Collagen Solutions plc (the Company or the Group )

Transcription

1 Collagen Solutions plc (the Company or the Group ) 13 July 2015 Final Results for the year ended 31 March 2015 Collagen Solutions plc (AIM: COS), the developer and manufacturer of medical grade collagen components for use in regenerative medicine, medical devices and in-vitro diagnostics, announces its final results for the year ended 31 March Financial Highlights Net funds of 5.4 million raised in an over-subscribed equity placing in December 2014 Strategic acquisition of Southern Lights Ventures 2002 Limited (Southern Lights Biomaterials or SLB) based in New Zealand Revenue and other income increased to 1.04 million (2014: 0.02 million) Adjusted LBITDA (before separately identifiable items): 689,816 (2014: 388,269) Net cash balances at 31 March 2015: 3.4 million (2014: 1.49 million) Operational Highlights Customer announcements of biomaterials supplied to Globus Medical Inc., Desu Medical, Kyeron Medical Innovations and Novabone Products LLC Smooth integration of management teams in Glasgow, San Jose and New Zealand Management team strengthened by appointment of Geoff Bennett as Chief Business Officer and the appointment of Prof. Robert Brown, UCL, as exclusive consultant and member of Scientific Advisory Board Post Period End New patent granted to Southern Lights Biomaterials for the novel processing of pericardium providing benefits for heart surgery patients. Tom Hyland appointed as Chief Operating Officer Innovate UK Grant Award with The Electrospinning Company Limited to develop a novel biosynthetic substance for internal wound healing Annual General Meeting The Company s AGM will be held at the offices of Shepherd and Wedderburn LLP, 191 West George Street, Glasgow G2 2LB on 24 August 2014 at 10:00 am Dr Stewart White, Chief Executive Officer of Collagen Solutions, commented: I believe the Collagen Solutions Group is now an industry-recognised global force in the provision of valueadded medical grade collagen biomaterials. The acquisition of Southern Lights Biomaterials cements our position by bringing an impressive customer base, providing surety of supply and commercial experience in the Asian markets. The Group now has a significant number of commercial opportunities to add to its already derisked business model. Our aim of attaining a valuation of 100 Million by 2020 is certainly closer not only due to M&A activities, but also through the normal course of our business, evidenced by the customer-related announcements we have made in the period. The assessment and plans for commercialisation of our own, and licensed-in IP continues, with the benefit of potential channels to market via an interested and existing customer base and network with which to partner. Enquiries: Collagen Solutions Plc Dr Stewart White, CEO Mob: Gill Black, CFO Tel: Panmure Gordon & Co (Nominated Adviser and Broker) Robert Naylor ( Corporate Finance ) Tel:

