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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Oxonica | LSE:OXN | London | Ordinary Share | GB00B0D09P49 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 3.125 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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RNS Number : 9231D
Oxonica plc
22 September 2008
22 September 2008
Oxonica plc
Interim results for the six months ended 30 June 2008
Oxonica plc, a leading international nanomaterials group, today announces interim results for the six months ended 30 June 2008.
Highlights
* Revenue reduced by 51% to £1.5m (1H07: £3.1m), mainly due to the loss of the one-off sales of Envirox* to Petrol Ofisi of £2.1 m
included in the prior year figure
* Gross profit increased by 7% to £1.3m (1H07: £1.2m)
* Operating loss after intangible amortisation and exceptional items was 122% higher at £7.1m (1H07: £3.2m), but before intangible
amortisation and exceptional items was only 7% higher at £3.1m (1H07: £2.9m)
* Net cash outflow before financing reduced by 31% to £2.9m (1H07: £4.2m) and cash balances at 30 June 2008 were £3.2m (1H07:
£2.5m).
* Oxonica Energy (Envirox*): Sales of £532k (1H07: £2,411k) - Strong pipeline of potential customers established following
successful follow-on trial with Stagecoach, initial sales made to Russia for mining sector applications
* Oxonica Materials (Optisol*): Sales of £41k (1H07: £264k) - Disappointing downturn in sales caused by poor summer weather in the
UK, de-stocking by customers and a high product price point - action being taken to restructure supply chain to reduce cost
* Oxonica Security: Sales of £490k (1H07: £332k) - US$ 2.15m of further purchase orders received from an existing customer for
development products to be delivered in 2008
* Oxonica Diagnostics: Sales of £446k (1H07: £94k) - Assignment and License Agreement signed with BD after the half-year end - BD
will pay Oxonica a total of up to US$7 m in connection with the transfer of the technology and additional payments on sales of BD products
covered by the Nanoplex* patents
* High Court judgment issued in favour of Neuftec in the Envirox* patent licensing dispute - Oxonica Energy has been advised by its
lawyers that it has good grounds upon which to appeal, which it is considering
* £3.0m discounted notes facility agreed with BlueCrest Capital Finance L.P. on 24 April 2008 - first tranche of notes with a value
of £1.5m issued at closing
Commenting on today's announcement, Richard Farleigh, Chairman, said:
"We are continuing to restructure the Group, concluding a strategic deal with BD for the Nanoplex* technology, eliminating non-essential
expenses and investing in developing the Security and Energy businesses".
For further information, please contact:
Oxonica plc Tel. 01865 856 700
Kevin Matthews, Chief Executive Officer
Richard Clarke, Chief Financial Officer
The Broadcast PR Business Tel. 020 7469 4036
Matthew Locke
Panmure Gordon Tel. 020 7459 3600
Hugh Morgan
Andrew Potts
Notes to Editors
About Oxonica plc - www.oxonica.com
Oxonica (AIM: OXN.L) is one of the leading international nanomaterials groups with products already launched into international markets
and is listed in London on the AIM market. It was spun-out from Oxford University in 1999. Oxonica's mission is to focus on the development
of innovative commercial solutions for international markets using its expertise in the design and application of nanomaterials. It owns a
portfolio of demand driven products that offer substantial benefits to the target markets of energy, materials, security and diagnostics.
The Group currently has four operating businesses: Oxonica Energy, Oxonica Materials, Oxonica Security and Oxonica Diagnostics. Oxonica
has already launched products into international markets. Lead products include:
* Envirox* fuel borne catalyst - a catalyst improving fuel economy and reducing emissions
* Optisol* UV absorber - a revolutionary photostable UV protection system designed to optimise the performance of quality sunscreens
and anti-premature aging products
Chairman's Review
Introduction
I am pleased to report that, after excluding the sales to Petrol Ofisi in the prior year, Oxonica's revenues to date in 2008 are
significantly higher than for the comparative period in 2007. Also, the cash outflow from operations is lower than in the corresponding
prior year period.
Having successfully raised £4.0 million in additional equity funds in December 2007, on 24 April 2008 the Company agreed a £3.0 million
secured discounted notes facility with BlueCrest Capital Finance, L.P. The first tranche of notes with a value of £1.5 million was issued at
closing and the remaining notes can be issued in a second tranche on or after 1 September 2008 conditional upon the achievement of certain
milestones agreed with BlueCrest Capital Finance. The first tranche notes were issued at a discount to their nominal value equivalent to an
interest rate of 14 per cent per annum and are repayable over 36 months. In addition, the Company issued warrants to BlueCrest Capital
Finance to subscribe for 569,801 shares in Oxonica at 35.1p per share, exercisable at any time up to 23 April 2018. Warrants for a further
£100,000 worth of Oxonica shares will be granted on issue of the second tranche notes at the average price per share for the 5 days prior to
issue.
