TIDMOXN
RNS Number : 3398P
Oxonica plc
24 March 2009
24 March 2009
Oxonica plc
Preliminary results for the year ended 31 December 2008
Oxonica plc (LSE: OXN.L), a leading international nanomaterials group, today
announces preliminary results for the year ended 31 December 2008.
Highlights
* Excluding non-recurring sales to Petrol Ofisi of GBP2.1m in the prior year,
turnover was 60% higher than the previous year at GBP3.4m (2007: GBP2.1m)
* Gross profit increased by 21% to GBP2.9m (2007: GBP2.4m)
* The operating loss before intangible amortisation, goodwill impairment charges
and exceptional items reduced by 24% to GBP3.8m (2007: GBP5.0m Loss restated)
* The cash outflow before financing reduced by 62% to GBP2.2m (2007: GBP5.8m)
* Oxonica Energy (Envirox(TM)): Sales of GBP1.1m (2007: GBP2.8m) - Excluding the
non-recurring Petrol Ofisi sales in the prior year (GBP2.1m), sales increased by
60% supported by Stagecoach's fleet expansion and initial sales into the mining
sector. Strong pipeline of potential customers established following successful
re-validation trial with Stagecoach which confirmed 4.3% fuel saving after 3
months
* Oxonica Materials (Optisol(TM)): Sales of GBP61k (2007: GBP361k) - 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 more than doubled to GBP1.5m (2007: GBP0.7m) - Letter of
Intent received on 3 December 2008 for 3 purchases of anti-counterfeiting
development products totalling US$4.0m for delivery by 1 October 2009 as part of
a continuing project with an existing customer - first purchase order for
US$1.4m received prior to year end
* Oxonica Diagnostics: Sales of GBP698k (2007: GBP311k) - Assignment and License
Agreement signed with BD on 19 September 2008 - US$3.5m paid on signing the
agreement with further payments of up to US$3.5m payable on Oxonica completing
certain technical transfer milestones. In addition, Oxonica is entitled to
payments on future sales of BD products covered by the patents assigned to BD.
* High Court judgment issued in favour of Neuftec in the Envirox(TM) patent
licensing dispute - having taken legal advice, Oxonica Energy has appealed the
decision which is due to be heard by the Court of Appeal in June 2009
* A secured discounted loan notes facility agreed with BlueCrest Capital Finance
L.P. on 23 April 2008 - notes with a value of GBP1.5m were drawn down on the
same date
Commenting on today's announcement, Richard Farleigh, Chairman, said:
"The Group continues to make progress towards its objective of delivering a
financially sustainable business through commercialising Oxonica's nanomaterial
products, while controlling costs".
For further information, please contact:
Oxonica plc 01865 856 728
Kevin Matthews, Chief Executive Officer
Richard Clarke, Chief Financial Officer
Panmure Gordon
020 7459 3600
Hugh Morgan
Andrew Potts
Notes to Editors
About Oxonica plc - www.oxonica.com
Oxonica (AIM: OXN.L) is a leading nanomaterials group with products already
launched into international markets. Oxonica's mission is to focus on the
commercialisation of innovative products using its expertise in the design and
application of nanomaterials.
Lead products include:
* Envirox(TM) Fuel Borne Catalyst - a nanocatalyst improving fuel economy
and reducing emissions
* Optisol(TM) UV absorber - a photostable UV protection system designed to
optimise the performance of quality sunscreens and anti-premature aging products
The Group also generates licence and development revenue from activities in the
clinical diagnostics and security markets.
Chairman's statement
In 2008 the Oxonica Group has made significant progress towards its strategic
objectives, announced this time last year. It has increased the focus on its
Nanomaterials business, found a partner for its Diagnostics business and has
reduced the on-going cash needs of the Group. On 19 September 2008, the Group
announced a deal with BD in Diagnostics, which generated a US$4.75 million cash
inflow in 2008, with a further inflow expected in 2009. The BD deal also allowed
the Group to significantly downsize its US operations and yet still maintain a
significant ongoing interest in the business with BD making payments on any
sales of BD products covered by Oxonica's technology for the remaining lifetime
of the patents (over 15 years).
Oxonica also continued to build its Nanomaterials business with notable
successes in Energy and Security. In February 2008, the Group announced the
successful conclusion of a follow-on trial with Stagecoach, which confirmed the
performance of Envirox(TM) and verified the level of fuel savings achieved by
Stagecoach. This trial result combined with rapidly rising fuel costs, increased
environmental concerns and a marketing push in the UK led to an upsurge of
interest in Envirox(TM). Oxonica Energy now has a stronger pipeline of potential
UK customers than at any time in its history. In addition to growing sales in
the UK bus and road haulage sector, Energy has successfully targeted the mining
sector making initial sales into Russia and, shortly after the year-end, the
Company secured its first US customer in this sector.
In the US, the Security business performed very well. In April 2008, the
business received purchase orders totalling US$2.15 million for development
products for an existing customer. These products were delivered as planned by
October 2008 and on 3 December 2008 we announced the receipt of a letter of
intent for three further purchases of development products from this customer
amounting to US$4 million for delivery by October 2009. The first purchase order
under this LOI for US$ 1.4 million was also received prior to the year-end.
The Board believe that Oxonica is now well positioned with a significantly
reduced cash burn and real growth opportunities in both its Energy business and
its Security business. The continued high levels of interest in energy
efficiency and reduction of carbon dioxide emissions aligns particularly well
with Envirox(TM).
Results
In the year to 31 December 2008, after excluding non-recurring sales of GBP2.1
million to Petrol Ofisi in the previous year, turnover increased by 60% to
GBP3.4 million (2007: GBP2.1 million). However, when the sales to Petrol Ofisi,
under the contract which was terminated on 22 May 2007, are included, Group
turnover was 19% lower than in the corresponding period in 2007 (2007: GBP4.2
million).
The gross margin improved from 58% to 86% partly due to the ability to utilise
Envirox(TM) inventory (sourced from Nyacol) previously written-down as a result
of the cancellation of the Petrol Ofisi contract and partly due to a favourable
sales mix.
Research and development costs increased by 12% to GBP2.9 million (2007: GBP2.6
million) as a result of increased development effort in the US in both Security
and Diagnostics in the first half of 2008. Excluding intangible amortisation and
exceptional items, sales and marketing and administration expenses reduced by
31% to GBP4.0 million (2007: GBP5.9 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 of GBP0.55 million (2007: nil) for
Neuftec's costs associated with the Neuftec litigation and a goodwill impairment
charge of GBP5.1 million (2007: nil) in connection with Oxonica Inc, which
reflects a review of the goodwill recognising current economic conditions as
well as the impact of the agreement with BD.
The operating loss including intangible amortisation, goodwill impairment and
exceptional items was 81% higher than the previous year at GBP9.7 million (2007:
GBP5.4 million Loss restated) However, in-line with the strategic objective of
reducing the ongoing cash needs of the Group, the cash outflow before financing
reduced by 62% to GBP2.2 million (2007: GBP5.8 million). Group cash balances,
including short term deposits, at the end of the year were GBP3.6 million (2007:
GBP4.8 million).
The Board is not recommending the payment of a dividend (2007: nil).
Funding
Having successfully raised GBP4.0 million in additional equity funds in December
2007, on 23 April 2008 the Company agreed a secured discounted loan notes
facility with BlueCrest Capital Finance, L.P. GBP1.5 million has been drawn down
on this facility.
Board
As I reported in the Interim Results, Martin Hagen did not seek re-appointment
to the Board at the AGM due to an increase in his other professional
commitments. The Company announced on 6 January 2009 that it had appointed
George Elliott as a non-executive director. Mr Elliott will chair the Audit and
Nominations Committees of Oxonica and I am delighted to welcome him to the
Board.
Management and Staff
2008 was once again a challenging year for the Group's management and staff,
especially in the US, where 9 employees were lost through redundancy in the
Diagnostics business prior to the agreement with BD. The Singapore office was
also closed at the end of the year, with the loss of one employee. At the
year-end, the Group had 40 employees in total. On behalf of the Board, I would
like to express our sincere appreciation to all our employees for their
sustained efforts and continued support.
Outlook
Despite the difficult and uncertain economic conditions, the Group's activities
are generally positioned in sectors that are not exposed to the economic cycle.
The one exception is Envirox(TM) sales into the mining sector. Nevertheless, the
Board is optimistic as to the Group's ability to deliver a business that is
financially sustainable, based on continued growth in sales of Oxonica's
nanomaterial products and the effective control of costs.
R Farleigh
Chairman
Business review
Operating Review
Overview of the Business
Oxonica is an advanced materials business with two operating divisions;
Nanomaterials and Diagnostics. The Group is headquartered in Oxford (UK) and has
US operations based in Mountain View, California.
2008 was a year of significant progress for the Group, with a major reduction in
operating cash outflow. This improvement resulted from the successful execution
of the strategy set down by the Board at this time last year to find a partner
for Diagnostics, to focus on developing the Nanomaterials business and to reduce
the on-going cash needs of the Group.
Diagnostics
The Diagnostics business had made considerable progress in 2007, however, it was
recognised that in order to succeed, and in particular to develop its own
diagnostic tests, the business not only needed to develop and manufacture a
range of nanomaterial markers, but also needed to carry out extensive clinical
assay development as well as the specification, design and prototyping of
associated readers and software. It became clear that the Group did not have the
resources to continue to support the in-house development of its own diagnostic
products in addition to commercialising the Envirox(TM) business. Following the
success of the follow-on trial with Stagecoach in February 2008, the Board took
the decision to concentrate on the development of the Nanomaterials business and
the commercialisation of Envirox(TM) and on 18 April 2008 appointed Think
Panmure, a US investment bank, to advise the Group and identify potential
partners and investors for the Diagnostics business. As subsequently reported on
19 September 2008, the Group signed an Assignment and License Agreement with BD.
Under the terms of this agreement, US$ 3.5 million was received on signing and a
further US$3.5 million is receivable on completion of certain technical
milestones, of which US$1.25 million was received before the year end. Oxonica
is entitled to payments on future sales of BD products covered by the
Nanoplex(TM) patents although such sales are not expected to result in
significant revenues to the Group in 2009. As a result of the transaction
Oxonica has significantly reduced its operating expenses in this business, with
BD assuming the costs associated with prosecuting the patent portfolio, and
Oxonica effecting a reduction in headcount with the loss of 9 employees from
Mountain View. Oxonica has retained a royalty-free, exclusive license to
continue to use the technology for the benefit of its Nanomaterials business in
the fields of industrial and homeland security and to evaluate certain
opportunities in in-vivo diagnostics, agriculture and chemicals. From an
operational perspective, Diagnostics sales in 2008 increased by 124% to GBP0.7
million (2007: GBP0.3m) as a result of higher sales of nanomaterial markers to
BD. These sales are unlikely to be repeated in 2009.
Nanomaterials
Energy
The Energy business is focused on developing the market for Envirox(TM),
Oxonica's fuel borne catalyst, used in diesel fuel and which has demonstrated
improvements in fuel efficiency of 4-10%. The product has a positive impact on
customers' profitability as well as helping them to reduce their carbon
footprint.
Envirox(TM) revenues in 2008 were 59% down at GBP1.1 million (2007: GBP2.8m) due
to the loss of the non-recurring sales to Petrol Ofisi of GBP2.1 million in the
prior year. After adjusting for these non-recurring revenues, turnover increased
by 60%. The underlying improvement was a result of higher sales to Stagecoach,
driven by its fleet expansion and initial sales into Russia for mining
applications.
The announcement in February 2008 of a successful follow-on trial with
Stagecoach, which demonstrated a statistically significant fuel saving of 4.3%,
provided a secure foundation for business growth. Stagecoach renewed its
commitment to purchase Envirox(TM) on a continuing basis and extended the use of
the product to further recently acquired bus depots.
Following this success, a clear market development strategy has been defined.
Phase 1 focuses on direct sales within the UK bus and truck industry to build a
stable, sustainable base of customers; Phase 2 involves the further development
of a distributor base to develop the mining sector across international markets;
Phase 3 is to develop the European and international bus and truck market,
building out from the UK base.
UK Bus industry - this is a consolidated market estimated to be worth GBP5m per
year. 2008 saw the development of trial projects with other major UK bus groups
and the adoption by a local operator in Scotland - Henderson Travel. The
announcement of changes to the Bus Service Operator's Grant by the Secretary of
State for Transport in December with the emphasis on improvements to fuel
efficiency should provide a favourable driver for sales growth.
UK Road Transport and Public Sector fleets - a fragmented market estimated to be
worth GBP25m per year. The surge in diesel fuel prices through 2008 generated a
high degree of interest in Envirox(TM) resulting in several new product trials
and some small customer adoptions. In order to address this market more fully we
have expanded the range of options available for operators to treat their fuel
with Envirox(TM).
* Vehicle Mounted Dosing Units - these enable the operator to use Envirox(TM) in
vehicles that re-fuel at service stations as well as at depot bulk storage
tanks.
* Dispensing Bottles - this is a convenient bottled format known as the
'Envirox(TM) Driver Pack' which enables drivers or workshop staff to manually
dose with additive prior to refuelling the vehicle.
* Diesel Fuel pre-mixed with Envirox(TM) - a regional fuel distribution company,
Ford Fuel Oils Ltd - based near Bath now offers its customers in South West
England the convenience of purchasing a premium diesel fuel which has been
pre-treated with Envirox(TM) at the fuel terminal. This means transport
operators do not need to manage the purchase and dosing of additive. One local
council fleet has been purchasing this premium diesel fuel since July 2008. If
this fuel distributor supply model proves successful it can be replicated in
other regions of the UK.
International Opportunities - Oxonica is continuing to pursue selected sales
growth opportunities internationally where it is possible to form partnerships
with effective local distributors servicing a particular market suited to
Envirox(TM) usage. To date, there has been a particular focus on the mining
sector where a major Russian operator has reported a fuel saving of 7%. Shortly
after the year-end, the Company secured its first US customer in this sector.
The dual benefits of Envirox(TM) in both financial and environmental terms to
major consumers of diesel fuel provide a compelling offer even in challenging
economic times.
Licence and Patent Dispute
As previously reported Oxonica Energy is in dispute with Neuftec Limited over
the terms of a licence between the parties which was terminated in February
2007. Legal proceedings between the parties commenced in February 2007.
Following a court hearing in June 2008, judgment was issued on 5 September 2008
and it was found that royalties were payable to Neuftec Limited under the
licence agreement, while it was in force. A further hearing was held on 10
October 2008 regarding the royalty payments, payment of costs and permission to
appeal. At the hearing Oxonica Energy requested permission to appeal and this
was granted. Oxonica Energy was ordered to pay the royalties into a joint bank
account in the names of both parties' solicitors pending the outcome of the
appeal. On 17 October 2008 the royalties due of GBP394,000, which had previously
been provided for, were paid into the account. A provision of GBP550,000 for the
defendant's estimated legal costs was made at the half-year. The appeal is due
to be heard in the week commencing June 22 2009.
Materials
The sales of Optisol(TM) UV absorber have been poor. Optisol(TM) sales fell by
83% in 2008 to GBP0.06 million (2007: GBP0.4m) as a result of the poor summer
weather in the UK, a decrease in distributors' stock levels and difficulties in
winning new customers. It was recognised in the early part of 2008 that the
price point of Optisol(TM) was slowing the rate of market penetration of the
product. As a result Oxonica has been actively seeking to restructure the supply
chain in collaboration with its two partners, Umicore (manufacturer) and Croda
(distributor). We now believe that we have sufficient flexibility in the supply
chain to be more aggressive on price at high-volume accounts and we are actively
engaging the market to determine the potential for the product going forward.
Security
In the US, the Security business performed strongly with sales more than
doubling in 2008 to GBP1.5million (2007: GBP0.7m). Having booked purchase orders
totalling US$2.15 million for development products for an existing customer in
the first half of the year, shortly before the year-end, the business received a
letter of intent for three further purchases of development products from this
customer amounting to US$4 million for delivery by October 2009.
