RLM.L Regulatory News (RLM)

PuriCore plc ("PuriCore" or the "the Company")

Final Results for the Year Ended 31 December 2015

Strong Revenue Growth in 2015; New Strategic Drug Development Focus

24 March 2016 - PuriCore plc (AIM: PURI), an emerging specialty biopharmaceutical company focused on leveraging its proprietary immunomodulatory technology, which also serves the Supermarket Retail sector and Wound Care market (as a medical device) utilizing different formulations for different applications, today announces its final results for the year ended 31 December 2015.

Alex Martin, Chief Executive Officer of PuriCore, said:

"We made good progress in 2015, most notably in finalising the outcome of our strategic and operational review which, as announced in February 2016, focuses on leveraging our proprietary immunomodulatory technology to develop novel, topical treatments for inflammatory diseases. Our Supermarket Retail business delivered impressive top-line growth, though it still required investment support. Given our new direction, the Board is evaluating a number of strategic alternatives for this business. We are excited about the prospects of our new drug development strategy and look forward to sharing more as it progresses."

FINANCIAL HIGHLIGHTS

PuriCore plc (the Company) is incorporated in the United Kingdom. The Group represents the Company and all its subsidiaries including PuriCore, Inc., PuriCore Europe Limited and PuriCore Scientific Limited.

· Group revenue increased 36.5% to $23.4 million (2014: $17.1m)

− Supermarket revenue increased by 42.0% to $22.2 million (2014: $15.6m)

§ Generator related revenue grew 42.6%; Concentrate revenue grew by 40.6%

− Health Sciences' revenue declined, as expected, to $0.6 million (2014: $1.5m) given termination of the Dermatology partnership following a change in control of the Group's partner

− Other revenue increased to $0.6 million (2014: nil) representing fees paid by third parties to gain letters of access to the Group's Active Chlorine Biocidal Products Regulation (BPR) dossier

· Gross margin of 28.4% (2014: 28.0%)

· Operating expenses increased to $16.3 million (2014: $12.2m) due primarily to planned R&D spend including the support of drug development, regulatory investments and costs and certain one-time fixed asset and intangible write-offs

· Loss from Operations was $9.4 million (2014: loss of $7.0m)

· Cash and cash equivalents were $15.5 million as at 31 December 2015 (as at 31 December 2014: $20.7m, net of $0.2m debt)

OPERATIONAL HIGHLIGHTS

· Supermarket Retail delivered strong top-line performance

− Continued growth in concentrate placements and usage of ProduceFresh® and FloraFresh®

− Sterilox® Fresh agreement with a top-three US supermarket retailer worth approximately $17.8 million over six years

· Advanced the Group's comprehensive analysis of potential healthcare applications of new formulations and high concentrations of proprietary hypochlorous acid platform technology

· Alex Martin appointed as Chief Executive Officer and Executive Director following Michael Ashton's retirement in June 2015

POST BALANCE SHEET EVENTS

· Completion of strategic review now positions PuriCore as an emerging specialty biopharmaceutical company, announced February 2016

− Confirmation of new drug development focus

− Development of novel, prescription, topical treatments for inflammatory diseases

§ to include Dermatology, Ophthalmology and potential rare disease indications

§ pre-clinical study results suggest a differentiated mechanism of action

− First Investigational New Drug (IND) applications planned for Q1 2017

· Board evaluating strategic alternatives for Supermarket Retail as announced February 2016

· In March 2016, the Company announced the appointment of Dr. Balkrishan (Simba) Gill as a Non-Executive Director of the Board

2015 Annual Report Availability

PuriCore's 2015 Annual Report and Accounts will be available in due course on the PuriCore website at www.puricore.com, will be posted to those shareholders who have not elected to receive the document electronically, and will be available for inspection at the National Storage Mechanism at www.hemscott.com/nsm.do.

2016 Notice of Annual General Meeting and Form of Proxy Availability

PuriCore's 2016 Annual General Meeting will be held at the offices of CMS Cameron McKenna LLP, Cannon Place, 78 Cannon Street, London EC4N 6AF on 16 June 2016 at 10:00 a.m. The 2016 Notice of Annual General Meeting and Form of Proxy is expected to be made available in April 2016 on the PuriCore website at www.puricore.com and will subsequently be posted to shareholders.

