RLM.L Regulatory News (RLM)

PuriCore plc

("PuriCore" or the "Company")

30 April 2013

PuriCore (LSE: PURI), the water-based clean technology company, today announces its Final Results for the year ended 31 December 2012. 

2012 Financial Highlights

·; Group revenue up 11.3% (12.0% at constant currency) to $47.4m (2011: $42.6m)

§ Supermarket Retail revenue up 14.0% to $22.2m (2011: $19.4m)

§ Endoscopy revenue up 4.6% (5.9% at constant currency) to $23.5m (2011: $22.5m)

§ Wound Care revenue up 160.0% to $1.7m (2011: $0.7m)

·; Improvement in gross profit margin to 32.7% (2011: 29.4%)

·; EBITDA* profitable: increase of $3.6m to $1.3m (2011: -$2.3m)

·; Cash flow generated from operations $4.5m (2011: -$0.06m)

·; Loss before interest and taxes of $2.1m (2011: $6.7m)

·; Operating expenses reduced 9% to $17.5m (2011: $19.2m)

·; Gross cash of $2.5m at 31 December 2012

* Earnings before interest, tax, depreciation, and amortisation.

2012 Operational Highlights

Food & Agriculture

·; Supermarket Retail: signed two major deals valued at approximately $9m

·; Agriculture: reported positive results from research collaboration at Oxford University

·; Water Treatment: signed a marketing partnership agreement with Lohas Products GmbH

Health Sciences

·; Endoscopy: recurring revenue increased 5.8% (7.5% at constant currency) to $18.2m (2011: $17.2m), accounting for 78% of divisional revenue

·; Wound Care: revenue continued to grow; focused on developing marketing partnerships

Post-Period Events

·; Converted 95% of the £7.95m of Convertible Loan Notes in January

·; Raised approximately £2.3m (before expenses) in a placing in January

·; Received US FDA regulatory clearance for Vashe Skin and Wound Hydrogel formulation itch related to atopic dermatitis in February

·; Formed marketing partnership with Onset Dermatologics for new Vashe-based dermatologic hydrogel products

·; Formed marketing partnership with SteadMed Medical in April for marketing of Vashe Wound Therapy in the US, Canada, and Mexico

·; Signed a $14m Sterilox Fresh agreement with a top-five US supermarket retailer in April

·; Strengthened Board through appointments of Danny Hegglin Non-Executive Director in January, Marella Thorell Finance Director in March, and Peter Larkin Independent Non-Executive Director in April

Michael Ashton, Executive Chairman, said:

"In 2012, PuriCore grew revenue, improved gross profit margin, and generated positive cash flow from operations whilst the successful post-period end restructuring of the Convertible Loan Notes and the raising of more than £2 million, through a placing of shares, have significantly strengthened our balance sheet. Looking ahead, the Directors remain confident of the Company's prospects to achieve sustainable growth in key business areas through the strategic expansion of our range of product formats, increasing the proportion of recurring revenues, and pursuing business development partnerships." 

PuriCore will host a conference call for investors and analysts today at 2.00 pm BST (9.00 am EST). From the UK, dial +44 (0)20 3139 4830 (Pin code: 62667591#) and from the US, dial +1 718 873 9077 (Pin code: 62667591#).

A recording of the results call will be available on the Company's website at www.puricore.com.

Enquiries:

About PuriCore

PuriCore plc (LSE: PURI) is a water-based clean technology company focused on developing and commercialising proprietary solutions that protect people from the spread of infectious pathogens without causing harm to human health or the environment. PuriCore's antimicrobial technology and complementary products are used principally in well-established core businesses and emerging sectors of two broad markets: Health Sciences and Food & Agriculture. In the Health Sciences market, PuriCore is the leading full provider of all products and services required for a safe, efficient, and compliant endoscope decontamination to protect patients in UK hospitals. PuriCore's breakthrough wound therapy solution is used to treat chronic and acute wounds including diabetic ulcers and burns as well as atopic dermatitis as dermatologic treatment products. In the Food & Agriculture market, both Sterilox Fresh and FloraFresh provide savings to supermarket retailers in labour costs and improvements in inventory loss of fresh produce and floral products. In addition, the Company is progressing in its research and development programmes at Oxford University on the use of its technology as an agricultural fungicide. PuriCore is headquartered in Malvern, Pennsylvania, with operations in Stafford and Clevedon, UK. To receive additional information on PuriCore, visit www.puricore.com.