Oxonica's security business is based on Sol-ID(TM) taggants, a series of
nanoscale optical labels that generate unique, fingerprint-like signatures. In
2008 the business was able to demonstrate that the manufacture of taggants can
be appropriately scaled-up and that the price point required by the major
end-user markets is achievable. In parallel, reader technology has been
developed to enable both high throughput and hand-held applications, although
the latter requires additional effort to reduce the reader cost. The business is
now in a position to begin to actively market the benefits of its products, with
a particular focus on providing anti-counterfeiting solutions involving
Sol-ID(TM) particles in coloured inks and clear lacquers. The accessible market
for Oxonica's Security products is estimated to be worth approximately US$200
million per annum. The Sol-ID(TM) anti-counterfeiting products were formally
introduced at the Tax Stamp Forum in Budapest in February 2009.
Summary
As a result of the agreement with BD on Diagnostics, Oxonica now has a much more
focused business and a considerably reduced cash burn going forward. At the same
time the potential remains for significant revenues in the future resulting from
the sales of BD products based on the technology transferred under the
agreement.
The management team is now able to concentrate on driving forward the
commercialisation of Envirox(TM), which has developed an increasingly robust and
broad based range of trial and test data and has an expanded pipeline of
potential customers. The business is very much in the cleantech or greentech
space with demonstrated fuel savings of 4-10%. Envirox(TM) is well positioned to
take advantage of the increasing focus from government, businesses and
individuals on reducing fuel use and minimising carbon footprint.
The Security business is continuing to perform well and in 2009 the management
team based in the US will focus on launching Sol-ID(TM) products more broadly to
the security market.
Dr K R K Matthews
Chief Executive Officer
Financial review
Analysis of results
Group turnover for the year was lower than the previous year at GBP3.4 million
(2007: GBP4.2 million), however this reduction was mainly due to the
non-recurring Petrol Ofisi contract sales in the prior year. Excluding Petrol
Ofisi sales (GBP2.1 million), Group revenue in fact grew by 60% over the prior
year, with all the businesses apart from Optisol(TM) demonstrating sales growth.
Gross profit increased to GBP2.9 million (2007: GBP2.4 million) despite the
sales shortfall, partly as a result of a stronger sales mix but also due to the
use of Envirox(TM) inventory written-down in the prior year.
The Group has continued to reduce its cash operating expenses. After excluding
depreciation, amortisation, goodwill impairment, share based payment charges and
the provision for Neuftec's legal fees, operating expenses reduced by 18% to
GBP6.4 million (2007: GBP7.8 million restated). A significant reduction in
overhead costs was achieved in the second half of the year following the
strategic deal with BD on the Diagnostics business.
Other operating income reduced to GBP0.25 million (2007: GBP1.0 million) due to
the contract termination settlement with Petrol Ofisi which was included in the
prior year figure.
The reduction in net financial income for the year to GBP15,000 (2007:
GBP150,000) results from the interest cost of the secured discounted loan notes
facility with BlueCrest Capital Finance, L.P., which was drawn down in the first
half of the year. The average interest rates on deposits also declined during
the year.
Cash and cash equivalents stood at GBP3.6 million at the year-end (2007: GBP4.8
million). Over the year, cash decreased by GBP1.2 million (2007: GBP2.0
million), driven by an outflow from operations of GBP1.9 million (2007: GBP5.5
million), an outflow of GBP0.3 million from investing activities (2007: GBP0.3
million) and a net cash inflow from financing of GBP1.0 million (2007: GBP3.8
million), which included the drawdown of GBP1.5 million under the BlueCrest
discounted notes facility.
Assignment and License Agreement
On 19 September 2008, the Group signed an Assignment and License Agreement with
BD. Under the terms of this agreement, US$3.5 million was received on signing
for the transfer to BD of the patents covering Oxonica's Nanoplex(TM)
technology, related know-how and the Nanoplex(TM) trademark. A further US$3.5
million is receivable on completion of certain technical milestones, of which
US$1.25 million was received before the year end. BD will continue to make
payments to Oxonica on sales of BD products covered by the Nanoplex(TM) patents,
although at a rate lower than in the original license agreement entered into in
August 2006. In view of the fact that Oxonica expects to receive payments in the
future from BD in respect of sales of diagnostics products and has certain
rights regarding opportunities in in-vivo diagnostics, the Group does not
consider diagnostics to constitute a discontinued business and has therefore not
accounted for it as such in these financial statements. The Group regards the
cash payments receivable under the agreement as offsetting the agreed reduction
in rate at which payments will be made on future sales of products covered by
the Nanoplex(TM) patents. Accordingly, the cash payments are being accounted for
as deferred revenue and will be released to the Income Statement over the
projected life of the agreement which is estimated at 15 years. In the year to
31 December 2008 cash payments of $4.75 million were received of which $88,000
was recognised in the Income Statement and the balance of $4.66 million has been
carried forward on the Balance Sheet as deferred income.
Goodwill impairment
During the year a provision for goodwill impairment of GBP5.1 million was made
in respect of Oxonica Inc, of which GBP3.28 million was booked at the half-year,
in June 2008. Impairment reviews were performed in September 2008 and again in
March 2009 and involved reviewing the cash projections for Oxonica Inc through
to 2017, including the anticipated impact of the BD Assignment and License
Agreement. A discount rate of 25% was used in both reviews. The basis for the
increase in the provision of GBP1.82 million at the year end is the more
cautious view being taken of the likely future growth rate in revenues in the US
business in light of the worldwide economic downturn.
Taxation
There is a tax charge in 2008 of GBP186,000 (2007: tax credit of GBP2,000). This
tax charge arose principally in the US following the restructuring of the US
operations to facilitate the Assignment and License Agreement with BD. The Group
has substantial tax losses available in the UK for carry forward against future
profits.
Financing
On 20 December 2007, the Group completed a successful placing of ordinary
shares, which raised GBP4.0 million, net of expenses. In addition to providing
working capital, the funds raised allowed the Group to increase investment in
the marketing activity for Envirox(TM) and to explore the strategic options to
best support the development of the Oxonica Diagnostics business.
On 23 April 2008, the Company entered into a GBP3.0 million secured discounted
loan notes facility with BlueCrest Capital Finance, L.P., secured by a fixed and
floating charge on the assets of the Group. Discounted loan notes with a total
value of GBP1.5 million were drawn down immediately on agreeing the facility and
the remaining notes were issuable in a second tranche on or after 1 September
2008 conditional upon the achievement of certain milestones agreed with
BlueCrest Capital Finance. These milestones were not met and the second tranche
will not therefore be drawn down. The first tranche notes were issued at a
discount to their nominal value equivalent to an interest rate of 14% 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. The fair value of the
warrants issued with the first tranche notes is GBP108,000 and the debt
component of GBP1,392,000 has been included on the balance sheet within Interest
Bearing Loans and Borrowings.
At the year end, 100% of Group borrowings were at fixed interest rates (2007:
0%). The ageing profile at the year end showed that 46% of debt is due to mature
within one year (2007: 77%) and the remaining 54% is due to mature in between
one and five years(2007: 23%).
Currency
The Group has both translational and transactional currency exposures.
Translational exposures arise on the translation of overseas results into
sterling. Transactional exposures arise where the currency of sale or purchase
invoices differs from the functional currency in which each company prepares its
local accounts. The transactional exposures include situations where foreign
currency denominated trade debtor, trade creditor and cash balances are held.
The largest transactional and translational exposures are to the US
dollar. Translational currency exposures are not hedged. However, transactional
currency exposures will be hedged to the extent that they become sufficiently
material.
Accounting standards and policies
This annual report complies with all Adopted IFRSs applicable to financial
statements at 31 December 2008. Oxonica's accounting policies are set out on
pages 13 to 18 and are consistent with previous years.
R J G Clarke
Chief Financial Officer
Consolidated income statement
for the year ended 31 December 2008
+----------------------+------+--------------+--------------+----------+--------------+--------------+----------+
| Note | 2008 | 2007 |
+----------------------+------------------------------------+----------------------------------------+
| | | Before | Intangible | Total | Before | Intangible | Total |
| | | intangible | amortisation | | intangible | amortisation | Restated |
| | | amortisation | and | | amortisation | and | |
| | | and | exceptional | | and | exceptional | |
| | | exceptional | items | | exceptional | items | |
| | | items | (Note 4) | | items | (Note 4) | |
| | | | | | Restated | Restated | |
+----------------------+------+--------------+--------------+----------+--------------+--------------+----------+
| | | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------+------+--------------+--------------+----------+--------------+--------------+----------+
| | | | | | | | |
+----------------------+------+--------------+--------------+----------+--------------+--------------+----------+
| Revenue from | 1,2 | 3,388 | - | 3,388 | 4,174 | - | 4,174 |
| Continuing | | | | | | | |
| activities | | | | | | | |
+----------------------+------+--------------+--------------+----------+--------------+--------------+----------+
| | | | | | | | |
+----------------------+------+--------------+--------------+----------+--------------+--------------+----------+
| Cost of sales | | (471) | - | (471) | (1,763) | - | (1,763) |
+----------------------+------+--------------+--------------+----------+--------------+--------------+----------+
| | | | | | | | |
+----------------------+------+--------------+--------------+----------+--------------+--------------+----------+
| Gross profit | | 2,917 | - | 2,917 | 2,411 | - | 2,411 |
+----------------------+------+--------------+--------------+----------+--------------+--------------+----------+
| | | | | | | | |
+----------------------+------+--------------+--------------+----------+--------------+--------------+----------+
| Other operating | 3 | 245 | - | 245 | 1,032 | - | 1,032 |
| income | | | | | | | |
+----------------------+------+--------------+--------------+----------+--------------+--------------+----------+
| Administration | | (2,918) | - | (2,918) | (2,599) | - | (2,599) |
| Expense - Research | | | | | | | |
| and development | | | | | | | |
+----------------------+------+--------------+--------------+----------+--------------+--------------+----------+
| Administration | 4 | (4,045) | (753) | (4,798) | (5,877) | (321) | (6,198) |
| Expense - Sales, | | | | | | | |
| marketing and other | | | | | | | |
+----------------------+------+--------------+--------------+----------+--------------+--------------+----------+
| Goodwill impairment | 10 | - | (5,130) | (5,130) | - | - | - |
+----------------------+------+--------------+--------------+----------+--------------+--------------+----------+
| | | | | | | | |
+----------------------+------+--------------+--------------+----------+--------------+--------------+----------+
| Operating loss | 2 | (3,801) | (5,883) | (9,684) | (5,033) | (321) | (5,354) |
+----------------------+------+--------------+--------------+----------+--------------+--------------+----------+
| | | | | | | | |
+----------------------+------+--------------+--------------+----------+--------------+--------------+----------+
| Financial income | 7 | 166 | - | 166 | 186 | - | 186 |
+----------------------+------+--------------+--------------+----------+--------------+--------------+----------+
| Financial expense | 7 | (151) | - | (151) | (36) | - | (36) |
+----------------------+------+--------------+--------------+----------+--------------+--------------+----------+
| | | | | | | | |
+----------------------+------+--------------+--------------+----------+--------------+--------------+----------+
| Net financial income | | 15 | - | 15 | 150 | - | 150 |
+----------------------+------+--------------+--------------+----------+--------------+--------------+----------+
| | | | | | | | |
+----------------------+------+--------------+--------------+----------+--------------+--------------+----------+
| Loss before tax | | (3,786) | (5,883) | (9,669) | (4,883) | (321) | (5,204) |
+----------------------+------+--------------+--------------+----------+--------------+--------------+----------+
| Taxation | 8 | (186) | - | (186) | 2 | - | 2 |
+----------------------+------+--------------+--------------+----------+--------------+--------------+----------+
| | | | | | | | |
+----------------------+------+--------------+--------------+----------+--------------+--------------+----------+
| Loss for the year | 23 | (3,972) | (5,883) | (9,855) | (4,881) | (321) | (5,202) |
| attributable to | | | | | | | |
| equity | | | | | | | |
| holders of the | | | | | | | |
| parent | | | | | | | |
+----------------------+------+--------------+--------------+----------+--------------+--------------+----------+
| | | | | | | | |
+----------------------+------+--------------+--------------+----------+--------------+--------------+----------+
| Basic and diluted | 24 | | | (15.04)p | | | (11.10)p |
| loss per share | | | | | | | |
+----------------------+------+--------------+--------------+----------+--------------+--------------+----------+
Statements of recognised income and expense
for the year ended 31 December 2008
+-------------------------------------------+----------+---------+----------+----------+
| | 2008 | 2008 | 2007 | 2007 |
+-------------------------------------------+----------+---------+----------+----------+
| | Group | Company | Group | Company |
| | | | Restated | Restated |
+-------------------------------------------+----------+---------+----------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-------------------------------------------+----------+---------+----------+----------+
| | | | | |
+-------------------------------------------+----------+---------+----------+----------+
| Fair value of equity component of new | 108 | 108 | - | - |
| debt | | | | |
+-------------------------------------------+----------+---------+----------+----------+
| Exchange differences on translation of | 1,548 | - | (175) | - |
| foreign operations | | | | |
+-------------------------------------------+----------+---------+----------+----------+
| | | | | |
+-------------------------------------------+----------+---------+----------+----------+
| | 1,656 | 108 | (175) | - |
+-------------------------------------------+----------+---------+----------+----------+
| Loss for the year | (9,855) | (9,551) | (5,202) | (848) |
+-------------------------------------------+----------+---------+----------+----------+
| | | | | |
+-------------------------------------------+----------+---------+----------+----------+
| Total recognised income and expense for | (8,199) | (9,443) | (5,377) | (848) |
| the period attributable to equity holders | | | | |
| of the parent | | | | |
+-------------------------------------------+----------+---------+----------+----------+
| Total recognised income and expense | - | - | (5,422) | (987) |
| for the period attributable to equity | | | | |
| holders of the parent (as previously | | | | |
| reported) | | | | |
+-------------------------------------------+----------+---------+----------+----------+
Balance sheets
at 31 December 2008
+-------------------------------------+------+----------+---------+----------+----------+
| |Note | 2008 | 2008 | 2007 | 2007 |
+-------------------------------------+------+----------+---------+----------+----------+
| | | Group | Company | Group | Company |
| | | | | Restated | Restated |
+-------------------------------------+------+----------+---------+----------+----------+
| | | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-------------------------------------+------+----------+---------+----------+----------+
| ASSETS | | | | | |
+-------------------------------------+------+----------+---------+----------+----------+
| Non current assets | | | | | |
+-------------------------------------+------+----------+---------+----------+----------+
| Intangible assets | 10 | 9,235 | - | 11,488 | - |
+-------------------------------------+------+----------+---------+----------+----------+
| Investments in subsidiaries | 10 | - | 9,763 | - | 14,836 |
+-------------------------------------+------+----------+---------+----------+----------+
| Property, plant and equipment | 11 | 842 | - | 671 | - |
+-------------------------------------+------+----------+---------+----------+----------+
| | | | | | |
+-------------------------------------+------+----------+---------+----------+----------+
| Total non current assets | | 10,077 | 9,763 | 12,159 | 14,836 |
+-------------------------------------+------+----------+---------+----------+----------+
| | | | | | |
+-------------------------------------+------+----------+---------+----------+----------+
| Current assets | | | | | |
+-------------------------------------+------+----------+---------+----------+----------+
| Inventories | 12 | 187 | - | 321 | - |
+-------------------------------------+------+----------+---------+----------+----------+
| Tax receivable | | 50 | - | 79 | - |
+-------------------------------------+------+----------+---------+----------+----------+
| Trade and other receivables | 13 | 921 | 5,709 | 623 | 7,527 |
+-------------------------------------+------+----------+---------+----------+----------+
| Cash and cash equivalents | | 3,597 | 2,983 | 4,811 | 4,432 |
+-------------------------------------+------+----------+---------+----------+----------+
| | | | | | |
+-------------------------------------+------+----------+---------+----------+----------+
| Total current assets | | 4,755 | 8,692 | 5,834 | 11,959 |
+-------------------------------------+------+----------+---------+----------+----------+
| | | | | | |
+-------------------------------------+------+----------+---------+----------+----------+
| TOTAL ASSETS | | 14,832 | 18,455 | 17,993 | 26,795 |
+-------------------------------------+------+----------+---------+----------+----------+
| | | | | | |
+-------------------------------------+------+----------+---------+----------+----------+
| EQUITY | | | | | |
+-------------------------------------+------+----------+---------+----------+----------+
| Issued share capital | 20 | 655 | 655 | 654 | 654 |
+-------------------------------------+------+----------+---------+----------+----------+
| Share premium | 23 | 26,310 | 26,310 | 26,303 | 26,303 |
+-------------------------------------+------+----------+---------+----------+----------+
| Exchange reserve | 23 | (66) | - | (1,614) | - |
+-------------------------------------+------+----------+---------+----------+----------+
| Other reserves | 23 | 9,953 | - | 9,953 | - |
+-------------------------------------+------+----------+---------+----------+----------+
| Retained earnings | 23 | (28,668) | (9,737) | (19,157) | (379) |
+-------------------------------------+------+----------+---------+----------+----------+
| | | | | | |
+-------------------------------------+------+----------+---------+----------+----------+
| Total equity attributable to the | 23 | 8,184 | 17,228 | 16,139 | 26,578 |
| shareholders of the parent | | | | | |
+-------------------------------------+------+----------+---------+----------+----------+
| | | | | | |
+-------------------------------------+------+----------+---------+----------+----------+
| LIABILITIES | | | | | |
+-------------------------------------+------+----------+---------+----------+----------+
| Current liabilities | | | | | |
+-------------------------------------+------+----------+---------+----------+----------+
| Interest bearing loans and | 16 | 552 | 552 | 163 | 151 |
| borrowings | | | | | |
+-------------------------------------+------+----------+---------+----------+----------+
| Trade and other payables | 14 | 4,898 | 27 | 1,610 | 28 |
+-------------------------------------+------+----------+---------+----------+----------+