2 Maisie Atkinson (Corporate Broking) Tel: Walbrook PR Ltd Tel: or Mike Wort Mob: Anna Dunphy Mob: CHAIRMAN S STATEMENT I am pleased to present Collagen Solutions annual report and accounts for the year ended 31 March The year under review has been one of considerable progress for the Group as a whole culminating in December with the strategic acquisition of Southern Lights Ventures 2002 Limited (Southern Lights Biomaterials or SLB). This acquisition would not have been possible had we not been able to bed down the acquisitions of Collbio Limited and Collagen Solutions LLC into a cohesive operating unit. That progress gave us the confidence that the original strategic plan could be successfully executed. The acquisition of Southern Lights Biomaterials based in New Zealand, which was established in 2003, has achieved much of what we want to achieve on a grander scale; it has a strong customer base generating recurring revenues (in Asia and North America), it has a surety of supply of high grade collagen from negligible BSE risk sources, and IP and know-how from which strategic value can be created. Allied to that it had in Geoff Bennett an experience and wisdom that has both complemented the existing team and strengthened the Board overall. Our objective remains the same which is to build a significant global biomaterials business by assisting customers in expediting the transition of their products from development through to manufacture by the provision of cost-effective, functional collagen materials and devices, across a range of clinical indications, for the ultimate benefit of providing effective and affordable treatment to patients. Overview The enlarged Group is still in its early stages of development; however, we are pleased to report that progress has been made in terms of creating long-term shareholder value. In particular I would draw your attention to the following: - Customer announcements of biomaterials supplied to Globus Medical Inc., Desu Medical, Kyeron Medical Innovations and Novabone Products LLC. - The management teams in Glasgow, San Jose and New Zealand have been integrated and are working effectively as a cohesive unit. - The appointment of Geoff Bennett as Chief Business Officer to the Board. - The successful technology transfer of the first product from San Jose to GMP manufacturing in Glasgow during the year. - We have made further advances in our work with one of our partners, Jellagen, on the processing of jellyfish into vector-free collagen. We have set ourselves a target by 2020 to create a biomaterials business with a value of 100 million through a combination of organic growth and exploitation of licensed IP, as well as through appropriate acquisitions, and we look forward to continuing that journey, having already made some significant progress. Results The Group s results for the year ended 31 March 2015 are set out in the Consolidated Statement of Comprehensive Income. Revenue and other income for the year was 1,035,500 (2014: 24,023). Administrative expenses (before separately identifiable items) were 1,265,918 (2014: 303,647), which includes the costs of operating a public company and the related regulatory costs. Selling and marketing costs were 218,732 (2014: 71,914). Losses before interest, tax, depreciation and amortisation ( LBITDA ) (before separately identifiable costs) were 689,816 (2014: 388,269) and the loss per share was 1.17p (2014: 1.10p). Revenue of 562,624 and profit after tax of 123,571 is attributable to Southern Light Biomaterials since 10 December 2014, the acquisition date.

3 Net cash used in operations during the year was 1,070,812 (2014: 524,839), net cash used in investing activities was 2,404,496 (2014: 1,357,278) and net cash inflow from financing activities was 5,363,304 (2014: 3,373,777). The Group s cash balances at 31 March 2015 were 3,391,356 (2014: 1,491,660). Board and management On the acquisition of Southern Lights Biomaterials, one of its co-founders, Geoff Bennett, was appointed to the Board. John Higgins, Chief Scientist, also became a key member of the management team. Both have extensive knowledge and contacts within the industry and are also significant shareholders in the Company. We have recently added the considerable experience of Tom Hyland to the management team, who joined the Company as Chief Operating Officer in April Tom has over 20 years collagen chemistry knowledge having worked in senior roles in various global medical device and life science organisations. I am very pleased to see the enlarged team gel and work together as a cohesive global unit under Stewart s leadership. Outlook The year 2015/16 will see a continued investment in people and facilities in our three locations as we continue to expand our sales pipeline. We are looking to develop strong collaborative partnerships with key players in the regenerative medicine space, and to develop our product offering whilst we continue to transfer technologies from our core R&D facility in San Jose to our manufacturing unit in Glasgow leading to the expansion of the Glasgow site. We also continue to expand our capacity and capabilities at our manufacturing facility in New Zealand. We are recognised within the industry for the quality of the materials that we produce, and our ability to do that within a GMP environment. That gives me confidence in our long-term revenue generation, as those revenues are effectively embedded into our customers products. What is more difficult to judge is the exact timing of such revenues as our customers take their products through to launch and beyond. The setting and management of expectations remains a key risk in the public equity markets where too great a store is placed on a single data point without reference to the underlying fundamentals. We have yet to reach a critical mass of manufactured products and we see this beginning to happen in the coming year, whilst as always remaining opportunistic to value-adding opportunities that will shorten this timescale. We are looking to continue to leverage opportunities to develop and exploit IP, and I will update you later in the year as we formalise such arrangements. It is anticipated that this investment will come from our existing resources. Your Group remains one of the most innovative and exciting that I have ever been involved in and I see the ability to secure significant value accretion in a relatively low-risk manner by adopting a portfolio approach with regard to development for our customers and ensuring our revenues are secured long term by taking that from R&D through to manufacturing. Thank you for your support. David Evans Non-executive Chairman 10 July 2015