Chairman's Report

PuriCore improved trading in 2012 with revenue growth in all business divisions and an increase in gross margin. The Company was profitable at the EBITDA (earnings before interest, tax, depreciation, and amortisation) level for the year with positive cash flow from operations. The loss for the year reduced by $8.2 million to $0.9 million. Additionally, post-period end the Company strengthened its balance sheet by successfully restructuring the majority of the £7.95 million of Convertible Loan Notes and raising gross proceeds of £2.3 million through a placing of new shares.

Food & Agriculture

Supermarket Retail: Fresh Produce and Floral

PuriCore continued to expand market share with leading US and Canadian retail supermarkets for Sterilox Fresh (for fresh produce applications) and FloraFresh (for floral applications). In 2012, the Supermarket Retail business increased revenues 14.0% to $22.2 million (2011: $19.4 million). As at 31 December 2012, the Company had captured approximately 22% of the target market in the US and Canada.

PuriCore closed two significant commercial agreements in October with a combined value of approximately $9 million. The first of these contracts, expected to generate approximately $7 million over four years, has been agreed with an existing customer, a top-five US supermarket retailer, to implement and use PuriCore's new formulation of FloraFresh across all stores. FloraFresh will be used by the supermarket's floral departments to improve the quality and shelf-life of flowers. In 2012, PuriCore launched FloraFresh Solution as a bottled concentrated product eliminating the need for and costs of System sales, installations, and servicing. The switch to a bottled concentrate model will also increase the proportion of recurring revenues to the Group. At the customer site, PuriCore now installs a simple, proprietary dilution system, which automatically dilutes the FloraFresh concentrate appropriately for use.

During the period, PuriCore also signed a new sales agreement, valued at approximately $2 million, with a long-standing US regional supermarket customer for the purchase of new Sterilox Fresh Systems. This retailer has used Sterilox Fresh for more than five years under lease agreements and has now purchased new systems under this capital sales agreement. Post period end, PuriCore signed a $14 million agreement for Sterilox Fresh with a top-five US supermarket retailer.

Agriculture

PuriCore continued to advance its research and development efforts in agriculture. In February 2012, the Biotechnology and Biological Sciences Research Council (BBSRC) awarded £500,000 in a research grant to The University of Oxford to study PuriCore's ActiVita Agricultural Solution, a proprietary, environmentally safe fungicidal solution formulated for agricultural applications. The three-year grant will fund research focused on exploring the mode of action of the ActiVita solution on fungi that devastate major food crops, including wheat, rice and maize. The research is led by Sarah Gurr, PhD, Professor of Molecular Plant Pathology at The University of Oxford, a specialist in crop disease, plant pathogenic fungi and fungal biotechnology. In October, PuriCore announced further positive results from the ActiVita Agriculture programme, reporting that ActiVita continues to demonstrate potential as a potent broad-spectrum antifungal agent. Research is ongoing, and when the Directors have a better understanding of the scope of the commercial opportunity, the Company plans to enter into discussions with appropriate partners.

Water Treatment

PuriCore advanced additional development and marketing opportunities in water treatment for a number of food and agriculture applications. In November, the Company announced that it had signed a marketing and distribution partnership agreement with Lohas Products GmbH, a German-based innovative provider of special individualised solutions for food safety and water treatment products.PuriCore will provide technical and scientific knowledge in the development and commercialisation of new applications, and Lohas will have an exclusive license to market and distribute the applications in certain markets and territories (exclusive of the US and UK). These new potential applications include, but are not limited to, the use of PuriCore's technology for seafood production, water treatment in restaurants, and livestock husbandry. Collaboration on marketing plans and application development will be on-going in 2013, and revenue generation is expected in 2014. Under the terms of the agreement, PuriCore and Lohas will share profits of the products equally as they are commercialised.