Enquiries:

About PuriCore

PuriCore is an emerging specialty biopharmaceutical company focused on developing novel immunomodulatory therapies, based on its proprietary hypochlorous acid platform technology. The Company has initiated a drug development program based upon its proprietary technology and formulations at high concentrations. The Company believes their formulations have novel immunomodulatory activity with potential application for the treatment of diseases in a number of therapeutic areas such as Dermatology and Ophthalmology, including potential rare diseases. Currently, the Company serves the Supermarket Retail sector and Wound Care market (as a medical device) utilizing different formulations. 

Certain statements made in this announcement are forward-looking statements. These forward-looking statements are not historical facts but rather are based on the Company's current expectations, estimates, and projections about its industry; its beliefs; and assumptions. Words such as 'anticipates,' 'expects,' 'intends,' 'plans,' 'believes,' 'seeks,' 'estimates,' and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties, and other factors, some of which are beyond the Company's control, are difficult to predict, and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. The Company cautions shareholders and prospective shareholders not to place undue reliance on these forward-looking statements, which reflect the view of the Company only as of the date of this announcement. The forward-looking statements made in this announcement relate only to events as of the date on which the statements are made. The Company will not undertake any obligation to release publicly any revisions or updates to these forward-looking statements to reflect events, circumstances, or unanticipated events occurring after the date of this announcement except as required by law or by any appropriate regulatory authority.

Chief Executive Officer's Report

In June 2015, I joined PuriCore as Chief Executive Officer and Executive Director. This is a very exciting time to be a part of PuriCore. Since joining, my key priority has been to formalise the business strategy and guide the Group through the significant change in direction to a new and potentially very rewarding drug development focus.

Building a Specialty Biopharmaceutical Company

2015 has been an important and decisive year for PuriCore. As announced in February 2016, a comprehensive and thoughtful review led to a new strategic focus for the business - to develop novel immunomodulatory therapies. We will initially focus on the development of novel, prescription, topical treatments for inflammatory diseases with a differentiated mechanism of action.

Drug development does come with uncertainty, but I believe that we are well positioned to embark on this journey as we have the expertise, strong intellectual property, and a validated, de-risked technology for which there is already a significant body of clinical evidence in humans. We will be supplementing our team in 2016 with the addition of a Chief Medical Officer, for which a search is advanced.

Building upon previous clinical experience with the Group's medical devices in Wound Care and Dermatology, we have developed proprietary formulations using high concentrations of our hypochlorous acid technology that are immunomodulatory and exhibit anti-inflammatory activity. Our preclinical study results suggest that these formulations have a differentiated mechanism of action. In animal models of disease, our formulations had a significant impact on allergen-induced itch and inflammation associated with atopic dermatitis by neutralizing and/or inhibiting key cytokines. Moreover, we believe our technology could offer an advantageous safety profile for use in infants and children.

During the year, we worked with a leading pharmaceutical consulting firm and influential key opinion leaders to complete a comprehensive drug development strategic review to assess unmet medical needs with considerable commercial value suitable for the development of a product pipeline based on our proprietary immunomodulatory technology. Our initial target indications include inflammatory diseases in Dermatology, Ophthalmology and potentially certain rare diseases.

In 2016, the Company will continue formulation development and conduct a series of additional preclinical and toxicology studies in support of two planned Investigational New Drug filings with the Food and Drug Administration (FDA), anticipated in Q1 2017. Clinical testing will commence, if and when, FDA approval is received.

Supermarket Retail

Our Supermarket Retail business has delivered strong revenue growth, up 42%. With new concentrate placements and consumable product sales coupled with significant capital equipment sales during the year, we have achieved significant penetration in both the produce and floral markets.

Given the re-focus of the Group, we are considering strategic options available for our Supermarket Retail business. Whilst this business delivered considerable top-line growth and impressive market penetration, it addresses a very different market segment to the new strategic direction of the business. The Board is evaluating strategic options such as spinning out the business into a stand-alone and separately funded entity, selling the business, establishing a joint venture or other arrangements that could further drive growth and deliver value to our shareholders.

Health Sciences

Revenues in Health Sciences primarily represent royalty income from the Group's distribution arrangement for our medical device Wound Care product and historically our Dermatology product. In 2015, revenues decreased, as expected, due to the termination of the Onset Dermatologics partnership as announced in December 2014 following their acquisition by Valeant Pharmaceuticals.

Thank You

I want to thank our employees for all their hard work and dedication through this period of change. Thank you also to our shareholders and Board for their support of our new strategic direction. We appreciate everyone's efforts in helping to build a bright future for PuriCore.