| Provisions | 15 | 550 | - | - | - |
+-------------------------------------+------+----------+---------+----------+----------+
| | | | | | |
+-------------------------------------+------+----------+---------+----------+----------+
| Total current liabilities | | 6,000 | 579 | 1,773 | 179 |
+-------------------------------------+------+----------+---------+----------+----------+
| | | | | | |
+-------------------------------------+------+----------+---------+----------+----------+
| Non current liabilities | | | | | |
+-------------------------------------+------+----------+---------+----------+----------+
| Interest bearing loans and | 16 | 648 | 648 | 81 | 38 |
| borrowings | | | | | |
+-------------------------------------+------+----------+---------+----------+----------+
| | | | | | |
+-------------------------------------+------+----------+---------+----------+----------+
| Total non current liabilities | | 648 | 648 | 81 | 38 |
+-------------------------------------+------+----------+---------+----------+----------+
| | | | | | |
+-------------------------------------+------+----------+---------+----------+----------+
| Total liabilities | | 6,648 | 1,227 | 1,854 | 217 |
+-------------------------------------+------+----------+---------+----------+----------+
| | | | | | |
+-------------------------------------+------+----------+---------+----------+----------+
| TOTAL EQUITY AND LIABILITIES | | 14,832 | 18,455 | 17,993 | 26,795 |
| | | | | | |
+-------------------------------------+------+----------+---------+----------+----------+
| | | | | | |
+-------------------------------------+------+----------+---------+----------+----------+
Cash flow statements
for the year ended 31 December 2008
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| | | 2008 | 2008 | 2007 | 2007 |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| | | Group | Company | Group | Company |
| | | | | Restated | Restated |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| | | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| | | | | | |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| Cash flows from operating activities | | | | | |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| Loss before tax | | (9,669) | (9,551) | (5,204) | (848) |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| Adjustments for: | | | | | |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| Depreciation, amortisation, impairment and | | | | | |
| loss on disposal | | 4,344 | 5,180 | 704 | - |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| Foreign exchange (gains)/losses | | (262) | - | - | 39 |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| Equity settled share-based payment expenses | | 236 | 85 | 317 | 113 |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| Financial income and expense | | (15) | (8) | (150) | (145) |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| | | | | | |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| Operating cash flow before changes in working | | | | | |
| capital, interest and taxes | | (5,366) | (4,294) | (4,333) | (841) |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| | | | | | |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| (Increase)/decrease in trade and other | | (298) | 2,252 | 71 | 118 |
| receivables | | | | | |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| Decrease in inventories | | 134 | - | 156 | - |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| Increase/(decrease) in trade and other | | | | | |
| payables | | 3,103 | (1) | (1,591) | (30) |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| Increase in provisions | | 550 | - | - | - |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| | | | | | |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| Cash utilised in operations | | (1,877) | (2,043) | (5,697) | (753) |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| Interest received | | 166 | 155 | 186 | - |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| Interest paid | | (151) | (147) | (36) | (20) |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| Tax received | | 29 | - | 76 | - |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| | | | | | |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| Net cash outflow from operating activities | | (1,833) | (2,035) | (5,471) | (773) |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| | | | | | |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| Cash flows from investing activities | | | | | |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| Capital expenditure | | (344) | - | (324) | - |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| | | | | | |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| Net cash used in investing activities | | (344) | - | (324) | - |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| | | | | | |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| Free cash flow | | (2,177) | (2,035) | (5,795) | (773) |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| | | | | | |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| Cash flows from financing activities | | | | | |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| Proceeds from the issue of share capital | | 8 | 8 | 4,047 | 4,047 |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| New bank loans | | 1,500 | 1,500 | - | - |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| Inter-company loans | | - | (434) | - | (4,953) |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| Repayment of bank loans | | (545) | (488) | (269) | (136) |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| | | | | | |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| Net cash from/(used in) financing activities | | 963 | 586 | 3,778 | (1,042) |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| | | | | | |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| Net decrease in cash and cash equivalents | | (1,214) | (1,449) | (2,017) | (1,815) |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| Cash and cash equivalents at 1 January | | 4,811 | 4,432 | 6,836 | 6,247 |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| Effect of exchange rate fluctuations on cash | | | | | |
| held | | - | - | (8) | - |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| | | | | | |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| Cash and cash equivalents at 31 December | | 3,597 | 2,983 | 4,811 | 4,432 |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
| | | | | | |
+-----------------------------------------------+--------+------------+------------+--------------+------------+
Notes to the financial statements
(forming part of the financial statements)
1Accounting policies
Oxonica plc (the "Company") is a company domiciled in the UK. The
consolidated financial statements as at, and for, the year ended 31 December
2008 comprise the Company and its subsidiaries (together referred to as the
"Group"). The Parent Company financial statements present information about the
Company as a separate entity and not about its group. Both the Parent Company
financial statements and the group financial statements have been prepared and
approved by the directors in accordance with International Financial Reporting
Standards as adopted by the EU ("Adopted IFRSs").
The accounting policies set out below have, unless otherwise stated, been
applied consistently to all periods presented in these financial statements. In
publishing the Parent Company financial statements here, together with Group
financial statements, the Company is taking advantage of the exemption in s230
of the Companies Act 1985 not to present its individual income statement and
related notes that form a part of these approved financial statements.
The Group has made prior period adjustments in relation to two items. Firstly,
to correct the share-based payments charges and secondly to correct the foreign
exchange on the retranslation of the goodwill and intangibles in accordance with
IAS 21 (see notes 10 and 21 respectively for further details). The result of
these adjustments was to decrease the 2007 net assets by GBP1,650,000 and reduce
the 2007 net loss in the income statement profit by GBP237,000.
The Parent Company has also had a prior period adjustment for the share-based
payment charges attributable to its own employees and the reimbursement from its
subsidiaries for share based payment charges relating to their own
employees (see note 21 for further details). This reimbursement is accounted for
in line with IFRS 2 which results in the recharge being treated as a capital
contribution to the subsidiary. This resulted in a decrease in the 2007 net loss
in the income statement of GBP136,000 and had no net impact on the 2007 net
assets.
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 December 2008 or 2007. Statutory
accounts for 2007, which were prepared under IFRS, have been delivered to the
registrar of companies. The auditors have reported on the 2007 accounts; their
report was (i) unqualified, (ii) did include a reference to matters to which the
auditors drew attention by way of emphasis without qualifying their report, in
relation to going concern and (iii) did not contain a statement under section
237(2) or (3) of the Companies Act 1985.
The statutory accounts for 2008, which are being prepared under accounting
standards adopted by the EU will be finalised on the basis of the financial
information presented by the directors in this preliminary announcement and will
be delivered to the registrar of companies in due course. We understand that the
audit report in the financial statements will be modified to include an emphasis
of matter relating to the assumption that the going concern basis of preparation
is appropriate.
New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations are not
yet effective for the year ended 31 December 2008, and have not been applied in
preparing these consolidated financial statements.
IFRS 8 operating segments introduces the "management approach" to segmental
reporting. IFRS 8, which becomes mandatory for the Group's 2009 financial
statements, will require the disclosure of segment information based on the
internal reports regularly reviewed by the Group's chief operating decision
makers in order to assess each segments performance and to allocate resources to
them. Currently the Group presents segment information in respect of its
business and geographical segments (see note 2) which is broadly in line with
their internal reports. Accordingly, IFRS 8 is not expected to have a
significant effect on the financial statement disclosures.
The other new standards that are not yet effective are not expected to have a
material impact on the financial statements.
Measurement convention
The financial statements are prepared on the historical cost basis. Non-current
assets are stated at the lower of previous carrying amount and recoverable
amount.
Going concern
The financial statements are prepared on a going concern basis which the
directors believe to be appropriate. The Group meets its day to day working
capital requirements through existing cash resources and a GBP1.5m
loan which was drawn down on 23 April 2008 and is being repaid in equal monthly
installments over 36 months from the date of drawdown As at 23 March 2009, the
Group's cash resources amounted to GBP2.9 million.
The directors have prepared projected cash flow forecasts for the period ending
twelve months from the date of their approval of these financial statements. On
the basis of these cash flow forecasts 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 the High Court judgment regarding the dispute with Neuftec
Limited. That judgment concluded that Oxonica Energy was required to pay
retrospective royalties of GBP394,000 plus the defendant's costs. The royalties
had previously been accrued and were paid into a joint bank account in the names
of both parties' solicitors pending the outcome of the appeal, but the exact
extent of the defendant's 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. 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.
-Taxation that may be payable following the restructuring of certain operations
of the business. Having consulted with the Group's tax advisers, the directors
have not included any tax payments in the cash flow forecast on the basis that
there are sufficient tax losses available to shelter any possible tax charges
that may arise on the restructuring or the receipts from other related
transactions. However, the directors note that the tax losses may be subject to
restrictions as to their use and that some tax payments may have to be made.
-Revenue growth and sales to a key Security customer. The directors have assumed
revenue growth in some areas of the business and the forecast includes GBP2.6
million of sales to a Security customer based on a letter of intent and a GBP0.9
million purchase order from that customer. The directors recognise that revenues
may not grow as planned and that there are risks associated with both the timing
and the ultimate amount of the forecast sales to the Security customer.
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. However, the timing of these
decisions will have an impact on the cash flows for the twelve month period from
the date of the board's approval of these financial statements.
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. The
financial statements do not include any adjustments that would result if the
Group were unable to continue as a going concern.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and all Group subsidiaries. Subsidiaries are entities controlled by
the Group. Control exists when the Group has the power, directly or indirectly,
to govern the financial and operating policies of an entity so as to obtain
benefits from its activities. The Company's investments in shares in Group
companies are stated at cost less provision for impairment. All intercompany
balances and transactions, including unrealised profits arising from intra-group
transactions, are eliminated in preparing the consolidated financial statements.
The financial statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the date that
control ceases.
Revenue
Revenue represents the total amount receivable by the Group for goods 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.
Revenue received under assignment and license agreements is accounted for as
deferred revenue and will be released to the income statement on a straight line
basis over the estimated life of the agreement.
Expenses
Operating lease payments
Payments made under operating leases are recognised in the income statement on a
straight-line basis over the term of the lease.
Finance lease payments
Minimum lease payments are apportioned between the finance charge and the
reduction of the outstanding liability. The finance charge is allocated to each
period during the lease term so as to produce a constant periodic rate of
interest on the remaining balance of the liability.
Net financing costs
Net financing costs comprise interest payable, finance charges on finance
leases, interest receivable on funds invested and foreign exchange gains and
losses that are recognised in the income statement.
Interest income and interest payable are recognised in the income statement as
they accrue, using the effective interest method.
Employee benefits
Defined contribution plans
Obligations for contributions to defined contribution pension plans are
recognised as an expense in the income statement as incurred.
Share-based payment transactions
The grant date fair value of 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 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 individual 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.
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
year to 31 December 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.
Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax
is recognised in the income statement except to the extent that it relates to
items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantively enacted at the balance sheet date, and
any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used
for taxation purposes. The following temporary differences are not provided for:
the initial recognition of goodwill; the initial recognition of assets or
liabilities that affect neither accounting nor taxable profit other than in a
business combination, and differences relating to investments in subsidiaries to
the extent that they will probably not reverse in the foreseeable future. The
amount of deferred tax provided is based on the expected manner of realisation
or settlement of the carrying amount of assets and liabilities, using tax rates
enacted or substantively enacted at the balance sheet date.
Deferred tax assets and liabilities require management judgement in determining
the amounts to be recognised. A deferred tax asset is recognised only to the
extent that it is probable that future taxable profits will be available against
which the asset can be utilised.
Foreign currency
Transactions in foreign currencies are translated at the foreign exchange rate
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are translated at
the foreign exchange rate ruling at that date. Foreign exchange differences
arising on translation are recognised in the income statement. Non-monetary
assets and liabilities that are measured in terms of historical cost in a
foreign currency are translated using the exchange rate at the date of the
transaction. Non-monetary assets and liabilities denominated in foreign
currencies that are stated at fair value are translated at foreign exchange
rates ruling at the dates the fair value was determined.
The assets and liabilities of foreign operations, including goodwill and fair
value adjustments arising on consolidation, are translated at foreign exchange
rates ruling at the balance sheet date. The revenues and expenses of foreign
operations are translated at an average rate for the period where this rate
approximates to the foreign exchange rates ruling at the dates of the
transactions.
Exchange differences arising from this translation of foreign operations, and of
related qualifying hedges are taken directly to the translation reserve. Such
qualifying hedges consist of loans entered into to fund the net assets of
foreign operations in the same currency. They are released into the income
statement upon disposal.
Investments in subsidiary undertakings
Investments in subsidiary undertakings including long term loans are included in
the balance sheet of the Company at the lower of cost and the expected
recoverable amount. Any impairment is recognised in the income statement.
Investments are impaired when the carrying value exceeds the recoverable amount,
typically the net realisable value of the investment.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and impairment losses.
Where parts of an item of property, plant and equipment have different useful
lives, they are accounted for as separate items of property, plant and
equipment.
Leases in which the Group assumes substantially all the risks and rewards of
ownership of the leased asset are classified as finance leases. Where land and
buildings are held under leases the accounting treatment of the land is
considered separately from that of the buildings. Leased assets acquired by way
of finance lease are stated at an amount equal to the lower of their fair value
and the present value of the minimum lease payments at inception of the lease,
less accumulated depreciation and impairment losses.
Depreciation is charged to the income statement on a straight-line basis over
the estimated useful lives of each part of an item of property, plant and
equipment. The estimated useful lives are as follows:
· Short leasehold improvements Over the period of the lease
· Plant, machinery and laboratory equipment 3 years
· Fixtures, fittings and computer equipment 4 years
Intangible assets
(i) Goodwill
Goodwill arose on the acquisition of Oxonica Inc on 7 February 2006 and
represents the excess of the cost of the acquisition over the Group's interest
in the net fair value of the identifiable assets, liabilities and contingent
liabilities of Oxonica Inc.
(ii) Other intangible assets
The other intangible asset relates to the patents and technology acquired at
fair value with the acquisition of Oxonica Inc on 7 February 2006. These patents
and technology are deemed to have an estimated useful life of 15 years.
Amortisation is charged to the income statement on a straight-line basis over
the estimated useful lives of intangible assets. Goodwill is systematically
tested for impairment at each balance sheet date.
Impairment excluding inventories and deferred tax assets
The carrying amounts of the Group's assets are reviewed at each balance sheet
date to determine whether there is any indication of impairment. If any such
indication exists, the asset's recoverable amount is estimated.
For goodwill, the recoverable amount is estimated at each balance sheet date.
An impairment loss is recognised whenever the carrying amount of an asset or its
cash-generating unit exceeds its recoverable amount. Impairment losses are
recognised in the income statement.
