TIDMNGG
RNS Number : 5184A
NextGen Group PLC
02 April 2012
NEXTGEN GROUP PLC
FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2011 AND NOTICE OF
AGM
NextGen Group plc (AIM: NGG, the "Company") announces its final
results for the year ended 31 December 2011.
The Company also gives notice that the Annual General Meeting
will be held at the office of Seymour Pierce Limited, 20 Old
Bailey, London, EC4M 7EN at 12 noon on 30 April 2012.
The notice convening the Annual General Meeting, together with
the annual report and accounts of the Company for the year ended 31
December 2011 (the "Annual Report") and the form of proxy for use
at the AGM, are being posted to shareholders and will be available
on the Company's website www.nextgensciences.com.
The appendices to this announcement contain additional
information which has been extracted from the Annual Report. This
announcement should be read in conjunction with, and not as a
substitute for, reading the full Annual Report.
The Company's auditor has reported on the accounts and its
reports are unqualified. The auditor also reports an Emphasis of
Matter. The Independent Auditors' Report on the Company's financial
statements is set out in full in the Annual Report.
For more information please contact:
NextGen Group
Klaus Rosenau, Chairman and CEO
klaus.rosenau@nextgensciences.com
+49 160 551 6756
Seymour Pierce
Jonathan Wright, Nicola Marrin
+44 (0) 20 7107 8000
Chief Executive Officer's Report
Strategic overview
NextGen Sciences, the Group's US based trading subsidiary offers
researchers across pharma, biotech and clinical/translational
settings, expertise in the field of protein biomarker discovery,
quantitative assay development & validation and in
qualification of biomarkers through testing of client samples.
Services available from NextGen Sciences include the identification
and characterization of clinically relevant proteins (putative
biomarkers), multiplex and quantitative assay development,
qualification, verification and validation of the protein biomarker
(validated or known biomarker) and the monitoring of protein
biomarkers during all phases of drug development.
Following the strategic change requirements defined by the
business in 2010, 2011 has been a year of implementation. The
business has established an almost entirely new operational team
and supported this with effective targeting and monitoring of its
sales and marketing activities. As a core component of its
strategy, the company successfully developed and launched two MRM
(multiple reaction monitoring) quantitative, protein assays using
mass spectrometry technology. These assays were developed for
specific proteins (potential biomarkers) in human plasma and CSF
(cerebrospinal fluid) and signalled a focusing of the business on
the oncology and CNS (central nervous system) disease areas. The
business has received revenue from customers for these products in
2011 and has further customers in the sales pipeline for 2012. The
company has continued to work on the development of further assays
and expects to release expanded versions in Q2 2012.
The company has also put considerable efforts into establishing
a Good Laboratory Practice (GLP) working environment and expects to
achieve these standards for its assay testing services in H2
2012.
The company has upgraded its website capabilities to support a
more focused alignment of marketing and sales activities. The
company has also implemented CRM and sales reporting structures to
more effectively monitor its customer base and the productivity of
its sales and marketing activities.
The company has integrated web-based (cloud) information
management and customer management databases to more effectively
support the integration of sales, marketing, operations and the
customer experience. This integration is critical for a business
with employees operating from diverse geographical locations.
The 2011 business model was focused on utilising protein mass
spectrometry technical capabilities as a Contract Research
Organisation (CRO) offering:
1. Protein Biomarker Discovery (de novo approaches through the GeLC-MS technology)
2. Protein Biomarker Assay Development (MRM technology)
i. Own product human Plasma assay panels (plasmadiscovery41) for
biomarker discovery and early stage biomarker qualification
(targeting the Oncology segment and in particular Breast, Prostate
and Pancreatic cancer)
ii. Own product human CSF (cerebrospinal fluid) assay panels
(csfdiscovery43) for biomarker discovery and early stage biomarker
qualification (targeting the CNS segment and in particular
Alzheimer's, Parkinson's and Multiple Sclerosis diseases)
3. Custom assay development for clients (plasma and CSF only)
4. Protein Biomarker Testing & Qualification (testing client samples against custom assays or our off-the-shelf plasmadiscovery41 and csfdiscovery43 assays)
Our customer segments have been and will continue to be large,
medium and small pharma/biotech, key academic centres and
translational medicine centres. We will use current and future
plasmadiscovery and csfdiscovery assays to enable focus on Oncology
and CNS therapeutic areas. We are focusing on biomarker discovery
and qualification for these major therapeutic areas which will
serve as 'conversation starters' across all customer segments in
these markets. Through targeting of the following segments our core
marketing strategy is to become a centrally networked player in the
biomarker space for Oncology and CNS disease. Key customer segments
we are targeting and the rationale for this is explained below.
1. Key Academic Centres/Translational Medicine Centres - focus
on key opinion leaders (KOLs) who lead the way in biomarker
research in our disease areas of interest and who will have access
to clinical samples to support their research activities. Our
products will provide new approaches to enable biomarker discovery
and qualification work with these clinical samples. Projects will
be revenue generating.
2. Disease Foundations - disease specific organisations which
both fund and undertake their own research. These groups are not
only a source of potential project revenue but they are extremely
well networked in their disease areas. These groups influence the
activities of the pharma and biotech and are often collaborators
with industry. They have access to patients and samples which is
valuable to pharma and biotech and a resource from which NextGen
Sciences can generate revenues through testing against our Plasma
and CSF assay panels.
3. Small and Mid-Tier Pharma & Biotech - targeting
specifically those involved in Oncology and CNS drug development.
They will have minimal biomarker discovery and multiplex assay
development capability but have the need to discover and qualify
biomarkers. They will seek to outsource these elements and will in
many cases have clinical samples to underpin these activities. Most
opportunities will be in discovery and early clinical phases. Some
projects may require GLP (GLP-like) working standards.
4. Large Pharma & Biotech - present two major routes.
Firstly, as described above for the Small and Mid-Tier companies
although going through all phases (pre-clinical and clinical).
Secondly, some of these companies develop MRM assays internally and
look to tech transfer the assay and sample analysis out to
companies with the capabilities of Nextgen Sciences. Again some
projects may require GLP (GLP-like) working standards.
In the second half of 2011 the company has continued to develop
its business strategy with a view to establishing a 'diagnostics'
business component. This would involve investment by the company in
projects (sole, collaborative or partnership) that would lead to
the creation of intellectual property (IP) and assay products that
could be sold and/or licenced for revenues and royalties. A number
of project opportunities have been developed within the CNS
therapeutic area and are likely to focus on diseases such as
Parkinson's, traumatic brain injury (TBI), multiple sclerosis (MS)
and a number of disorders associated with cognitive decline.
The development of a diagnostics 'project engine' will be
ongoing through 2012 and will focus on biomarkers for disease
progression, patient stratification (supporting moves towards
personalised medicines) and point-of-care diagnostics. Projects
will be selected for evaluation based upon observed market
opportunities and it is envisaged that a diversified portfolio of
projects will be established with a range of commercial
exploitation routes.
Projects would utilise the biomarker discovery, assay
development and biomarker qualification capabilities that the
company has demonstrated through 2011.
The Group's laboratory and sales operations are located in the
Ann Arbor, Michigan, USA facility.
Trading Review
Group revenue from continuing operations for the year ended 31
December 2011 was $1.828 million (2010: $1.216 million), an
increase of 50.3%.
Gross profit margin improved from a gross loss of 1.1% in the
year ended 31 December 2010 to a gross profit of 29.7% in the year
ended 31 December 2011. The other operating expenses decreased by
5.4% to $3.020 million (2010: $3.193 million). In addition share
based payment in the form of fair value of options granted to
managers and employees amount to $2.076 million (2010: $ nil).
Furthermore the fair value of the conversion rights and attached
warrants to the convertible loans amount to $2.182 million (2010:
$nil).
After a net finance charge of $2.499 million (2010: $0.134
million), the Group reports a post-tax loss of $7.052 million
(2010: loss $3.341million). This result represents a basic loss per
share of 0.10 cents (2010: loss 0.06 cents).
Biomarker services
The biomarker market is growing strongly, and is anticipated in
a 2011 BCC Research report to be worth from $25bn to $79bn by 2016.
Of this nearly $3bn is expected to be for protein-based biomarkers
alone. For NextGen Sciences areas of therapeutic focus, the global
CNS biomarker market is expected to reach close to $3.2 billion by
2015 (BCC Research, 2010), and the global oncology biomarker market
is expected to grow to $5.7 billion by 2014 (Goliath, 2010).