Two events occurred following the period end which have had a significant impact on these accounts. Firstly, the High Court judgment
announced on 5 September 2008 regarding the patent licensing dispute with Neuftec, which found against Oxonica Energy and secondly the
signing of an Assignment and License Agreement with BD under the terms of which BD will pay Oxonica a total of up to US$ 7 million in
connection with the transfer of the technology and additional payments on sales of BD products covered by the Nanoplex* patents. As a
result of the Neuftec judgment, a provision has been made for a possible award of costs to Neuftec, which we have estimated at £0.5 million.
This is in addition to the provision for potential royalties payable of £0.4 million previously made. In conjunction with the strategic
review and the agreement with BD, we reviewed the carrying value of goodwill associated with the acquisition of Oxonica Inc (formerly
Nanoplex Technologies Inc) in 2006, which comprises the Security and Diagnostics businesses, and this has resulted in the Group recognising an impairment charge of £3.3 million.
Results
In the six months ended 30 June 2008 revenue was £1.5 million (2007: £3.1 million), a reduction of 51% compared with the same period
last year. However, after adjusting for the £2.1 million of sales of Envirox* to Petrol Ofisi in the prior year under the contract which was
terminated on 22 May 2007, revenues were 44% higher than in the corresponding period in 2007. Envirox* revenues were 78% down at £532,000
(1H07: £2,411,000) due to the loss of the one-off sales to Petrol Ofisi of £2.1 million in the prior year partly offset by additional sales
to Stagecoach resulting from fleet expansion and initial sales into Russia for mining applications. Optisol* sales reduced by 84% to £41,000
(2007: £264,000) caused by poor summer weather in the UK, a reduction in distributors' inventory levels and difficulties in winning new
customers. However, in the US, Security sales were up 48% to £490,000 (2007: £332,000) following additional orders for development products
from an existing customer and Diagnostics sales increased more than four times to £446,000 (2007: £94,000) as a result of higher sales to BD under the follow-on research and collaboration
agreement. Revenue does not include grant income received which is included under Other Operating Income of £123,000 (2007: £852,000). Other
Operating Income in the prior period included the contract termination settlement with Petrol Ofisi.
The gross margin increased from 39% to 86% partly due to the ability to utilise Envirox* inventory previously written-down as a result
of the cancellation of the Petrol Ofisi contract and partly due to a favourable sales mix which included a smaller proportion of lower
margin Optisol* sales. Research and development costs rose by 41% to £1.5 million (2007: £1.0 million) as a result of increased development
effort in the US in both Security and Diagnostics. Excluding intangible amortisation and exceptional items, sales and marketing and
administration expenses reduced by 22% to £3.1 million (2007: £4.0 million) largely due to the actions taken to reduce costs following the
loss of the Petrol Ofisi contract in the previous year. Exceptional items include the provision for defendant's costs associated with the
Neuftec litigation and a goodwill impairment charge of £3.3 million (2007: nil) in connection with Oxonica Inc, which reflects a review of
the goodwill recognising the impact of the latest agreement with BD. The operating loss including intangible amortisation and exceptional items was more than double the previous year at £7.1 million
(2007: £3.2 million). However, the cash outflow before financing reduced by 31% to £2.9 million (2007: £4.2 million). Cash balances,
including short term deposits, at the end of the period were £3.2 million (2007: £2.5 million).
Business overview
The Group consists of two separate divisions, Oxonica Nanomaterials and Oxonica Diagnostics. The Nanomaterials division includes the
Energy, Security and Materials businesses (including Optisol* UV absorber) and the Diagnostics division consists of the Group's activities
in the detection of diseases and biological markers for clinical, veterinary, food and bioterrorism markets.
Oxonica Nanomaterials
Energy: The Energy business comprises the Envirox* Fuel Borne Nanocatalyst with demonstrated improvements in fuel economy and reduced
emissions for diesel vehicles.
Following the successful outcome of the follow-on trial with Stagecoach announced in February 2008, there has been a significant
increase in interest in Envirox* and Oxonica Energy now has a stronger pipeline of potential UK customers than at any time in its history.
The rise in oil prices and enhanced environmental pressures are making Envirox* an increasingly attractive product for all types of
significant diesel fuel users. In addition to growing sales in the UK, Oxonica Energy has now made initial sales into Russia for
applications in the mining sector.
With regard to the patent licensing dispute with Neuftec, as announced on 5 September 2008, in the judgment issued on 5 September 2008
it was found that royalties are payable to Neuftec on Envirox* sourced from Oxonica Energy's current supplier under the license agreement
for the period it was in force. There will shortly be a further hearing regarding the royalties payable, the payment of costs and permission
to appeal. A provision had previously been made for £408,000, based on Oxonica Energy's estimate of the royalties that might be payable, and
a further provision of £550,000 for the possible payment of defendant's costs has been made in these accounts. Oxonica Energy has been
advised by its lawyers that it has good grounds for an appeal, which it is currently considering. Neuftec has issued further legal
proceedings relating principally to the alleged supply of Envirox* sourced from Oxonica Energy's previous supplier. Oxonica Energy has filed
a defence and made a counterclaim. The stock of Envirox* sourced from the previous supplier held by Oxonica Energy has been fully provided for.