Health Sciences

Endoscopy

In the Endoscopy business, strong recurring revenue streams contributed to the division's revenue increase of 4.6% (5.9% at constant currency) to $23.5 million for 2012 (2011: $22.5 million). The business continued to focus on increasing recurring revenues to reduce the potential impact of capital spending delays by its primary customer, the UK National Health Service (NHS). PuriCore achieved a 5.8% (7.5% at constant currency) increase in recurring revenues, which now account for 78% of division revenue. This increase was achieved by driving additional revenues from new service contracts with existing customers, offering of private-labeled chemistries, service contract updates, and the new catalogue of surgical consumables made available through the strategic acquisition of Monmouth Surgical in May 2012.

Wound Care and Dermatology

In the Wound Care business (including Dermatology and Dental), revenue increased by 160% to $1.7 million (2011: $0.7 million). During the year, the Company focused on business development opportunities in new geographies and a variety of Health Sciences market segments to expand the reach and product adoption of its current products and to commercialise new formulations. In April 2013, PuriCore announced an exclusive marketing partnership with SteadMed Medical, a leading marketer of acute and chronic wound care products, to commercialise Vashe Wound Therapy in the US, Canada, and Mexico. Vashe will be an integral part of the SteadMed comprehensive protocol of care for acute and chronic wounds and burns, targeting wound care centres, hospitals, and home health agencies. The Directors believe that this agreement will expand marketing reach for the Vashe product through SteadMed's experienced sales, marketing, and clinical teams. Under the terms of the multi-year agreement, PuriCore received an upfront payment of $500,000 and will receive royalties in the high teens based on sales volumes. All intellectual property related to Vashe remains with PuriCore.

Post period end, in February 2013, PuriCore announced that it had received US FDA regulatory clearance for Vashe Skin and Wound Hydrogel formulation for the management and relief of pain, burning, and itching experienced with various dermatoses including atopic dermatitis. The Company intends to use this hydrogel clearance to advance new product development and partnering opportunities in dermatology, wound care, and animal health. One such opportunity is PuriCore's partnership with Onset Dermatologics, a leader in the development and commercialisation of prescription dermatology products, for Vashe-based dermatology products, which was announced in March 2013. The agreement includes upfront payments and double-digit royalty payments on future sales of Aurstat Anti-Itch Hydrogel and Aurstat Kit. Onset Dermatologics will market and distribute this new Vashe-based formulation as Aurstat Anti-Itch Hydrogel and as a component of Aurstat Kit exclusively in the US beginning in May 2013.

Strategic Update and Outlook

PuriCore's business mix is designed to deliver both robust growth and cash generation. To this end the Company is focused on three key strategies to drive continued growth and sustainable profitability.

Expand Range of Product Formats

During the past several years, PuriCore has been successful in developing bottled formulations for a number of products. The bottling of Vashe Wound Therapy has expanded the Company's ability to reach more hospitals and wound care centres. Last year, PuriCore successfully introduced FloraFresh concentrate solution, which replaced the FloraFresh System and eliminated the need and costs of System sales, manufacturing, capital investment, installations, and servicing machines. The bottled model provides for a long-term stream of recurring revenues generated from the Group's consumable product range. The Group is also investigating opportunities to offer customers additional Sterilox Fresh products. The addition of bottled Sterilox Fresh offerings would allow the Company to offer supermarket retail customers options for the generation and delivery of Sterilox Fresh, either on-site generation or delivery of a bottled concentrate solution for on-site dilution. The Directors believe the potential addition of a concentrate to the Sterilox Fresh product range will expand the Company's reach into smaller retailers and other foodservice operations. In addition, PuriCore will pursue additional sales opportunities within each current customer for new applications of the Sterilox technology, including fresh cut fruit packs to extend shelf life, floral products to reduce labour and extend product life, and seafood to eliminate odour and address cross contamination.

Increase Recurring Revenues

The Company continues to shift its strategy to sales that generate recurring revenues, which comprise rental or lease agreements, service contracts, bottled products, disinfectant chemistry, managed services, and consumables. This strategy reduces the potential impact of capital spending delays by large customers, including both the NHS and larger supermarket retailers in the US. In the UK recurring revenues have increased by driving additional revenues from new service contracts with existing customers coming into effect, the offering of private-labelled chemistries, service contract price increases for some of the legacy products, and the new catalogue of surgical consumables. In the US, the majority of recurring revenues comprise service agreements and currently a relatively small amount of bottled products. The proportion of recurring to non-recurring revenue is expected to increase going forward.