The official NIH (National Institute of Health) definition of a
biomarker is: "A characteristic that is objectively measured and
evaluated as an indicator of normal biologic processes, pathogenic
processes, or pharmacologic responses to a therapeutic
intervention."
Biomarkers (including genomic, proteomic and metabolomic) have
enormous potential in diagnosis of disease and disease progression
and are under intense investigation for their predictive ability in
the drug development process.
The pharmaceutical and biotechnology industry is under pressure
to reduce the attrition rate of compounds through the development
process. The industry is looking towards biomarkers as the key for
better target selection, measurement of efficacy, measurement of
toxicity and to ensure that drugs are targeted to the correct
patient cohorts. Combined, this approach will enable the industry
to reduce its current attrition rates. The role of biomarkers spans
all aspects of drug discovery and development. It has been
recognized that integration of biomarkers through the different
phases of drug development can yield safer drugs with enhanced
therapeutic efficacy in a cost-effective manner. Biomarkers also
provide the critical link in translational medicine (bench to
bedside) and are essential for the realization of personalized
medicine.
A 2007 Report 'Biomarkers: The Expanding Global Market' from BCC
Research (http://www.bccresearch.com/) divided the biomarker market
into three main segments:
1. Biomarker discovery
2. Molecular diagnostics
3. Clinical trials
NGG will focus exclusively on products that can address all
three segments of the market. This will place NGG and its
technological capabilities at the centre of the personalized
medicine business model for drug development i.e. discovery of
companion diagnostics and development of validated biomarker assays
to drive and enable the appropriate selection of patient cohorts
during clinical trials and post drug approval.
Current trading and outlook
In 2011 NextGen Sciences implemented its business strategy
focused on biomarker discovery and biomarker qualification (through
the development of MRM based quantitative assays). The company
effectively focused its restructured operational and sales &
marketing teams towards development and successful
commercialisation of new products.
During 2011 the company continued to offer and perform services
for pharma, biotech and academic customers in the USA, EU and
Japan.
In Q1 and Q2 of 2011 the company launched two new
'off-the-shelf' biomarker assay panels (plasmadiscovery41 and
csfdiscovery43). The company has attracted revenues for both these
products.
The company has continued to develop these assays and released
its expanded cerebrospinal fluid (CFS) multiple protein (multiplex)
assay, csfdiscovery82 (since renamed as CSF assay-human A.1.0), for
central nervous system (CNS) biomarker discovery and qualification
in January 2012. The company is on target to release further assays
in first half of 2012. The company has a growing pipeline of
potential customers for both the new products in 2012.
These assays will serve a number of purposes:
1. They will demonstrate to the market place that NextGen
Sciences is able to develop technically validated, quantitative MRM
assays for biomarker discovery and qualification. This will attract
revenue through custom assay development and testing projects or
assay transfer projects (assays developed by the customers) from
the customer to NextGen Sciences.
2. They will enable NextGen Sciences to build market traction
and brand awareness in the field of Oncology diseases through the
human plasma assay. This will bring near term revenues through
testing of samples against the plasma assay. This will also attract
custom assay development projects and opportunities for NextGen
Sciences to become involved in co-development opportunities in the
Oncology disease area.
3. They will enable NextGen Sciences to build market traction
and brand awareness in the field of CNS disease through the human
CSF assay. This will also attract custom assay development projects
and opportunities for NextGen Sciences to become involved in
co-development opportunities in the CNS disease area.
4. They will drive the growth of our biomarker discovery
services since these services can be the first step in selecting
potential biomarkers for which MRM assays can be developed to
enable biomarker qualification.
The company expects to be GLP ready for its assay testing
services in H2 2012, currently estimating at 80% complete against
its implementation plans.
The company has upgraded its website architecture to enhance the
information available to customers and to promote greater exposure
of the business activities through search engines. The company has
commenced the implementation of detailed sales and marketing
reporting structures will enable the company to better focus its
client expansion and revenue generating activities in 2012.
The company announced the establishment of a second subsidiary
business (NextGen Sciences Dx), which will undertake its own
diagnostic projects in the CNS therapeutic area. The diagnostics
business will utilise the technical expertise and capabilities of
the NextGen Sciences CRO business to drive these projects.
NextGen announced in March 2012 that it had filed a provisional
patent for biomarkers that had shown the ability to identify
patients with cognitive decline (early stage dementia).
The NextGen Sciences Dx business expects to create
1. Intellectual property and assays that can be sold/licenced
for revenues, including follow through royalties
2. Assay products that can be made available to customers for
biomarker discovery/qualification testing services for additional
revenue generation
3. An international reputation as a protein biomarker company,
primarily in the CNS therapeutic area
NextGen Sciences believes that it is vital for the growth of the
business that it continues to deploy resources as available, to the
development of therapeutically relevant assay panels (plasma and
CSF). This will enable the company to focus on specific market
segments to attract samples for biomarker testing as a highly
scalable and profitable business element. Furthermore the company
looks to deploy resources for the development of diagnostic
projects and products that utilise the technical capabilities that
have been established and demonstrated through 2011.
Klaus Rosenau
Chief Executive Officer
30 March 2012
Annual General Meeting ("AGM")
The AGM will be held at the offices of Seymour Pierce Limited,
20 Old Bailey, London EC4M 7EN on 30 April 2012. Notice of the AGM
will be sent to shareholders.
Consolidated income statement
For the year ended 31 December 2011
Note 2011 2010
$ $
Revenue 7 1,827,658 1,215,554
Cost of sales (1,283,970) (1,229,460)
------------- -------------
Gross profit/(loss) 543,688 (13,906)
Other operating expenses 8 (3,020,296) (3,193,424)
Share based payments 17 (2,075,969) -
------------- -------------
Operating loss (4,552,577) (3,207,330)
Finance income - 3,482
Finance costs 11 (2,499,033) (137,120)
============= =============
Loss before taxation (7,051,610) (3,340,968)
Income tax expense 19 (25) (196)
Loss after taxation (7,051,635) (3,341,164)
Net loss attributable to equity
shareholders of the parent (7,051,635) (3,341,164)
---------------------------------- ----- ------------- -------------
Basic and diluted loss per share 20 0.10c 0.06c
Consolidated statement of comprehensive income
For the year ended 31 December 2011
2011 2010
$ $
Net loss attributable to equity
shareholders (7,051,635) (3,341,164)
Currency retranslation losses (74,470) (80,625)
Total comprehensive loss attributable
to equity shareholders (7,126,105) (3,421,789)
======================================= ================ ================
Consolidated statement of financial position
At 31 December 2011
Note 2011 2010
$ $
Non-current assets
Goodwill 9 507,862 507,862
Property, plant and equipment 10 605,086 742,440
Investment 6 - 35
============ ============
1,112,948 1,250,337
============ ============
Current assets
Trade and other receivables 14 69,580 308,829
Cash and cash equivalents 15 70,461 21,255
============ ============
140,041 330,084
============ ============
Total assets 1,252,989 1,580,421
--------------------------------------------- ---- ------------ ------------
Equity
Called up share capital 16 12,081,563 10,615,514
Share premium account 10,283,781 10,276,362
Merger reserve 10,026,450 10,026,450
Other reserves 3,014,298 938,329
Foreign currency translation
reserve (671,261) (596,791)
Profit and loss account (38,932,079) (31,880,444)
============ ============
Equity shareholders' funds (4,197,248) (620,580)
============ ============
Liabilities
Non-current liabilities
Finance lease 12 188,368 296,131
Current liabilities
Trade payables and other current liabilities 18 384,469 770,639
Finance lease 12 161,236 147,693
Loans 12 2,534,193 986,538
Derivative financial liabilities 12 2,181,971 -
5,261,869 1,904,870
Total liabilities 5,450,237 2,201,001
============ ============
Total equity and liabilities 1,252,989 1,580,421
--------------------------------------------- ---- ------------ ------------
The accompanying accounting policies and notes are an integral
part of these financial statements. The financial statements were
approved by the Board of Directors on 30 March 2012.
