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Xenetic Biosciences (XEN)

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Wednesday 06 June, 2012

Xenetic Biosciences

Final Results

RNS Number : 7193E
Xenetic Biosciences PLC
06 June 2012
 



6 June 2012

Xenetic Biosciences plc

('Xenetic' or 'the Company')

 

Final Results

 

Xenetic Biosciences plc (LSE: XEN.L), a bio-pharmaceutical company specialising in the development of high-value differentiated biological and vaccines and novel cancer drugs, today announces its final results for the twelve months ended 31 December 2011.

 

Xenetic also announces that its Annual General Meeting is to be held at the offices of Pinsent Masons LLP at 30 Crown Place, London EC2A 4ES on Thursday 28 June 2012 at 11am.

 

Copies of the Company's Annual Report and Accounts and Notice of Annual General Meeting have been posted to shareholders. A copy of the Annual Report and Accounts will be made available on the Company's website (www.xeneticbio.com).

 

- Ends -

 

Enquiries:

Xenetic Biosciences plc

+44 (0)20 3021 1500

M. Scott Maguire, Chief Executive Officer




Singer Capital Markets (NOMAD & Broker)

+44 (0)20 3205 7500

Claes Spång




Walbrook PR

+44 (0)20 7933 8780

Paul McManus

paul.mcmanus@walbrookpr.com

Paul Cornelius

paul.cornelius@walbrookir.com

 



CHAIRMAN'S STATEMENT

The period since my last Statement has been truly pivotal in your Company's development as it saw the completion of a set of Proposals that together represent a solid foundation for future growth, proposals that were set out in the Shareholder Circular published in August 2011 and approved at the Extraordinary General Meeting held in September 2011.

·    In November 2011 we successfully completed the Subscription Agreement with SynBio LLC ("SynBio") whereby more than £12 million of new equity was injected into the Company. SynBio was also granted 11,080,000 share warrants exercisable for a period of 3 years at an Exercise Price of 33 pence per share.

 

SynBio (based in Moscow) and Xenetic also entered into a 6-product Co-Development Agreement ("CDA") for the development of new proprietary products using the Company's platform technologies.  With these six new candidates, we have a total of 12 products in various stages of development in Russia.  These 12 candidates represent the commitment of the Russian government to develop their biotech industry based on Xenetic's technologies.

 

SynBio is a newly-formed Russian entity based in Moscow with US$50 million of equity funding from Rusnano, the Russian State-funded venture capital entity established to develop the Russian biotech industry, this being one of the key objectives in Russia's national strategic development plan to evolve from a resource-dependent economy to a knowledge-based one.  Xenetic was one of the first biotech companies where the Russian government has decided to make our technologies the backbone of their biotech industry.

·    In January 2012 Xenetic completed the acquisition of 100% of the issued share capital of SymbioTec GmbH ("SymbioTec") in consideration of the issue of 80 million new ordinary shares in the Company, thereby acquiring full ownership of SymbioTec's proprietary platform technology, OncoHist®, an early stage technology with likely broad application in the oncology field.  The first application of the technology is as a novel therapy for the treatment of refractory Acute Myeloid Leukaemia ("AML") as well as for Acute Lymphoblastic Leukaemia ("ALL") for both of which indications OncoHist® has been granted Orphan and Rare Disease designation in both the EU and the United States.   Clinical trials of OncoHist® for AML and Non Hodgkins Lymphoma ("NHL") have already commenced in Russia.

·    Directly following the SymbioTec acquisition Xenetic entered into new arrangements with Serum Institute of India Pty Limited ("Serum") which, in consideration of the issue of 9 million new shares by Xenetic, the parties:

(a)  consolidated a variety of prior agreements into a new Master Agreement;

(b)  improved, in Xenetic's favour, the economic terms of the commercialisation of ErepoXen® in both the Developing and the Developed Worlds.

Serum completed a new equity subscription for 2.5 million new shares at 11 pence (raising £0.275 million of further new equity)  alongside their being granted warrant rights over a further 7.5 million shares at exercise prices ranging from 15 to 25 pence.