Pursue Business Development Partnerships

PuriCore is pursuing additional marketing partnerships with established distributors and marketers to capitalise on opportunities for rapid market penetration and revenue growth, which require limited financial investment by the Group. The Company signed an agreement in March 2013 with SteadMed Medical, a leading wound care marketing partner, to gain quicker distribution and sales growth in the US, Canada, and Mexico for its prescription Vashe product. In addition, PuriCore has partnered with Onset Dermatologics, a leading dermatologic company, which will launch new gel-based dermatologic products based on PuriCore's wound care technology in May. In new areas such as Water Treatment, PuriCore is partnering with Lohas Products GmbH to develop products for new applications in this segment. To support these new opportunities, PuriCore is pursuing broader regulatory approvals to permit more claims and indications for use as well as new product formats and formulations.

In 2013, the Company will focus on these key strategies whilst continuing to increase revenues and control costs to drive sustainable, profitable growth in key business areas. In the Supermarket Retail sector, existing Sterilox Fresh opportunities and the new FloraFresh formulation are expected to deliver increased market share. In the UK, the business remains focused on growing recurring revenue, capitalising on new customer opportunities, and controlling costs. The new partnership agreements, in addition to other marketing partnership discussions ongoing, will allow the Company to capitalise on additional marketing resources and increase out-licensing revenue.

On behalf of the Board, I would like to thank the PuriCore team in the UK and the US for their outstanding work, diligence, and determination to continue to improve PuriCore's top- and bottom-line performance. We welcome the addition of Danny Hegglin and Peter Larkin to the Board of Directors as well as Marella Thorell, who now also serves as Finance Director. I would also like to personally thank Mike Sapountzoglou for his dedicated service as a member of the Board of Directors for the past 14 years. In addition, we thank our shareholders for their continued commitment to the Company and their belief in the potential of PuriCore's technology.

Michael R.D. Ashton

Executive Chairman

30 April 2013

Finance Director's Report

Income Statement

Revenue for the Group increased 11.3% (12.0% at constant currency) to $47.4 million in 2012 (2011: $42.6 million). This growth was driven by continued sales growth in all business units. All business divisions as well as the Group as a whole achieved EBITDA (earnings before interest, tax, depreciation, and amortisation) profitability for the full year. PuriCore's EBITDA was $1.3 million, an improvement of $3.6 million (2011: a loss of $2.3 million).

The Company improved gross profit margin to 32.7% (2011: 29.4%), due to increased profit margins in the Endoscopy and Wound Care segments. Loss before interest and taxes was $2.1 million for the year as compared with $6.7 million in 2011. During the period, PuriCore remained focused on reducing operating expenses, resulting in a further reduction of 9% during the year.

Cash Flow

PuriCore generated $4.3 million in cash flow from operations in 2012, an improvement of $4.4 million (2011: absorption of $0.1 million). As at 31 December 2012, cash and cash equivalents were $2.5 million (as at 31 December 2011: $4.5 million). The placing, announced in December 2012 and approved by shareholders in January 2013, raised approximately £2.3 million in new shares (before expenses) at a price of 43 pence per Ordinary Share. Cash and cash equivalents as at 31 March 2013 (including the impact of the placing) were $4.3 million.

Debt

As announced in December 2012 and approved by shareholders in January 2013, the Company continued to focus on strengthening its balance sheet with the restructure of 95.28% of the £7.95 million of Convertible Loan Notes, which mature on 31 December 2013. The restructuring varied the terms of the Company's Convertible Loan Note Instrument to enable conversion of £7.575 million of the Convertible Loan Notes at 40 pence per Ordinary Share in January 2013. As a result, £375,000 in aggregate nominal amount of Convertible Loan Notes remain outstanding and due for repayment by the Company (unless previously converted at 75p) on 31 December 2013. Certain Noteholders also agreed to satisfy £198,245 of interest due to them in respect of the Convertible Loan Notes for the period from 1 July 2012 to the date of Conversion by the issue of Ordinary Shares at 40 pence per Ordinary Share, further preserving cash. 

In addition, the Company reduced other debt and lines of credit. Total debt (after accounting for the restructuring of the Convertible Loan Notes) as at 31 March 2013 was $0.9 million.