Klaus Rosenau Leif Hamoe
CEO CFO
Company no. 5556404
Consolidated statement of cash flows
For the year ended 31 December 2011
Note 2011 2010
$ $
Cash flows from operating activities 21 (2,301,998) (2,666,477)
Taxation (paid)/received (25) (196)
=========== ===========
Net cash flow from operating activities (2,302,023) (2,666,673)
=========== ===========
Cash flows from investing activities
Interest received - 3,482
Purchase of property, plant and equipment (26,523) (136,009)
Net cash flow from investing activities (26,523) (132,527)
=========== ===========
Cash flows from financing activities
Interest paid 11 (14,741) (13,363)
Finance lease interest paid 11 (41,159) (40,387)
Loan interest paid and monitoring fee 11 (152,097) (31,890)
Proceeds from borrowings 12 1,492,394 1,370,500
Repayment of borrowing 12 - (475,300)
Capital element of finance lease rentals (164,891) (336,353)
Issue of shares 1,462,049 2,276,105
Share issue costs recognized in operating
expenditure (207,803) (257,933)
=============================================== ======== =========== ===========
Net cash flow from financing activities 2,377,752 2,491,379
=============================================== ======== =========== ===========
Net (decrease)/increase in cash and
cash equivalents 49,206 (307,821)
Cash and cash equivalents at the beginning
of the year 15 21,255 329,076
Cash and cash equivalents at the end
of the year 15 70,461 21,255
=============================================== ======== =========== ===========
Consolidated statement of changes in equity
Foreign Total
currency share-
Share Merger Other translation Profit and holders
capital Share premium reserve reserves reserve loss funds
$ $ $ $ $ $ $
Balance at
1 January 2011 10,615,514 10,276,362 10,026,450 938,329 (596,791) (31,880,444) (620,580)
Issue
of share capital 1,466,049 7,419 - - - - 1,473,468
Share-based
payments - - - 2,075,969 - - 2,075,969
Transaction
with owners 1,466,049 7,419 - 2,075,969 - - 3,549,437
Total
comprehensive
income - - - - (74,470) (7,051,635) (7,126,105)
================== ========== ============= ========== ========= ============ ============ ===========
Balance at
31 December
2011 12,081,563 10,283,781 10,026,450 3,014,298 (671,261) (38,932,079) (4,197,248)
================== ========== ============= ========== ========= ============ ============ ===========
Balance at
1 January 2010 8,339,409 10,276,362 10,026,450 938,329 (516,166) (28,539,280) 525,104
Issue
of share capital 2,276,105 - - - - - 2,276,105
Transaction
with owners 2,276,105 - - - - - 2,276,105
Total
comprehensive
income - - - - (80,625) (3,341,164) (3,421,789)
------------------ ---------- ------------- ---------- --------- ------------ ------------ -----------
Balance at
31 December
2010 10,615,514 10,276,362 10,026,450 938,329 (596,791) (31,880,444) (620,580)
------------------ ---------- ------------- ---------- --------- ------------ ------------ -----------
The accompanying accounting policies and notes are an integral
part of these financial statements.
Notes to the consolidated accounts
1. Nature of operation
NextGen Group plc and its subsidiaries (together 'Group') offers
the highest quality proteomic services with a strategic focus on
protein biomarker discovery, assay development, validation and
testing that gives researchers the ability to characterize and
measure proteins in biological samples with accurate, precise and
robust assays. Services available from the Group include the
identification and characterization of clinically relevant proteins
(putative biomarkers), assay development, qualification,
verification and validation of the protein biomarker (validated or
known biomarker) and the monitoring of protein biomarkers during
all phases of drug development.
The Group's biomarker and target validation services offer a way
to improve drug development for all therapeutic areas. The Group'
platforms are used to develop protein biomarker assays for
pharmaceutical and biotechnology companies. This has helped relieve
the bottleneck of assay development. The Group has demonstrated
that the platform can be used to develop multiplex assays in the
timelines required by the industry.
The Group continues to develop a number of pre-defined assay
panels which will fulfil certain needs in the market and allow easy
entrance to biomarker testing to many of the Group's present and
future customers. At the same time working relationships with
pharmaceutical biotechnology and diagnostic companies continues to
expand and name branding has become solidified. This is supported
in the continued growth of our client list from around the globe
and that our clients now reach into different life science sectors
such as agriculture.
2. General information and statement of compliance with IFRS
NextGen Group Plc (NextGen) is the Group's ultimate parent
company. The company is incorporated in the United Kingdom. The
address of NextGen Group's registered office is 8th Floor, Kildare
House 3, Dorset Rise, London EC4Y 8EN. NextGen Group's shares are
listed on the AIM Market of the London Stock Exchange.
The consolidated financial statements of the Group have been
prepared under the historic cost convention and in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the EU.
The Group financial statements consolidate the financial
statements of NextGen Group Plc, NextGen Sciences Limited and
NextGen Sciences Inc. (collectively the 'Group'), drawn up to 31
December each year.
The consolidated financial statements for the year ended 31
December 2011 (including comparatives) were approved and authorized
for issue by the Board of Directors on 30 March 2012.
3. Going concern
The financial statements have been prepared on a going concern
basis, which assumes that the Group will continue to trade for the
foreseeable future. During the year the Group incurred losses after
taxation of $7,051,635 and had an accumulated profit and loss
account deficit of $38,932,079 at 31 December 2011.
The nature and stage of the Group's business are such that
substantial losses have been incurred and there can be considerable
unpredictable variations in the timing of cash inflows. The
directors have prepared projected cash flow information, which
incorporates their best estimate of the timing and value of sales
revenue and consequential external funding requirements. The
Directors remain in discussion with the majority shareholders of
the Group to arrange further funding in order to support the
continued operation and growth of the Group. In addition to a
placing and advance of convertible loans in the year, the Group
raised a further EUR800,000 by way of a convertible loan agreement
on 2 February 2012. This loan and the discussions with investors
give the Directors confidence that additional funds will be
available for the company to finance the operations and to pay back
the convertible loans. On the basis of the additional funding and
the forecast for 2012 and 2013 the directors expect the Group to
continue to meet its liabilities as they fall due. For this reason
the Directors continue to adopt the going concern basis in
preparing the financial statements. This assumes that required
levels of sales revenue and forecast external funding are achieved
by the Group. The financial statements do not include any
adjustments that would result should the Group not generate
forecast sales revenue or raise adequate funding.
4. Changes in accounting policies
4.1 Overall considerations
The accounting policies applied by the Group are consistent with
the policies adopted in the last annual financial statements for
the year to 31 December 2010.
Of the new Standards and Interpretations effective for the year
ended 31 December 2011, there was no impact on the presentation of
the financial statements of NextGen Group plc. The accounting
policies have been applied consistently throughout the Group for
the purposes of the preparation of these consolidated financial
statements.
4.2 Standards, amendments and interpretations to existing
standards that are not yet effective and have not been adopted
early by the Group
At the date of authorization of these financial statements,
certain new standards, amendments and interpretations to existing
standards have been published but are not yet effective, and have
not been adopted early by the Group. The Standards and
Interpretations in issue, expected to be relevant to the Group, but
not yet effective for the year ended 31 December 2011 are listed
below. NextGen Group plc has not adopted these early.
Number Title Effective
---------- --------------------------------------------- ------------
IFRS 9 Financial Instruments 01 Jan 2015
---------- --------------------------------------------- ------------
IFRS 10 Consolidated Financial Statements 01 Jan 2013
---------- --------------------------------------------- ------------
IFRS 12 Disclosure of Interests in Other Enteties 01 Jan 2013
---------- --------------------------------------------- ------------
IFRS 13 Fair Value measurements 01 Jan 2013
---------- --------------------------------------------- ------------
Deferred Recovery of Underlying Assets - Amendments 01 Jan 2012
Tax to IAS 12 Income Taxes
---------- --------------------------------------------- ------------
Amendment Presentation of items of Other Comprehensive 01 Jan 2012
IAS 1 Income - Amendments to IAS 1
---------- --------------------------------------------- ------------
Management anticipates that all of the pronouncements will be
adopted in the Group's accounting policies for the first period
beginning after the effective date of the pronouncement. The
standards and interpretations are not expected to have any
significant impact on Group's financial statements, in their
periods of initial application.
5. Summary of accounting policies
5.1 Overall considerations
The significant accounting policies that have been used in the
preparation of these consolidated financial statements are
summarized below. These policies have been consistently applied to
all years presented, unless otherwise stated.
5.2 Basis of consolidation
The Group financial statements consolidate those of the parent
company and all of its subsidiary undertakings drawn up to 31
December 2011. Subsidiaries are all entities over which the Group
has the power to control the financial and operating policies. All
subsidiaries have a reporting date of 31 December.
Unrealized gains and losses on transactions between Group
companies are eliminated. Where unrealized losses on intra-group
asset sales are reversed on consolidation, the underlying asset is
also tested for impairment from a group perspective. Amounts
reported in the financial statements of subsidiaries have been
adjusted where necessary to ensure consistency with the accounting
policies adopted by the Group.