Impairment losses recognised in respect of cash-generating units are allocated
first to reduce the carrying amount of any goodwill allocated to cash-generating
units and then to reduce the carrying amount of the other assets in the unit on
a pro rata basis. A cash generating unit is the smallest identifiable group of
assets that generates cash inflows that are largely independent of the cash
inflows from other assets or groups of assets.
Goodwill was tested for impairment as at 1 January 2006, the date of transition
to Adopted IFRSs, even though no indication of impairment existed.
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.
Trade and other receivables
Trade and other receivables are recorded at their fair value amount less an
allowance for any doubtful debts.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and short term deposits. Bank
overdrafts that are repayable on demand and form an integral part of the Group's
cash management are included as a component of cash and cash equivalents for the
purpose only of the statement of cash flows.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less
attributable transaction costs. Subsequent to initial recognition,
interest-bearing borrowings are stated at amortised cost with any difference
between cost and redemption value being recognised in the income statement over
the period of the borrowings on an effective interest basis.
Trade and other payables
Trade and other payables are stated at their fair value.
Own shares held by ESOP trust
Transactions of the Company-sponsored ESOP trust are treated as being those of
the Company and are therefore reflected in the Parent Company and Group
financial statements. In particular, the trust's purchases of shares in the
Company are debited directly to equity.
Provisions
A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation as a result of a past event, and it is probable
that an outflow of economic benefits will be required to settle the obligation.
If the effect is material, provisions are determined by discounting the
expected, risk adjusted, and future cash flows at a pre-tax risk-free rate.
Government grants
Grants that compensate the Group for expenses incurred are recognised in the
income statement on a systematic basis in the same periods in which the expenses
are recognised. Grants that compensate the Group for the cost of an asset are
deducted from the cost of the related asset. Depreciation is based on the net
carrying amount of the asset. Government grants are recognised initially as
deferred income when there is reasonable assurance that they will be received
and that the Group will comply with the conditions associated with the grant.
Intra-group financial instruments
Where the Group enters into financial guarantee contracts to guarantee the
indebtedness of other companies within its group, the company considers these to
be insurance arrangements and accounts for them as such. In this respect, the
company treats the guarantee contract as a contingent liability until such time
as it becomes probable that the company will be required to make a payment under
the guarantee.
Equity instruments
Equity instruments issued by the Group are recorded at the proceeds received,
net of direct issue costs.
Compound instruments
A compound instrument was issued by the Group in the form of a secured loan with
an option to purchase shares at a specified future date and price. The liability
component of the compound instrument was recognised at the fair value of a
similar liability that does not have the attached options. The equity component
is recognised initially at the difference between the fair value of the compound
instrument as a whole and the fair value of the liability component. Subsequent
to recognition the liability component of a compound instrument is measured at
amortised cost using the effective interest method. The equity component of the
compound instrument is not remeasured subsequent to initial recognition. The
unwinding of the discount on the liability component is accounted for as an
interest expense.
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 US$5.6 million 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.
(iv) Provision for potential award of legal costs to Neuftec
In the patent licensing dispute with Neuftec, it was found that royalties were
payable to Neuftec under the license agreement for the period it was in force
and that Oxonica Energy should pay Neuftec's appropriate legal costs. The
royalties payable were paid into a joint bank account in the names of both
parties' solicitors in 2008 and having consulted with its legal advisers, a
provision has been made for payment of Neuftec's costs. The actual costs
following their assessment by the Court may differ from the amount provided.
Having taken legal advice, Oxonica Energy has appealed the decision and this is
due to be heard by the Court of Appeal in June 2009. The dispute with Neuftec is
continuing and there is the possibility of further legal proceedings and claims.
However, at this stage, the directors do not consider that any further
provisions are required or that there are any contingent liabilities.
2 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
The Revenue reported below represents sales to third parties. There is no
intercompany trading between the businesses.
+-------------------------------+------------+------------+------------+------------+
| | | | 2008 | 2007 |
+-------------------------------+------------+------------+------------+------------+
| | | | GBP'000 | GBP'000 |
+-------------------------------+------------+------------+------------+------------+
| Revenue | | | | |
+-------------------------------+------------+------------+------------+------------+
| Energy | | | 1,139 | 2,763 |
+-------------------------------+------------+------------+------------+------------+
| Materials | | | 61 | 361 |
+-------------------------------+------------+------------+------------+------------+
| Security | | | 1,490 | 739 |
+-------------------------------+------------+------------+------------+------------+
| Diagnostics | | | 698 | 311 |
+-------------------------------+------------+------------+------------+------------+
| | | | | |
+-------------------------------+------------+------------+------------+------------+
| Total | | | 3,388 | 4,174 |
+-------------------------------+------------+------------+------------+------------+
| | | | | |
+-------------------------------+------------+------------+------------+------------+
+-------------------------------+------------+------------+------------+------------+
| | | | 2008 | 2007 |
| | | | | Restated |
+-------------------------------+------------+------------+------------+------------+
| | | | GBP'000 | GBP'000 |
+-------------------------------+------------+------------+------------+------------+
| Operating profit/(loss) | | | | |
+-------------------------------+------------+------------+------------+------------+
| Energy | | | (1,144) | 425 |
+-------------------------------+------------+------------+------------+------------+
| Materials | | | (2,570) | (2,880) |
+-------------------------------+------------+------------+------------+------------+
| Security | | | 544 | (456) |
+-------------------------------+------------+------------+------------+------------+
| Diagnostics | | | (2,119) | (1,355) |
+-------------------------------+------------+------------+------------+------------+
| Other | | | (4,395) | (1,088) |
+-------------------------------+------------+------------+------------+------------+
| | | | | |
+-------------------------------+------------+------------+------------+------------+
| Total | | | (9,684) | (5,354) |
+-------------------------------+------------+------------+------------+------------+
| | | | | |
+-------------------------------+------------+------------+------------+------------+
+-------------------------------+------------+------------+------------+------------+
| | | | 2008 | 2007 |
| | | | | Restated |
+-------------------------------+------------+------------+------------+------------+
| | | | GBP'000 | GBP'000 |
+-------------------------------+------------+------------+------------+------------+
| Total assets | | | | |
+-------------------------------+------------+------------+------------+------------+
| Energy | | | 684 | 792 |
+-------------------------------+------------+------------+------------+------------+
| Materials | | | 388 | 715 |
+-------------------------------+------------+------------+------------+------------+
| Security | | | 1,040 | 127 |
+-------------------------------+------------+------------+------------+------------+
| Diagnostics | | | 491 | 379 |
+-------------------------------+------------+------------+------------+------------+
| Other | | | 12,229 | 15,980 |
+-------------------------------+------------+------------+------------+------------+
| | | | | |
+-------------------------------+------------+------------+------------+------------+
| Total | | | 14,832 | 17,993 |
+-------------------------------+------------+------------+------------+------------+
+-------------------------------+------------+------------+------------+------------+
| | | | 2008 | 2007 |
+-------------------------------+------------+------------+------------+------------+
| | | | GBP'000 | GBP'000 |
+-------------------------------+------------+------------+------------+------------+
| Total liabilities | | | | |
+-------------------------------+------------+------------+------------+------------+
| Energy | | | 630 | 469 |
+-------------------------------+------------+------------+------------+------------+
| Materials | | | 800 | 864 |
+-------------------------------+------------+------------+------------+------------+
| Security | | | 580 | 72 |
+-------------------------------+------------+------------+------------+------------+
| Diagnostics | | | 3,411 | 215 |
+-------------------------------+------------+------------+------------+------------+
| Other | | | 1,227 | 234 |
+-------------------------------+------------+------------+------------+------------+
| | | | | |
+-------------------------------+------------+------------+------------+------------+
| Total | | | 6,648 | 1,854 |
+-------------------------------+------------+------------+------------+------------+
| | | | | |
+-------------------------------+------------+------------+------------+------------+
Secondary
The Group sales are managed into four regions
+-------------------------------+------------+------------+------------+------------+
| | | | 2008 | 2007 |
+-------------------------------+------------+------------+------------+------------+
| | | | GBP'000 | GBP'000 |
+-------------------------------+------------+------------+------------+------------+
| Revenue by geographical | | | | |
| market | | | | |
+-------------------------------+------------+------------+------------+------------+
| UK | | | 629 | 832 |
+-------------------------------+------------+------------+------------+------------+
| Europe | | | 18 | 2,079 |
+-------------------------------+------------+------------+------------+------------+
| USA | | | 2,188 | 1,050 |
+-------------------------------+------------+------------+------------+------------+
| Rest of world | | | 553 | 213 |
+-------------------------------+------------+------------+------------+------------+
| | | | | |
+-------------------------------+------------+------------+------------+------------+
| | | | 3,388 | 4,174 |
+-------------------------------+------------+------------+------------+------------+
| | | | | |
+-------------------------------+------------+------------+------------+------------+
+-------------------------------+------------+------------+------------+------------+
| | | | 2008 | 2007 |
+-------------------------------+------------+------------+------------+------------+
| | | | GBP'000 | GBP'000 |
+-------------------------------+------------+------------+------------+------------+
| Revenue by geographical | | | | |
| origin | | | | |
+-------------------------------+------------+------------+------------+------------+
| UK | | | 1,200 | 3,124 |
+-------------------------------+------------+------------+------------+------------+
| USA | | | 2,188 | 1,050 |
+-------------------------------+------------+------------+------------+------------+
| | | | | |
+-------------------------------+------------+------------+------------+------------+
| | | | 3,388 | 4,174 |
+-------------------------------+------------+------------+------------+------------+
| | | | | |
+-------------------------------+------------+------------+------------+------------+
+-------------------------------+------------+------------+------------+------------+
| | | | 2008 | 2007 |
+-------------------------------+------------+------------+------------+------------+
| | | | | Restated |
+-------------------------------+------------+------------+------------+------------+
| | | | GBP'000 | GBP'000 |
+-------------------------------+------------+------------+------------+------------+
| Total assets by geographical | | | | |
| origin | | | | |
+-------------------------------+------------+------------+------------+------------+
| UK | | | 13,264 | 17,444 |
+-------------------------------+------------+------------+------------+------------+
| USA | | | 1,531 | 506 |
+-------------------------------+------------+------------+------------+------------+
| Rest of world | | | 37 | 43 |
+-------------------------------+------------+------------+------------+------------+
| | | | | |
+-------------------------------+------------+------------+------------+------------+
| | | | 14,832 | 17,993 |
+-------------------------------+------------+------------+------------+------------+
| | | | | |
+-------------------------------+------------+------------+------------+------------+
+-------------------------------+------------+------------+------------+------------+
| | | | 2008 | 2007 |
+-------------------------------+------------+------------+------------+------------+
| | | | GBP'000 | GBP'000 |
+-------------------------------+------------+------------+------------+------------+
| Total liabilities by | | | | |
| geographical origin | | | | |
+-------------------------------+------------+------------+------------+------------+
| UK | | | 2,634 | 1,549 |
+-------------------------------+------------+------------+------------+------------+
| USA | | | 3,991 | 287 |
+-------------------------------+------------+------------+------------+------------+
| Rest of world | | | 23 | 18 |
+-------------------------------+------------+------------+------------+------------+
| | | | | |
+-------------------------------+------------+------------+------------+------------+
| | | | 6,648 | 1,854 |
+-------------------------------+------------+------------+------------+------------+
| | | | | |
+-------------------------------+------------+------------+------------+------------+
3. Other operating income
Other operating income comprises grant income received of GBP177,806 (2007:
250,177), rental income and the contract termination settlement with Petrol
Ofisi in 2007.
4. Intangible amortisation and exceptional items
The following items have been described as "exceptional" as they are significant
by size and/or nature and are expected to be non-recurring.
+---------------------------------------+----------------+----------+------------+
| | 2008 | 2007 |
| | | Restated |
+--------------------------------------------------------+----------+------------+
| | | GBP'000 | GBP'000 |
+---------------------------------------+----------------+----------+------------+
| Intangible amortisation (note 10) | | 203 | 186 |
+---------------------------------------+----------------+----------+------------+
| Write-off of Neuftec patent licence terminated on 26 | - | 135 |
| February 2007 | | |
+--------------------------------------------------------+----------+------------+
| Provision for award of legal costs to Neuftec | 550 | - |
| following High Court judgment against Oxonica Energy | | |
| (note 15) | | |
+--------------------------------------------------------+----------+------------+
| Impairment (note 10) | 5,130 | - |
+--------------------------------------------------------+----------+------------+
| | 5,883 | 321 |
+---------------------------------------+----------------+----------+------------+
The provision for legal costs to Neuftec of GBP550,000 has been included on the
balance sheet within provisions as at 31 December 2008.