Operating Expense Controls

Operating expenses, comprising sales and marketing, research and development (R&D), and general and administrative expenses, decreased 9% to $17.5 million (2011: $19.2 million). Sales and marketing expenses in 2012 totalled $4.6 million, which is consistent with the prior period (2011: $4.6 million) and represents an ongoing focus on revenue growth. R&D costs for the year decreased 9% to $4.0 million (2011: $4.4 million). General and administrative expenses in 2012 totalled $9.0 million compared with $10.2 million in 2011. The decrease was driven by headcount management and lower professional fees. PuriCore continues to prudently manage cash expenditures and supplier terms, while focusing its investments in core areas of the business and short-term growth opportunities.

Marella Thorell

Finance Director

30 April 2013

Consolidated Statement of Comprehensive Income

For the Year Ended 31 December 2012

Consolidated Statement of Changes in Equity

For the Year Ended 31 December 2012

Consolidated Statement of Financial Position

At 31 December 2012

The consolidated financial statements and related notes were approved by the Board of Directors and authorised for issue on 30 April 2013 and were signed on its behalf by:

Marella Thorell

Finance Director

Consolidated Statement of Cash Flows

For the Year Ended 31 December 2012

Statement of Directors' Responsibilities in Respect of the Annual Report and the Financial Statements

The Directors are responsible for preparing the Annual Report and the group and parent company financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare group and parent company financial statements for each financial year. Under that law they are required to prepare the group financial statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the parent company financial statements on the same basis.

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and parent company and of their profit or loss for that period. In preparing each of the group and parent company financial statements, the Directors are required to:

·; select suitable accounting policies and then apply them consistently;

·; make judgements and estimates that are reasonable and prudent;

·; state whether they have been prepared in accordance with IFRSs as adopted by the EU; and

·; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the parent company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company's transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report, and Corporate Governance Statement that comply with that law and those regulations.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility Statement of the Directors in Respect of the Annual Financial Report

Each of the Directors, whose names and functions are listed below, confirms that, to the best of his knowledge:

a) the financial statements have been prepared in accordance with the applicable law and International Financial Reporting Standards as adopted by the EU and give a true and fair view of the assets, liabilities, financial position, and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

b) the review of the business includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

Joseph William Birkett

Chairman of the Audit Committee

30 April 2013

Risks and Uncertainties

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

The risks included here are not exhaustive. The Group operates in a competitive and rapidly changing environment. 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.

RISKS RELATING TO THE GROUP'S BUSINESS

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

A significant proportion of the Group's sales contracts are with a limited number of customers such as the NHS and certain large retail supermarket chains. Failure to deliver products and/or services to these customers, termination by any of these customers of their agreements, if any, 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. The group is endeavoring to diversify its customer base and product offerings to mitigate this risk.

The Group has a history of operating losses.

The Group has experienced operating losses in each year since its inception and, as at 31 December 2012, had an accumulated deficit of approximately $175.3million. While there can be no assurance that the Group will achieve net profitability, there have been considerable improvements made in sales growth, gross margin and operating expense control.

The Group is reliant on core technology and development and is subject to competition.

The Group is reliant on its core technology platform, particularly in the Supermarket Retail and Wound Care businesses, and is potentially subject to competition from other companies that might have products in development or commercially available that are more advanced and/or less expensive. In relation to future products, competitors may precede the Group in commercialising, developing and receiving regulatory approval for 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. The Group seeks to mitigate these risks through diversifying its product portfolio, targeted development effort focused on markets with opportunity for return and remaining vigilant and pro-active in regards to competitive threats, to the extent possible.

The Group's products are subject to various US, European, and other legislative and regulatory requirements.

The Group's products are subject to various US, European and other legislative and regulatory requirements. If the Group or its third party manufacturers fail to satisfy legislative and regulatory requirements, this could result in the imposition of sanctions on the Group, including fines, injunctions, 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.

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 sell its products profitably or at all. Further, the Group may not be successful in securing regulatory clearance for devices or products it may develop in the future. Even if regulatory clearance is granted, it is subject to continual review and this approval maybe withdrawn or restricted. Any or a combination of these factors could have a material adverse effect on the Group's business, financial condition and results of operations. The Group seeks to mitigate these risks through quality procedures to assess on-going compliance with regulatory guidance.