Oxonica has continued to discuss with the US EPA the additional testing that they have indicated will be required in order for Envirox*
to be sold in the USA for on-road use. As yet no detailed agreement has been reached as to the nature or extent of the additional testing.
In the meantime, Oxonica is evaluating off-road applications in the US.
Materials: Oxonica Materials comprises the Optisol* and Solacor* UV absorbers - advanced photostable UV protection materials for
personal care and industrial applications. The sales performance of Optisol* UV absorber has been disappointing. There has been some
de-stocking in the supply chain in the first half of 2008. In addition the winning of new accounts has been slower than expected as a result
of the high cost of the current supply chain which results in a high market price. Discussions are in progress with both the supplier and
distributor of Optisol* regarding reducing supply chain costs and the Company expects to announce a revised supply structure later in the
year. In the meantime a fully formulated product, Optisol* Sun Defence, has been launched in the UK market and the initial feedback has been
encouraging.
Oxonica has continued to explore the options for the development of the UV protection technology for the industrial markets of coatings
and plastics. The product (Solacor*) is being evaluated by a number of blue-chip industrial partners and steady, but slow progress is being
made in securing a manufacturing partner to allow Oxonica to address this market.
Security: Subsequent to the acquisition of Nanoplex Technologies Inc. in February 2006, Oxonica established Oxonica Security in order to
pursue a number of commercial applications for nanotechnology based marker systems for anti-counterfeiting and brand protection. The market
for this anti-counterfeiting technology comprises applications in high value documents, tax stamps, pharmaceuticals, fuel and luxury goods.
As reported earlier in the year, Security received purchase orders totalling US$2.15 million in April 2008 for a number of development
products to be delivered over the seven months to October 2008 as part of a continuing project with one of its existing customers. On
completion of the deliveries against these orders, revenue to this customer will have amounted to US$5.30 million since November 2005. This
follow-on order resulted from the successful completion of the orders announced in June, 2007 and the significant technical progress
achieved. The business is now implementing the necessary process developments to allow product manufacture on a commercial scale.
Oxonica Diagnostics: The Diagnostics business consists of the Group's activities in the detection of diseases and biological markers for
clinical, veterinary, food and bioterrorism markets. As reported on 19 September 2008, following an exercise to identify potential strategic
partners for this business, the Group has signed an Assignment and License Agreement with BD. Under the terms of this agreement, BD will pay
Oxonica a total of up to US$ 7 million. Of that, US$3.5 million is payable on signing the agreement in exchange for the assignment to BD of
the patents covering Oxonica's Nanoplex* technology, related know-how and the Nanoplex* trademark. A further US$ 3.5 million is payable on
Oxonica completing certain technical transfer milestones. In addition, BD will make payments to Oxonica on sales of BD products covered by
the Nanoplex* patents, albeit at rates lower than that of the original license agreement. As a result of this transaction, BD will assume
the responsibility and costs associated with prosecuting the patent portfolio and will also take responsibility for the manufacture of the Nanoplex* tags for its own requirements. This
will allow Oxonica to achieve a significant reduction in operating expenses related to the Diagnostics business. Oxonica will retain a
royalty free, exclusive license to continue to use the technology in the fields of industrial and homeland security and to continue to
evaluate opportunities in in-vivo diagnostics, agriculture (excluding veterinary) and fine chemicals.
Board
Martin Hagen did not seek re-appointment to the Board at the AGM due to an increase in his other professional commitments at the
Institute of Chartered Accountants in England and Wales and at the Financial Services Authority. On behalf of the Board, I would like to
thank Martin for his valuable contribution to Oxonica, especially as Chairman of the Nominations and Audit Committees, and in particular for
his guidance during the Company's transition to International Financial Reporting Standards. The Company has commenced the search for a
replacement for Mr Hagen and in the meantime Ed Weeks will be the Senior Independent Director.
Management and staff
The first half of 2008 has continued to prove challenging for the management and staff, particularly in the US, where we lost 9
employees through redundancy as part of the cost reduction exercise to reduce the cash burn in the Diagnostics business prior to the
agreement with BD. At 31 August, after the redundancies, the Group had 40 employees of which 20 (50%) were based in California. On behalf of
the Board, I would like to express our sincere appreciation to all our employees for their sustained efforts and continued support.
Future outlook
With a strong pipeline of potential customers and some exciting opportunities in Russia, Envirox* is expected to make further progress
in the second half. In the US, the Security business continues to perform well and the agreement with BD on Diagnostics, signed after the
half-year end will strengthen the Group's cash position and reduce the cash burn going forward. The Board continues to believe that Oxonica
has considerable potential and is optimistic that the Group can move closer to break-even by the end of the year.