4 CEO S STATEMENT Collagen Solutions partners with its customers to expedite their products to the market. Through these customers, the Group provides products and services in a diverse range of life science markets and territories. The Group has facilities in the UK, the USA and now also New Zealand, as a result of the acquisition of Southern Lights Biomaterials in December The Group remains focussed on delivering products of the highest quality to our valued, and now expanded, customer base. Operational trading Revenue comprises direct sales of existing collagen products, development activities and, as a result of the SLB acquisition, tissue supply. The Group has won business from US-based customers Globus Medical and Novabone, both of which utilise Collagen Solutions materials in FDA-approved products. This model of embedded materials in approved products, and therefore embedded long-term revenues, is a theme which is reflected across the Group. Last year it was our stated intent to continue to establish and increase these longterm relationships. I believe we have demonstrated this in the various new customer announcements. In order to provide our functional materials, the Group must continually invest in its manufacturing and quality systems to ensure compliance with ever-increasing requirements from regulatory bodies. As a result of the SLB acquisition, the Group now has two facilities which hold ISO and certifications. This provides the Group with added mitigation around business continuity. We now have another accredited standalone facility with experienced staff who understand the requirements of manufacturing and quality management systems to successfully operate in the medical device industry. Research and development activities within the Group continue to be core to our ability to innovate and expedite solutions for our customers and have benefited from ongoing investment in the current year. To assist our R&D team, I am pleased to report that Professor Robert Brown of University College London was appointed to the Group as Scientific Advisor, joining our Scientific Advisory Board. Similarly, we have been fortunate that Tom Hyland, our new Chief Operating Officer, has also joined the Scientific Advisory Board. Robert and Tom come with a vast amount of experience in collagen-based tissue regeneration, collagen chemistry and GMP manufacturing. With the acquisition of SLB, the Group has a biomaterials development team which is truly world class and positions us very well to compete in a global industry where customers have diverse clinical application requirements across a wide range of life science markets and territories. Our product range continues to expand to serve these markets. The Group s gross profit margin of 78% reflects the value our customers place on our products, services and support. During the current year the Group has continued to refine its IP strategy. The Group has licensed technology from University College London which it believes will be novel in the provision of added value polymeric collagen formulations in the regenerative medicine space. Collagen Solutions willingness to collaborate on exciting development projects continued in the period with its participation in the SMART funding obtained by its strategic partner Jellagen Pty Ltd, of which the Group holds 10.5% interest. Acquisition of Southern Lights Biomaterials On 10 December 2014 Collagen Solutions plc acquired the New Zealand-based Southern Lights Biomaterials by issuing equity worth 1.95 million, cash of 2.46 million and providing contingent consideration of NZD 4 million relating to performance conditions. This acquisition is a transformational event for the Group and has proven to be wholly complementary and additive to the existing capabilities within the Group. There are many reasons why the SLB acquisition was attractive to the Board: biomaterials Company with an established reputation; established customer base, with a significant proportion in Asia; safe and established supply chain from BSE free New Zealand; capacity and capability around tissue supply; experienced management, Geoff Bennett joined the Group board as Chief Business Officer (CBO); and complementary product range now includes tendon as well as existing hide-sourced materials.