As the Group transitions to a recurring-revenue, consumables-based revenue model, consumption levels may not be as high as forecast.

The Group has a mixture of capital equipment, leased equipment, service contracts, and consumables sales. With a stated intent to transition the business in the medium term 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, this could have a material adverse effect on the Group's business, financial condition and results of operations if appropriate measures are not taken to reduce costs in line with reduced sales.

Rapid growth in the Group's Wound Care business is dependent upon successful marketing Partnerships.

The Group has significant growth expectations for the Wound Care business built largely on the stated interest of, and discussions with, potential marketing partners and represents an important part of the Group's growth strategy going forward. It is possible that PuriCore will not be able to agree terms with potential partners resulting in a slower than expected revenue growth and the need for PuriCore invest in a direct sales strategy to grow the business. The Group seeks to mitigate this risk by concurrently assessing other means to growth the Wound Care business.

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 regularly considers additional sub-contract manufacturers, there can be no guarantee that the Group will be able to access additional sources to manufacture these integral products. The Group believes that appropriate supply chain systems for order management and quality control 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 revenue recognition.

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 healthcare and retail supermarket sectors. These sectors are subject to spending policy changes as a consequence of a downturn in the economy. In the UK, the NHS has announced austerity measures to reduce costs. The Group's sales to the NHS may be subject to pricing and/or quantity pressures as a result. These pressures are present in the US healthcare sector as well. The retail supermarket sector has been impacted by decreases in consumer spending arising from the economic downturn, resulting in reduced spending on capital equipment. These macroeconomic pressures may result in lower revenues being realised by the Group.

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, 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 Company. The factors that may affect the Company's share price are:

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

·; fluctuations in stock market prices and volumes, and 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.

RISKS RELATING TO INTELLECTUAL PROPERTY AND LITIGATION

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.

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 and may require it to engage in costly litigation. The Group seeks to mitigate this risk by maintaining a pro-active approach to managing its intellectual property portfolio and being cognizant of potential infringements.

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.

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. 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 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. 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.

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, manufacturing, marketing, sale, installation, training and use of its products.

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 judgement. Any product liability claim or judgement 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.

The Sterilox Solution may cause damage to the protective coating on some endoscopes.

As with some other high level disinfectants on the market, the use of Sterilox Solution on some endoscopes, in certain cases, may damage the protective coating on the insertion tubes over time, resulting in significant additional expenses associated with scope repair and replacement. The Company continues to address the problem through innovation, by working with its customers and various manufacturers, including paying for appropriate scope repair costs and by anticipating and accounting for these costs in its business and financial models. However, there is no certainty that these remedial actions will continue to be effective and there may be a significant adverse impact on the Group's endoscopy business if such damage were to take place on any significant scale.

Basis of Preparation

PuriCore plc (the "Company") is incorporated in the UK. PuriCore, Inc., (a US subsidiary) is incorporated under the laws of Delaware in the USA. The Group financial statements were authorised for issue by the Board of Directors on 30 April 2013. European Union law (EULAW) (IAS Regulation EC 1606/2002) requires that the financial statements of the Group are 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 2012.

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 the Group headquarters are located in the US and a significant portion of the Group's revenue and expenses are denominated in USD.

Some asset and liability amounts reported in the accounts are based on management estimates and assumptions. 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.

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2012 or 2011 but is derived from those accounts. 

Statutory accounts for 2011 have been delivered to the registrar of companies, and those for 2012 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

Going Concern

The financial statements have been prepared on a going concern basis, which the Directors believe to be appropriate for the following reasons.

The Group meets its day-to-day working capital requirements through cash balances and external funding facilities. The cash balance was $2.5 million at 31 December 2012 and $4.3 million at 31 March 2013. The external funding facilities include loan notes secured on the Group's leased assets and convertible loan notes. The outstanding loans and borrowings were $13.4 million at 31 December 2012. Of this amount, $12.2 million, representing 95.28% of the Convertible Loan Notes, were converted into ordinary shares on 10 January 2013 on the basis of $0.69 per ordinary share. Also on this date the Group issued approximately 5.4 million new ordinary shares generating cash proceeds of approximately $3.7 million (excluding expenses).