Richard Farleigh
Chairman
Independent review report to Oxonica plc
Introduction
We have been instructed by the Company to review the financial information for the six months ended 30 June 2008 which comprises the
Consolidated income statement, Consolidated statement of recognised income and expense, Consolidated balance sheet, Consolidated cash flow
statement and the related explanatory notes. We have read the other information contained in the interim report and considered whether it
contains any apparent misstatements or material inconsistencies with the financial information.
This report is made solely to the Company in accordance with the terms of our engagement. Our review has been undertaken so that we
might state to the Company those matters we are required to state to it in this 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 reached.
Directors' responsibilities
The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the interim report in accordance with the AIM Rules.
As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the EU. The
interim financial statements included in this half-yearly report has been prepared in accordance with the recognition and measurement
requirements of IFRSs as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on the interim financial statements in the half-yearly report 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 UK. A review
of interim financial information consists of making enquiries, 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 interim financial statements in the
half-yearly report for the six months ended 30 June 2008 is not prepared, in all material respects, in accordance with the recognition and
measurement requirements of IFRSs as adopted by the EU and the AIM Rules.
Emphasis of matter - Going concern
In forming our conclusion on the financial statements, which is not qualified, we have considered the adequacy of the disclosure made in
note 2 to the interim financial statements concerning the Group's ability to continue as a going concern. As more fully explained in note 2,
the Company has prepared cash flow forecasts that include certain cash flow assumptions relating to the implications of a High Court
judgment and the ability of the Group to generate further cash payments from a new assignment and license agreement. These conditions, along
with the other matters referred to in note 2 indicate the existence of material uncertainties which may cast significant doubt on the
Group's ability to continue as a going concern. The interim financial statements do not include the adjustments that would result if the
Group were unable to continue as a going concern.
KPMG Audit Plc
Chartered Accountants
Arlington Business Park
Theale
Reading
RG7 4SD
19 September 2008
Consolidated income statement
For the period ended 30 June 2008
Six months to 30 June 2008 Unaudited Six months to 30 June 2007 Unaudited
Year to 31 December 2007 Audited
Before Intangible Intangible Total Before Intangible Intangible Total
Before Intangible Intangible Total
amortisation and amortisation and amortisation and amortisation and
amortisation and amortisation and
exceptional items exceptional items exceptional items exceptional items
exceptional items exceptional items
(Note 5) (Note 5)
(Note 5)
£'000 £'000 £'000 £'000 £'000 £'000
£'000 £'000 £'000
Revenue from continuing 1,509 - 1,509 3,101 - 3,101
4,174 - 4,174
activities
Cost of sales (210) - (210) (1,883) - (1,883)
(1,763) - (1,763)
Gross profit 1,299 - 1,299 1,218 - 1,218
2,411 - 2,411
Other operating income 123 - 123 852 - 852
1,032 - 1,032
Research and development (1,457) - (1,457) (1,036) - (1,036)
(2,599) - (2,599)
Sales, marketing and (3,103) (656) (3,759) (3,973) (244) (4,217)
(6,074) (361) (6,435)
administration expenses
Goodwill impairment - (3,280) (3,280) - - -
- - -
Operating loss (3,138) (3,936) (7,074) (2,939) (244) (3,183)
(5,230) (361) (5,591)
Financial income 98 - 98 122 - 122
186 - 186
Financial expense (48) - (48) (18) - (18)
(36) - (36)
Net financial income 50 - 50 104 - 104
150 - 150
Loss before tax (3,088) (3,936) (7,024) (2,835) (244) (3,079)
(5,080) (361) (5,441)
Taxation (18) - (18) (1) - (1)
2 - 2
Loss for the period
attributable to equity holders (3,106) (3,936) (7,042) (2,836) (244) (3,080)
(5,078) (361) (5,439)
of the parent
Basic and diluted loss per ( 10.75)p (6.82)p
(11.61)p
share
Consolidated statement of recognised income and expense
For the period ended 30 June 2008
Six months to 30 Six months to 30 Year to
June 2008 Unaudited June 2007 Unaudited 31
December
2007
Audited
£'000 £'000 £'000
Loss for the period ( 7,042) (3,080) (5,439)
Fair value of equity component 108 - -
of new debt
Exchange differences on
translation of foreign 2 (2) 17
operations
Total recognised income and
expense for the period (6,932) (3,082) (5,422)
attributable to equity holders
of the parent
Consolidated balance sheet
As at 30 June 2008
30 June 30 June 31 December 2007
2008 2007 Audited
Unaudite Unaudite
d d
£'000 £'000 £'000
Assets
Non current assets
Intangible assets 9,752 13,254 13,138
Property, plant and equipment 608 664 671
Total non-current assets 10,360 13,918 13,809
Current assets
Inventories 268 311 321
Tax receivable 62 125 79
Trade and other receivables 1,066 1,830 623
Cash and cash equivalents 3,160 2,529 4,811
Total current assets 4,556 4,795 5,834
TOTAL ASSETS 14,916 18,713 19,643
Equity
Issued share capital 655 453 654
Share premium 26,303 22,522 26,303
Exchange reserve 92 - 88
Other reserves 9,953 9,953 9,953
Retained earnings (25,869) (17,033) (19,209)
