pursuant to the Company’s option schemes.

Nominations Committee

The Nominations Committee has four members, Roy Davis (Chair), James McCullough and Andy Boteler. The Nominations Committee regularly reviews the structure, size and composition required of the Board compared to its current position, makes recommendations to the Board, considers succession planning and nominates candidates to fill Board vacancies. The Nominations Committee also keeps key positions outside the main board and other personnel considered critical to the business under review. The Nominations Committee meets at least twice per year, and otherwise as necessary to consider proposals for Board appointments and other matters.

Terms of Reference for each of the Committees can be found on this website.

The Chairman and the Board will continue to monitor and evolve the Company’s corporate governance structures and processes, in order that these evolve over time, in line with the Company’s growth and development.

  1. Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

The Board is committed to maintaining effective communication and having constructive dialogue with its shareholders. The Company aspires to have close ongoing relationships with its private shareholders, institutional shareholders, and analysts and for them to have the opportunity to discuss issues and provide feedback at meetings with the Company. The Company receives reports from ISS, reviews their findings and meets with same to discuss shareholder matters. The Board maintains that, if there is a resolution passed at a GM with 20% votes against, the Company will seek to understand the reason for the result and, where appropriate, take suitable action.

This page was last updated on: 17 February 2023

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