The Directors have prepared cash flow forecasts to 31 December 2014. These forecasts make a number of assumptions, the most significant of which relate to the level of revenue growth, the conversion of the convertible loan notes into ordinary shares, and the issuance of $3.7 million worth of new shares. The forecasts include planned repayments of other loan notes in full as they fall due and do not assume any further debt financing will be required.

The base case cash flow forecasts show that the Group will be able to continue to operate within its available facilities throughout the period to 31 December 2014. The Directors have prepared a reasonably possible downside sensitivity to the base case forecasts, which also shows that the Group will be able to continue to operate within its available facilities throughout the period to 31 December 2014, albeit with reduced headroom.

On the basis that the Group has successfully procured the conversion of $12.2 million of its Convertible Loan Notes into ordinary shares and issued 5.4 million new ordinary shares generating cash proceeds of $3.7 million (excluding expenses) in January 2013, the Directors consider that the Group will continue to operate with sufficient funding for at least 12 months from the date of approval of these financial statements.

The Directors have concluded that the assumptions discussed above do not cast significant doubt on the Group's and the Company's ability to continue to operate as a going concern and therefore they continued to prepare the financial statements on a going concern basis. The financial statements do not contain any adjustments that would result from the basis of preparation being inappropriate.

Select Notes to the Financial Statements

For the Year Ended 31 December 2012

NOTE 2 - Segmental Analysis

The Group is managed by type of business. Segmental information is provided having regard to the nature of the goods and services provided and the markets served. Under 'other,' PuriCore has classified certain businesses, including Dental and Wound Care, not yet generating significant revenues, and other business development activities.

Primary Reporting Format - Business Segments

1 Segment result is before interest and tax.

2 Other includes Wound Care, Dermatology and Dental.

3Corporate and unallocated in 2012 includes costs associated with Agriculture and Water Treatment.

4Corporate and unallocated in 2011 includes approximately $0.9 million of one-time costs related to the abandoned subsidiary disposal plan.

Information about Geographical Areas

The above analysis is based on the location of the customers.

Products and Services Provided

PuriCore's water-based clean technology equipment and services aim to safely, effectively, and naturally kill infectious pathogens without causing harm to human health or the environment. PuriCore's solutions are produced at a range of concentrations to meet the needs of each application. The solutions are considered reliable, safe, effective, and environmentally friendly. PuriCore's UK business also manufactures a range of automated endoscope reprocessors, storage cabinets, and laboratory clean air equipment as well as provide a full line of endoscope reprocessing suite supplies and services.

PuriCore's products are currently used in the following areas:

UK Endoscopy - PuriCore aims to provide a full suite of equipment, supplies, chemistries, and services required for a compliant endoscope decontamination suite. In addition, this business sells a catalogue of surgical consumables and manufactures and sells a line of laboratory clean air equipment. In 2012, no customers made up more than 10% of the total Endoscopy segment revenue.

US & Canadian Supermarket Retail - Sterilox Fresh Solution is an intervention that aims to improve shelf life and home life for fresh produce, and FloraFresh Solution improves the quality of final products whilst decreasing labour costs. In 2012, three customers made up 30%, 11% and 11% each of the total Supermarket Retail segment revenue.

US Wound Care - Vashe Wound Therapy is an FDA-cleared medical device for use in debriding, lubricating, and moistening chronic and acute wounds. PuriCore manufactures and sells a line of bottled Vashe Wound Therapy for use in hospitals, wound care clinics, and burn centres.

US & UK Dental - Sterilox Solution acts to decontaminate water lines and maintain acceptable water quality levels providing a safer, healthier work environment for patients and staff.

NOTE 3 - Loss for the Year

Loss for the year has been arrived at after charging/(crediting):

NOTE 5 - Finance Costs

NOTE 8 - Loss per Share

The calculation of basic and diluted earnings per share is based on the following data:

The Company's issued share capital at 31 December 2012 consists of 25,292,164 10 pence ordinary shares.

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

NOTE 14 - Trade and Other Receivables

An analysis of the provision for impairment of receivables is as follows.

The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.

The age profile of trade receivables for the Group at the year end is as follows.