Alex Martin

Chief Executive Officer

24 March 2016

Chief Financial Officer's Report

PuriCore plc (the Company) is incorporated in the United Kingdom. The Group represents the Company and all its subsidiaries including PuriCore, Inc., PuriCore Europe Limited and PuriCore Scientific Limited.

Income Statement

Group revenue increased 36.5% to $23.4 million for the period (2014: $17.1m), reflecting the previously announced capital equipment sale order and an increase in concentrate sales in the Supermarket Retail business. Health Sciences' revenue declined, as expected, to $0.6 million (2014: $1.5m) given termination of the Dermatology partnership following a change in control of the Group's partner. Group revenue also includes $0.6 million of fees paid by third parties to gain letters of access to the Group's Biocidal Products Regulation dossier.

Gross profit margin for the Group increased slightly to 28.4% (2014: 28.0%) through increased sales of higher margin consumable products in Supermarket Retail partially offset by the Group's continued investment in upgrading generators and rolling-out a simpler, replacement concentrate delivery system.

Operating expenses increased to $16.3 million (2014: $12.2m) primarily due to: Research & Development investments specifically related to our new drug development strategy; regulatory investments and provisions; and the write off of certain fixed assets (concentrate delivery systems that were replaced by capital equipment). In September 2015, the Group reached a settlement with the California Department of Pesticide Regulation in connection with the sale and promotion of the Group's concentrate products in California. The Group is cooperating with the Environmental Protection Agency (EPA) related to their on-going investigation of concentrate products and has recorded an associated provision in the accounts as at 31 December 2015. The regulatory costs and fixed asset write-off are included in General & Administrative expenses.

For 2015, PuriCore reported an EBITDA* loss of $6.8 million (2014: loss $4.9m), and a net loss from Continuing Operations of $9.4 million (2014: loss $7.0m).

Cash Flow

Cash and cash equivalents as at 31 December 2015 were $15.5 million (as at 31 December 2014: $20.9m

before debt). PuriCore used $3.4 million of cash in operating activities and spent $1.7 million to fund the purchase of fixed assets (primarily concentrate delivery systems placed in supermarkets) during 2015. The Group used $0.2 million to repay its line of credit.

Debt

The Group had no outstanding debt as at 31 December 2015 having paid off the expiring line of credit.

Marella Thorell

Chief Financial Officer and Chief Operating Officer

24 March 2016

* Earnings before interest, tax, depreciation, fixed asset write-off, amortisation and non-cash equity-related charges.

Consolidated Statement of Comprehensive Income

For the Years Ended 31 December

* Continuing Operations comprise the Group's Supermarket Retail and Health Sciences businesses.

Consolidated Statement of Changes in Equity

For the Years Ended 31 December 

The share premium is restated to reflect the equity structure of the legal parent with the difference being the sum arising from the reverse acquisition in 2006 included in other reserves. $98,694,664 has been transferred from share premium to other reserves as at 31 December 2013 and 31 December 2014.

Other reserves also includes share-based payments and warrant expense. Reclassification of Other Reserves to Retained Earnings in 2015 relates to costs associated with prior share-based payment and warrant expense for share options and warrants which lapsed.

The cumulative translation adjustment is restated to reflect the recycle of foreign currency translation differences to the income statement on the disposal of the UK Endoscopy subsidiary in 2014. $2,400,000 has been adjusted through the 2014 Consolidated Statement of Comprehensive Income and to the cumulative translation reserve as at 31 December 2014. This also resulted in a reduction in the 2014 basic and diluted earnings per share from $0.29 to $0.25.

Consolidated Statement of Financial Position

As at 31 December 

Consolidated Statement of Cash Flows

For the Years Ended 31 December

* Includes Continuing and Discontinued Operations

Marella Thorell

Chief Financial Officer

Company no: 05789798

RISKS AND UNCERTAINTIES

The risks included here are not exhaustive. The Group operates in a competitive and rapidly changing environment and has embarked on a new strategic direction. New risks emerge periodically, and it is not possible to predict all such risk factors for the Group's business or the extent to which any factor or combination of factors might cause actual results to differ materially from those contained in any forward-looking statements.

Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

Risk management is seen as an important element of internal controls and is used to mitigate the Group's exposure to such risks to the extent possible.

RISKS RELATING TO THE GROUP'S BUSINESS AND FUTURE STRATEGY

The new strategic focus is subject to the uncertainties of drug development and the availability of financing.