5.3 Foreign currency translation
Functional and presentational currency
The Group's consolidated financial statements are presented in
US dollars, the reporting currency of the Group, being the currency
of the primary economic environment in which the Group operates.
The functional and presentational currency for the parent Company
is Sterling as the parent Company does not trade and key
transactions originate in the UK.
Transactions, balances and foreign subsidiaries
Transactions in foreign currencies are translated at the
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities in foreign currencies are translated at the
rates of exchange ruling at the balance sheet date. Any exchange
differences arising on the settlement of monetary items or on
translating monetary items at rates different from those at which
they were initially recorded are recognised in profit or loss in
the period in which they arise.
The assets and liabilities in the financial statements of
foreign operations and related goodwill are translated into the
group presentational currency at the rate of exchange ruling at the
balance sheet date. Income and expenses are translated at the
actual rate. The exchange differences arising from the
retranslation of foreign operations are recognised in other
comprehensive income and taken directly to the "Foreign currency
translation reserve" in equity. On disposal of a foreign operation
the cumulative translation differences (including, if applicable,
gains and losses on related hedges) are transferred to the income
statement as part of the gain or loss on disposal.
The Group has taken advantage of the exemption in IFRS 1 and has
deemed cumulative translation differences for all foreign
operations to be nil at the date of transition to IFRS. The gain or
loss on disposal of these operations excludes translation
differences that arose before the date of transition to IFRS and
includes later translation differences.
5.4 Segment reporting
An operating segment is a component of an entity:
-- that engages in business activities from which it may earn
revenues and incur expenses (including revenues and expenses
relating to transactions with other components of the same
entity),
-- whose operating results are regularly reviewed by the
entity's chief operating decision maker to make decisions about
resources to be allocated to the segment and assess its
performance, and
-- for which discrete financial information is available.
The Group considers that it has a single operating segment being
Biomarker services, which includes Biomarker Discovery, Biomarker
Assay Development and Biomarker Testing.
5.5 Revenue
Revenue is measured by reference to the fair value of
consideration received or receivable by the Group for services
provided, excluding sales tax, VAT and trade discounts. Revenue is
recognised upon the performance of services in line with the
development of the work and when significant acts set out in the
contract are met. Where completion of a sale is conditional upon
customer acceptance, recognition is deferred until such acceptance
is received.
Revenue from the sale of service is recognised when all the
following conditions have been satisfied:
-- The Group has reached significant acts as set out in the contract
-- The amount of revenue can be measured reliably
-- It is probable that the economic benefits associated with the
transaction will flow to the Group, and the costs incurred and to
be incurred in respect of the transaction can be measured
reliably.
In cases where economic benefits cannot be estimated reliably,
revenue is only recognised to the extent that the expenses incurred
are recoverable.
Where a discount is provided to a customer for the cost of
materials and that the company can subsequently use on its own
research or for the purpose of marketing and/or generating
intellectual property, revenue is recognised based on the fair
value of the services provided, being the gross fee and the
discount element is recorded as a cost in the income statement.
5.6 Borrowing costs
Finance costs of debt are recognized in the income statement in
the period in which they were incurred.
5.7 Research and development expenditures
Research costs are recognised as expenses in the period in which
they are incurred.
Development costs are also expensed in the period in which they
are incurred unless they satisfy the criteria as set out in IAS 38
"Intangible Assets", in which case they are capitalised as an
intangible asset. The Group capitalises development costs upon
demonstration of the following:
-- The technical feasibility of completing the intangible asset
so that it will be available for use or sale.
-- Its intention to complete the intangible asset and use or sell it.
-- Its ability to use or sell the intangible asset.
-- How the intangible asset will generate probable future economic benefits.
-- The availability of adequate resources to complete the development and to use the asset.
-- Its ability to measure reliably the expenditure attributable
to the intangible asset during its development.
5.8 Property, plant and equipment
Property, plant and equipment are stated at historical cost, net
of depreciation and impairment. Depreciation is calculated to write
off the cost less estimated residual value of each asset on a
straight-line basis over its expected useful life. The periods
generally applicable are:
Plant, machinery and office
equipment 3 to 5 years
Fixtures and fittings 3 to 5 years
Computer equipment 3 to 5 years
The periods for plant, machinery, office equipment, and computer
equipment have been increased to 5 years from 2011 because
machinery and computer equipment is considered to have a longer
useful life than before.
Material residual value estimates and estimates of useful life
are updated as required, but at least annually, whether or not the
asset is re-valued.
Gains or losses arising on the disposal of property, plant and
equipment are determined as the difference between the disposal
proceeds and the carrying amount of the assets and are recognized
in the Income Statement within 'other income' or 'other operating
expenses'.
5.9 Leased assets
Assets held under finance leases and other similar contracts,
which confer rights and obligations similar to those attached to
owned assets, are capitalised as property, plant and equipment and
are depreciated over the shorter of the term of the lease and their
expected useful lives. The capital elements of future lease
obligations are recorded as liabilities, while the finance element
is charged to the income statement over the period of the lease so
as to produce a constant rate of charge on the balance of the
capital repayments outstanding. Hire purchase transactions are
dealt with similarly, except that assets are depreciated over their
useful economic lives.
All other leases are regarded as operating leases and the
payments made under them are charged to the income statement on a
straight-line basis over the lease term, even if the payments are
not made on such a basis.
5.10 Goodwill
Goodwill (being the difference between the fair value of
consideration paid for new interests in group companies and the
fair value of the Group's share of their net identifiable assets
and contingent liabilities at the date of acquisition) is
capitalised. Goodwill is not amortised, but is subject to an annual
review for impairment (or more frequently if necessary). Any
impairment is charged to the income statement as it arises.
5.11 Impairment testing of goodwill, other intangible assets and
property plant and equipment
For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash
flows (cash-generating units). As a result, some assets may be
tested individually for impairment and some are tested at
cash-generating unit level. Goodwill is allocated to those
cash-generating units that are expected to benefit from synergies
of the related business combination and represent the lowest level
within the Group at which management monitors the related cash
flows.
Goodwill, other individual assets or cash-generating units that
include goodwill, other intangible assets with an indefinite useful
life, and those intangible assets not yet available for use are
tested for impairment at least annually. All other individual
assets or cash-generating units are tested for impairment whenever
events or changes in circumstances indicate that the carrying
amount may not be recoverable.
An impairment loss is recognised for the amount by which the
asset's or cash-generating unit's carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of fair
value, reflecting market conditions less costs to sell, and value
in use based on an internal discounted cash flow evaluation.
Impairment losses recognised for cash-generating units, to which
goodwill has been allocated, are credited initially to the carrying
amount of goodwill. Any remaining impairment loss is charged pro
rata to the other assets in the cash generating unit. With the
exception of goodwill, all assets are subsequently reassessed for
indications that an impairment loss previously recognised may no
longer exist.
5.12 Financial instruments
Financial assets and financial liabilities are recognized when
the Group becomes a party to the contractual provisions of the
financial instrument. Financial assets are derecognized when the
contractual rights to the cash flows from the financial asset
expire, or when the financial asset and all substantial risks and
rewards are transferred.
Financial assets and financial liabilities are measured
initially at fair value plus transactions costs, except for
financial assets and financial liabilities carried at fair value
through profit or loss, which are measured initially at fair
value.
Financial assets and financial liabilities are measured
subsequently as described below.
Financial assets
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. Trade receivables and cash balances are classified as loans
and receivables. These are measured, subsequent to initial
recognition at fair value, at amortised cost using the effective
interest rate method, less provision for impairment. Any change in
their value through impairment or reversal of impairment is
recognised in the income statement.
Provision is made against trade receivables where there is
objective evidence that the Group will not be able to collect all
amounts due to it in accordance with the original terms of those
receivables. The amount of the write-down is determined as the
difference between the asset carrying amount and the present value
of estimated future cash flows.
Financial liabilities
Financial liabilities are obligations to pay cash or other
financial assets and are recognised when the Group becomes a party
to the contractual provisions of the instrument. Financial
liabilities include borrowings, trade and other payables which are
measured initially at fair value and subsequently at amortised cost
using the effective interest method. A financial liability is
derecognised only when the obligation is extinguished, that is,
when the obligation is discharged, cancelled or expires.
Financial instruments
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a
residual interest in the assets of the entity after deducting all
of its financial liabilities.