5 Expenses and auditors' remuneration
+------------------------------------------------------+------------+------------+
| | 2008 | 2007 |
+------------------------------------------------------+------------+------------+
| | | Restated |
+------------------------------------------------------+------------+------------+
| | GBP'000 | GBP'000 |
+------------------------------------------------------+------------+------------+
| Included in operating loss are the following: | | |
+------------------------------------------------------+------------+------------+
| Auditors' remuneration | | |
+------------------------------------------------------+------------+------------+
| audit of these financial statements | 33 | 47 |
+------------------------------------------------------+------------+------------+
| audit of subsidiaries' financial statements | 9 | 33 |
+------------------------------------------------------+------------+------------+
| other services relating to taxation | 25 | 52 |
+------------------------------------------------------+------------+------------+
| other advisory services | - | 27 |
+------------------------------------------------------+------------+------------+
| Depreciation | 343 | 370 |
+------------------------------------------------------+------------+------------+
| Amortisation of intangibles | 203 | 199 |
+------------------------------------------------------+------------+------------+
| (Profit)/loss on disposal of non current assets | (10) | 136 |
+------------------------------------------------------+------------+------------+
| Government grants | (178) | (250) |
+------------------------------------------------------+------------+------------+
| Net (profit)/loss on foreign exchange transactions | (166) | 1 |
+------------------------------------------------------+------------+------------+
| | | |
+------------------------------------------------------+------------+------------+
6 Remuneration
Staff numbers and costs
The average number of persons employed by the Group (including executive
directors) during the year, analysed by category was as follows:
+-----------------------------------+-----------+-----------+-----------+-----------+
| 2008 | 2007 | 2007 | 2007 |
+-----------------------------------+-----------+-----------+-----------+
| Group | Company | Group | Company |
+-----------------------------------+-----------+-----------+-----------+
| | | | | |
+-----------------------------------+-----------+-----------+-----------+-----------+
| Technical staff | 20 | - | 29 | - |
+-----------------------------------+-----------+-----------+-----------+-----------+
| Sales and marketing | 10 | - | 16 | - |
+-----------------------------------+-----------+-----------+-----------+-----------+
| Management and administration | 13 | 2 | 15 | 2 |
+-----------------------------------+-----------+-----------+-----------+-----------+
| | | | | |
+-----------------------------------+-----------+-----------+-----------+-----------+
| | 43 | 2 | 60 | 2 |
+-----------------------------------+-----------+-----------+-----------+-----------+
The aggregate payroll costs of these persons were as follows:
+----------------------------------+------------+------------+-----------+-----------+
| | | | Restated | Restated |
+----------------------------------+------------+------------+-----------+-----------+
| | Group | Company | Group | Company |
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
| | | | | |
+----------------------------------+------------+------------+-----------+-----------+
| Wages and salaries | 2,730 | 361 | 3,326 | 479 |
+----------------------------------+------------+------------+-----------+-----------+
| Social security costs | 242 | 43 | 298 | 48 |
+----------------------------------+------------+------------+-----------+-----------+
| Pension costs | 128 | 22 | 152 | 27 |
+----------------------------------+------------+------------+-----------+-----------+
| Company contribution to share | 10 | 3 | 14 | 3 |
| incentive plan | | | | |
+----------------------------------+------------+------------+-----------+-----------+
| Share based payments | 236 | 84 | 317 | 116 |
+----------------------------------+------------+------------+-----------+-----------+
| | | | | |
+----------------------------------+------------+------------+-----------+-----------+
| | 3,346 | 513 | 4,107 | 673 |
+----------------------------------+------------+------------+-----------+-----------+
| | | | | |
+----------------------------------+------------+------------+-----------+-----------+
7 Financial income and expense
+------------------------------------------------------+------------+------------+
| | 2008 | 2007 |
+------------------------------------------------------+------------+------------+
| | GBP'000 | GBP'000 |
+------------------------------------------------------+------------+------------+
| Financial income | | |
+------------------------------------------------------+------------+------------+
| Bank interest receivable | 166 | 186 |
+------------------------------------------------------+------------+------------+
| | | |
+------------------------------------------------------+------------+------------+
| Financial expense | | |
+------------------------------------------------------+------------+------------+
| Bank interest paid | - | (20) |
+------------------------------------------------------+------------+------------+
| Lease interest paid | (3) | (10) |
+------------------------------------------------------+------------+------------+
| Other loans | (148) | (6) |
+------------------------------------------------------+------------+------------+
| | | |
+------------------------------------------------------+------------+------------+
| | (151) | (36) |
| | | |
+------------------------------------------------------+------------+------------+
| | | |
+------------------------------------------------------+------------+------------+
8 Taxation
Recognised in the income statement
+------------------------------------------------------+---------------------------------+------------+
| | 2008 | 2007 |
+------------------------------------------------------+---------------------------------+------------+
| | GBP'000 | GBP'000 |
+------------------------------------------------------+---------------------------------+------------+
| Current tax expense | | |
+------------------------------------------------------+---------------------------------+------------+
| Current year | - | - |
+------------------------------------------------------+---------------------------------+------------+
| Reversal of research and development tax credit | (18) | - |
+------------------------------------------------------+---------------------------------+------------+
| Overseas tax | (168) | 2 |
+------------------------------------------------------+---------------------------------+------------+
| | | |
+------------------------------------------------------+---------------------------------+------------+
| Total tax (charge)/ credit in income statement | (186) | 2 |
+------------------------------------------------------+---------------------------------+------------+
| | | |
+------------------------------------------------------+---------------------------------+------------+
+-----------------------------------------------------------+----------+------------+----------+-------------+
| | | 2008 | | 2007 |
| | | | | Restated |
+-----------------------------------------------------------+----------+------------+----------+-------------+
| | | GBP'000 | | GBP'000 |
+-----------------------------------------------------------+----------+------------+----------+-------------+
| Reconciliation of effective tax rate | | | | |
+-----------------------------------------------------------+----------+------------+----------+-------------+
| Loss for the year | | (9,855) | | (5,202) |
+-----------------------------------------------------------+----------+------------+----------+-------------+
| Total income tax | | (186) | | 2 |
+-----------------------------------------------------------+----------+------------+----------+-------------+
| Loss before income tax | | (9,669) | | (5,204) |
+-----------------------------------------------------------+----------+------------+----------+-------------+
| | | | | |
+-----------------------------------------------------------+----------+------------+----------+-------------+
| Income tax using the Company's domestic tax rate | 28.5% | (2,756) | 30.00% | (1,562) |
+-----------------------------------------------------------+----------+------------+----------+-------------+
| Effects of: | | | | |
+-----------------------------------------------------------+----------+------------+----------+-------------+
| Expenses not deductible for tax purposes | (16.9%) | 1,637 | (0.02%) | 1 |
+-----------------------------------------------------------+----------+------------+----------+-------------+
| Depreciation for the year in excess of capital allowances | (0.1%) | 13 | 0.15% | (8) |
+-----------------------------------------------------------+----------+------------+----------+-------------+
| Reversal of research and development tax credit | (0.2)% | 18 | 0.00% | - |
+-----------------------------------------------------------+----------+------------+----------+-------------+
| Overseas taxation | (1.7)% | 168 | (0.06%) | 3 |
+-----------------------------------------------------------+----------+------------+----------+-------------+
| Increase in tax losses carried forward | (11.4%) | 1,106 | (31.05%) | 1,564 |
+-----------------------------------------------------------+----------+------------+----------+-------------+
| | | | | |
+-----------------------------------------------------------+----------+------------+----------+-------------+
| Total current tax (charge)/ credit (see above) | 1.9% | 186 | (0.04%) | (2) |
+-----------------------------------------------------------+----------+------------+----------+-------------+
There is no taxation charge for the period due to losses incurred. At 31
December 2008 the Group had tax losses, subject to the agreement of HM Revenue
and Customs of approximately GBP5.6 million (2007: GBP4m) available for offset
against future taxable profits of the same trade.
Provision for deferred taxation
The Group's and the Company's UK net deferred tax, calculated under the
liability method at 28% (2007: 28%), is GBPnil (2007: GBPnil).A GBP1,246,000
(2007: GBP976,000) US deferred tax liability has been recognised on the
temporary timing differences created by the consolidation adjustment that
recognises the patents. An equal amount of deferred tax asset has been
recognised to offset this.
A deferred tax asset has not been recognised in respect of the remaining tax
losses as, based on detailed budgets, the Group does not anticipate taxable
profits to arise within the immediate future. In the medium term it is
anticipated that the Group will generate profits and that the losses will then
be recovered.
+--------------------------+----------+----------+-----------------------------------+----------+-----------------------------------+
| | Restated | Restated | Restated | | |
+--------------------------+----------+----------+-----------------------------------+----------+-----------------------------------+
| Movement in unrecognised | Balance | Movement | Balance at | Movement | Balance at |
| deferred tax assets | at | | 31 | | 31 |
| | 1 | | December | | December |
| | January | | 2007 | | 2008 |
| | 2007 | | | | |
+--------------------------+----------+----------+-----------------------------------+----------+-----------------------------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------------+----------+----------+-----------------------------------+----------+-----------------------------------+
| | | | | | |
+--------------------------+----------+----------+-----------------------------------+----------+-----------------------------------+
| Tax losses | 4,001 | 1,135 | 5,136 | 501 | 5,637 |
+--------------------------+----------+----------+-----------------------------------+----------+-----------------------------------+
| | | | | | |
+--------------------------+----------+----------+-----------------------------------+----------+-----------------------------------+
9 Profit of parent company
As permitted by section 230 of the Companies Act 1985, the income statement of
the Parent Company is not presented as part of these financial statements. The
Parent Company's loss for the financial year amounted to GBP9,443,000 (2007:
GBP848,000 loss restated).
10 Intangible assets
+------------------------------------+-----------+------------+----------+----------+
| | Goodwill | Patents | Licences | Total |
| | | and | | |
| | | Technology | | |
+------------------------------------+-----------+------------+----------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------------------+-----------+------------+----------+----------+
| Cost | | | | |
+------------------------------------+-----------+------------+----------+----------+
| At 1 January 2007* | 9,186 | 2,841 | 250 | 12,277 |
+------------------------------------+-----------+------------+----------+----------+
| Amount written-off | - | - | (250) | (250) |
+------------------------------------+-----------+------------+----------+----------+
| Foreign Exchange adjustment | (139) | (43) | - | (182) |
+------------------------------------+-----------+------------+----------+----------+
| | | | | |
+------------------------------------+-----------+------------+----------+----------+
| At 31 December 2007* | 9,047 | 2,798 | - | 11,845 |
+------------------------------------+-----------+------------+----------+----------+
| | | | | |
+------------------------------------+-----------+------------+----------+----------+
| At 1 January 2008 | 9,047 | 2,798 | - | 11,845 |
+------------------------------------+-----------+------------+----------+----------+
| Foreign Exchange adjustment | 3,440 | 1,069 | - | 4,509 |
+------------------------------------+-----------+------------+----------+----------+
| | | | | |
+------------------------------------+-----------+------------+----------+----------+
| At 31 December 2008 | 12,487 | 3,867 | - | 16,354 |
+------------------------------------+-----------+------------+----------+----------+
| | | | | |
+------------------------------------+-----------+------------+----------+----------+
| Amortisation and impairment | | | | |
+------------------------------------+-----------+------------+----------+----------+
| At 1 January 2007* | - | 184 | 102 | 286 |
+------------------------------------+-----------+------------+----------+----------+
| Charge for the year | - | 185 | 14 | 199 |
+------------------------------------+-----------+------------+----------+----------+
| Amount written-off | - | - | (116) | (116) |
+------------------------------------+-----------+------------+----------+----------+
| Foreign Exchange adjustment | - | (12) | - | (12) |
+------------------------------------+-----------+------------+----------+----------+
| At 31 December 2007* | - | 357 | - | 357 |
+------------------------------------+-----------+------------+----------+----------+
| | | | | |
+------------------------------------+-----------+------------+----------+----------+
| At 1 January 2008 | - | 357 | - | 357 |
+------------------------------------+-----------+------------+----------+----------+
| Charge for the year | - | 203 | - | 203 |
+------------------------------------+-----------+------------+----------+----------+
| Goodwill impairment charge | 5,130 | - | - | 5,130 |
+------------------------------------+-----------+------------+----------+----------+
| Foreign Exchange adjustment | 1,237 | 192 | - | 1,429 |
+------------------------------------+-----------+------------+----------+----------+
| At 31 December 2008 | 6,367 | 752 | - | 7,119 |
+------------------------------------+-----------+------------+----------+----------+
| | | | | |
+------------------------------------+-----------+------------+----------+----------+
| Net book value | | | | |
+------------------------------------+-----------+------------+----------+----------+
| At 1 January 2007* | 9,186 | 2,657 | 148 | 11,991 |
+------------------------------------+-----------+------------+----------+----------+
| At 31 December 2007* | 9,047 | 2,441 | - | 11,488 |
+------------------------------------+-----------+------------+----------+----------+
| | | | | |
+------------------------------------+-----------+------------+----------+----------+
| At 1 January 2008 | 9,047 | 2,441 | - | 11,488 |
+------------------------------------+-----------+------------+----------+----------+
| At 31 December 2008 | 6,120 | 3,115 | - | 9,235 |
+------------------------------------+-----------+------------+----------+----------+
| | | | | |
+------------------------------------+-----------+------------+----------+----------+
* Restated
The goodwill, patents and technology comprises intangible assets acquired with
Nanoplex Technologies Inc (re-named Oxonica Inc) on 7 February 2006 and licences
relates to the patent licence from Neuftec Limited that was acquired on 7
December 2001 and terminated in 2007.
The goodwill arising on the acquisition is attributable to the anticipated
future profitability of Oxonica Inc based on its management and skills, future
strategic customer relationships and synergies with the Oxonica Group.
Goodwill is deemed to be a dual purpose asset which is not attributable to a
specific cash generating unit. The Group's goodwill was reviewed at the balance
sheet date, as in prior periods, using the methodology described below.
The recoverable amount of goodwill has been calculated with reference to its
value in use. Cash flow projections, which were based on a ten year business
plan due to the long-term nature of the agreements, were used to calculate the
value in use. These are based on management's best estimations, reflecting on
past experiences and future expectations. The growth rate applied beyond the ten
year forecast was 5%. The pre-tax discount rate used was 24% (2008 interim:
24%). The discount rate was estimated based on the Group's weighted average cost
of capital, adjusted to reflect the risks specific to the asset being assessed.
Based on this assessment, an impairment loss of GBP5,130,000 (2007: GBPnil) was
recognised in the income statement in the year.
In prior periods goodwill and intangibles arising on the acquisition of
businesses in the US had inadvertently been treated as Sterling amounts instead
of Dollar denominated balances which require retranslation at each accounting
period end with the resulting gain or loss having been recorded as part of the
foreign currency translation adjustment in the statement of recognised income
and expenditure. These adjustments result in GBP1,650,000 decrease in the
closing 2007 net assets and a GBP1,221,000 decrease in the opening 2007 net
assets. This has no impact on reported loss and on cash flow for either period.
Investments in subsidiaries
+----------------------------------------------------+---------+---+---+----------+
| | | | | Company |
+----------------------------------------------------+---------+---+---+----------+
| | | | | GBP'000 |
+----------------------------------------------------+---------+---+---+----------+
| Cost | | | | |
+----------------------------------------------------+---------+---+---+----------+
| At 1 January 2007 (restated) | | | | 14,836 |
+----------------------------------------------------+---------+---+---+----------+
| Share based payments - share options granted to | | | | - |
| subsidiary company employees (previously reported | | | | |
| as GBP273,000) | | | | |
+----------------------------------------------------+---------+---+---+----------+
| | | | | |
+----------------------------------------------------+---------+---+---+----------+
| At 31 December 2007 (restated) | | | | 14,836 |
+----------------------------------------------------+---------+---+---+----------+
| | | | | |
+----------------------------------------------------+---------+---+---+----------+
| At 1 January 2008 | | | | 14,836 |
| Impairment | | | | (5,073) |
+----------------------------------------------------+---------+---+---+----------+
| | | | | |
+----------------------------------------------------+---------+---+---+----------+
| At 31 December 2008 | | | | 9,763 |
+----------------------------------------------------+---------+---+---+----------+
| | | | | |
+----------------------------------------------------+---------+---+---+----------+
Management have impaired the Company's investment by GBP5,073,000 (2007: nil) to
its recoverable amount. The recoverable amount is based on management's best
estimates of its value in use. The key assumptions in the estimate is the future
expected cash flows of the subsidiaries which is discussed above and the
Directors' report.
The Company's investment in subsidiary undertakings comprises 100 percent of the
issued share capital of the following companies:
+-----------------------------+---------------+-------------------------------------+
| | Country | Principal activity |
| | of | |
| | incorporation | |
+-----------------------------+---------------+-------------------------------------+
| Oxonica Materials Limited | England | Development and commercialisation |
| | | of advanced nanomaterials for UV |
| | | protection |
+-----------------------------+---------------+-------------------------------------+
| Oxonica Energy Limited** | England | Development, sales and marketing |
| | | and supply of fuel additive |
| | | products |
+-----------------------------+---------------+-------------------------------------+
| Oxonica Healthcare Limited | England | Dormant |
+-----------------------------+---------------+-------------------------------------+
| Oxonica Overseas Holdings | England | Holding company |
| Limited | | |
+-----------------------------+---------------+-------------------------------------+
| Oxonica Inc. | USA | Development and commercialisation |
| | | of advanced nanomaterials for |
| | | biodiagnostics applications |
+-----------------------------+---------------+-------------------------------------+
| Oxonica Materials Inc. | USA | Development and commercialisation |
| | | of advanced nanomaterials for |
| | | security applications |
+-----------------------------+---------------+-------------------------------------+
| Oxonica Singapore Pte | Singapore | Sales and marketing of fuel |
| Limited* | | additive products |
+-----------------------------+---------------+-------------------------------------+
*Owned by Oxonica Overseas Holdings Limited
**Owned by Oxonica Materials Limited
11 Property, plant and equipment
Group
+------------------------------------+--------------+------------+-----------+---------+
| | Short | Plant, | Fixtures, | |
| | | machinery | fittings | |
+------------------------------------+--------------+------------+-----------+---------+
| | Leasehold | & | & | |
| | | laboratory | computer | |
+------------------------------------+--------------+------------+-----------+---------+
| | improvements | equipment |equipment | Total |
+------------------------------------+--------------+------------+-----------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------------------+--------------+------------+-----------+---------+
| Cost | | | | |
+------------------------------------+--------------+------------+-----------+---------+
| Balance at 1 January 2007 | 86 | 1,361 | 385 | 1,832 |
+------------------------------------+--------------+------------+-----------+---------+
| Additions | 19 | 292 | 18 | 329 |
+------------------------------------+--------------+------------+-----------+---------+
| Disposals | - | (84) | (5) | (89) |
+------------------------------------+--------------+------------+-----------+---------+
| Foreign Exchange adjustment | - | (2) | (4) | (6) |
+------------------------------------+--------------+------------+-----------+---------+
| | | | | |
+------------------------------------+--------------+------------+-----------+---------+
| Balance at 31 December 2007 | 105 | 1,567 | 394 | 2,066 |
+------------------------------------+--------------+------------+-----------+---------+
| Balance at 1 January 2008 | 105 | 1,567 | 394 | 2,066 |
+------------------------------------+--------------+------------+-----------+---------+
| Additions | - | 335 | 29 | 364 |
+------------------------------------+--------------+------------+-----------+---------+
| Disposals | - | (12) | (19) | (31) |
+------------------------------------+--------------+------------+-----------+---------+
| Foreign Exchange adjustment | 2 | 244 | 21 | 267 |
+------------------------------------+--------------+------------+-----------+---------+
| | | | | |
+------------------------------------+--------------+------------+-----------+---------+
| Balance at 31 December 2008 | 107 | 2,134 | 425 | 2,666 |
+------------------------------------+--------------+------------+-----------+---------+
| | | | | |
+------------------------------------+--------------+------------+-----------+---------+
| Depreciation | | | | |
+------------------------------------+--------------+------------+-----------+---------+
| Balance at 1 January 2007 | 79 | 806 | 216 | 1,101 |
+------------------------------------+--------------+------------+-----------+---------+
| Charge for year | 17 | 285 | 68 | 370 |
+------------------------------------+--------------+------------+-----------+---------+
| Disposals | - | (71) | (3) | (74) |
+------------------------------------+--------------+------------+-----------+---------+
| Foreign Exchange adjustment | - | (1) | (1) | (2) |
+------------------------------------+--------------+------------+-----------+---------+
| | | | | |
+------------------------------------+--------------+------------+-----------+---------+
| Balance at 31 December 2007 | 96 | 1,019 | 280 | 1,395 |
+------------------------------------+--------------+------------+-----------+---------+
| | | | | |
+------------------------------------+--------------+------------+-----------+---------+
| Balance at 1 January 2008 | 96 | 1,019 | 280 | 1,395 |
+------------------------------------+--------------+------------+-----------+---------+
| Charge for year | 5 | 282 | 56 | 343 |
+------------------------------------+--------------+------------+-----------+---------+
| Disposals | - | (11) | (13) | (24) |
+------------------------------------+--------------+------------+-----------+---------+
| Foreign Exchange adjustment | 6 | 93 | 11 | 110 |
+------------------------------------+--------------+------------+-----------+---------+
| | | | | |
+------------------------------------+--------------+------------+-----------+---------+
| Balance at 31 December 2008 | 107 | 1,383 | 334 | 1,824 |
+------------------------------------+--------------+------------+-----------+---------+
| | | | | |
+------------------------------------+--------------+------------+-----------+---------+
| Net book value | | | | |
+------------------------------------+--------------+------------+-----------+---------+
| At 1 January 2007 | 7 | 555 | 169 | 731 |
+------------------------------------+--------------+------------+-----------+---------+
| At 31 December 2007 | 9 | 548 | 114 | 671 |
+------------------------------------+--------------+------------+-----------+---------+
| | | | | |
+------------------------------------+--------------+------------+-----------+---------+
| At 1 January 2008 | 9 | 548 | 114 | 671 |
+------------------------------------+--------------+------------+-----------+---------+
| At 31 December 2008 | - | 751 | 91 | 842 |
+------------------------------------+--------------+------------+-----------+---------+
| | | | | |
+------------------------------------+--------------+------------+-----------+---------+
12 Inventories
+------------------------------------------+---------+---------+---------+---------+
| | 2008 | 2008 | 2007 | 2007 |
+------------------------------------------+---------+---------+---------+---------+
| | Group | Company | Group | Company |
+------------------------------------------+---------+---------+---------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------------------------+---------+---------+---------+---------+
| | | | | |
+------------------------------------------+---------+---------+---------+---------+
| Finished goods | 187 | - | 321 | - |
+------------------------------------------+---------+---------+---------+---------+
| | | | | |
+------------------------------------------+---------+---------+---------+---------+
The cost of inventories recognised as expense and included in cost of sales
amounted to GBP226,000 (2007: GBP930,754).