PuriCore is embarking on a new strategic direction focused on developing its platform technology at high concentrations for drug applications. Such a strategy involves inherent risks associated with demonstrating safety and efficacy of compounds, ensuring stable formulations, demonstrating clinical efficacy, achieving regulatory approval and then delivering commercial success.

Failure to implement a successful research and development strategy could result in an inability to deliver new products and indications, which would have a material detrimental effect on the sustainability of the business. Failure of programmes could result from lack of organisational resource or capability deficiencies, inadequate planning or anticipation of obstacles, poorly designed testing protocols, changes in the regulatory landscape, failure to achieve clinical results or regulatory approvals, or from the formulations not having the clinical benefits or safety profiles that were anticipated. Even if regulatory approvals are obtained, adoption of the Group's products could prove slow or difficult, depending upon other products or available therapies for the indications. Other drug companies could develop safer or more effective products for the same indications and secure a significant portion of the available market. Macro-economic factors could impact the pricing or payors' willingness to reimburse patients for the Group's product. There are many uncertainties and variables which could impact the timing and likelihood of the Group successfully delivering a new drug. Additionally, given the significant investment required, the Group may not be able to fund on-going development costs without additional financing from one or more sources.

The Group's products are subject to various legislative and regulatory requirements.

The Group's products are subject to various legislative and regulatory requirements. If the Group or its third party manufacturers or distributors fail to satisfy legislative and regulatory requirements, this could result in the imposition of sanctions on the Group, including fines, injunctions such as 'stop sale orders', civil penalties, import bans, delays, suspension or withdrawal of approvals, license revocation, seizures or recall of products, operating restrictions, and criminal prosecutions, any of which could materially harm the Group's product development and commercialisation efforts as well as have a material effect on the business or results of operations.

Related to the Supermarket Retail business, the Environmental Protection Agency (EPA) has been reviewing the Group's concentrate products as part of an ongoing investigation. The Group has been asked to provide additional information related to previous sales and promotion of these products, and is fully cooperating with the EPA. PuriCore has processes and procedures intended to drive regulatory compliance. However, no assurance can be provided regarding the ability of those processes and procedures to totally mitigate compliance risk.

The medical device sector is highly regulated and the Group and its distribution, manufacturing and other partners must comply with many regulations relating to the marketing of its products. The Group could suffer significant negative effects if either it or partners do not comply.

There are a broad range of regulations relating to the development, testing, approval and manufacturing of drugs which the Group must successfully navigate and comply with in order to commercialise new drugs. Even if regulatory clearance is granted, it is subject to continual review and any approval may be withdrawn or restricted.

Any one or a combination of these risk factors could have a material adverse effect on the Group's business, financial condition and results of operations. While the Group endeavors to manage these risks internally and through contractual arrangements and monitoring for those that are the responsibility of a third party, there are inherent risks particularly in arrangements that are not completely under the Group's control.

Legislative changes or regulatory reform of the healthcare systems in the countries in which the Group operates may also affect the Group's ability to develop or sell its products profitably or at all.

The Group has a history of operating losses and significant investment will be required to support the new business strategy which will not be provided by the Group's current operations.

The Group has experienced operating losses in each year since its inception and, as at 31 December 2015, had an accumulated deficit of approximately $174 million. The Group has a cash position of $15.5 million as at 31 December 2015. However, the Group will need a source of funding in the future to support its new drug development strategy and to reach a value inflection point for the new strategy. The Board is evaluating strategic alternatives for the Supermarket Retail business which could provide a source of cash; however, the costs associated with developing, testing and obtaining regulatory approval are significant. In addition, the timeline for obtaining regulatory approval for a drug is lengthy and the Group does not have positive cash flow from operating businesses to cover the costs of developing new drug products, so additional funding will be necessary. Failure to obtain funding could have a material adverse effect on the Group's business, financial condition and results of operations, and ability to execute the strategy.

The Company may need to raise additional capital. If it is unable to raise additional capital in the future, product development could be limited, constraints could be placed on the operations of the business and long-term viability may be at risk. If the Company raises additional capital existing shareholders' interests in the Company may be diluted. The Company may seek to obtain additional funds through equity or debt financings, or strategic alliances with third parties either alone or in combination with equity or debt financing investments.

There are factors that may cause the Group's future capital requirements to be greater than anticipated or could accelerate the need for funds including but without limitation:

· unforeseen developments during pre-clinical and/or clinical trials;

· delays in the timing of receipt of required regulatory approval or clearances;

· unanticipated expenses in research and development for the drug development business;

· unanticipated expenses in defense of intellectual property rights;

· lack of financial resources to adequately support operations;

· the need to respond to technological changes and competition;

· unforeseen problems in attracting and retaining qualified personnel;

· claims that might be brought in excess of the Group's insurance coverage; or,

· imposition of penalties for failure to comply with regulatory guidelines.