Where the contractual obligations of financial instruments
(including share capital) are equivalent to a similar debt
instrument, those financial instruments are classed as financial
liabilities.
Financial liabilities are presented as such in the balance
sheet. Finance costs and gains or losses relating to financial
liabilities are included in the income statement. Finance costs are
calculated so as to produce a constant rate of return on the
outstanding liability.
Where contractual terms of a financial instrument do not have
any terms meeting the definition of a financial liability then this
is classed as an equity instrument. Dividends and distributions
relating to equity instruments are debited direct to equity.
5. 13 Income taxes
Current tax is the tax currently payable or receivable on the
result for the period. Deferred income taxes are calculated using
the liability method on temporary differences. Deferred tax is
generally provided on the difference between the carrying amounts
of assets and liabilities and their tax bases. However, deferred
tax is not provided on the initial recognition of goodwill, nor on
the initial recognition of an asset or liability unless the related
transaction is a business combination or affects tax or accounting
profit. Deferred tax on temporary differences associated with
shares in subsidiaries is not provided if reversal of these
temporary differences can be controlled by the Group and it is
probable that reversal will not occur in the foreseeable future. In
addition, tax losses available to be carried forward as well as
other income tax credits to the Group are assessed for recognition
as deferred tax assets.
Deferred tax liabilities are provided in full, with no
discounting. Deferred tax assets are recognised to the extent that
it is probable that the underlying deductible temporary differences
will be able to be offset against future taxable income. Current
and deferred tax assets and liabilities are calculated at tax rates
that are expected to apply to their respective period of
realisation, provided they are enacted or substantively enacted at
the balance sheet date.
Changes in deferred tax assets or liabilities are recognised as
a component of tax expense in the income statement, except where
they relate to items that are charged or credited directly to
equity (such as share based payments) in which case the related
deferred tax is also charged or credited directly to equity.
Deferred tax is measured using rates of tax that have been enacted
or substantively enacted by the balance sheet date.
The group has not recognised a deferred tax asset because the
economic benefit of the Group's trading losses is uncertain.
5. 14 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand
deposits, together with other short-term, highly liquid investments
that are readily convertible into known amounts of cash and which
are subject to an insignificant risk of changes in value.
5. 15 Equity and reserves
Share capital represents the nominal value of shares that have
been issued.
Share premium includes any premiums received on issue of share
capital. Transaction costs associated with the issuing of shares
are deducted from share premium received, net of any related income
tax benefits.
Merger reserves are reserves generated from the application of
merger relief on past business combinations.
Other reserves include share based payments.
Foreign currency translation differences arising on the
translation of the Group's entities, which report in Sterling, are
included in the translation reserve.
Profit and loss account includes all current and prior period
results.
5. 16 Employment benefits
The Group operates a defined contribution scheme under which the
amount charged to the income statement is the contributions payable
in the year. Differences between contributions payable in the year
and contributions actually paid are shown as payables in the
balance sheet.
5. 17 Share based employee remuneration
The group operates an equity-settled share-based compensation
plan. In accordance with the transitional provisions, IFRS 2 has
been applied to all grants of equity instruments after 7 November
2002 that were unvested as of 1 January 2006.
The group issues equity-settled share-based payments to certain
employees. Equity-settled share-based payments are measured at fair
value (excluding the effect of non-market-based vesting conditions)
at the date of grant. The fair value determined at the grant date
of the equity-settled share-based payments is expensed on a
straight-line basis over the vesting period, based on the group's
estimate of shares that will eventually vest and adjusted for the
effect of non-market-based vesting conditions.
Fair value is measured by use of the Black-Scholes option
pricing model. The expected life used in the model has been
adjusted, based on management's best estimate, for the effects of
non-transferability, exercise restrictions, and behavioural
considerations. The key factors in the model is shown in Note
17.2.
5. 18 Provisions
Provisions are recognized when present obligations as a result
of a past event will probably lead to an outflow of economic
resources from the Group and amounts can be estimated reliably.
Timing or amount of the outflow may still be uncertain. A present
obligation arises from the presence of a legal or constructive
commitment that has resulted from past events, for example, product
warranties granted, legal disputes or onerous contracts.
Provisions are measured at the estimated expenditure required to
settle the present obligation, based on the most reliable evidence
available at the reporting date, including the risks and
uncertainties associated with the present obligation.
Where there are a number of similar obligations, the likelihood
that an outflow will be required in settlement is determined by
considering the class of obligations as a whole. Provisions are
discounted to their present values, where the time value of money
is material.
Any reimbursement that the Group can be virtually certain to
collect from a third party with respect to the obligation is
recognized as a separate asset. However, this asset may not exceed
the amount of the related provision.
All provisions are reviewed at each reporting date and adjusted
to reflect the current best estimate.
5. 19 Significant management judgement in applying accounting
policies
The following are significant management judgements in applying
the accounting policies of the Group that have the most significant
effect on the financial statements. Critical estimation
uncertainties are described in section 5.20.
Revenue
The Group receives payments in advance on larger projects. The
amount is recognized as revenue over the period during which the
service is performed. The nature of services provided depends on
the specific project. Therefore management needs to make
significant judgement in determining when to recognize income from
prepayments. In particular, this requires knowledge of the
development detail and the level of completion on a project.
Research and development costs
Management monitors progress of internal research and
development projects by using a project management system.
Significant judgement is required in distinguishing research from
the development phase. Development costs are recognized as an asset
when all the criteria are met, whereas research costs are expensed
as incurred. There are no such development costs in the year.
5. 20 Estimation uncertainty
When preparing the financial statements management undertakes a
number of judgements, estimates and assumptions about recognition
and measurement of assets, liabilities, income and expenses.
The actual results may differ from the judgements, estimates and
assumptions made by management, and will seldom equal the estimated
results.
Information about estimates and assumptions that have the most
significant effect on recognition and measurement of assets,
liabilities, income and expenses are discussed below.
Impairment
An impairment loss is recognized for the amount by which the
asset's or cash- generating unit's carrying amount exceeds its
recoverable amount. To determine the recoverable amount, management
estimates expected future cash flows from each cash-generating unit
and determines a suitable interest rate in order to calculate the
present value of those cash flows. In the process of measuring
expected future cash flows management makes assumptions about
future operating results. These assumptions relate to future events
and circumstances. The actual results may vary, and may cause
significant adjustments to the Group's assets within the next
financial year.
Impairment reviews in respect of goodwill are performed at least
annually. More regular reviews are performed on all non-current
assets if events indicate that this is necessary. Examples of such
triggering events would include a significant planned
restructuring, a major change in market conditions or technology,
expectations of future operating losses, or negative cash
flows.
The recoverable amounts of cash-generating units are determined
based on the higher of realisable value and value-in-use
calculations. These calculations require the use of estimates.
Further details are given in Note 9.
6. Investments
2011 2010
$ $
Investment (eXeTek) - 35
Net book value - 35
-------------------- ---- ----
The directors have been notified that eXeTek Limited has stopped
trading and have therefore written off the investment.
7. Segment reporting
NextGen provides Biomarker and Proteomic Services. The
activities undertaken by this operating segment includes the
Biomarker Discovery, Biomarker Assay Development and Analytical
Services and Testing. The activities are carried out by the
Company's internal Research and Development Department. The Groups
resources are reviewed on the basis of a single operating
segment.
The key segmental measure is operating result, which is the loss
before impairment, finance costs and taxation and is as set out in
the consolidated income statement.
The group's revenue from external customers and its non-current
assets arise from the following geographical areas:
2011 2010
Geographical Analysis Revenue Non-current Revenue Non-current
by destination Assets Assets
$ $ $ $
USA 1,517,973 1,110,741 676,992 1,245,161
Europe 123,223 2,207 252,826 5,176
Rest of the World 186,462 - 285,736 -
1,827,658 1,112,948 1,215,554 1,250,337
----------------------- ---------- ------------- ---------- ------------
8. Operating expenses (continuing operations)
The operating loss on continued operations is stated after
charging:
Operating expenses 2011 2010
$ $
Staff Costs (321,515) (519,567)
Tenancy (70,462) (115,154)
Legal & Professional (1,088,550) (1,006,419)
Office Costs (79,181) (28,328)
Travel (122,399) (115,904)
Communications & IT (24,929) (44,876)
Marketing (839,597) (822,108)
Share issue costs (102,364) (159,327)
Loan arrangement costs (105,439) (98,606)
Insurances (38,731) (19,603)
Other Expenses (99,002) (159,201)
Depreciation (236,411) (303,880)
Exchange differences 108,284 136,483
Profit on disposal on property,
plant and equipment - 63,066
Total operating Expenses (3,020,296) (3,193,424)
--------------------------------- ------------ ------------
The operating loss is stated after charging:
2011 2010
$ $
Fees payable to the company's auditor for
the audit of the company's annual report 55,642 46,413
Fees payable to the company's auditors
for other services:
- Audit of the company's subsidiaries pursuant
to legislation - 7,264
- Tax services 1,615 9,117
- Advise on share based payments, review
of the interim report 7,271 -
Operating lease charges
- Land and building 150,823 161,531
Research and development 579,291 210,918
9. Goodwill and other intangible assets
Intangible assets represent goodwill arising on the
consolidation of former Proteomic Research Services Inc. now
NextGen Sciences Inc.