During 2007 the Group reversed GBP49,141 of a previous inventory write-down. In
addition the Group created a provision for slow moving stock. This amounted
to GBP16,166 (2007: GBP82,293) and has been included in cost of sales.
13 Trade and other receivables
+------------------------------------------+---------+---------+---------+---------+
| | 2008 | 2008 | 2007 | 2007 |
+------------------------------------------+---------+---------+---------+---------+
| | Group | Company | Group | Company |
+------------------------------------------+---------+---------+---------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------------------------+---------+---------+---------+---------+
| | | | | |
+------------------------------------------+---------+---------+---------+---------+
| Trade receivables | 568 | - | 249 | - |
+------------------------------------------+---------+---------+---------+---------+
| Amounts owed by Group undertakings | - | 5,687 | - | 7,498 |
+------------------------------------------+---------+---------+---------+---------+
| VAT receivable | 90 | 2 | 26 | 15 |
+------------------------------------------+---------+---------+---------+---------+
| Prepayments and accrued income | 181 | 20 | 346 | 14 |
+------------------------------------------+---------+---------+---------+---------+
| Sundry receivables | 82 | - | 2 | - |
+------------------------------------------+---------+---------+---------+---------+
| | 921 | 5,709 | 623 | 7,527 |
+------------------------------------------+---------+---------+---------+---------+
| | | | | |
+------------------------------------------+---------+---------+---------+---------+
14 Trade and other payables
+--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+---------+---------+---------+----------+-+
| | 2008 | 2008 | 2007 | 2007 |
+--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+---------+---------+---------+----------+
| | Group | Company | Group | Company |
+--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+---------+---------+---------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+---------+---------+---------+----------+
| Current | | | | |
+--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+---------+---------+---------+----------+
| | | | | |
+--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+---------+---------+---------+----------+
| Trade payables | 663 | - | 747 | - |
+--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+---------+---------+---------+----------+
| Other taxation and social security | 35 | - | 38 | - |
+--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+---------+---------+---------+----------+
| Accruals and deferred income | 3,747 | 27 | 823 | 27 |
+--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+---------+---------+---------+----------+
| Other creditors | 453 | - | 2 | 1 |
+--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+---------+---------+---------+----------+
| | 4,898 | 27 | 1,610 | 28 |
+--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+---------+---------+---------+----------+
| Accruals and deferred revenue includes GBP3,491,000 (2007: GBPnil) which relates to the deferral of the cash payments received from BD at the start of the licensing agreement. This revenue will be recognised over the 15 year estimated life of the licence agreement. |
| 15 Provisions |
| Group Total |
| GBP000 |
| Balance at 1 January 2008 - |
| Provisions made during the 550 |
| year |
| Provisions used during the - |
| year |
| Provisions reversed during - |
| the year |
| Balance at 31 December 2008 550 |
| |
+--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+---------+---------+---------+----------+-+
16 Interest bearing loans and borrowings
+------------------------------------------+---------------------------------+----------------+---------------------------------+---------------+
| | 2008 | 2008 | 2007 | 2007 |
+------------------------------------------+---------------------------------+----------------+---------------------------------+---------------+
| | Group | Company | Group | Company |
+------------------------------------------+---------------------------------+----------------+---------------------------------+---------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------------------------+---------------------------------+----------------+---------------------------------+---------------+
| Current liabilities | | | | |
+------------------------------------------+---------------------------------+----------------+---------------------------------+---------------+
| Secured bank loans | 552 | 552 | 151 | 151 |
+------------------------------------------+---------------------------------+----------------+---------------------------------+---------------+
| Unsecured bank loans | - | - | 12 | - |
+------------------------------------------+---------------------------------+----------------+---------------------------------+---------------+
| | 552 | 552 | 163 | 151 |
+------------------------------------------+---------------------------------+----------------+---------------------------------+---------------+
| | | | | |
+------------------------------------------+---------------------------------+----------------+---------------------------------+---------------+
| Non-current liabilities | | | | |
+------------------------------------------+---------------------------------+----------------+---------------------------------+---------------+
| Secured bank loans | 648 | 648 | 38 | 38 |
+------------------------------------------+---------------------------------+----------------+---------------------------------+---------------+
| Unsecured bank loans | - | - | 43 | - |
+------------------------------------------+---------------------------------+----------------+---------------------------------+---------------+
| | 648 | 648 | 81 | 38 |
+------------------------------------------+---------------------------------+----------------+---------------------------------+---------------+
| | | | | |
+------------------------------------------+---------------------------------+----------------+---------------------------------+---------------+
Terms and debt repayment schedule
+------------------+----------+----------+----------+---------+----------------------------------+---------+----------+
| | | Nominal | | 2008 | 2008 | 2007 | 2007 |
+------------------+----------+----------+----------+---------+----------------------------------+---------+----------+
| | Currency | interest | Year | Face | Carrying | Face | Carrying |
| | | rate | of | value | amount | value | amount |
| | | | maturity | | | | |
+------------------+----------+----------+----------+---------+----------------------------------+---------+----------+
| | | | | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------+----------+----------+----------+---------+----------------------------------+---------+----------+
| | | | | | | | |
+------------------+----------+----------+----------+---------+----------------------------------+---------+----------+
| Secured bank | GBP | 7.4% | 2009 | - | - | 189 | 189 |
| loans | sterling | | | | | | |
+------------------+----------+----------+----------+---------+----------------------------------+---------+----------+
| Secured bank | GBP | 14% | 2010 | 1,308 | 1,308 | - | - |
| loans | sterling | | | | | | |
+------------------+----------+----------+----------+---------+----------------------------------+---------+----------+
| Unsecured bank | GBP | 0% | 2012 | - | - | 55 | 55 |
| loans | sterling | | | | | | |
+------------------+----------+----------+----------+---------+----------------------------------+---------+----------+
| | | | | 1,308 | 1,308 | 244 | 244 |
+------------------+----------+----------+----------+---------+----------------------------------+---------+----------+
17 Financial instruments
The Group's financial instruments comprise loans, short term bank deposits and
cash. The Group has various other financial instruments, such as trade debtors
and trade creditors that arise directly from its operations which have not been
included in the credit risk disclosures.
The main risks arising from the Group's financial instruments are credit risk
and liquidity risk. The policies for managing these risks are regularly reviewed
and agreed by the Board. The Group does not trade in financial instruments.
No derivatives were used by the Group during the period under review (2007:
nil).
Interest rate risk
Interest risk is the risk that changes in market prices will affect the Group's
income or the value of its holdings of financial instruments.
The interest rate profile of the Group's financial assets and liabilities is as
follows:
+-----------------------+---------------------------------+----------+-------------+-------------------------------------+-------------------------------------+
| | Assets | Assets | Liabilities | Liabilities | |
| | | | | | |
+-----------------------+---------------------------------+----------+-------------+-------------------------------------+-------------------------------------+
| | floating | fixed | floating | fixed | Total |
| | rate | rate | rate | rate | |
+-----------------------+---------------------------------+----------+-------------+-------------------------------------+-------------------------------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-----------------------+---------------------------------+----------+-------------+-------------------------------------+-------------------------------------+
| At 31 December 2007 | | | | | |
+-----------------------+---------------------------------+----------+-------------+-------------------------------------+-------------------------------------+
| Cash at bank | 815 | 3,996 | - | - | 4,811 |
+-----------------------+---------------------------------+----------+-------------+-------------------------------------+-------------------------------------+
| Other loans | - | - | (244) | - | (244) |
+-----------------------+---------------------------------+----------+-------------+-------------------------------------+-------------------------------------+
| | | | | | |
+-----------------------+---------------------------------+----------+-------------+-------------------------------------+-------------------------------------+
| Total | 815 | 3,996 | (244) | - | 4,567 |
+-----------------------+---------------------------------+----------+-------------+-------------------------------------+-------------------------------------+
| | | | | | |
+-----------------------+---------------------------------+----------+-------------+-------------------------------------+-------------------------------------+
| At 31 December 2008 | | | | | |
+-----------------------+---------------------------------+----------+-------------+-------------------------------------+-------------------------------------+
| Cash at bank | 681 | 2,916 | - | - | 3,597 |
+-----------------------+---------------------------------+----------+-------------+-------------------------------------+-------------------------------------+
| Other loans | - | - | - | (1,308) | (1,308) |
+-----------------------+---------------------------------+----------+-------------+-------------------------------------+-------------------------------------+
| | | | | | |
+-----------------------+---------------------------------+----------+-------------+-------------------------------------+-------------------------------------+
| Total | 681 | 2,916 | - | (1,308) | 2,289 |
+-----------------------+---------------------------------+----------+-------------+-------------------------------------+-------------------------------------+
The weighted average interest rate for the fixed rate liabilities is 14% (2007:
16%) and the weighted average period for which interest rates are fixed is 1
year.
The interest rate profile of the Company's financial assets and liabilities is
as follows:
+-------------------------------+--------------+--------------+--------------+--------------+----------------+
| | Assets | Assets | Liabilities | Liabilities | |
| | | | | | |
+-------------------------------+--------------+--------------+--------------+--------------+----------------+
| | floating | fixed rate | floating | fixed rate | Total |
| | rate | | rate | | |
+-------------------------------+--------------+--------------+--------------+--------------+----------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-------------------------------+--------------+--------------+--------------+--------------+----------------+
| At 31 December 2007 | | | | | |
+-------------------------------+--------------+--------------+--------------+--------------+----------------+
| Cash at bank | 436 | 3,996 | - | - | 4,432 |
+-------------------------------+--------------+--------------+--------------+--------------+----------------+
| Other loans | - | - | (189) | - | (189) |
+-------------------------------+--------------+--------------+--------------+--------------+----------------+
| | | | | | |
+-------------------------------+--------------+--------------+--------------+--------------+----------------+
| Total | 436 | 3,996 | (189) | - | 4,243 |
+-------------------------------+--------------+--------------+--------------+--------------+----------------+
| | | | | | |
+-------------------------------+--------------+--------------+--------------+--------------+----------------+
| At 31 December 2008 | | | | | |
+-------------------------------+--------------+--------------+--------------+--------------+----------------+
| Cash at bank | 67 | 2,916 | - | - | 2,983 |
+-------------------------------+--------------+--------------+--------------+--------------+----------------+
| Other loans | - | - | - | (1,308) | (1,308) |
+-------------------------------+--------------+--------------+--------------+--------------+----------------+
| | | | | | |
+-------------------------------+--------------+--------------+--------------+--------------+----------------+
| Total | 67 | 2,916 | - | (1,308) | 1,675 |
+-------------------------------+--------------+--------------+--------------+--------------+----------------+
| | | | | | |
+-------------------------------+--------------+--------------+--------------+--------------+----------------+
Sensitivity analysis
A change of 1 basis point in interest rates at the balance sheet date would have
increased / (decreased) profit or loss by the amounts shown below. This
calculation assumes that the change occurred at the balance sheet date and had
been applied to risk exposures existing at that date.
This analysis assumes that all other variables, in particular foreign currency
rates, remain constant and considers the effect of financial instruments with
variable interest rates, financial instrument at fair value through profit or
loss or available for sale with fixed interest rates and the fixed rate element
of interest rate swaps. The analysis is performed on the same basis for 2007.
+---------------------------------+----------+----------+----------+------------+
| | 2008 | 2008 | 2007 | 2007 |
+---------------------------------+----------+----------+----------+------------+
| | Group | Company | Group | Company |
+---------------------------------+----------+----------+----------+------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------------------------+----------+----------+----------+------------+
| Profit or loss | | | | |
+---------------------------------+----------+----------+----------+------------+
| Increase | 22 | 16 | 46 | 42 |
+---------------------------------+----------+----------+----------+------------+
| | | | | |
+---------------------------------+----------+----------+----------+------------+
| Total | 22 | 16 | 46 | 42 |
+---------------------------------+----------+----------+----------+------------+
| | | | | |
+---------------------------------+----------+----------+----------+------------+
Foreign currency risk
Foreign exchange risk is the risk that changes in market prices will affect the
Group's income or the value of its holdings of financial instruments.
During the period under review the Group has entered into only a limited number
of transactions with overseas customers and suppliers in currencies other than
sterling. The Group's currency exposure is currently small. The Group will
continue to monitor any exposure to foreign exchange risk and manage
accordingly.
Sensitivity analysis
A 10 percent weakening of the following currencies against the pound sterling at
31 December 2008 would have increased / (decreased) profit or loss by the
amounts shown below. This calculation assumes that the change occurred at the
balance sheet date and had been applied to risk exposures existing at that date.
This analysis assumes that all other variables, in particular other exchange
rates and interest rates, remain constant. The analysis is performed on the same
basis for 31 December 2007.