All or any of these factors may utilise the Group's cash resources and increase the amount, and accelerate the timing of, any equity or debt financing. An equity raise or even a debt raise (which could include a convertible feature or warrants) may dilute existing shareholders' ownership stakes.

The Group's new business strategy exposes it to a higher level of risk associated with pre-clinical and clinical studies.

As the Group is embarking upon a new business strategy in developing drug formulations in targeted therapeutic areas, there is an increased risk associated with the necessary pre-clinical (animal) and clinical (human) studies that need to be conducted. The clinical testing could result in harm to humans for which the Group could be held responsible. If humans and/or animals were harmed as a consequence of the Group's actions, it could have a material negative effect on the Group's financial results and cash flow as well as its reputation and consequently its access to potential financing. The Group will seek to mitigate these risks with management oversight and liability insurance.

The Group is reliant on core technology and development.

The Group is reliant on its core platform technology and is potentially subject to competition from other companies that might have products in development or commercially available which are more advanced and/or less expensive. In relation to future products, competitors may precede the Group in developing, receiving regulatory approval and commercialising their products and competitors may also succeed in developing products that are even safer, more effective, or more economically viable than products developed by the Group.

As a result, the Group's products may not be competitive or available in the market in a timely manner therefore eroding the Group's market share and/or potential for growth or creating pricing pressure in the market. The Group seeks to mitigate these risks through strengthening the science and technology of its products, diversifying its product portfolio, endeavouring to rapidly increase market share and enter into new markets with opportunities for return, improving manufacturing efficiencies and remaining vigilant and pro-active in regard to competitive threats, to the extent possible.

The Group has a significant concentration of revenue derived from a few customers.

A significant proportion of the Group's sales contracts are with a limited number of customers such as certain large retail supermarket chains. Failure to deliver products and/or services to these customers, termination by any of these customers of their agreements with the Group, and/or a reduction in spending by these customers could have a material adverse effect on the Group's business, financial condition, and results of operations in the form of reduced revenues and cash flow. The Group is endeavouring to diversify its customer base through additional product offerings and new customers to mitigate this risk.

As the Group seeks to grow recurring, consumables-based revenue, consumption levels may not be as high as forecast whilst investments are necessary to establish the consumable platform at customers.

The Group derives revenue from a mixture of capital equipment, leased equipment, service contracts, concentrate sales and royalty income. With a stated intent to transition the Supermarket Retail business to a more consumables-based revenue model, future revenues are to a greater extent dependent upon on-going consumption levels from customers. If usage levels in future years do not achieve expectations and if appropriate measures are not taken to reduce costs in line with reduced sales, this could have a material adverse effect on the Group's business, financial condition, and results of operations. Further for Supermarket Retail customers, the Group must make initial investments in installing the concentrate delivery system for the consumable products at customer locations and may not re-coup the cost of this investment if consumption levels do not meet expectations. The Group seeks to mitigate this risk by closely monitoring and reporting to the customer on consumption, by maintaining close customer relationships to ensure usage of consumables and by expanding the use and application of the consumables throughout the customers operations.

The Group is dependent on a limited number of sub-contract manufacturers to assemble many of its products and to produce certain components within these products.

The Group is dependent on a limited number of sub-contract manufacturers to produce its range of products. Although the Group considers additional sub-contract manufacturers, there can be no guarantee that the Group will be able to access additional sources to manufacture its integral products. The Group believes that appropriate supply chain systems will continue to be applied, but there is no guarantee that its sub-contractors will continue to devote adequate resources to the production of the Group's products or deliver sufficient quantities of finished products on a timely basis or at an acceptable cost or to enable the Group to maintain sufficient inventory to meet customer demand, which may delay or reduce revenues.

PuriCore's business and the advancement of the new strategy could suffer if it cannot attract and retain the services of key employees.

The Group depends upon the continued service and performance of existing executive officers, and relies on key personnel in formulating and implementing product research and development strategies and other activities related to the Group's drug development strategy. The Group's success depends in large part on its ability to attract and retain highly skilled employees with the right expertise who are able to advance the new strategy. The Group competes for such personnel with other companies and may not be successful in hiring or retaining qualified personnel, particularly if financing the strategy becomes a bigger challenge.

