DMTR.L Regulatory News (DMTR)

30 Jun 2008 07:00



Embargo for 7.00am on 30 June 2008

OXFORD ADVANCED SURFACES GROUP PLC (FORMERLY KANYON PLC)

AUDITED FINAL RESULTS FOR THE PERIOD ENDING 31 DECEMBER 2007

CHAIRMAN'S STATEMENT 

We are pleased to report on your Group's results following the reverse acquisition of Kanyon plc in December 2007 and readmission to AIM as Oxford Advanced Surfaces Group plc (OASG). The reverse acquisition was achieved by the issue of 77,539,907 ordinary shares of 1 pence each with a premium of 24 pence per share plus £50,000 in cash. Acquisition costs of £434,000 were incurred.

The Group has continued to build on the initial business development work undertaken by Oxford Advanced Surfaces Limited by turning a number of relationships into joint development agreements. These are with major companies across the UK, Europe and the USA. Employee numbers have risen from 2 to 7, of which 6 are focused on research and development. Since the period end staff numbers have continued to grow following the appointment of a Chief Financial Officer and a Business Development Director along with increasing the research staff to 12.

These results have been prepared using reverse acquisition accounting. The result is to reflect the business combination as if Oxford Advanced Surfaces Limited (OAS) had acquired Oxford Advanced Surfaces Group plc. Although these results have been issued in the name of the legal parent, the Group's activity is, in substance, a continuation of the legal subsidiary, OAS. The comparative figures shown in these results are those of OAS.

The shortened 5 month period ended 31 December 2007 delivered Group revenue of £65,000 compared to £77,000 for the prior period and a loss before tax of £615,000 compared to £142,000. Excluding share based payments the loss before tax for the period ended 31 December 2007 was £221,000 (period ended 31 July 2007: £141,000). Research and development costs increased from £44,000 to £82,000 driven by the volume of work in the development pipeline and the rapid expansion of the business.

We are engaging with an increasing number of partners and potential customers and have grown rapidly to meet the high level of demand for our technology, the latest example of which was a joint development agreement signed in April 2008 with DuPont Advanced Fibre Systems. This is one of several agreements we have reached and we are discussing different applications for our core technology with leading edge global partners.

OASG develops and commercialises advanced materials and technology solutions leveraging a proprietary surface modification technology called OntoTM. The technology exploits and controls a reactive chemistry allowing the rapid and convenient modification of the surface properties of a wide range of materials with a high degree of control over processing parameters. OntoTM can be applied as a wet coating by spin, dip, roll or spray and cured with either heat or irradiation. By selective coating (screen, inkjet printing) or selective curing (photolithography) highly patterned surfaces can be formed. This delivers permanent, dramatic and highly valuable changes to surface functionality. The OntoTM coating technology is a versatile, effective, yet simple approach to deliver intelligent advanced materials.

Industry has an increasing need for novel and more complex advanced materials to deliver innovation, reduce costs or address environmental issues. Our surface modification technology can enable the use of existing materials in new ways or a combination of different materials for new effects, delivering highly tailored advanced materials. One example is that fluoropolymers, which are known for their hydrophobicity (water repulsion), also make useful dielectric materials. The downside is that they can be difficult to incorporate into electronic devices. By modifying the surface of a fluoropolymer making it hydrophilic some of these problems can be solved. This is one example in which OntoTM can deliver a valuable functionality enabling a new application for an existing material. Since OntoTM technology can also utilise existing industrial coating and curing processes, it is easy and quick to adopt and commercialise.

Initial applications include tailored wetting properties, adhesion, metallization and bio-activity. The early target markets include:-

Kanyon plc, before it became OASG, acquired the entire share capital of Solar Labs plc in April 2007. This was though the issue of 433,841,307 0.1 pence shares (prior to the share consolidation) with a 0.9 pence premium. £95,000 of acquisition costs were incurred. Since the period end Solar Labs plc has been renamed Oxford Energy Technologies Limited (OET). The change in name reflects the broadening of OET's strategy to encompass a wider range of energy and low carbon technologies.