+---------------------------------+----------+----------+----------+------------+
| | Profit or loss | Profit or loss |
+---------------------------------+---------------------+-----------------------+
| | 2008 | 2008 | 2007 | 2007 |
+---------------------------------+----------+----------+----------+------------+
| | Group | Company | Group | Company |
+---------------------------------+----------+----------+----------+------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------------------------+----------+----------+----------+------------+
| | | | | |
+---------------------------------+----------+----------+----------+------------+
| Euro | (2) | - | (4) | - |
+---------------------------------+----------+----------+----------+------------+
| USD | (113) | (45) | (10) | (13) |
+---------------------------------+----------+----------+----------+------------+
| SGD | (3) | - | (3) | - |
+---------------------------------+----------+----------+----------+------------+
| AUD | 3 | - | - | - |
+---------------------------------+----------+----------+----------+------------+
| | | | | |
+---------------------------------+----------+----------+----------+------------+
A 10 percent strengthening of the above currencies against the pound sterling at
31 December 2008 would have had the equal but opposite effect on the above
currencies to the amounts shown above, on the basis that all other variables
remain constant.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial
obligations as they fall due.
It is currently the Group's policy to finance its business by means of
internally generated funds and new share capital. The cash position of the Group
is regularly reviewed by the Board (see also going concern paragraph in note 1
Accounting policies).
The following are the contractual maturities of financial liabilities, including
estimated interest payments and excluding the effect of netting agreements:
+------------------+-+-------------------+-------------+---------+---------+----------+----------+-------------+---------+-----------+----------+-+
| | 20082007 |
| | |
+--------------------+----------------------------------------------------------------------------------------------------------------------------+
| | Carrying | Contractual | | 1 to | 2 to | Carrying | Contractual | 1 | 1 | 2 to |
| | amount | cash flows | 1 | <2years | <5years | amount | cash flows | year | to | <5years |
| | | | year | | | | | or | <2years | |
| | | | or | | | | | less | | |
| | | | less | | | | | | | |
+------------------+---------------------+-------------+---------+---------+----------+----------+-------------+---------+-----------+----------+
| | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 |
+------------------+---------------------+-------------+---------+---------+----------+----------+-------------+---------+-----------+----------+
| Non-derivative | | | | | | | | | | |
| financial | | | | | | | | | | |
| liabilities | | | | | | | | | | |
+------------------+---------------------+-------------+---------+---------+----------+----------+-------------+---------+-----------+----------+
| Secured bank | 1,308 | 1,308 | 552 | 756 | - | 244 | 244 | 189 | - | 55 |
| loans | | | | | | | | | | |
+------------------+---------------------+-------------+---------+---------+----------+----------+-------------+---------+-----------+----------+
| Trade and other | 4,898 | 4,898 | 4,898 | - | - | 1,610 | 1,610 | 1,610 | - | - |
| payables | | | | | | | | | | |
+------------------+---------------------+-------------+---------+---------+----------+----------+-------------+---------+-----------+----------+
| | | | | | | | | | | |
+------------------+---------------------+-------------+---------+---------+----------+----------+-------------+---------+-----------+----------+
| | | 6,206 | 5,450 | 756 | - | | 1,854 | | | |
| | | | | | | | | 1,799 | - | 55 |
+------------------+-+-------------------+-------------+---------+---------+----------+----------+-------------+---------+-----------+----------+-+
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group's receivables from customers
and investment securities.
+-------------------------------+-----------------------+----------+------------+
| | | Carrying Amount |
+-------------------------------+-----------------------+-----------------------+
| | | 2008 | 2007 |
+-------------------------------+-----------------------+----------+------------+
| | | GBP'000 | GBP'000 |
+-------------------------------+-----------------------+----------+------------+
| | | | |
+-------------------------------+-----------------------+----------+------------+
| Trade Receivables | | 568 | 249 |
+-------------------------------+-----------------------+----------+------------+
| Cash and Cash equivalents | | 3,597 | 4,811 |
+-------------------------------+-----------------------+----------+------------+
| Total | | 4,165 | 5,060 |
+-------------------------------+-----------------------+----------+------------+
| | | | |
+-------------------------------+-----------------------+----------+------------+
The maximum exposure to credit risk for trade receivables at the reporting date
by geographic region was:
+-------------------------------+-----------------------+----------+------------+
| | | Carrying Amount |
+-------------------------------+-----------------------+-----------------------+
| | | 2008 | 2007 |
+-------------------------------+-----------------------+----------+------------+
| | | GBP'000 | GBP'000 |
+-------------------------------+-----------------------+----------+------------+
| | | | |
+-------------------------------+-----------------------+----------+------------+
| Domestic | | 76 | 87 |
+-------------------------------+-----------------------+----------+------------+
| Euro-zone countries | | 1 | 45 |
+-------------------------------+-----------------------+----------+------------+
| United States | | 375 | 68 |
+-------------------------------+-----------------------+----------+------------+
| Australasia | | 21 | 49 |
+-------------------------------+-----------------------+----------+------------+
| Rest of world | | 95 | - |
+-------------------------------+-----------------------+----------+------------+
| Total | | 568 | 249 |
+-------------------------------+-----------------------+----------+------------+
| | | | |
+-------------------------------+-----------------------+----------+------------+
The maximum exposure to credit risk for trade receivables at the reporting date
by type of customer was:
+-------------------------------+-----------------------+----------+------------+
| | | Carrying Amount |
+-------------------------------+-----------------------+-----------------------+
| | | 2008 | 2007 |
+-------------------------------+-----------------------+----------+------------+
| | | GBP'000 | GBP'000 |
+-------------------------------+-----------------------+----------+------------+
| | | | |
+-------------------------------+-----------------------+----------+------------+
| Distributors | | 95 | 43 |
+-------------------------------+-----------------------+----------+------------+
| End-user customers | | 473 | 206 |
+-------------------------------+-----------------------+----------+------------+
| Total | | 568 | 249 |
+-------------------------------+-----------------------+----------+------------+
| | | | |
+-------------------------------+-----------------------+----------+------------+
The ageing of trade receivables at the reporting date was:
+----------------------+-----------+----------+------------+----------+------------+
| | | | | |
+----------------------+-----------+----------+------------+----------+
| | | 2008 | 2008 | 2007 | 2007 |
+----------------------+-----------+----------+------------+----------+------------+
| | | Gross | Impairment | Gross | Impairment |
+----------------------+-----------+----------+------------+----------+------------+
| | | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------+-----------+----------+------------+----------+------------+
| | | | | | |
+----------------------+-----------+----------+------------+----------+------------+
| Not past due | | 329 | - | 147 | - |
+----------------------+-----------+----------+------------+----------+------------+
| Past due 0-30 days | | 80 | - | 54 | - |
+----------------------+-----------+----------+------------+----------+------------+
| Past Due 31-60 days | | 17 | - | - | - |
+----------------------+-----------+----------+------------+----------+------------+
| Past Due 61-120 days | | 189 | 72 | - | - |
+----------------------+-----------+----------+------------+----------+------------+
| Past Due 120-365 | | 37 | 33 | - | - |
| days | | | | | |
+----------------------+-----------+----------+------------+----------+------------+
| Past due more than | | 167 | 146 | 141 | 93 |
| one year | | | | | |
+----------------------+-----------+----------+------------+----------+------------+
| Total | | 819 | 251 | 342 | 93 |
+----------------------+-----------+----------+------------+----------+------------+
The Group's most significant customer, a US security customer, accounts for
GBP55,496 of the trade receivables carrying amount at 31 December 2008 (2007:
GBP43,956).
The Company had no trade receivables in either 2008 or 2007 and therefore had no
credit risk exposure.
Impairment losses
The movement in the allowance for impairment in respect of trade receivables
during the year was as follows:
+-------------------------------+-----------------------+----------+------------+
| | | Carrying Amount |
+-------------------------------+-----------------------+-----------------------+
| | | 2008 | 2007 |
+-------------------------------+-----------------------+----------+------------+
| | | GBP'000 | GBP'000 |
+-------------------------------+-----------------------+----------+------------+
| | | | |
+-------------------------------+-----------------------+----------+------------+
| Balance at 1 January | | 93 | 108 |
+-------------------------------+-----------------------+----------+------------+
| Impairment loss recognised | | - | (15) |
+-------------------------------+-----------------------+----------+------------+
| Impairment loss created | | 132 | - |
+-------------------------------+-----------------------+----------+------------+
| Foreign exchange adjustment | | 26 | - |
+-------------------------------+-----------------------+----------+------------+
| | | | |
+-------------------------------+-----------------------+----------+------------+
| Balance at 31 December | | 251 | 93 |
+-------------------------------+-----------------------+----------+------------+
| | | | |
+-------------------------------+-----------------------+----------+------------+
The impairment loss created during the year relates to amounts owed by the
Group's Russian distributor which are more than 120 days old. The impairment
loss reported at 31 December 2007 relates to three customers where the debt is
greater than 365 days old.
Currency risk
The Group's exposure to foreign currency risk is set out in the table below:
+------------------+-------+------+-------+------+-----+-------+------+--------+------+------+
| | | 31 December 2008 | | 31 December 2007 |
+------------------+-------+---------------------------+-------+-----------------------------+
| GBP000's | GBP | AUD | USD | Euro | SGD | GBP | AUD | USD | Euro | SGD |
+------------------+-------+------+-------+------+-----+-------+------+--------+------+------+
| | | | | | | | | | | |
+------------------+-------+------+-------+------+-----+-------+------+--------+------+------+
| Cash and cash | 2,603 | - | 938 | 20 | 36 | 4,423 | - | 331 | 27 | 30 |
| equivalents | | | | | | | | | | |
+------------------+-------+------+-------+------+-----+-------+------+--------+------+------+
| Trade | 77 | 21 | 470 | - | - | 87 | 48 | 68 | 46 | - |
| Receivables | | | | | | | | | | |
+------------------+-------+------+-------+------+-----+-------+------+--------+------+------+
| Trade Payables | (439) | (54) | (168) | (1) | (1) | (381) | (48) | (287) | (31) | - |
+------------------+-------+------+-------+------+-----+-------+------+--------+------+------+
| | | | | | | | | | | |
+------------------+-------+------+-------+------+-----+-------+------+--------+------+------+
| Gross Balance | 2,241 | (33) | 1,240 | 19 | 35 | 4,129 | - | 112 | 42 | 30 |
| sheet Exposure | | | | | | | | | | |
+------------------+-------+------+-------+------+-----+-------+------+--------+------+------+
At the balance sheet date there were no forward exchange contracts in place.
The exchange rates that were applied during the year were:
+-------------------+----------+--------------+--------------+---------------+----------------+
| | | Average Rate | Reporting Date Spot Rate |
+-------------------+----------+-----------------------------+--------------------------------+
| | | 2008 | 2007 | 2008 | 2007 |
+-------------------+----------+--------------+--------------+---------------+----------------+
| USD | | 1.8378 | 2.0144 | 1.4378 | 1.9906 |
+-------------------+----------+--------------+--------------+---------------+----------------+
| Euro | | 1.2479 | 1.4567 | 1.0344 | 1.3615 |
+-------------------+----------+--------------+--------------+---------------+----------------+
| SGD | | 2.5858 | 3.0073 | 2.0715 | 2.8654 |
+-------------------+----------+--------------+--------------+---------------+----------------+
| AUD | | 2.1713 | 2.3918 | 2.0622 | 2.2663 |
+-------------------+----------+--------------+--------------+---------------+----------------+
Fair values of financial assets and liabilities
There are no material differences between the fair value of any of the Group's
financial assets or liabilities and their book value as at the balance sheet
date.
Guarantees and security
The Group has provided security over all its assets to BlueCrest Capital
Finance, the providers of the drawn down GBP1,500,000 loan facility (2007:
GBPnil). A second charge over all the Group's assets is provided to HSBC (2007:
primary charge).
Capital management
The board's policy is to maintain a strong capital base so as to maintain
investor, creditor and market confidence and to sustain future development of
the business. There were no changes in the Group's approach to capital
management during the year.
18 Operating leases
Non-cancellable operating lease rentals are payable as follows:
+-------------------------------------+----------+----------+---------------------------------+----------+
| | 2008 | 2008 | 2007 | 2007 |
+-------------------------------------+----------+----------+---------------------------------+----------+
| | Group | Company | Group | Company |
+-------------------------------------+----------+----------+---------------------------------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-------------------------------------+----------+----------+---------------------------------+----------+
| Annual commitments which expire: | | | | |
+-------------------------------------+----------+----------+---------------------------------+----------+
| | | | | |
+-------------------------------------+----------+----------+---------------------------------+----------+
| Later than one year and not later | 398 | 398 | 106 | 106 |
| than five years | | | | |
+-------------------------------------+----------+----------+---------------------------------+----------+
| | | | | |
+-------------------------------------+----------+----------+---------------------------------+----------+
19 Capital commitments
The Group had no capital commitments outstanding at the year end (2007: GBPnil).
20 Called up share capital
+-------------------------------------+-------------+-----------+-------------+-----------+
| | | 2008 | | 2007 |
+-------------------------------------+-------------+-----------+-------------+-----------+
| | Number | | Number | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| | of | GBP | of | GBP |
| | shares | | shares | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Authorised | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Ordinary shares of GBP0.01p each | 500,000,000 | 5,000,000 | 500,000,000 | 5,000,000 |
+-------------------------------------+-------------+-----------+-------------+-----------+
| | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Allotted, called up and fully paid | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
| Ordinary shares of GBP0.01p each | 65,536,833 | 655,368 | 65,471,567 | 654,715 |
+-------------------------------------+-------------+-----------+-------------+-----------+
| | | | | |
+-------------------------------------+-------------+-----------+-------------+-----------+
During the year 7,723 (2007: 9,228) new ordinary shares with a nominal value of
GBP0.01 each were issued to employees by way of free share awards and 57,543
(2007: 424,204) new ordinary shares with a nominal value of GBP0.01 each were
issued as a result of the exercise of share options.
21 Share based payments
The Group has adopted IFRS 2 and accordingly, sales and marketing and
administration costs include a charge of GBP236,366 (2007 restated: GBP317,128)
in respect of share based payments issued to employees.
(a) Share option scheme
Under the Company's share option scheme, employees held options at 31 December
2008 over unissued ordinary shares as follows:
+-----------+---------+-----------+-----------+-----------+----------+----------+----------+
| Options | Options | Options | Options | Options | Exercise | Earliest | Date |
| held at | granted | exercised | lapsed | held at | price | exercise | options |
| 1 | | | | 31 | | date | |
| January | | | | December | | | lapse |
| 2008 | | | | 2008 | | | |
+-----------+---------+-----------+-----------+-----------+----------+----------+----------+
| | | | | | | | |
+-----------+---------+-----------+-----------+-----------+----------+----------+----------+
| 3,851,110 | - | - | (700,150) | 3,150,960 | GBP0.447 | Between | Between |
| | | | | | | 15/05/08 | 21/11/12 |
| | | | | | | & | & |
| | | | | | | 01/01/07 | 15/07/15 |
+-----------+---------+-----------+-----------+-----------+----------+----------+----------+
| 137,155 | 29,748 | (57,543) | (40,860) | 68,502 | $0.227 | Between | Between |
| | | | | | | 01/01/02 | 01/01/13 |
| | | | | | | & | & |
| | | | | | | 01/12/05 | 29/11/15 |
+-----------+---------+-----------+-----------+-----------+----------+----------+----------+
| |
+-----------+
| 3,988,265 | 29,748 | (57,543) | (741,010) | 3,219,462 | | | |
+-----------+---------+-----------+-----------+-----------+----------+----------+----------+
| | | | | | | | |
+-----------+---------+-----------+-----------+-----------+----------+----------+----------+
The estimated fair values of share options which fall under the IFRS 2
accounting charge, and the inputs used in the Black-Scholes model to calculate
those fair values, are as follows:
+--------------+-----------+----------+----------+------------+----------+---------+-----------+
| Date of | Estimated | Share | Exercise | Expected | Expected | Risk | Expected |
| grant | fair | price | price | volatility | Life | free | dividends |
| | value | | | | | rate | |
+--------------+-----------+----------+----------+------------+----------+---------+-----------+
| 15 July 2005 | GBP0.7636 | GBP0.958 | GBP0.447 | 52% | 1 yrs | 4.5% | 0% |
| | | | | | 5 mths | | |
+--------------+-----------+----------+----------+------------+----------+---------+-----------+
| 8 February | GBP1.5512 | GBP1.68 | GBP0.134 | 52% | 0 yrs | 4.5% | 0% |
| 2006 | | | | | | | |
+--------------+-----------+----------+----------+------------+----------+---------+-----------+
| | | | | | | | |
+--------------+-----------+----------+----------+------------+----------+---------+-----------+
The Group's prior period income statement has been restated to correct the
share-based payment charges recognised in administrative expenses. The share
options expense has been decreased from GBP197,000 previously recorded to
GBPnil. This arises as a result of adjusting the amortisation period for the
charge over the life of the options to a spread over the vesting period. As all
options have vested prior to the beginning of the prior financial year there is
no share option charge in the current or prior year. The correction to the
earlier periods would be made in retained earnings increasing the loss for the
year with an equal and opposite adjustment to the equity settled share based
payment in reserves, however it does not effect the reserves brought forward in
2007.