RISKS RELATING TO THE MARKETPLACE IN WHICH THE GROUP OPERATES

The sectors in which the Group operates are subject to macroeconomic pressures that may result in tighter spending practices.

PuriCore's customers are primarily in the retail supermarket and healthcare sectors. These sectors are subject to spending policy changes as a consequence of any downturn in the economy. These pressures are present in the US healthcare sector and the retail supermarket sector has been impacted by decreases in consumer spending arising from the economic downturns. These macroeconomic pressures may result in lower revenue being realised by the Group, pricing pressures for its products or lower consumption, and/or lower than expected market size or prices associated with the drug business.

RISKS RELATING TO THE ORDINARY SHARES

The share price of the Company may fluctuate significantly.

The share price may, in addition to being affected by the Group's actual or forecasted operating results and market reception to the new business strategy, fluctuate significantly as a result of factors beyond the Company's control and may not always reflect the underlying asset value or the prospects of the Group. The factors that may affect the Company's share price include:

· liquidity of the Ordinary Shares and willingness of shareholders to sell when there are demand or supply imbalances;

· fluctuations in stock market prices and volumes, and sector or general market volatility;

· changes in laws, rules and regulations applicable to the Company, its operations and involvement in actual or threatened litigation;

· general economic and political conditions, including in the regions in which the Group operates; and

· changes in the structure of the European Union and financial implications of the sovereign debt crisis.

There can be no assurance that an active or liquid trading market for the Company's Ordinary Shares will be developed or, if developed, that it will be maintained.

The Company's shares were admitted to trading on AIM following delisting on 23 December 2014. There can be no assurance that an active or liquid trading market for the Ordinary Shares will develop or, if developed, that it will be maintained following admission to AIM. AIM is a market designed primarily for emerging or smaller companies to which a higher investment risk tends to be attached than to larger or more established companies and may not provide the liquidity normally associated with the premium segment of the Official List. The Ordinary Shares may, therefore, be difficult to sell compared to the shares of companies listed on the premium segment of the Official List and their market prices may be subject to greater fluctuations than might otherwise be the case.

Further, a quotation on AIM affords shareholders a lower level of regulatory protection than that afforded to shareholders in a company with its shares listed on the premium segment of the Official List. The future success of AIM and liquidity in the market for the Company's shares cannot be guaranteed. Potential investors and shareholders should be aware that the value and any income from the Ordinary Shares can go down as well as up and that investment in securities which are traded on AIM might be less realisable and might carry a higher risk than a security listed on the Official List. Liquidity on AIM is currently provided by market makers who are member firms of the London Stock Exchange and are obliged to quote a share price for each company for which they make a market between 8.00 a.m. and 4.30 p.m. on a business day.

RISKS RELATING TO INTELLECTUAL PROPERTY

The Group may be unable to adequately protect its intellectual property.

The Group is the owner of intellectual property rights, comprising patents, trademarks, designs, copyright, trade secrets, and confidential information. While it may apply from time to time to register additional patents, trademarks, designs and copyright and take reasonable steps to protect its trade secrets and confidential information, there can be no assurance that any of its registered intellectual property rights will not be successfully challenged or that third parties will not misappropriate such secrets and information. The Group relies to a great extent on its patents and whilst no validity challenges have previously been made, there is no guarantee that they will not be made in the future. Other companies may obtain intellectual property rights based on developments in technology used by the Group. Without obtaining a license to utilise such intellectual property rights, the Group would be restricted from utilising such new developments.

As the Group executes its new drug development strategy and promotes this strategy to the current and/or prospective investors and others, its intellectual property portfolio may be scrutinised by competitors and others in the market place, which could lead to intellectual property challenges and potential incremental costs. Any misappropriation, or challenge to its intellectual property rights, or failure to obtain protection for a license in relation to such intellectual property could have a material adverse effect on the Group's business, financial condition, and results of operations or ability to execute its strategy and may require the Group to engage in costly litigation. The Group seeks to mitigate this risk by increasing investment in new patents and by having a robust process to monitor and/or defend existing patents.

Intellectual property litigation and/or infringement actions may be brought against the Group or may need to be brought by the Group.

There can be no assurance that the Group will not receive a notification that any products or systems infringe any third-party intellectual property rights in the future. Any litigation to determine the validity of third-party infringement claims, whether or not determined in the Group's favour or settled by the Group, would be costly and could divert the efforts and attention of the management and technical personnel from productive tasks, which could have a material adverse effect on the Group's business, financial condition and results of operations and/or its ability to advance the new drug development strategy.