OET will develop novel solutions for the fast growing and increasingly important renewable energy markets using the Group's OntoTM technology. Initial development projects will focus on photovoltaics, where the target will be to improve the efficiency of solar cells, and solid state lighting where the technology is aimed at delivering dramatic efficiency and lifetime improvements, along with improved emission colour.

Financial resources continue to be managed prudently, with tight cost controls. Cash reserves at the period end were £6.8 million.

We are confident that 2007's strong performance will continue. Future activities for 2008 include the negotiation and conclusion of further joint development agreements with key industry players in our main target markets. We will continue to expand our research and development resources to deal with the demands of our partners and ensure that the company has access to the best people.

Whilst many of our projects are moving from proof of concept into application development there is more work and resource needed to take them through to full commercialisation. In order to maximise its opportunities, the Group intends to continue to expand its capability to carry out development work in-house and add to its intellectual property and expertise. 

We are delighted with the progress made by the Group and anticipate further growth and development, building on our solid foundations in 2008. We would like to thank our employees and management for their dedication and hard work without which this significant progress would not have been possible.

J P Scudamore  Chairman 27 June 2008

For further information, please contact:

The final audited results have been sent to shareholders and are available on the Company's website: www.oxfordadvancedsurfaces.com

  OXFORD ADVANCED SURFACES GROUP PLC (FORMERLY KANYON PLC)

CONSOLIDATED INCOME STATEMENT

For The Period Ending 31 December 2007

Loss per share attributable to the equity holders of the Company during the year:

Total and continuing:

- Basic and diluted  7 (0.83)p (0.24)p

  OXFORD ADVANCED SURFACES GROUP PLC (FORMERLY KANYON PLC)

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

For The Period Ending 31 December 2007

Group 

  OXFORD ADVANCED SURFACES GROUP PLC (FORMERLY KANYON PLC)

CONSOLIDATED BALANCE SHEET

31 December 2007

  OXFORD ADVANCED SURFACES GROUP PLC (FORMERLY KANYON PLC)

CONSOLIDATED CASHFLOW STATEMENT

For The Period Ending 31 December 2007

  1. ACCOUNTING POLICIES

General information

Oxford Advanced Surfaces Group plc ("the Company") and its subsidiaries (together "the Group") develops and commercialises advanced materials and technology solutions leveraging a breakthrough surface modification technology platform called OntoTM. The Company is registered in England and Wales and is listed on AIM, a market operated by the London Stock Exchange.

Basis of preparation

These results have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The results have been prepared under the historical cost convention. 

Critical accounting estimates and judgements 

The preparation of financial information in conformity with IFRS as adopted by the European Union requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Group results are disclosed below.

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 present circumstances.

Basis of consolidation and Reverse Acquisition

The Company was incorporated on 13 June 2006 as Kanyon Two plc. On 10 July 2006 the Company changed its name to Kanyon plc and on 28 December 2007 it was changed to Oxford Advanced Surfaces Group plc. On 31 December 2007 following the readmission to AIM the Company became the legal parent of Oxford Advanced Surfaces Limited (see note 6). 

The combination has been accounted for as a reverse acquisition as if Oxford Advanced Surfaces Limited acquired Oxford Advanced Surfaces Group plc. Although these Group results have been issued in the name of the legal parent, the Group's activity is in substance a continuation of that of the legal subsidiary, Oxford Advanced Surfaces Limited, because after the transaction the former Board of Oxford Advanced Surfaces Limited were deemed to have control of the Group and of the legal parent. The following accounting treatment has been applied in respect of the reverse acquisition. 

c) Comparative numbers presented in the Group results are those reported in the financial statements of the legal subsidiary, Oxford Advanced Surfaces Limited, for the period ended 31 July 2007.

The Company's results and related notes are for the period from 1 February 2007 to 31 December 2007 and present comparative information for the period from 13 June 2006 to 31 January 2007. 

The Group's consolidated results and related notes are for the five month period from 1 August 2007 to 31 December 2007 and the comparatives are for the 13 month period from 14 June 2006 to 31 July 2007, representing the continuation of the financial information of the legal subsidiary, Oxford Advanced Surfaces Limited. 