5 This acquisition has built revenue and offers the Group the ability to implement its previously stated strategic aim to combine and expand both development and manufacturing capabilities to ensure the Group becomes a globally recognised company in the chemistry, supply, development and manufacture of medical grade collagen biomaterials. Markets served The acquisition of SLB into the newly expanded Group means that there are significant benefits already being realised through simple activities of upselling a wider product range to a much expanded customer base. Our location in New Zealand and established business activities mean that the Group now has reach into the Asian market. In addition the added manufacturing capacity allows the business to compete on a volume basis and still retain its operating margins. We have medical grade products which can be utilised in the markets for: medical devices - our core business; in vitro reagents/ diagnostics - where collagen is used as a reagent there is less regulatory approval required, compared with medical devices. We expect discussions held in the period to provide access to this market; regenerative medicine products - we believe we can add value to existing therapeutic agents by combining with a biomaterial solution which can add efficacy, viability and other benefits of applications such as ease of use to healthcare professionals. Although at an early stage, the Board is excited by the prospects for the Group to add value to such disruptive treatments. By serving a range of market territories and customers with clinical indications, the diverse, de-risked nature of our business model is clear. Global Business Development The Group now has three main locations addressing customer needs around the world; North America San Jose, USA Europe Glasgow, UK Asia Marton, New Zealand These local capabilities and reach are important, providing convenience and surety to customers. Within the current period the business development team has integrated well in order to serve our global market and has been actively cross-selling the Group s products in their respective regions and market sectors. I am pleased to say that Geoff Bennett, our Chief Business Officer, is now part of this team. Geoff s previous experience as a Chartered Accountant, public company CFO and more recently serial entrepreneur and MD of SLB will ensure our business processes are capable of meeting this global demand. Strategic risks and mitigation The Group s main activity relies on established relationships with a variety of leading suppliers of raw biomaterials. It is possible that some issues may arise, such as a disease outbreak, which could damage our supply chain. Similarly, many of our customers have products on the market, whilst others require ongoing development support, regulatory approval or further investment to reach commercial volumes. It is possible that some customers products may not reach the market for reasons unrelated to Collagen Solutions activities. It is our view that such risks have been mitigated as much as is possible by building on our robust strategy of maintaining a diverse and de-risked business model. That is, the Group can provide even greater level of surety around its supply chain, with control of source material from New Zealand. Coupled with its existing supply chain, the Group is in an extremely competitive position, which we believe has no peer comparison. Post-balance sheet events: Retained ISO / ISO certifications for our manufacturing facility in Glasgow following external audit during June Innovate UK Grant Award with The Electrospinning Company Ltd to develop novel bio-synthetic substance for internal wound healing.

6 Tom Hyland joined as Chief Operating Officer for the Group (non-board). Tom brings world class expertise in collagen chemistry, medical device manufacture and significant general management experience from a range of large life science companies. The Group s subsidiary SLB received approval from the US patent office on its novel process involving pericardium for usage in the heart valve replacement market. Expansion into an additional 3,250 sq. ft. space at our Glasgow facility. Outlook / current trading The coming period will see the focus of the management team towards converting the cross selling opportunities which have already been identified as a result of the acquisition of SLB. The Group will continue to actively sell its global manufacturing capacity, which now includes significant volume potential in our New Zealand facility. It is our aim that a greater amount of products will be used in the reagent and diagnostics space in addition to the fascinating advances we are observing in our activities with regenerative medicine companies. With a strong internal IP base the Group will also advance discussions with suitable strategic partners in order to realise the maximum value for its IP and, therefore, shareholder return. I share the Board s view that the opportunities for the Group are significant and that Collagen Solutions is now recognised as a significant global player in the biomaterials field. Dr Stewart White Chief Executive Officer 10 July 2015

7 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 March 2015 Before separately identifiable items Separately identifiable items (Note 5) Total 2015 Before separately identifiable items Separately identifiable items (Note 5) Notes Revenue 3 972, ,846 24,023-24,023 Cost of Sales (213,920) - (213,920) (12,084) - (12,084) Gross profit 758, ,926 11,939-11,939 Share-based compensation (26,746) - (26,746) (24,647) - (24,647) Administrative expenses (1,265,918) (155,131) (1,421,049) (303,647) (74,769) (378,416) Selling and marketing costs (218,732) - (218,732) (71,914) - (71,914) Other income 62,654-62, Operating loss before interest, tax, depreciation (689,816) (155,131) (844,947) (388,269) (74,769) (463,038) and amortisation Amortisation and depreciation (129,778) - (129,778) (16,960) - (16,960) Finance income 1,470-1, Finance expense (129,122) - (129,122) Loss before taxation (947,246) (155,131) (1,102,377) (405,229) (74,769) (479,998) Taxation (21,215) - (21,215) Loss for the year (968,461) (155,131) (1,123,592) (405,229) (74,769) (479,998) Currency translation difference 317, ,669 (44,666) - (44,666) Other comprehensive income/loss 317, ,669 (44,666) - (44,666) Total comprehensive expense for the year (650,792) (155,131) (805,923) (449,895) (74,769) (524,664) Basic and diluted loss per share pence 4 (1.17p) (1.10p) Total 2014