The Directors cannot guarantee that infringement claims by third parties or claims by customers or end users of the Group's products resulting from infringement claims will not be asserted in the future or that such assertions, if proven to be true, will not materially adversely affect the Group's business, financial condition, and results of operations and/or compromise the timing, costs and reliability of its new drug development strategy. In the event of an adverse ruling in any such matter, the Group could be required to pay substantial damages; cease the manufacture, use, and sale of infringing products; discontinue the use of certain processes; or obtain a license under the intellectual property rights of the third-party claiming infringement. A license may not be available on reasonable terms or at all. Any limitations on the Group's ability to develop or market its products, or delays and costs associated with redesigning its products or payments of license fees to third parties, or any failure by the Group to develop or license a substitute technology on commercially reasonable terms could have a material adverse effect on the Group's business, financial condition and results of operations or advancement of the new strategy. There can be no assurance that the Group will not need to bring (or otherwise participate in) claims against third parties for infringement of intellectual property owned by the Group.

RISKS RELATING TO PRODUCT LIABILITY

The business of the Group exposes its products to potential product liability risks. If the Group was sued in a product liability action, it could be forced to pay substantial damages and the attention of the management team may be diverted from operating the business or advancing the strategy.

The fact that the Group is in the healthcare and retail supermarket sectors may expose it to potential product liability risks associated with the research, development, manufacture, marketing, sale, installation, training and use of its products. In addition, a product liability claim would be time-consuming and expensive to defend and could result in the diversion of management's attention from the core business and new strategy.

The Group has product liability insurance in place. Whilst the Directors believe that the current levels of coverage are sufficient for its current products, there can be no assurance that the level of insurance carried now or in the future will be adequate to cover the financial damages resulting from a product liability claim or judgment. Any product liability claim or judgment that exceeds the Group's insurance coverage limits could have a material adverse effect on the Group. The Group seeks to mitigate this risk by maintaining levels of liability insurance, which the Directors believe is sufficient to address this risk.

Select Notes to the Financial Statements

For the Years Ended 31 December 2015 and 2014

BASIS OF PREPARATION

PuriCore plc (the Company) is incorporated in the United Kingdom (UK). PuriCore, Inc. (a United States (US) subsidiary), is incorporated under the laws of Delaware in the US. The Group represents the Company and all its subsidiaries including PuriCore, Inc., PuriCore Europe Limited and PuriCore Scientific Limited. The Group consolidated financial statements were authorised for issue by the Board of Directors on 24 March 2016. European Union law (EULAW) (IAS Regulation EC 1606/2002) requires the financial statements of the Group be prepared in accordance with International Financial Reporting Standards as adopted by the EU (Adopted IFRSs). The financial statements have been prepared on the basis of the recognition and measurement requirements of Adopted IFRSs that are endorsed by the EU and effective as at 31 December 2015.

On 30 June 2014, the Group sold the entire issued share capital of PuriCore International Limited (PIL), the Group's UK Endoscopy business. Accordingly, PIL's operational results have been included as a discontinued operation for the year ended 31 December 2014. A discontinued operation is a component of the Group's business that represents a separate major line of business that has been disposed. Classification as a discontinued operation occurred upon disposal.

Continuing Operations comprise the Group's Supermarket Retail and Health Sciences businesses. PIL's results for the year ended 31 December 2014 presented in the Consolidated Statement of Comprehensive Income are reflected as Discontinued Operations. The Consolidated Statement of Cash Flows for the period ended 31 December 2014 reflects PIL results and the sale within operating and investing activities.

The Company has chosen to present its own results under Adopted IFRSs and by publishing the Company financial statements here with the Group financial statements the Company is taking advantage of the exemption in section 408 of the Companies Act 2006 not to present its individual statements of comprehensive income and related notes.

The financial statements are presented in US dollars (USD), rounded to the nearest dollar. The USD has been chosen as the presentational currency as a significant portion of the Group's revenue and expenses are denominated in USD. The accounting policies set out below have, unless otherwise stated, been applied consistently throughout the year.

Some asset and liability amounts reported in the accounts are based on management estimates and assumptions that affect the reported amounts. There is therefore a risk of significant changes to the carrying amounts for these assets and liabilities within the next financial year. Management regularly reviews the estimates and assumptions that drive key financial calculations and disclosures. Key risks are considered in these calculations, where necessary.