While the above matters have obvious economic significance, they have an even broader relevance to your Company's future in that, not only does Xenetic have a new and potentially important development partner in SynBio (now the Company's largest single shareholder currently holding ~45% of the equity), but SynBio now stands alongside Pharmsynthez (based in St Petersburg) as one of the Company's key development alliances.

Through CDAs with these two Russian companies along with Baxter International Inc, Xenetic now has up to 13 drug candidates in development under programmes where, through clinical trials to be conducted in Russia, human proof of concept will be established on the most promising of the various candidates such that Xenetic can initiate Western clinical trials based on strong clinical and analytical data.  This is a core part of the Company's product development strategy and is designed to reduce the clinical and economic risks of initiating Western trials based only upon pre-clinical evidence.

SIGNIFICANT SHAREHOLDERS

As at the date of this Statement, shareholdings greater than 3 per cent are noted below:

NAME

No. shares

%

SynBio LLC

184,755,238

45.30%

Serum Institute of India Ltd and related parties

44,316,415

10.87%

RBC Trustees (Guernsey) Limited *

33,400,606

8.19%

Dr Volker Rusch **

16,344,599

4.01%

Klaus Faber AG **

15,506,210

3.80%

Pershing Nominees Limited ***

12,230,000

3.00%


*       Relates to JSOP shares issued on 10th June 2010 and 1st March 2012

**     Former major shareholder of SymbioTec GmbH

***   Excludes 1,825,420 shares held by C W Hill, a director of the Company

TECHNOLOGY PLATFORMS

Xenetic's technologies are designed to improve the efficacy, safety, stability, biological half-life and immunologic characteristics of its products using its three proprietary patented technology platforms:

1. PolyXen®

For extending the efficacy and half life of biologic drugs

2. ImuXen®

For creating new vaccines and improving existing vaccines

3. OncoHist®

For novel mode of action drugs for oncology therapies

CLINICAL PROGRAMMES

The Company has multiple drug and vaccine programmes with three products currently in human clinical development:

   ErepoXen®:

A long-acting erythropoietin ("EPO") currently in Phase II(b) trials in India. ErepoXen® is a long-acting formulation for the treatment of anaemia in both End Stage Renal Disease patients and for those undergoing chemotherapy.

OncoHist®:

A recombinant human histone H1.3 molecule in Phase I clinical trials in Russia for refractory Acute Myeloid Leukaemia ("AML") and Non Hodgkin's Lymphoma ("NHL").

SuliXen®:

A long-acting insulin with two ongoing trials in Russia being for both the treatment of diabetes and for a central nervous system ("CNS") condition.

 


Baxter International Inc

The Company also has an important license agreement with Baxter International Inc ("Baxter") to develop a novel series of polysialylated blood coagulation factors, including Factor VIII. In 2010, Xenetic and Baxter announced positive results with a PSA-Factor VIII candidate in a series of preclinical studies and the selection of a lead candidate, providing confidence in the programme's potential to transition into clinical development.

The novel polysialyated Factor VIII candidate is now expected to enter Western clinical trials in H1-2013.

PROPRIETARY PRODUCT PIPELINE

ErepoXen® (Polysialylated Erythropoietin)

ErepoXen® is a new product candidate from Xenetic, currently undergoing Phase II(b) clinical trials. The product offers an improved form of erythropoietin ("EPO"). EPO is a hormone produced by the kidneys to maintain red blood cell production and prevent anaemia. Chronic renal (kidney) failure or chemotherapy to treat cancer can cause anaemia. In cases of renal failure, the kidneys no longer manufacture enough EPO hormone and this causes anaemia. EPO therapy is the treatment of choice for this type of anaemia. The benefits of ErepoXen® are:

1. Reduction in the frequency of dosage;

2. Reduction in immunogenicity; and

3. Reduction in toxicity.

A further potential benefit of ErepoXen® is that it uses polysialic acid ("PSA"). PSA is a polymer of sialic acid (a sugar) and is found naturally in the human body. Most importantly, PSA is completely biodegradable and does not accumulate in the body over time.