Total equity attributable to the 11,134 15,895 17,789
shareholders of the parent
Liabilities
Current liabilities
Interest bearing loans and borrowings 286 164 163
Trade and other payables 1,842 2,489 1,610
Provisions 550 - -
Total current liabilities 2,678 2,653 1,773
Non-current liabilities
Interest-bearing loans and borrowings 1,104 165 81
Total non-current liabilities 1,104 165 81
Total liabilities 3,782 2,818 1,854
TOTAL EQUITY AND LIABILITIES 14,916 18,713 19,643
Consolidated cash flow statement
For the period ended 30 June 2008
Six months to 30 Six months to 30 Year to
June 2008 Unaudited June 2007 Unaudited 31
December
2007
Audited
£'000 £'000 £'000
Cash flows from operating
activities
Loss before tax (7,024) (3,079) (5,441)
Adjustments for:
Depreciation, amortization, 3,547 274 597
impairment and loss on
disposal
Equity settled share-based 272 260 514
payment expenses
Net finance income and expense (50) (104) (150)
Operating cash flow before (3,255) (2,649) (4,480)
changes in working capital,
interest and taxes
(Increase)/decrease in trade (372) (1,159) 71
and other receivables
Decrease in inventories 53 167 156
Increase/(decrease) in trade 708 (761) (1,591)
and other payables
Cash utilised in operations (2,866) (4,402) (5,844)
Interest received 98 122 186
Interest paid ( 48) (18) (36)
Income tax received - 30 76
Net cash outflow from (2,816) (4,268) (5,618)
operating activities
Cash flows from investing
activities
Capital expenditure (98) (111) (324)
Loss on disposal of intangible - 147 147
asset
Net cash used in investing (98) 36 (177)
activities
Net cash outflow before (2,914) (4,232) (5,795)
financing activities
Cash flows from financing
activities
Proceeds from the issue of - 64 4,047
share capital
New bank loans 1,500 - -
Repayment of bank loans and (244) (137) (269)
hire purchase liabilities
Net cash from/(used in) 1,256 (73) 3,778
financing activities
Net decrease in cash and cash ( 1,658) (4,305) (2,017)
equivalents
Cash and cash equivalents at 1 4,811 6,836 6,836
January
Effect of exchange rate 7 (2) (8)
fluctuations on cash held
Cash and cash equivalents at 3,160 2,529 4,811
the end of the period
Notes to the interim report
For the period ended 30 June 2008
1. Basis of preparation
Oxonica plc ("the Company") is a company domiciled in the UK. The consolidated interim financial statements as at, and for, the six
months ended 30 June 2008 comprise the Company and its subsidiaries (together referred to as "the Group").
The Group's interim financial statements for the six months ended 30 June 2008 were authorised for issue by the Board of Directors on 19
September 2008.
The comparative financial information for the year ended 31 December 2007 has been extracted from the published audited financial
statements of the Company. The comparative financial information for the six months ended 30 June 2007 has been extracted from the unaudited
interim financial statements of the Company.
The consolidated interim financial information does not constitute statutory accounts within the meaning of section 240 of the Companies
Act 1985. These interim results are unaudited but have been reviewed by the Group's auditors. The statutory accounts for the period ended 31
December 2007 have been reported on by the Group's auditors and delivered to the registrar of companies. The report of the auditors was
unqualified and did not contain the statements under section 237(2) or (3) of the Companies Act 1985.
The Group's interim financial statements have been prepared and approved by the Directors in accordance with the AIM Rules and
International Financial Reporting Standards as adopted by the EU ("Adopted IFRSs"). The recognition and measurement requirements of adopted
IFRSs have been applied; however, the voluntary compliance with IAS34 has not been adopted.
These interim statements have been prepared on a consistent basis to that used for the financial statements for the year ended 31
December 2007.
Copies of this statement are being posted to shareholders and will also be available on the investor relations page of the Group's
website (www.oxonica.com). Further copies are available from the Company Secretary at Begbroke Science Park, Sandy Lane, Yarnton,
Kidlington, Oxfordshire OX5 1PF.
2. Going concern
The interim financial statements are prepared on a going concern basis which the directors believe to be appropriate for the following
reasons. The Group meets its day to day working capital requirements through existing cash resources and a £1.5m loan. As at 18 September
2008, the Group's cash resources amounted to £2.1 million.
The directors have prepared projected cash flow information for the period ending twelve months from the date of their approval of these
financial statements. On the basis of this cash flow information the directors consider that, for the foreseeable future, the Group will
continue to operate within its existing resources and meet its obligations as they fall due. The directors note that the margin of available
resources over forecast requirements is not large. The preparation of the forecast requires the directors to make certain assumptions
regarding measurement and timing of cash flows. In particular, the forecast contains assumptions concerning:
* The implications of a recent High Court judgment regarding a patent dispute. That judgment concluded that Oxonica Energy is required
to pay retrospective royalties amounting to £408,000 plus the defendant's costs. The exact extent of those costs is currently unknown.