Goodwill Licence Total
Cost $ $ $
At 1 January 2011 1,015,724 38,462 1,054,186
Eliminated - (38,462) (38,462)
-------------------- --------- -------- ---------
At 31 December 2011 1,015,724 - 1,015,724
-------------------- --------- -------- ---------
Amortisation and Impairment
At 1 January 2011 507,862 38,462 546,324
Eliminated - (38,462) (38,462)
At 31 December 2011 507,862 - 507,862
------------------------------------ ------- -------- --------
Net book amount at 31 December 2011 507,862 - 507,862
------------------------------------ ------- -------- --------
Goodwill Licence Total
Cost $ $ $
At 1 January 2010 1,015,724 38,462 1,054,186
Additions - - -
-------------------- --------- ------- ---------
At 31 December 2010 1,015,724 38,462 1,054,186
-------------------- --------- ------- ---------
Amortisation and Impairment
At 1 January 2010 507,862 38,462 546,324
At 31 December 2010 507,862 38,462 546,324
---------------------------- ------- ------ -------
Net book amount at 31 December 2010 507,862 -507,862
------------------------------------ ------- -------
Goodwill on the acquisition of Proteomic Research Services Inc.
is represented by the assembled workforce, the synergies that the
Group considers it gained by acquiring PRS, the speed to market
that the Group gained by acquiring PRS rather than establishing its
own similar operations.
The Group tests goodwill annually for impairment or more
frequently if there are indications that goodwill might be
impaired.
In assessing whether a write-down of goodwill is required, the
carrying value of the cash generative unit (CGU) is compared with
its recoverable amount. The recoverable amount of goodwill has been
determined on a value in use calculation using cash flow forecasts
based on projected future trading, discounted to arrive at a net
present value.
The carrying value of goodwill of $507,862 has been entirely
allocated to the biomarker services operations of NextGen Sciences
Inc.
The key assumptions in the cash flow forecast are as
follows:
-- Revenues are determined by management expectations of sales
levels achievable based on their knowledge of current order levels,
recent budget and forecasts for the next five years.
-- The expected increase in sales values is deliverable using
the current infrastructure as adjusted for any additional
investment in capital expenditure
-- The pre-tax discount rate applied to the cash flow
projections is 24% to reflect current market estimates of the value
of money and the Groups weighted average cost of capital.
The Group acknowledges that future revenues depend on both
successful assay developments and market traction, and are not yet
supported by a secure order book and pipeline.
The sensitivity analysis performed on the cash flow forecasts
shows that the carrying value of the goodwill allocated to the
Biomarker Service CGU would still be exceeded by the net present
value of the future cash flows, if the discount rate is increased
to 30%. If profit forecasts are reduced by 25 % then the value of
goodwill would exceed the net present value of future cash flows
forecast to 2016.
10. Property, plant and equipment
The Group's property, plant and equipment comprise plant &
machinery, office equipment and IT equipment. The carrying amount
can be analysed as follows:
Office
equipment
Plant and fixtures
machinery and fittings Computer Equipment Total
$ $ $ $
Gross carrying amount
Balance 1 January
2011 1,661,640 41,794 29,924 1,733,358
Additions 88,409 - 10,648 99,057
Balance 31 December
2011 1,750,049 41,794 40,572 1,832,415
---------------------- ---------- ------------- ------------------ ---------
Depreciation and
impairment
Balance 1 January
2011 929,888 37,343 23,687 990,918
Depreciation 229,520 2,672 4,219 236,411
Balance 31 December
2011 1,159,408 40,015 27,906 1,227,329
---------------------- ---------- ------------- ------------------ ---------
Carrying amount
at 31 December 2011 590,641 1,779 12,666 605,086
---------------------- ---------- ------------- ------------------ ---------
Office
equipment
Plant fixtures Computer
and machinery and fittings Equipment Total
$ $ $ $
Gross carrying amount
Balance 1 January 2010 2,119,819 39,201 347,249 2,506,269
Additions 660,464 - - 660,464
Disposals (1,126,232) - (307,143) (1,433,375)
Reclassification 7,589 2,593 (10,182) -
Balance 31 December 2010 1,661,640 41,794 29,924 1,733,358
---------------------------- -------------- ------------- ---------- -----------
Depreciation and impairment
Balance 1 January 2010 1,740,449 37,354 306,429 2,084,232
Depreciation 291,176 3,125 9,585 303,886
Disposals (1,090,299) - (306,901) (1,397,200)
Reclassification (11,438) (3,136) 14,574 -
Balance 31 December 2010 929,888 37,343 23,687 990,918
---------------------------- -------------- ------------- ---------- -----------
Carrying amount at 31
December 2010 731,752 4,451 6,237 742,440
---------------------------- -------------- ------------- ---------- -----------
Included within Property, Plant and Equipment are assets held
under finance leases with a carrying value of $574,197 (2010,
$702,360). The depreciation charge for equipment held under finance
lease was $168,331 (2010, $268,410).
11. Financial assets and liabilities
Financial instruments in the Group comprise as follows:
Classification and fair values of financial assets and
liabilities
The table sets out the Group's accounting classification of each
class of financial asset and financial liability. The company
considers that the carrying value of financial assets and
liabilities represent their fair value.
All financial assets are classified as loans and receivables and
all financial liabilities except derivatives are held at amortised
cost.
2011 2010
$ $
Financial assets
Trade receivables 30,173 210,343
Provision for doubtful receivables (20,725) (20,725)
Cash and cash equivalents 70,461 21,255
------------------------------------ --------- ---------
Total financial assets 79,909 210,873
------------------------------------ --------- ---------
2011 2010
Financial liabilities $ $
Trade payables 224,824 450,775
Other payables 10,853 11,318
Accruals 107,297 37,181
Loans 2,534,193 986,538
------------------------------------ ------------------ ----------------
Financial liabilities, held
at amortised cost 2,877,167 1,485,812
Derivative liabilities at 2,181,971 -
fair value
------------------------------------ ------------------ ----------------
Total financial liabilities 5,059,138 1,485,812
------------------------------------ ------------------ ----------------
Net financial assets/(liabilities) (4,979,229) (1,274,939)
------------------------------------ ------------------ ----------------
Finance costs
Finance costs during the year were as follows:
2011 2010
$ $
Interest on bank loans and overdrafts 14,741 13,363
Interest on loans 261,162 83,370
Interest on finance leases and hire
purchase contracts 41,159 40,387
Fair value of derivative liabilities 2,181,971 -
Total 2,499,033 137,120
-------------------------------------- --------- -------
12. Borrowings
Borrowings during the year were as follows:
Loan finance 2011 2010
$ $
Carrying amount 1 January 986,538 -
New borrowings 1,548,612 1,457,729
Exchange rate adjustment (957) -
Pay back of borrowings - (471,191)
Carrying amount 31 December 2,534,193 986,538
---------------------------- --------- ---------
2011 2010
$ $
Derivative liability 2,181,971 -
===================== ========= ====
The company has in 2011 announced two convertible loans from
Alpha 4 Concepts GmbH of $611 thousand (EUR453 thousand) and $881
thousand (EUR650 thousand).
The loans bear interest at 12% per annum and may be repaid in
cash or satisfied by the allotment of shares and warrants. Upon
conversion, the number of ordinary shares to be issued will equate
to the loan converted at par value of the shares based on the
exchange rate at the conversion date. The two loans outstanding are
repayable on 30 September 2012 and 31 October 2012 unless the
repayment of the loans is requested by the lender. Loans have been
classified as current liabilities as the holders can require
repayment at 7 days' notice.