8 CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 31 March 2015 ASSETS Non-current assets Notes Intangible assets 12,918,911 6,894,398 Property, plant and equipment 793, ,484 13,712,636 7,126,882 Current assets Inventories 218,544 39,265 Trade and other receivables 644, ,036 Cash and cash equivalents 3,391,356 1,491,660 4,254,375 1,697,961 Total assets 17,967,011 8,824,843 EQUITY AND LIABILITIES Equity attributable to equity holders of the parent company Share capital 7 1,754, ,260 Share premium 7,845,973 3,230,105 Share-based compensation 51,393 24,647 Merger reserve 4,531,798 2,842,683 Translation reserve 273,003 (44,666) Retained deficit (1,603,590) (479,998) Total equity 12,853,266 6,256,031 Non-current liabilities Deferred tax 285,022 - Other financial liabilities 4,319,891 2,409,236 Borrowings 87,563 - Total non-current liabilities 4,692,476 2,409,236 Current liabilities Trade and other payables 359, ,576 Income tax liabilities 40,153 - Borrowings 21,843 - Total current liabilities 421, ,576 Total liabilities 5,113,745 2,568,812 Total liabilities and equity 17,967,011 8,824,843

9 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 31 March 2015 Share Capital Share Premium Account Share- Based Payment Reserve Merger Reserve Translation Reserve Retained Deficit Issue of shares for cash 450,000 3,600, ,050,000 Issue of consideration of 233, ,149, ,382,271 shares on acquisition Share issue costs - (369,895) - (306,328) - - (676,223) Total transactions with owners 683,260 3,230,105-2,842, ,756,048 in their capacity as owners Share-based compensation , ,647 Loss for the period (479,998) (479,998) Currency translation difference (44,666) - (44,666) Loss and total comprehensive (44,666) (479,998) (524,664) expense for the period. At 1 April ,260 3,230,105 24,647 2,842,683 (44,666) (479,998) 6,256,031 Issue of shares for cash 857,143 5,142, ,000,000 Issue of consideration shares on acquisition 214, ,740, ,954,286 Share issue costs - (526,989) - (50,885) - - (577,874) Total transactions with owners in their capacity as owners 1,071,429 4,615,868-1,689, ,376,412 Share-based compensation , ,746 Loss for the year (1,123,592) (1,123,592) Currency translation difference , ,669 Loss and total comprehensive income for ,669 (1,123,592) (805,923) the year At 31 March ,754,689 7,845,973 51,393 4,531, ,003 (1,603,590) 12,853,266 Total

10 CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 31 March 2015 Note 2015 Cash flow from operating activities Loss before taxation (1,102,377) (479,998) Share-based compensation 26,746 24,647 Depreciation 75,110 12,647 Amortisation 54,668 4,313 Finance expense 129,122 - Finance income (1,470) - Loss on sale of property, plant and equipment 4,834 - Increase in inventories (122,743) (13,337) Increase in trade and other receivables (194,770) (65,511) Increase/(decrease) in trade and other payables 89,909 (6,876) Foreign exchange - (724) Cash used in operations (1,040,971) (524,839) Interest paid (3,822) - Taxation paid (26,019) - Net cash used in operations (1,070,812) (524,839) Investing activities Proceeds from sale of property, plant and equipment 12,716 - Payments to acquire property, plant and equipment (158,792) (426) Payments to acquire licensed IP and patents (68,222) - Payments to acquire Southern Lights Ventures 2002 Limited 6 (2,191,668) 15,471 Payments to acquire business and assets of Collagen Solutions - (1,398,985) LLC Net cash acquired with acquisition of business and assets of - 26,662 Collagen Solutions LLC Interest received 1,470 - Net cash used in investing activities (2,404,496) (1,357,278) Financing activities Net proceeds on issue of ordinary shares 5,422,126 3,373,777 Repayment of director s loan (53,468) - Repayment of related party loan (5,354) - Net cash generated from financing activities 5,363,304 3,373,777 Net increase in cash and cash equivalents 1,887,996 1,491,660 Effect of exchange rate changes on the balance of cash held in 11,700 - foreign currencies Net increase in cash and cash equivalents 1,899,696 1,491,660 Cash and cash equivalents at the beginning of the financial year 1,491,660 - Cash and cash equivalents at the end of the financial year 3,391,356 1,491,