Business combinations

On acquisition, the assets and liabilities and contingent liabilities of subsidiaries are measured at their fair values at the date of acquisition. Any excess of cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. 

The results of the subsidiaries acquired during the period are included in the Group income statement from the effective date of acquisition. 

When necessary, adjustments are made to the results of subsidiaries to bring the accounting policies used into line with those used by the group. 

All intra-group transactions, balances, income and expenses are eliminated on consolidation. 

Revenue recognition

Revenue is measured as the fair value of the consideration received or receivable in the normal course of business, net of discounts, VAT and other sales related taxes and is recognised to the extent that it is probable that the economic benefits associated with the transaction will flow in to the Group.

Investments in subsidiaries

In the parent company's balance sheet investments in subsidiaries are recorded at cost less any provision for impairment. Investments are recognised as an asset and reviewed for impairment at least annually. Any impairment is recognised immediately in profit or loss and is not subsequently reversed.

Goodwill

Goodwill arising on consolidation represents the difference between the cost of the business combination and the net fair value of identified assets and liabilities. Goodwill is recognised as an asset and reviewed for impairment at least annually. Any impairment is recognised immediately in profit or loss and is not subsequently reversed. 

Research and development

Research costs are charged against income as they are incurred. Certain development costs are capitalised as intangible assets, when it is probable that future economic benefits will flow to the Group. Such intangible assets are amortised on a straight-line basis from the point at which the assets are ready for use over the period of the expected benefit, and are reviewed for impairment at each balance sheet date. Other development costs are charged against income as incurred since the criteria for their recognition as an asset are not met.

  The criteria for recognising expenditure as an asset are:

Completion of the intangible asset is technically feasible so that it will be available for use or sale;

The Group intends to complete the intangible asset and use or sell it;

The Group has the ability to use or sell the intangible asset;

The intangible asset will generate probable future economic benefits. Among many other things, this requires that there is a market for the output from the intangible asset or for the intangible asset itself, or, if it is to be used internally, the asset will be used in generating such benefits;

That the Group has available to it adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

That the Group can reliably measure the expenditure attributable to the intangible asset during its development.

The costs of an internally generated intangible asset comprise all directly attributable costs necessary to create, produce and prepare the asset to be capable of operating in the manner intended by management. Directly attributable costs include employee (other than Directors) costs incurred on technical development, testing and certification, materials consumed and any relevant third party costs. The costs of internally generated developments are recognised as intangible assets and are subsequently measured in the same way as externally acquired intangible assets. However, until completion of the development project, the assets are subject to impairment testing only.

Careful judgement by the Directors is applied when deciding whether the recognition requirements for development costs have been met. This is necessary as the economic success of any product development is uncertain and may be subject to future technical problems at the time of recognition. Judgements are based on the information available at each Balance Sheet date which includes the progress with third party pilot plants, testing and certification and progress on, for example, establishment of commercial arrangements with third parties. In addition, all internal activities related to research and development of new products are continuously monitored by the Directors.

Patents and licenses

Patent costs and licensing rights are amortised over their estimated useful economic life of 20 years.

Plant and equipment

Plant and equipment are stated at cost, net of depreciation and provision for any impairment. Depreciation is calculated to write off the cost of all plant and equipment to estimated residual value by equal annual instalments over their expected useful lives as follows

Plant and Machinery 20% reducing balance

Office furniture and fittings 20% reducing balance

Computer and IT equipment 33% straight line

Impairment of plant and equipment and intangible assets

At each balance sheet date, the Group reviews the carrying amounts of its plant and equipment and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired.

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation reserve movement.

  Financial assets and liabilities

Trade and other receivables

Trade and other receivables are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method less any provision for impairment.

Trade and other payables

Trade and other payables are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.

Cash and cash equivalents

Cash and cash equivalents comprise cash at hand and deposits on a term of not greater than 3 months.

Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the period. The Group's liability for the current tax year is calculated by using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred income tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the results and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax is calculated using tax rates that have been enacted or substantially enacted by the balance sheet date and are expected to apply to the period when the asset is realised or the liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred tax is charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.