The company has entered into convertible agreements in 2010 and
2011 of in total EUR1,803,000 and the fair value of the conversion
rights and the attached warrants amounts to $2,181,971, which is
included as a financial liability.
The fair value is based on the Black Scholes valuation model and
includes the following key factors:
- Conversion price on shares and exercise price on warrants are 0.1p.
- The volatility is calculated for the conversion rights and the
warrants to 124.51% and 121.60% respectively. The volatility is
based 1 year for the conversion rights and 3 years for the
warrants.
- The risk free rate is 3.58% and no dividend is expected.
.
Finance leases 2011 2010
$ $
Current
Finance leases 161,236 147,693
---------------------- ------- -------
Total 161,236 147,693
---------------------- ------- -------
Non-current
Finance leases 188,368 296,131
---------------------- ------- -------
Total 188,368 296,131
====================== ======= =======
Total finance leases 349,604 443,824
====================== ======= =======
All non-current finance leases mature between two and five years
from the balance sheet date.
There are no material differences between the total of the
future minimum lease payments and their present values of the
finance leases at either year end. The finance leases do not
contain any unusual clauses or arrangements such as purchase
options.
Maturity profile
The following table summarises the maturity profile of the
Group's financial obligations in respect of loan finance and
finance leases based on contractual undiscounted payments.
2011 2010
$ $
Within 6 month 798,633 70,830
6 - 12 month 1,930,400 789,586
1 - 2 years 154,674 422,709
2 - 5 years 90 147,237
Total contractual obligation on Loans
and Leases 2,883,797 1,430,362
-------------------------------------- --------- ---------
13. Deferred tax assets and liabilities
The following deferred tax assets are unprovided at 31
December:
2011 2010
$ $
Property, plant and equipment 594 1,133
Other 1,131 1,388
Tax losses carried forward 7,506,614 6,321,172
============================== ========= =========
Unprovided deferred tax asset 7,508,339 6,323,693
============================== ========= =========
14. Trade and other receivables
2011 2010
$ $
Trade receivables 30,173 210,343
Provision for doubtful receivables (20,725) (20,725)
VAT 16,131 37,758
Prepayments, accrued income and other
receivables 44,001 81,453
Total trade and other receivables 69,580 308,829
-------------------------------------- -------- --------
The ageing analysis of trade receivables past due, but not
impaired, is as follows:
2011 2010
$ $
Less than 3 months - 109,024
3 to 6 months - 28,100
Over 6 months 5,288 20,125
=================== ===== =======
Total 5,288 157,849
=================== ===== =======
The net carrying value of trade receivables is considered a
reasonable approximation of fair value. The receivables due more
than 6 month are mostly University/ Hospital customers and other
state institutions that normally pay, but much later than
agreed.
The entire Group's trade and other receivables have been
reviewed for indications of impairment. Certain trade receivables
were found to be impaired but the allowance for credit losses
previously recorded is considered to be adequate.
15. Cash and cash equivalents
Below is shown the cash and cash equivalents:
2011 2010
$ $
Cash at bank and in hand 70,461 21,255
========================= ====== ======
16. Equity
Share Capital, authorised and fully paid shares comprises
ordinary shares with par value of 0.1p. All shares are equally
eligible to receive dividends and the repayment of capital and
represent one vote at the shareholder's meeting of NextGen Group
Plc.
At the AGM on 28 June 2011 it was approved to increase the
general authority to allot shares up to 25,000,000,000 ordinary
shares from 13,700,000,000 ordinary shares. Of this authority,
6,460,000,000 shares will be reserved for issue pursuant to the
exercise of existing conversion rights and warrants of the company.
2,000,000,000 shares will be reserved for issue pursuant to funding
opportunities. 2,000,000,000 shares will be reserved to cover
options for employees and 14,540,000,000 shares will be available
for issue in the future including the issue of shares as
consideration for any acquisition opportunities that may arise.
2011 2010
$ $
Value of authorised shares 38,640,000 20,885,850
========================================= =========== ===========
Total value 38,640,000 20,885,850
========================================= =========== ===========
Value of allotted, called up and fully
paid 12,081,563 10,615,514
========================================= =========== ===========
Total value 12,081,563 10,615,514
========================================= =========== ===========
Shares issued and fully paid. 2011 2010
Number Number
Beginning of the year 6,316,978,644 4,796,978,644
Shares issue 929,810,000 1,520,000,000
=============================== ============== ==============
Total number 7,246,788,644 6,316,978,644
=============================== ============== ==============
The Group issued 927,410,000 shares on 27 January 2011 at par
value. Issue costs of new shares has been charged to the income
statement amounted to $102,364. The new shares were issued with 1
warrant per each placing share at 0.1p per share (payable on
exercise) for a period of 3 years from the date of grant.
The Group issued 2,400,000 shares on 18 March 2011 at market
value.
None of the parent's shares are held by any company of the
Group.
17. Employee Remuneration
17.1 Employee benefits expenses
Staff costs during the year were as follows:
2011 2010
$ $
Wages and salaries 1,318,090 1,421,597
Social security costs 99,333 93,144
Other pension costs 11,481 29,388
Share based payments 2,075,969 -
Total 3,504,873 1,544,129
---------------------- --------- ---------
The average number of employees of the Group during the year
was:
2011 2010
Number Number
Technical 6.0 6.9
Sales and marketing 4.0 4.0
Administration 4.2 4.8
Total number of employees 14.2 15.7
========================== ====== ======
17.2 Share based payment expenses
The following share options were outstanding over 0.1p ordinary
shares in respect of NextGen Group Plc share option schemes.
Date of grant Expiry date No of options Exercise price
16 Apr 2003 16 Apr 2013 253,750 GBP0.0010
16 Apr 2003 16 Apr 2013 952,969 GBP0.1034
16 Apr 2003 16 Apr 2013 253,750 GBP0.1724
23 Sep 2004 23 Sep 2014 1,590,041 GBP0.0276
9 Mar 2005 9 Mar 2015 1,448,550 GBP0.0276
18 March 2011 18 March 2021 580,399,336 GBP0.0010
18 March 2011 18 March 2021 62,150,000 GBP0.0033
Share options of 580,399,336 at an exercise price of GBP0.001
were granted in the year on 18 March with an expiry date of 18
March 2021 and share options of 62,150,000 at an exercise price of
GBP0.0033 were granted in the year on 18 March with an expiry date
of 18 March 2021.
The right to exercise share options is subject in all cases to
service conditions as specified in the detailed scheme rules.
At 31 December 2011, the Group had the following outstanding
options and exercise prices:
2011 2011 2011 2010 2010 2010
Weighted Options Weighted Average Options Weighted
average average exercise average
exercise remaining price per remaining
price per contractual share contractual
share life life
Expiry dates GBP No. Months GBP No. Months
2011 - - - 0.04170 9,207,647 2
2013 0.09760 1,460,469 16 0.09760 1,460,469 32
2014 0.02760 1,590,041 33 0.02760 1,590,041 45
2015 0.02760 1,448,550 39 0.02760 1,448,550 51
2021 0,00122 642,549,336 112
============= ========== =========== ============ ========== ========== ============
Total 0.00156 647,048,396 112 0.04453 13,706,707 10
============= ========== =========== ============ ========== ========== ============
At the end of 2011 all options except 3,750,000 had vested and
were exercisable and at the end of 2010 all options had vested and
were exercisable.
Movements in the number of share options outstanding and their
related weighted average exercise prices are as follows:
2011 2010
Weighted Weighted
average exercise average exercise
price per 2011 price per 2010
share Options share Options
Outstanding at 1 January 0.04453 13,706,707 0.00983 67,589,055
Number granted 0.00122 642,549,336 0.01980 85,401,751
Number lapsed 0.10012 (9,207,647) 0.00718 (139,284,099)
=========================== ================= =========== ================= =============
Outstanding at 31 December 0.00156 647,048,396 0.04453 13,706,707
=========================== ================= =========== ================= =============
Key factors on option valuation:
2011 2010
Exercise price GBP0.0010- GBP0.0010
0.0033p
Expected volatility 78.79% 67.92%
Expected life 3-10 years 3 years
Risk free rate 3.58% 3.11%
Dividends Nil Nil
17.3 Pension
The Group operates a defined contribution pension scheme. The
assets of the scheme are held separately from those of the Group in
an independently administered fund. The pension cost charge
represents contributions payable by the Group to the fund and
amount to $11,481 (2010: $29,388). Contributions totalling $ nil
(2010: $ nil) were payable to the fund at year end and are included
in other payables.