Having consulted with the Group's legal advisers, the directors have included in the cash flow forecast an amount that reflects their
current best estimate of £550,000. The directors note that the counter party may seek a higher amount and that there is no certainty in
relation to the amounts included in the forecast. Oxonica Energy retains the right to appeal against the judgment and is considering its
options.
* The magnitude and timing of payments arising from an Assignment and License Agreement with BD, entered into on 19 September 2008. The
terms of the agreement provide for an immediate payment of US$3.5 million and further payments totaling US$ 3.5 million are receivable
should the Group successfully complete certain technical transfer milestones. In drawing up the cash flow information, certain assumptions
have been made regarding the success and timing of those milestones.
In concluding that the going concern basis of preparation is appropriate, the directors note that a degree of discretion is available to
them to reduce research and development, marketing and administration expenses without materially curtailing the operations of the Group. In
the light of the above, the directors acknowledge that there are material uncertainties that may cast significant doubt on the Group's
ability to continue as a going concern. The Group may, therefore, be unable to continue realising its assets and discharging its liabilities
in the normal course of business but the interim financial statements do not include any adjustments that would result if the Group were
unable to continue as a going concern.
3. Accounting policies
The preparation of the interim financial statements requires management to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Estimates and judgements are
continually reviewed and are based on historical experience and other factors, and expectations of future events that are believed to be
reasonable under the circumstances. Actual results may differ from these estimates.
The Group's principal accounting policies, the significant judgements made by management in applying these policies and the key sources
of uncertainty are as follows:
* Revenue and revenue recognition
Revenue represents the total amount receivable by the Group for goods and services supplied and services provided, excluding value added
tax and other sales-related taxes. Revenue from product sales is recognised when substantially all the risks and rewards have been
transferred to the customer. Revenue from funded development contracts is recognised on a percentage of completion basis. Costs which have
been incurred on funded development contracts and are recoverable, but which have not yet been billed to the customer are carried forward on
the balance sheet as deferred revenue.
* Research and development expenditure
Development expenditure on new products is capitalised only once the criteria specified under IAS 38, Intangible Assets have been met.
Prior to and during the period ended on 30 June 2008, no development expenditure satisfied the necessary conditions of IAS 38. The Group
monitors the level of product development costs against all criteria set out in IAS 38. These include the requirement to establish that a
flow of economic benefits is probable before costs are capitalised. This is only apparent shortly before a product is launched into the
market. The level of development costs incurred after these criteria have been met is currently insignificant.
* Non-current assets
Intangible assets (excluding goodwill) and property, plant and equipment are stated at cost less accumulated depreciation and any
recognised impairment loss. Depreciation is provided at rates calculated to write down the cost of assets to their residual values over
their estimated useful lives. The value of the assets is reviewed for impairment if events or circumstances indicate the carrying values may
not be recoverable.
* Goodwill
Purchased goodwill (representing the excess of the fair value of the consideration given over the fair value of the separable net assets
acquired) arising on consolidation in respect of acquisitions is capitalised. Goodwill is not amortised, but is regularly reviewed for
impairment. Determining whether goodwill is impaired requires an estimation of the value in use, which is calculated by estimating the
future cashflow expected to arise from the cash-generating unit and discounted by a suitable discount rate in order to calculate the present
value. During the period a provision for impairment of £3,280,000 was made in respect of Oxonica Inc. This was based on cash flow
projections for Oxonica Inc through to 2017 (incorporating the impact of the BD Assignment and License Agreement which was completed after
the end of the period) and a terminal growth rate of 15% per annum. The discount rate applied was 25%.
* Inventories
Inventories are stated at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items.
Cost is based on the weighted average principle and includes expenditure incurred in acquiring the inventories and bringing them to their
existing location and condition. In determining the allowance to be made for obsolete and slow moving items, the Group makes assumptions as
to future inventory usage based on forecast sales.
* Share based payment transactions
The grant date fair value of equity settled options granted to employees is recognised as an employee expense with a corresponding
increase in equity, over the period in which the employees become unconditionally entitled to the options. The fair value of the options
granted is measured using an option valuation model, taking into account the terms and conditions upon which the options were granted. The
amount recognised as an expense is adjusted to reflect the actual number of share options that vest except where the forfeiture is due only
to share prices not achieving the threshold for vesting.
The Group and Company took advantage of the option available in IFRS 1 to apply IFRS 2 only to equity instruments that were granted
after 7 November 2002 and that had not vested by 1 January 2006.
Where the Company grants options over its own shares to the employees of its subsidiaries it recognises, in its financial statements, an
increase in the cost of investment in its subsidiaries equivalent to the equity-settled share-based payment charge recognised in its
consolidated financial statements with the corresponding credit being recognised directly in equity. Development, sales and marketing and
administration expenses includes a charge of £272,000 (2007: £260,000) in respect of share based payments to employees.