Share-based payments 

All share-based payment arrangements granted that had not vested prior to 1 July 2007 are recognised in the Group results.

All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees are rewarded using share based payments, the fair values of employees' services are determined indirectly by reference to the fair value of the instrument granted to the employee. This fair value is appraised at the grant date and excludes the impact of non-market vesting conditions (for example, profitability and sales growth targets).

Share options are valued at the date of grant using the Black-Scholes Merton option pricing model and are charged to operating profit over the vesting period of the award with a corresponding credit to the share based payment reserve.

If vesting periods or other non-market vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting.

Upon exercise of share options the proceeds received net of attributable transaction costs are credited to share capital, and where appropriate, share premium.

  Accounting standards and interpretations not applied

At the date of authorisation of these results, the following Standards and Interpretations that have not been applied in these results were in issue but not yet effective or endorsed (unless otherwise stated):

The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the results of the Group.

2. EMPLOYEES AND DIRECTORS

Group

The average monthly number of employees of the Group (including executive directors) were: 

Directors' emoluments 

The following disclosures are in respect of the emoluments paid to the directors of the Company for the period 1 August 2007 to 31 December 2007. The comparatives relate to Oxford Advanced Surfaces Limited.

No pension contributions were made on behalf of the directors. 

Oxford Advanced Surfaces Group plc has granted the following options to the following persons, in replacement of their options in Oxford Advanced Surfaces Limited. The comparatives represent the options that were issued by Oxford Advanced Surfaces Limited. The conversion factor of 476.26 represents the same factor that was applied in the share for share exchange on the reverse acquisition of Oxford Advanced Surfaces Limited.

M L Bravo exercised 8,310 of his Oxford Advanced Surfaces Limited options immediately before the reverse acquisition. On acquisition these shares were replaced with 3,957,721 ordinary shares in Oxford Advanced Surfaces Group plc. The gain recognised on these options was £983,000. No other directors exercised any options during the period.

The following director held shares in Oxford Advanced Surfaces Group plc prior to and after the reverse acquisition.

M L Sutcliffe's share option agreement was amended on the 28 March 2007 to reduce the number of options to 1,250,000. In accordance with the requirements of the share option agreement following the 1 for 10 share consolidation his options were consolidated to 125,000 new ordinary shares at an exercise price of 10 pence per share. 

  3. OPERATING LOSS 

Group

Operating loss is stated after charging

  4. INTANGIBLE ASSETS 

Group

All the goodwill in the Group arose on the reverse acquisition of Oxford Advanced Surfaces Group plc by Oxford Advanced Surfaces Limited. 

Company

The Company had no intangible assets during the period.

  5. PROPERTY, PLANT AND EQUIPMENT

Group 

No assets were held under finance leases.

Company

The Company had no fixed assets during the period.

  6. ACQUISITION OF SUBSIDIARY UNDERTAKINGS

Company

On 31 December 2007 the Company acquired 100% of the issued share capital of Oxford Advanced Surfaces Limited for cash consideration of £50,000 and 77,539,907 ordinary shares of 1 pence each issued at a premium of 24 pence each and incurred directly attributable acquisition costs of £434,000. The total cost of the combination was £19,869,000. Under IFRS 3, this transaction has been accounted for as a reverse acquisition.

The cost of the acquisition has been determined from the perspective of Oxford Advanced Surfaces Limited. As there was no readily available fair value of the legal subsidiary's equity instruments at the date of the acquisition the total fair value of all the issued equity instruments of the legal parent, Oxford Advanced Surfaces Group plc, before the business combination was used as the basis for determining the combination's cost. Immediately before the acquisition the legal parent had 88,384,131 ordinary 1 pence shares in issue. The directors have placed a fair value on these shares of 25 pence each valuing the combination at £22,096,000. Including the cash consideration and the acquisition costs the total amount deemed to have been paid for the Company was £22,580,000.

The fair value of the assets acquired has been assessed as the book value on the date of acquisition. Assets include £15,663,000 of goodwill which is allocated between two cash generating units, Oxford Energy Technologies Limited (£3,847,000) and Oxford Advanced Surfaces Group plc (£12,298,000). The reverse acquisition adjustment represent the difference between the cost of the consolidation as recognised in the Company compared to the cost as calculated under reverse acquisition accounting.