These adjustments have had no impact on net assets for either period, on neither
cash flows nor taxation.
The Parent Company's prior period income statement share-based payment expense
(included in administrative expenses) has been reduced by GBP137,000 for the
same reasons as the Group charge. The correction is less than the Group
restatement as the subsidiaries are recharged for their employees' portion of
the Group charge. The recharged element impacts the Parent Company's investment
in its subsidiaries and accordingly this has also been restated in the prior
periods.
(b) Long Term Incentive Plan (LTIP)
Under the Rules of the LTIP, which was suspended shortly after the year-end,
directors and senior employees received conditional rights to acquire ordinary
shares in the Company. Eligible employees were awarded rights to acquire a
maximum number of shares at the beginning of a holding period, a proportion of
which they were entitled to receive based on the extent to which the performance
conditions set by the Remuneration Committee at the time the allocation was made
were satisfied. If the performance conditions were not satisfied the share award
lapsed. See Remuneration Report for details of performance conditions.
Details of the LTIPs outstanding during the year are as follows:
+----------------------------+---+----+----------+------+-----------+----------+
| | | | | | 2008 | 2007 |
| | | | | | Number | Number |
| | | | | | of | of |
| | | | | | shares | Shares |
+----------------------------+---+----+----------+------+-----------+----------+
| | | | | | | |
+----------------------------+---+----+----------+------+-----------+----------+
| At 1 January | | | | | 653,375 | 769,384 |
+----------------------------+---+----+----------+------+-----------+----------+
| Granted during the year | | | | | - | - |
+----------------------------+---+----+----------+------+-----------+----------+
| Lapsed during the year | | | | | (515,276) | (32,107) |
+----------------------------+---+----+----------+------+-----------+----------+
| Forfeited during the year | | | | | (138,099) | (83,902) |
+----------------------------+---+----+----------+------+-----------+----------+
| Released during the year | | | | | - | - |
+----------------------------+---+----+----------+------+-----------+----------+
| Outstanding at 31 December | | | | | - | 653,375 |
+----------------------------+---+----+----------+------+-----------+----------+
The estimated fair values of LTIP awards which fall under the IFRS 2 accounting
charge, and the inputs used in the Monte Carlo model to calculate those fair
values, are as follows:
+--------------+-----------+---------+----+------------+----------+---------+-----------+
| Date of | Estimated | Share | | Expected | Expected | Risk | Expected |
| grant | fair | price | | volatility | Life | free | dividends |
| | value | | | | | rate | |
+--------------+-----------+---------+----+------------+----------+---------+-----------+
| 19 September | GBP0.7459 | GBP1.30 | | 58.2625% | 2 yrs | 4.4082% | 0% |
| 2006 | | | | | | | |
+--------------+-----------+---------+----+------------+----------+---------+-----------+
| | | | | | | | |
+--------------+-----------+---------+----+------------+----------+---------+-----------+
Expected volatility was determined by calculating the annualised standard
deviation of daily continuously compounded returns of Group's share price
calculated over the period from the Company's flotation to the date of grant.
The expected life used in the model is in line with the vesting period of the
LTIP award (2 years). The Company had assumed that the number of LTIP awards
that would ultimately be released would reduce by 5% per annum.
(c) Share Incentive Plan (SIP)
All UK employees are eligible to participate in the UK Share Incentive Plan
which is a HM Revenue and Customs approved share incentive plan for UK
employees. Until 1 January 2008 the Group also operated an International Share
Incentive Plan for employees outside of the UK. Employees are able to buy shares
through the plan ("Invest Shares") and these shares are held in trust on behalf
of the employee. For every Invest Share bought the Company will give the
employee one matching share for free ("Plus Shares"). Employees have to take
their shares out of the plan on leaving the Company and will not be entitled to
all the Plus Shares if they leave within 3 years of acquiring the linked Invest
Shares.
Under the SIP, the Company can also make awards of Free Shares to employees.
Under the UK SIP employees are awarded shares which are subject to three year
holding period. Under the International Plan employees were awarded rights to
acquire a maximum number of shares at the beginning of a holding period set by
the Company.
For the purposes of IFRS 2 the fair value of the Plus and Free Shares is
determined as the market value of the shares at the date of grant. In
determining the charge to the income statement the Company has assumed that the
number of Plus Share awards that will ultimately be released is reduced by 5%
per annum.
Details of the SIP Awards (Plus and Free Shares) outstanding during the year are
as follows:
+---------------------------+---+--+----------+----------+-----------+----------+
| | | | 2008 | 2008 | 2007 | 2007 |
| | | | Number | Number | Number | Number |
| | | | of | of | of | of |
| | | | Free | Plus | Free | Plus |
| | | | shares | shares | shares | shares |
+---------------------------+---+--+----------+----------+-----------+----------+
| | | | | | | |
+---------------------------+---+--+----------+----------+-----------+----------+
| At 1 January | | | 23,073 | 21,088 | 107,662 | 3,432 |
+---------------------------+---+--+----------+----------+-----------+----------+
| Granted during the year | | | 2,307 | 40,912 | 25,380 | 23,635 |
+---------------------------+---+--+----------+----------+-----------+----------+
| Forfeited during the year | | | - | - | - | (40) |
+---------------------------+---+--+----------+----------+-----------+----------+
| Released during the year | | | - | - | (109,969) | (5,939) |
+---------------------------+---+--+----------+----------+-----------+----------+
| Outstanding at 31 | | | 25,380 | 62,001 | 23,073 | 21,088 |
| December | | | | | | |
+---------------------------+---+--+----------+----------+-----------+----------+
22 Pension scheme
The company operates a defined contribution pension scheme. The pension cost
charge for the period represents contributions payable by the Company to the
scheme and amounted to GBP128,354 (2007: GBP151,752). At the year end, GBP6,584
accruals were outstanding in relation to pension contributions (2007: GBP7,004).
23 Capital and reserves
Reconciliation of movement in capital and reserves
+----------------------------+----------+------------+----------+------------+-------------+------------+----------+
| Group | Share | Share | Merger | Shares to | | Retained | Total |
| | capital | premium | Reserve* | be issued | Exchange | Earnings | Parent |
| | | | | ** | reserve | Restated | equity |
| | | | | | Restated | | |
| | | | | | *** | | |
+----------------------------+----------+------------+----------+------------+-------------+------------+----------+
| | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 |
+----------------------------+----------+------------+----------+------------+-------------+------------+----------+
| | | | | | | | |
+----------------------------+----------+------------+----------+------------+-------------+------------+----------+
| Balance at 1 January 2007 | 428 | 18,971 | 9,953 | 4,225 | (1,439) | (14,986) | 17,152 |
+----------------------------+----------+------------+----------+------------+-------------+------------+----------+
| Total recognised income | | | | | | | |
| and expense | - | - | - | - | (175) | (5,202) | (5,377) |
+----------------------------+----------+------------+----------+------------+-------------+------------+----------+
| Issue of shares | 226 | 7,332 | - | (4,225) | - | 714 | 4,047 |
+----------------------------+----------+------------+----------+------------+-------------+------------+----------+
| Equity-settled share based | | | | | | | |
| payment transactions | - | - | - | - | - | 317 | 317 |
+----------------------------+----------+------------+----------+------------+-------------+------------+----------+
| | | | | | | | |
+----------------------------+----------+------------+----------+------------+-------------+------------+----------+
| Balance at 31 December | | | | | | | |
| 2007 | 654 | 26,303 | 9,953 | - | (1,614) | (19,157) | 16,139 |
+----------------------------+----------+------------+----------+------------+-------------+------------+----------+
| | | | | | | | |
+----------------------------+----------+------------+----------+------------+-------------+------------+----------+
| | | | | | | | |
+----------------------------+----------+------------+----------+------------+-------------+------------+----------+
| Balance at 1 January 2008 | 654 | 26,303 | 9,953 | - | (1,614) | (19,157) | 16,139 |
+----------------------------+----------+------------+----------+------------+-------------+------------+----------+
| Total recognised income | | | | | | | |
| and expense | - | - | - | - | 1,548 | (9,747) | (8,199) |
+----------------------------+----------+------------+----------+------------+-------------+------------+----------+
| Issue of shares | 1 | 7 | - | - | - | - | 8 |
+----------------------------+----------+------------+----------+------------+-------------+------------+----------+
| Equity-settled share based | | | | | | | |
| payment transactions | - | - | - | - | - | 236 | 236 |
+----------------------------+----------+------------+----------+------------+-------------+------------+----------+
| | | | | | | | |
+----------------------------+----------+------------+----------+------------+-------------+------------+----------+
| Balance at 31 December | | | | | | | |
| 2008 | 655 | 26,310 | 9,953 | - | (66) | (28,668) | 8,184 |
+----------------------------+----------+------------+----------+------------+-------------+------------+----------+
* The merger reserve of GBP9,953,000 represents the difference between the
nominal value of the shares in Oxonica Materials Ltd received and the nominal
value of the shares issued in Oxonica plc as a result of the share exchange and
75 for 1 bonus issue which took place on 16 June 2005 as part of a corporate
restructuring prior to the flotation on AIM.
** The shares to be issued of GBP4,225,000 represents the shares issued as
deferred consideration in connection with the acquisition of Oxonica Inc which
was settled in 2007.
*** The exchange reserve was previous reported as GBP71,000 at 1 January 2007
and as GBP88,000 at 31 December 2007.
+-----------------------------------------+------------+-------------+------------+-------------+------------+-----------+
| Company | | Share | Share | Shares to | Retained | Total |
| | | capital | premium | be issued | Earnings | parent |
| | | | | | | equity |
+-----------------------------------------+------------+-------------+------------+-------------+------------+-----------+
| | | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 |
+-----------------------------------------+------------+-------------+------------+-------------+------------+-----------+
| | | | | | | |
+-----------------------------------------+------------+-------------+------------+-------------+------------+-----------+
| Balance at 1 January 2007 | | 428 | 18,971 | 4,225 | (358)* | 23,266 |
+-----------------------------------------+------------+-------------+------------+-------------+------------+-----------+
| Total recognised income and expense* | | - | - | - | (848)* | (848) |
+-----------------------------------------+------------+-------------+------------+-------------+------------+-----------+
| Issue of shares (previously reported as | | 226 | 7,332 | (4,225) | 714 | 4,047 |
| GBP987,000) | | | | | | |
+-----------------------------------------+------------+-------------+------------+-------------+------------+-----------+
| Equity-settled share based payment* | | | | | | |
| transactions (previously reported as | | - | - | - | 113* | 113 |
| GBP525,000) | | | | | | |
+-----------------------------------------+------------+-------------+------------+-------------+------------+-----------+
| | | | | | | |
+-----------------------------------------+------------+-------------+------------+-------------+------------+-----------+
| Balance at 31 December 2007 | | 654 | 26,303 | - | (379)* | 26,578 |
+-----------------------------------------+------------+-------------+------------+-------------+------------+-----------+
| | | | | | | |
+-----------------------------------------+------------+-------------+------------+-------------+------------+-----------+
| Balance at 1 January 2008 | | 654 | 26,303 | - | (379) | 26,578 |
+-----------------------------------------+------------+-------------+------------+-------------+------------+-----------+
| Total recognised income and expense | | - | - | - | (9,443) | (9,443) |
+-----------------------------------------+------------+-------------+------------+-------------+------------+-----------+
| Issue of shares | | 1 | 7 | - | - | 8 |
+-----------------------------------------+------------+-------------+------------+-------------+------------+-----------+
| Equity-settled share based payment | | | | | | |
| transactions | | - | - | - | 85 | 85 |
+-----------------------------------------+------------+-------------+------------+-------------+------------+-----------+
| | | | | | | |
+-----------------------------------------+------------+-------------+------------+-------------+------------+-----------+
| Balance at 31 December 2008 | | 655 | 26,310 | - | (9,737) | 17,228 |
+-----------------------------------------+------------+-------------+------------+-------------+------------+-----------+
| * Restated | | | | | | |
+-----------------------------------------+------------+-------------+------------+-------------+------------+-----------+
24 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
the year. Options over 3,219,462 ordinary shares (2007: 3,988,266) are not
included in the calculation of diluted loss per share as their effect is
anti-dilutive.
+--------------------------------------------------------+------------+------------+
| | 2008 | 2007 |
| | | Restated |
+--------------------------------------------------------+------------+------------+
| | GBP'000 | GBP'000 |
+--------------------------------------------------------+------------+------------+
| Basic and diluted loss attributable to ordinary | (9,855) | (5,202) |
| shareholders | | |
+--------------------------------------------------------+------------+------------+
| | | |
+--------------------------------------------------------+------------+------------+
| | No. | No. |
+--------------------------------------------------------+------------+------------+
| Weighted average number of ordinary shares | 65,523,768 | 46,859,697 |
+--------------------------------------------------------+------------+------------+
| | | |
+--------------------------------------------------------+------------+------------+
| Loss per share - basic and diluted | (15.04)p | (11.10)p |
+--------------------------------------------------------+------------+------------+
25 Contingent liabilities
The Company and its subsidiaries are, from time to time, parties to legal
proceedings and claims which arise in the ordinary course of business. The
position with regard to the patent dispute with Neuftec Limited is set out in
note 1. Except as disclosed in connection with Neuftec, the directors are not
aware of any circumstances which could result in any material contingent
liabilities for the Group.
26 Related party disclosures
The following directors or parties related to directors held shares in the
Company:
+------------------------------------------------------+--------------+-------------+
| | 2008 | 2007 |
+------------------------------------------------------+--------------+-------------+
| | No of shares | No of |
| | | shares |
+------------------------------------------------------+--------------+-------------+
| | | |
+------------------------------------------------------+--------------+-------------+
| Richard Farleigh | 13,218,995 | 13,218,995* |
+------------------------------------------------------+--------------+-------------+
| Kevin Matthews | 56,283 | 49,866 |
+------------------------------------------------------+--------------+-------------+
| Richard Clarke | 40,761 | 34,344 |
+------------------------------------------------------+--------------+-------------+
| Martin Hagen | 148,857 | 148,857 |
+------------------------------------------------------+--------------+-------------+
| Gordon Ringold | 467,503 | 467,503 |
+------------------------------------------------------+--------------+-------------+
| Alavita, Inc (a company of which Gordon Ringold is a | 4,287,371 | 4,254,326 |
| director) | | |
+------------------------------------------------------+--------------+-------------+
| | | |
+------------------------------------------------------+--------------+-------------+
| | | |
+------------------------------------------------------+--------------+-------------+
* Includes interest in 6,190,476 shares held by The Kyabram Trust, a
discretionary family trust
The Group has a related party relationship with its subsidiaries and with its
key management personnel. The key management personnel of the Group are the
executive directors. Compensation of key management personnel was:
+--------------------------------------------------------+------------+------------+
| | 2008 | 2007 |
| | | Restated |
+--------------------------------------------------------+------------+------------+
| | GBP'000 | GBP'000 |
+--------------------------------------------------------+------------+------------+
| | | |
+--------------------------------------------------------+------------+------------+
| Remuneration | 361 | 479 |
+--------------------------------------------------------+------------+------------+
| Social security costs | 43 | 48 |
+--------------------------------------------------------+------------+------------+
| Equity settled transactions | 84 | 116 |
+--------------------------------------------------------+------------+------------+
| Company contribution to share incentive plan | 3 | 3 |
+--------------------------------------------------------+------------+------------+
| Pension costs | 22 | 27 |
+--------------------------------------------------------+------------+------------+
| | 513 | 673 |
+--------------------------------------------------------+------------+------------+
This information is provided by RNS
The company news service from the London Stock Exchange
END
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Oxonica (LSE:OXN)
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