18. Trade and other payables
Trade and other payables recognised in the statement of
financial position can be analysed as follows:
2011 2010
$ $
Trade payables 224,824 450,775
Social security and sundry taxes 8,252 3,634
Other payables 10,853 11,318
Accruals and deferred income 140,540 304,912
================================= ======= =======
Total 384,469 770,639
================================= ======= =======
The ageing analysis of trade payables is as follows:
2011 2010
$ $
Less than 3 months 157,377 361,087
3 to 6 months 5,688 -
Over 6 months 61,759 89,688
=================== ======= =======
Total 224,824 450,775
=================== ======= =======
All trade payables are contractually due for settlement within 6
months.
19. Taxation
The tax charge is based on the loss for the year and
represents:
2011 2010
$ $
Loss before taxation (7,051,610) (3,340,968)
--------------------------------------------- ----------- -----------
Expected corporation tax on loss at
26 % (2010 28%) (1,833,419) (935,471)
Effects of:
Expenses not deductible for tax purposes 647,210 69,863
Depreciation in excess of capital allowances 792 819
Tax losses carried forward 1,185,442 865,058
Other short term timing differences - (269)
Foreign tax - 196
Total tax charge for the year 25 196
--------------------------------------------- ----------- -----------
Unrealised tax losses of $27.980 million (2010: $23.421 million)
remain available to offset against future taxable trading profits,
subject to restrictions that may arise from any changes in trade. A
deferred tax asset of $7.275 million (2010: $6.321 million)
calculated at 26% (2010: 27%) in respect of these trading losses
has not been recognised as an asset due to the uncertainty that
exists at 31 December 2011 over the value of the future benefit of
these losses.
20. Loss per share and dividends
20.1 Loss per share
The calculation of the basic loss per share is based on the loss
attributable to ordinary shareholders divided by the weighted
average number of shares in issue during the year. Diluted loss per
share is the same as basic loss per share.
Reconciliation of the loss and weighted average number of shares
used in the calculations are set out below:
2011 2010
$ $
Loss attributable to ordinary shareholders: (7,051,635) (3,341,164)
Weighted average number of shares - basic 7,180,226,836 5,510,677,274
Basic and diluted (Total operations) (0.10 cents) (0.06 cents)
20.2 Dividends
No dividends have been declared or paid in 2011 and 2010.
21. Cash flow adjustments and changes in working capital
The following non-cash flow adjustments and adjustments for
changes in working capital have been made to loss before tax to
arrive at operating cash flow:
2011 2010
$ $
Net loss (7,051,635) (3,341,164)
Taxation 25 196
Finance income - (3,482)
Finance cost 317,062 137,120
Depreciation of property, plant and
equipment 236,411 303,886
Loss/(Profit) on sale of property, plant
and equipment - (63,066)
Share issue costs and loan commission 207,803 257,933
================================================ =========== ===========
Trade and other current receivables 239,249 (12,637)
Provisions - (1,162)
Trade payables and other current liabilities (386,171) 96,666
================================================ =========== ===========
Changes in working capital (146,922) 82,867
Share option charge 2,075,969 -
Fair value on warrants 2,181,971
Effect of exchange rate fluctuations (122,682) (40,767)
================================================ =========== ===========
Cash flow from operating activities (2,301,998) (2,666,477)
================================================ =========== ===========
22. Related party transactions and transactions with Key
management personnel
22.1 Related party transaction
Related party transactions during the period consisted of
consultancy payments to Nanotecquity AG, a Company of which Klaus
Rosenau is a director and OAR GmbH, a Company wholly owned by Klaus
Rosenau's mother and of which he is a director and Hamo ApS, a
company owned by Leif Hamoe.
Within the income statement related party transactions costs are
amounting to $576,171 (2010: $585,065).
2011 2010
$ $
OAR GmbH
Loan commission 106,836 98,606
Funding fee etc. 104,133 159,327
Expenses 211,003 241,546
Nanotecquity AG
Monitoring fee 154,199 85,586
================= ======= =======
Total expenses 576,171 585,065
================= ======= =======
22.2 Transaction with key management personnel
Key management of the Group are members of the board of
directors (including the period prior to Board appointment).
Key managements remuneration is as follows:
2011 2010
$ $
Emoluments 846,946 921,584
Share based payments 1,724,796 -
Pension contributions to money purchase
pension schemes - 6,196
Total remuneration 2,571,742 927,780
------------------------------------------- --------- -------
Number Number
The number of directors who were members
of a money purchase pension scheme during
the year 0 1
Highest paid director - emoluments 366,160 352,518
- pension costs - -
Total remuneration 366,160 352,518
------------------------------------------- --------- -------
Further details of the Directors' Remuneration and share options
are given in the Directors' Remuneration Report.
23. Financial Instrument Risk
23.1 Risk management objectives and policies
The Group is exposed to various risks in relation to financial
instruments. The main types of risks are market risk, credit risk
and liquidity risk.
The Group's risk management is coordinated at its headquarters,
in close cooperation with the Board of Directors, and focuses on
actively securing the Group's short to medium-term cash flows by
minimizing the exposure to financial markets.
The Group does not actively engage in the trading of financial
assets for speculative purposes nor does it write options. The most
significant financial risks to which the Group is exposed are
described below.
The Group is exposed to market risk, specifically to currency
risk and interest rate risk, which result from its operating
activities.
23.2 Interest rate risk
The Group finances its operations through a mixture of loans and
leasing. The Group's exposure to interest rate fluctuations on its
borrowings is managed by the use of both fixed and floating
facilities. For obligations under convertible loan notes, the fixed
rate interest rate is 12.0 % (2010: 12.0%), excluding the 1% per
month monitoring fee. For obligation under finances leases, the
weighted average fixed interest rate is 9.72% (2010: 11.5%), and
the weighted average period for which the rate is fixed is 1.82
years (2010: 0.49 years).
23.3 Liquidity risk
The Group seeks to manage financial risk, to ensure sufficient
liquidity is available to meet foreseeable needs and to invest cash
assets safely and profitably.
23.4 Currency risk
The Group is exposed to translation and transaction foreign
exchange risk primarily from inter-company transactions between its
UK and US companies.
Other loan finance, including convertible loans, has been
secured in euro and Placing Finance from the issue of share capital
is in sterling.
All leasing arrangements are placed in the US and denominated in
USD.
23.5 Credit risk
The principal credit risk arises from the Group's trade
receivables. In order to manage credit risk the directors review
the potential customer's organisation type, for example;
pharmaceutical company, university or research company and the
prospect of cash collection within the agreed payment terms.
The credit risk for liquid funds is considered negligible since
the counterparties are reputable banks with high credit
ratings.
24. Capital management policies and procedures
2011 2010
$ $
Total shareholder funds (4,197,248) (620,579)
Cash and bank 70,461 21,255
Loans 2,534,193 986,537
Total (1,592,594) 387,213
------------------------ ----------- ---------
The Group's capital management objectives are:
-- to ensure the Group's ability to continue as a going concern;
and
-- to provide an adequate return to shareholders
by pricing products and services commensurately with the level
of risk and securing the necessary equity and loan finance to meet
the expected cash-flow requirements.
25. Post-reporting date events
The company entered in February 2012 into a new convertible loan
agreement with ALPHA4 Concepts for EUR800 thousand and unchanged
conditions compared to the loans obtained in 2011.
The company released its expanded CSF assay (csfdiscovery82) in
January 2012.
Furthermore the Company announced in March 2012 that its newly
established subsidiary NextGen Sciences Dx has filed for
intellectual property on a combination of protein biomarkers with
the potential for diagnosing changes in cognition for patients with
early-stage dementia.
26. Commitments
26.1 Capital Commitments
The Group had no capital commitments at 31 December 2011 or 31
December 2010 for the acquisition of property, plant and equipment
or intangible assets.
26.2 Leasing Commitments
The Group has operating lease commitments for the US facilities
ending 30 November 2012:
2011 2010
$ $
Operating lease commitments:
One year or less 144,033 155,050
Between two and five years - 144,033
----------------------------- ------- -------
Total 144,033 299,083
----------------------------- ------- -------
The operation lease does not contain any unusual clauses or
arrangements.
27. Authorization of financial statement
The consolidated financial statement for the year ended 31
December 2011 (including comparatives) was approved by the Board of
Directors on 30 March 2012.
Klaus Rosenau Leif Hamoe
Chairman and CEO Board Member and CFO
This information is provided by RNS
The company news service from the London Stock Exchange
END
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