* Key sources of estimation uncertainty
The preparation of Oxonica's financial statements, in accordance with IAS 1, Presentation of Financial Statements, requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosure
of contingent assets and liabilities at the date of Oxonica's financial statements. Oxonica's estimates and judgements are continually
evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances.
Oxonica makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the
related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts
of assets and liabilities within the next financial year are discussed below.
(i) Capitalisation of intangibles
On acquisition of Nanoplex Technologies Inc an external valuation of the intangible assets purchased was carried out under IFRS 3 and
IAS 39, a valuation of £3.2M and an estimated useful life of 15 years were derived. The useful life was estimated based on discussions
regarding the likely commercial lifespan of the assets and is therefore subject to change.
(ii) Impairment reviews
Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units to which goodwill has
been allocated. The value in use calculation requires an estimate of the future cash flows expected to arise from the cash generating unit
and a suitable discount rate in order to calculate present value.
(iii) Provisions for receivables
The risk of uncollectability of accounts receivable is primarily estimated based on prior experience with, and the past due status of,
doubtful debtors, while large accounts are assessed individually based on factors that include ability to pay, bankruptcy and payment
history. In addition, debtors in certain countries are subject to a higher collectability risk, which is taken into account when assessing
the overall risk of uncollectability. Should the outcome differ from the assumptions and estimates, revisions to the estimated valuation
allowances would be required.
4. Segment reporting
A segment is a distinguishable component of the Group that is engaged either in providing related products or services (business
segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks
and returns that are different from those of other segments. Segment information is presented in respect of the Group's business and
geographical segments. The Group's primary format for segment reporting is based on business segments. The business segments are determined
based on the Group's management and internal reporting structure. Inter-segment pricing is determined on an arm's length basis.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a
reasonable basis. Unallocated items comprise mainly investments and related revenue, loans and borrowings and related expenses, corporate
assets and head office expenses, and income tax assets and liabilities.
Primary
For management purposes the Group is currently organised into four different operating businesses.
Revenue 30 June 30 June 2007 31 December 2007
2008 Unaudited Audited
Unaudite £'000 £'000
d
£'000
Energy 532 2,411 2,763
Materials 41 264 361
Security 490 332 739
Diagnostics 446 94 311
Group - - -
Total 1,509 3,101 4,174
Operating profit/(loss) before tax 30 June 30 June 2007 31 December 2007
2008 Unaudited Audited
Unaudite £'000 £'000
d
£'000
Energy (816) 536 406
Materials (1,020) (1,658) (2,908)
Security 135 (542) (456)
Diagnostics (1,204) (723) (1,368)
Group and unallocated costs (4,119) (692) (1,265)
Total (7,024) (3,079) (5,591)
Total Assets 30 June 30 June 2007 31December 2007
2008 Unaudited Audited
Unaudited £'000 £'000
£'000
Energy 723 1,737 792
Materials 522 448 715
Security 54 247 127
Diagnostics 850 496 379
Group and unallocated assets 12,767 15,785 17,630
Total 14,916 18,713 19,643
Total Liabilities 30 June 30 June 2007 31December 2007
2008 Unaudited Audited
Unaudited £'000 £'000
£'000
Energy 1,032 1,040 469
Materials 762 1,197 864
Security 190 66 72
Diagnostics 415 292 215
Group and unallocated 1,383 223 234
liabilities
Total 3,782 2,818 1,854
Secondary
The Group sales are managed into four regions.
Revenue by geographical market 30 June 30 June 2007 31December 2007
2008 Unaudited Audited
Unaudited £'000 £'000
£'000
UK 284 968 832
Europe 284 1,255 2,079
USA 936 420 1,050
Rest of world 5 458 213
Total 1,509 3,101 4,174
Revenue by geographical origin 30 June 30 June 2007 31December 2007
2008 Unaudited Audited
Unaudited £'000 £'000
£'000
UK 573 2,681 3,124
USA 936 420 1,050
Total 1,509 3,101 4,174
Total Assets by geographical 30 June 30 June 2007 31December 2007
origin 2008 Unaudited Audited
Unaudited £'000 £'000
£'000
UK 13,968 17,922 19,094
USA 904 743 506
Rest of world 44 48 43
Total 14,916 18,713 19,643
Total Liabilities by 30 June 30 June 2007 31December 2007
geographical origin 2008 Unaudited Audited
Unaudited £'000 £'000
£'000
UK 3,160 2,450 1,549
USA 605 358 287
Rest of world 17 10 18
Total 3,782 2,818 1,854
Capital expenditure 30 June 30 June 2007 31December 2007
2008 Unaudited Audited
Unaudited £'000 £'000
£'000
UK 14 48 114
USA 84 63 215
Rest of world - - -
Total 98 111 329
Depreciation and amortisation 30 June 30 June 2007 31December 2007
2008 Unaudited Audited
Unaudited £'000 £'000
£'000
UK 218 241 518
USA 49 33 70
Rest of world - - 8
Total 267 274 596
5. Intangible amortisation and exceptional items
Six months to 30 Six months to 30 Year to
June 2008 Unaudited June 2007 Unaudited 31
December
2007
Audited
£'000 £'000 £'000
Intangible amortisation 106 109 226
Write-off of Neuftec patent
licence terminated on 26 - 135 135
February 2007
Provision for potential award
of legal costs to Neuftec
following High Court judgment
against Oxonica Energy 550 - -
656 244 361
The provision for legal costs to Neuftec of £550,000 has been included on the Balance Sheet within Provisions as at 30 June 2008.