11 NOTES TO THE AUDITED PRELIMINARY ANNOUNCEMENT 1. BASIS OF THE ANNOUNCEMENT The audited preliminary results for the year ended 31 March 2015 were approved by the Board of directors on 10 July The financial information in this preliminary announcement does not constitute full accounts within the meaning of section 434 (3) of the Companies Act 2006 but is derived from the accounts for the year ended 31 March The figures for the year are audited. The preliminary announcement is prepared on the same basis as set out in the statutory accounts for the year ended 31 March Those accounts upon which the auditors issued an unqualified opinion, also had no statement under section 498(2) or (3) of the Companies Act While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards, as adopted by the European Union (EU) (IFRS), this announcement does not in itself contain sufficient information to comply with IFRS. The Company is a limited liability company incorporated and domiciled in England & Wales and whose shares are quoted on AIM, a market operated by The London Stock Exchange. The consolidated financial information of Collagen Solutions plc is presented in pounds sterling (), which is also the functional currency of the Group. The statutory accounts for the financial year ended 31 March 2015 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. 2. GOING CONCERN As part of its going concern review the Board has followed the guidelines published by the Financial Reporting Council entitled Going Concern and Liquidity Risk Guidance for UK Companies In determining the appropriate basis of preparing the financial statements, the Directors are required to consider whether the Company can continue in operational existence for the foreseeable future, being a period of not less than twelve months from the date of the approval of the financial statements. As at 31 March 2015 the Group had cash and cash equivalents of 3.39 million and net current assets of 3.83 million. Management prepares detailed working capital forecasts which are reviewed by the Board on a regular basis. Cash flow forecasts and projections have been prepared through to 30 September 2016, and take into account sensitivities on revenues, and costs. Having made relevant and appropriate enquiries, including consideration of the Company s and Group s current cash resources and the working capital forecasts, the Directors have a reasonable expectation that the Company and Group will have adequate cash resources to continue to meet the requirements of the business for at least the next twelve months. Accordingly, the Board continues to adopt the going concern basis in preparing the financial statements. 3. SEGMENTAL REPORTING The Group s Chief Operating Decision Maker, the Chief Executive Officer, is responsible for resource allocation and the assessment of performance. In the performance of this role, the Chief Executive Officer reviews the Group s activities, in the aggregate. The Group has therefore determined that it has only one reportable segment under IFRS 8, Operating Segments, which is biomaterials. 4. LOSS PER SHARE The calculation of basic loss attributable to the equity holders of the parent is based on losses of 1,123,592 ( ,998) and on 96,409,178 ( ,668,474) ordinary shares being the weighted average number of shares in issue during the year. The loss for the year and the weighted average number of ordinary shares for calculating the diluted loss per share for the year ended 31 March 2015 are identical to those for the basic loss per share. This is because the outstanding share options would have the effect of reducing the loss per ordinary share and would therefore not be dilutive under the terms of International Accounting Standard (IAS) No SEPARATELY IDENTIFIABLE ITEMS Separately identifiable items of 155,131 (2014: 74,769) relating to the acquisition and integration costs of Southern Lights Ventures 2002 Limited t/a Southern Lights Biomaterials ( Collbio Limited and