As the results have been prepared under reverse acquisition accounting rules the results of Oxford Advanced Surfaces Group plc (formerly Kanyon plc) have been included in the consolidated results from 31 December 2007.  Oxford Advanced Surfaces Group plc and its subsidiary, Oxford Energy Technologies Limited, did not contribute any material revenues or losses since the date of acquisition. If Oxford Advanced Surfaces Group plc had been a member of the Group from 1 August 2007 it would have contributed £nil revenue and £369,000 loss.

The reverse acquisition reserve arises due to the treatment of equity on a reverse acquisition which uses the equity structure of the legal parent rather than that of Oxford Advanced Surfaces Limited.

The goodwill is attributed to the future profit potential of the two cash generating units.

7. LOSS PER SHARE (BASIC AND DILUTED)

The loss per share is based on the loss of £615,000 (31 July 2007: loss of £142,000) and 74,341,761 (31 July 2007: 59,921,132) ordinary shares of 1 pence each, being the weighted average number of shares in issue during the period. The weighted average number of shares for the period ended 31 December 2007 is based on the number of shares issued by Oxford Advanced Surfaces Group plc to acquire Oxford Advanced Surfaces Limited for the period up to the acquisition and the weighted average number of shares in issue for the period since the acquisition. The weighted average number of shares for the period ended 31 July 2007 assumes that the 77,539,907 ordinary shares issued in relation to the reverse acquisition of Oxford Advanced Surfaces Limited are weighted in relation to the number of shares in issue by Oxford Advanced Surfaces Limited during the period.

Dec July

2007  2007

Loss attributable to equity holders of the Group (£'000)   (615) (142)

Weighted average number of ordinary shares in issue  74,341,761  59,921,132

Basic & diluted loss per share (pence)  (0.83)    (0.24)

The share options and warrants in issue are anti-dilutive and, therefore, diluted loss per share is equivalent to the basic loss per share.

8. RELATED PARTIES AND DIRECTORS' TRANSACTIONS

Group

During the period under review Dr M G Moloney received fees through Oxford University Consulting in relation to technical support to the Group for the sum of £9,000 (period ending 31 July 2007: £18,000). There were no amounts due at the end of the period (period ending 31 July 2007: £5,000).

Company

During the period under review a payment of fees relating management services was made to Ora Capital Partners Plc. The total amount in respect of these services was £13,000 (period ending 31 January 2007: £5,000). The balance outstanding at the end of the period was £2,000 (period ending 31 January 2007: £1,000). D R Norwood and M A Bretherton are Directors of Ora Capital Partners plc.

Remuneration of key management personnel

The remuneration of the directors and other key management personnel of the Group is set out below in aggregate.

9. POST BALANCE SHEET EVENTS 

On 3 March 2008, 1,339,984 additional share options were granted, exercisable after a vesting period of three years. The fair value of the options granted is £765,000. 

10. FINANCIAL INFORMATION

The financial information set out above is derived from the statutory accounts within the meaning of Section 240 of the Companies Act 1985. Statutory accounts for the period ended 31 December 2007 will be delivered to the Registrar of Companies and sent to Shareholders shortly. The Company's auditors have issued an unqualified auditor's report, which does not contain any statement under Section 237(2) or (3) of the Companies Act 1985, on the statutory financial statements for the year ended 31 December 2007. Statutory accounts for the period ended 31 July 2007 have been delivered to the Registrar of Companies. The Company's auditors issued an unqualified auditor's report, which did not contain any statement under Section 237(2) or (3) of the Companies Act 1985, on the statutory financial statements for the period ended 31 July 2007.

The Annual Report and Accounts will be made available to the public at the Company's registered office, Centre for Innovation and Enterprise, Begbroke Science Park, Sandy Lane, Yarnton OX5 1PF from the date of release.

The Annual General Meeting will be held at 17 Hanover Square, London W1S 1HU on 24 July 2008 at 10:30 a.m.