6. Loss per ordinary share
Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of ordinary
shares in issue during each period. Options over 3,253,541 ordinary shares (2007:4,864,780) are not included in the calculation of diluted
loss per share as their effect is anti-dilutive.
30 June 30 June 2007 31 December 2007
2008 Unaudited Audited
Unaudite
d
£'000 £'000 £'000
Basic and diluted loss for the
period attributable to ordinary
shareholders (7,042) (3,080) (2,412)
No. No. No.
Weighted average number of
ordinary shares
65,525, 45,176,067 41,773,796
214
Loss per share - basic and diluted (10.75)p (6.82)p (5.77)p
7. Reconciliation of movements in equity
Share
Share premiu Merger reserve Exchange Shares to Retained
capit m reserve be issued earnings
al accoun Total
t
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2008 654 26,303 9,953 88 - (19,209) 17,789
Total recognised income and
expense - - - - - (6,932) (6,932)
Revaluation of foreign assets
- - - 4 - - 4
Equity-settled share based
payment transactions - - - - - 272 272
Issue of Shares 1 - - - - - 1
At 30 June 2008 655 26,303 9,953 92 - (25,869) 11,134
Share
Share premiu Merger reserve Exchange Shares to Retained
capit m reserve be issued earnings
al accoun Total
t
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2007 428 18,971 9,953 71 4,225 (14,998) 18,650
Total recognised income and
expense - - - (22) - (5,439) (5,461)
Revaluation of foreign assets
- - - 28 - - 28
Equity-settled share based
payment transactions - - - 11 - 514 525
Issue of shares 226 7,332 - - (4,225) 714 4,047
At 31 December 2007 654 26,303 9,953 88 - (19,209) 17,789
The gain of £714,000 in 2007 arising on the settlement of the deferred consideration for Nanoplex results from the fact that the fixed
number of shares to be issued were actually issued at a lower share price than the price ruling at the date the acquisition was completed.
8. Principal Exchange Rates
30 June 30 June 2007 31December 2007
2008 Unaudited Audited
Unaudited
Average for the period
Euro 1.2850 1.4810 1.4567
United States Dollar 1.9854 1.9800 2.0144
Period end
Euro 1.2630 1.4705 1.3615
United States Dollar 1.9931 1.9767 1.9906
9. Interest bearing loans and borrowings
On 23 April 2008, the Company entered into a £3.0 million secured Discounted Notes facility (the "Facility") with BlueCrest Capital
Finance, L.P. ("BlueCrest Capital Finance"), secured by a fixed and floating charge on the assets of the Group.
The first tranche of discounted notes (the "First Tranche") with a total value of £1.5 million was issued at closing of the Facility and
the remaining notes can be issued in a second tranche (the "Second Tranche") on or after 1 September 2008 conditional upon the achievement
of certain milestones agreed with BlueCrest Capital Finance. The First Tranche notes were issued at a discount to their nominal value
equivalent to an interest rate of 14 per cent per annum and are repayable over 36 months. In addition, the Company has issued warrants to
BlueCrest Capital Finance to subscribe for 569,801 shares in Oxonica at 35.1p per share, exercisable at any time up to 23 April 2018.
Warrants for a further £100,000 worth of Oxonica shares will be granted on issue of the Second Tranche notes at the average price per share
for the 5 days prior to issue.
The fair value of the warrants issued with the First Tranche notes is £108,000 and the debt component of £1,392,000 has been included on
the balance sheet within Interest Bearing Loans and Borrowings.
10. Safe Harbour
Our interim statement contains certain statements, statistics and projections that are or may be forward-looking. The accuracy and
completeness of all such statements, including, without limitation, statements regarding the future financial position, strategy, projected
costs, plans and objectives for the management of future operations of the Company and its subsidiaries is not warranted or guaranteed.
These statements typically contain words such as "intends", "expects", "anticipates", "estimates" and words of similar import. By their
nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in
the future. Although the Company believes that the expectations reflected in such statements are reasonable, no assurance can be given that
such expectations will prove to be correct. There are a number of factors, which may be beyond the control of the Company, which could cause
actual results and developments to differ materially from those expressed or implied by such forward-looking statements. Other than as required by applicable law or the applicable rules of any
exchange on which our securities may be listed, the Company has no intention or obligation to update forward-looking statements contained
herein.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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