NOTE 1 - Segmental Analysis

PuriCore currently serves the Supermarket Retail sector and Wound Care market (as a medical device within the Health Sciences segment) utilizing unique formulations.

Segmental information is provided having regard to the nature of the goods and services provided and the markets served. During the year ended 31 December 2015, the Health Sciences segment included costs related to the Company's drug development programs. Discontinued Operations represents the Group's UK Endoscopy business which was sold as at 30 June 2014.

During the year ended 31 December 2015, three US Supermarket Retail customers individually represented 10.0% or more of Group revenue and collectively represented 69.1% or $16.1 million of Group revenue.

An analysis of the Group's business segments for the years ended 31 December is as follows.

(1) In 2015, Company and Other includes Biocidal Products Regulation revenue and costs associated with operating PuriCore plc.

(2) Includes amortisation of medical device-related intangible asset no longer in use.

(3) Represents the write off of certain concentrate delivery system assets, as customers purchased alternate capital equipment (generators), no longer in use.

(4) In 2014, Company includes costs associated with operating PuriCore plc.

Information about Geographical Areas

An analysis of the Group's revenue by geographic location of its customers, segment assets and capital and intangible expenditures are as follows.

NOTE 2 - Profit / (Loss) for the Year

An analysis of the Group's profit / (loss) from Continuing Operations for the years ended 31 December has been arrived at after charging:

An analysis of Group auditor's remuneration for the years ended 31 December is as follows.

Certain taxation compliance services for the year ended 31 December 2014 were provided by outside taxation consultants, rather than the Group's auditors, and therefore are not reported in the table above. These taxation compliance services were performed by the auditors in 2015.

NOTE 3 - Earnings / (Loss) per Share

The Company's issued share capital at 31 December 2015 consisted of 50,135,432, 10 pence ordinary shares.

The calculation of the Group's basic and diluted earnings or loss per share for the years ended 31 December is based on the following data.

(1) The calculation for diluted loss per share is identical to that used for basic loss per share. The exercise of share options would have the effect of reducing the loss per share and are therefore excluded since not dilutive under the terms of IAS 33 'Earnings per share'.

NOTE 4 - Trade, Other Receivables and Other Current Assets

The Directors consider the carrying amount of trade and other receivables approximates fair value. An analysis of Group trade and other receivables as at 31 December is as follows.

An analysis of the Group's capital lease receivables as at 31 December is as follows.

Customer credit terms are generally 30 days from invoice date. The Group has good relations with its customers and minimal historical write-offs. An analysis of the age profile of Group trade receivables as at 31 December is as follows.

An analysis of Group trade, capital lease, and other receivables by currency as at 31 December is as follows.

An analysis of the Group's provision for impairment of receivables as at 31 December is as follows.

The Group's provision for impairment of receivables is located within the United States.

NOTE 5 - Cash and Cash Equivalents

An analysis of the Group's cash and cash equivalents as at 31 December is as follows.

(1) Cash equivalents represent funds held in a money market fund backed by U.S. Treasury securities.

NOTE 6 - Trade Payables and Other Accruals

The Directors believe the carrying amount of trade payables and other accruals approximates their fair value. An analysis of the Group's trade payables and other accruals as at 31 December is as follows.

Accruals include an estimate associated with a pending regulatory matter.

NOTE 7 - Loans and Borrowings

An analysis of the Group's loans and borrowings as at 31 December is as follows.

Revolving Credit Arrangement

In December 2015, PuriCore, Inc.'s outstanding secured revolving credit arrangement (the "LOC") expired and was repaid in full. In December 2013, PuriCore, Inc. entered into the LOC with a US bank. The LOC limit was the lesser of $5,000,000, or 80% of the Group's eligible accounts receivable domiciled in the US and the UK (see below for amendments). The LOC's interest rate was prime rate plus 1.5% per annum with a minimum rate of 5.5%. The LOC was secured by the Group's accounts receivable, inventory, equipment, general intangibles, intellectual property, and other personal property assets. In addition, the Group was required to maintain certain covenants. In conjunction with the LOC, in December 2013, the Group issued to the bank warrants to purchase 154,229 shares of common stock. The warrants are fully exercisable at 49.43 pence per share and have a term of five years from date of grant.

In June 2014, the Group's LOC was amended due to the sale of the UK Endoscopy business and references to PIL were removed. In addition, a minimum interest charge of $1,000 per month was established. In December 2014, certain covenants of the LOC were modified to allow the Group to maintain accounts outside of the bank for asset management and investment needs.