ErepoXen® is currently in Phase II clinical development in collaboration with our partner, the Serum Institute of India.

OncoHist® (Recombinant human Histone H1.3)

OncoHist® is a novel bio-therapeutic molecule for the treatment of tumours, in particular, haematologic malignancies. It is being jointly developed by Xenetic and our recently acquired German subsidiary, SymbioTec GmbH.

The product is currently in human clinical trials in Russia for the treatment of both refractory Acute Myeloid Leukaemia and for Non Hodgkin's Lymphoma. This has the potential to be a blockbuster candidate as a non-toxic therapy for deadly cancers.

 


SuliXen® (Polysialylated Insulin)

SuliXen® is a proprietary human insulin product candidate from Xenetic, which offers potential for the treatment of Type II Diabetes. It is a long acting injected form of insulin with a performance profile modelled on the existing "best in class" product.

The compound has successfully completed Phase I clinical studies in Russia where it is also on track to commence a Phase I trial for a CNS (central nervous system) indication.  Now that the product is in the Russian government controlled entity we would expect to see advancement of this candidate in the second half of 2012.

PRODUCT DEVELOPMENT PIPELINE

To view Product Development Pipeline chart please refer to  www.xeneticbio.com

Note to Product Development Pipeline chart (ante)

Shareholders might also care to note that an HIV programme - directly comparable to the one worked on with the International Aids Vaccine Initiative ("IAVI"). The program with IAVI is currently "on hold" while the development process advances to a clinical proof of concept in Russia.


Financial Summary

The financial results for the Group in the period under review were:


2011

        2010


£'000

          £'000

Revenue

143

1,566

Total pre-tax losses for period

2,854

1,934

Non-cash component of total pre-tax loss

242

755

Net cash as at 31st December

11,075

851

Net asset value as at 31st December

10,976

1,987





    Pence

     Pence

Loss per share - basic and fully diluted

1.44

1.13

Net asset value per share - basic

3.81

1.12

Net asset value per share - fully diluted

3.73

1.11

 

The following table summarises the broad application of funds in the period:




2011

2011

2010

2010

Cash settled expenses



£'000

%

£'000

%

R&D expense - cash settled



1,050

38.5

1,467

53.4

Other expenses - cash settled


1,678

61.5

1,280

46.6

                                                                               


------------

------------

------------

------------

Total expenses - cash settled


2,728

100.0

2,747

100.0




----------------------

====================

----------------------

=====================

Non cash items







Equity settled share option expense



26


135


Share based payment - Baxter warrants



-


367


Depreciation



216


253





------------


------------




242


755



----------------------


----------------------


TOTAL ADMINISTRATIVE COSTS

2,970


3,502



====================


====================


 

The above numbers reflect the planned reduction in our scientific London-based effort in preparation for the upcoming developments to be made in the new Drug Development Centre now being established in the USA.  This, combined with the increased administrative costs associated with the impact of negotiating and executing the Proposals (per the Shareholder Circular of 4th August), while maintaining overall cash-based costs to a level comparable with the previous period, changed the balance of expenditure as between "R&D" and "Other".


POST BALANCE SHEET EVENTS

As mentioned above, the Company completed two important transactions after the FY2011 year-end, being:

(a)  The acquisition of SymbioTec GmbH on 17th January 2012.  The transaction was completed for total consideration of 80 million new ordinary shares issued as fully paid to the Vendors;

(b)  Completion on 16th January 2012 of new contractual and financial arrangements with Serum Institute of India Pty Limited.

While the arrangements with Serum are clearly important, they are, in essence, an updating of the relationship in consideration of clinical and commercial developments that have taken place over the course of the now nearly 8 years that the two companies have been closely allied.

The SymbioTec acquisition was an important initiative which has both extended the scope of the Company's technology offerings and enhanced our ability to address the Orphan and Rare Disease sector.