12 business and assets of Collagen Solutions LLC) are included within administrative expenses. 6. ACQUISITION On 10 December 2014 the Company completed the acquisition of the entire issued share capital of Southern Lights Ventures 2002 Limited, t/a Southern Lights Biomaterials, for a maximum consideration of up to 6 million. Initial consideration of 4 million was satisfied by 2.5 million in cash and 1.5 million in new ordinary shares issued at 7p per share, although the actual share price on date of acquistion had increased to 9.12p. In addition, a performance consideration payable is contingent on the future sales revenues up to the period ended 31 March The contingent consideration is to be satisfied by up to NZD 4 million in two tranches of cash contingent on future sales revenues and it is anticipated at this time that the consideration will be payable in full and has been provided for on that basis. The fair value of this contingent consideration included at the balance sheet date is 1,704,693. At the date of acquisition the relevant Southern Lights Ventures 2002 Limited assets comprised the following: Book Value Fair Value Adjustment Fair Value Assets Non-current assets Intangible assets Patents and licensed IP 83, , ,723 Customer contracts and relationships - 1,356,649 1,356,649 Property, plant and equipment 482, , ,019 1,515,126 2,081,145 Current assets Inventories 51,807-51,807 Trade and other receivables 268, ,054 Cash and cash equivalents 270, , , Total assets 1,156,660 1,515,126 2,671,786 Current liabilities Trade and other payables 186, ,323 Related party loan 19,373-19, , ,696 Non-current liabilities Deferred tax (4,503) 303, ,522 Related party loan 90,822-90,822 86, , ,344 Total liabilities 292, , ,040 Net assets 864,645 1,212,101 2,076,746 Goodwill arising on acquisition 4,044,681 6,121,427 Settled by: Cash consideration 2,462,448 21,428,572 ordinary shares at 9.12p per share 1,954,286 Contingent consideration 1,704,693 6,121,427 Net cash acquired with subsidiary undertaking 270,780 The strike price at which the consideration shares were issued was 7p being the price per the Admission document. On 10 December 2014 when the shares were issued the price was 9.12p. Acquisition costs relating to the acquisition of Southern Lights Ventures 2002 Limited and under IFRS 3 (revised) are written off to comprehensive income as incurred.

13 Goodwill arising from the acquisition consists mainly of the anticipated synergies and economies of scale from combining and integrating the New Zealand and existing UK and US businesses, including their skilled development teams, as one Group. Customer contracts, relationships and pipeline opportunities were identified and discounted cash flow values were attributed. Revenues from patents held were also valued on a discounted cash flow basis. The fair value of the acquired identifiable intangible assets of 1,515,126 has been determined by the use of the multi-period excess earnings method from management s assessment of the present value of the incremental after-tax cash flows (excess earnings) attributable to the intangible asset over its remaining useful life. The revenue included in the Consolidated Statement of Comprehensive Income since 10 December 2014 contributed by Southern Lights Ventures 2002 Limited was 0.56m. Southern Lights Ventures 2002 Limited also contributed a profit after tax and management charges of 0.12m over the same period. Had SLB been consolidated from 1 April 2014 the Consolidated Statement of Income would show pro forma revenue of 1.8m and loss after tax of 0.8m. 7. SHARE CAPITAL Issued and full paid: 2015 No No Issued ordinary shares of 1p 170,968,865 1,709,689 63,826, ,260 Issued deferred shares of 9p 500,000 45, ,000 45,000 Balance at end of year 171,468,865 1,754,689 64,326, ,260 Ordinary shares The total number of issued shares at 31 March 2015 was 170,968,865 ( ,826,007). On 10 December 2014 as part of the initial consideration for the acquisition of Southern Lights Ventures 2002 Limited, 21,428,572 shares were issued pursuant to a placing at a price of 7p per share and at the same time a further 85,714,286 shares were issued at 7p for cash. The fair value of these shares at 10 December 2014 was 9.12p. Deferred shares The total number of deferred shares at 31 March 2015 was 500,000 ( ,000). The deferred shares do not confer any voting rights. Options At 31 March 2015 the Company had 5,438,349 (2014-4,050,000) unissued ordinary shares of 1p each under the Company s share option schemes, details of which are as follows: Number Option price Date from which exercisable Expiry date Grant date pence 29 March ,050, January March July , January July November ,000, January November 2024