Xenetic paid a total of 80 million new ordinary shares issued as fully paid and valued on 16th January 2012 at the closing market price on that day, being 7.625 pence per share. This valued the transaction at £6.1 million.

The objective of the International Financial Reporting Standards ("IFRS") is to enhance the relevance, reliability and comparability of the information that a reporting entity provides in its financial statements about a business combination. It does that by establishing principles and requirements for how an acquirer:

(a)  recognises and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree;

 

(b)  recognises and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and

 

(c)  determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination.

There is a substantial amount of detailed work and market analysis that the Company will have to conduct in order to establish a fair and reasonable basis of allocating values to each of Purchased IP and Purchased Goodwill.

This task will be undertaken in the course of the next few months as a more detailed development plan is established for OncoHist® in full consideration of the current clinical developments being experienced in Russia, the pre-clinical status of the candidate in the EU and the optimal clinical development pathway to bring the product to Western markets in as early course as may be reasonably possible.

The outcome of this work will be reflected in the Company's Interim Consolidated Financial Statements to be published at a date no later than 30th September 2012.

 


CURRENT TRADING AND CONCLUSION

More recently, and as the first step in establishing the Company's new Drug Development Centre of Excellence in Boston, the Company announced the appointment from 30th April 2012 of Dr Henry Hoppe IV as VP of Drug Development. Dr Hoppe is a leading biotechnology drug development executive with over 20 years experience in biologic drug development. Dr Hoppe's principal expertise lies in the processes surrounding regulatory submissions, IND filings and clinical trials, especially in the orphan and rare disease arena, exemplified in his 17 years at Genzyme Corporation where he was instrumental in the development and launch of many of their leading products. Dr Hoppe has Inventor status on four US granted patents addressing oncology diseases, anaemia and cystic fibrosis, each of which holds potential significance in the Xenetic drug development plan.

I remain optimistic that the Company's technology platforms will now enter a period of enhanced application and exploitation for the benefit of shareholders and, in due course, that of patients who will benefit from the unique combination of improved therapeutics and potential non-toxic therapies that our technologies confer.

While there are still many operational steps to take and clinical hurdles to overcome, Xenetic is now moving decisively through its aspired-for renaissance as a Speciality Drug Developer working closely with our key collaborative partners in Russia, India and the United States.

Notwithstanding that your Company today is relatively well-funded, the joint commitment to planning and execution of our shared programmes is pivotal in ensuring that every pound, dollar, euro, rouble and rupee is applied to delivering the broadest possible positive output from our efforts.

We are excited to have taken the first important steps in building up our Drug Development Centre in Boston and executing our plans for advancing drugs into FDA clinical development and eventual market launch. We intend to build this business with a major focus on developing novel therapies for Rare and Orphan Diseases; this is the path blazed by Genzyme Corporation and one that Xenetic is following. Building off Henry Hoppe's front-line experience in Genzyme (and elsewhere) with his near unparalleled depth of knowledge in the Orphan field will, in my view, greatly enhance the effective execution of Xenetic's clinical development plans as a key driver in unlocking the huge therapeutic potential of Xenetic's three current patent-protected enabling and platform technologies which, in turn, will generate shareholder value that fully reflects the inherent worth of the Company.

In furtherance of the US-based development plans, Xenetic Bioscience Inc was incorporated in May 2012 as the operating entity through which the new initiative will be executed.

I look forward to meeting as many shareholders as are able to attend the forthcoming Annual General Meeting, Notice (and related documents) of which accompany these Financial Statements.  The meeting is to be held at noon on Thursday 28th June 2012 at the offices of Pinsent Masons LLP, 30 Crown Place, London, EC2A 4ES.

 

Brian Richards

Non Executive Chairman


REPORT OF THE DIRECTORS

 

The Directors present their report and the financial statements for the year ended 31st December 2011.

PRINCIPAL ACTIVITIES

The Group's principal activity is the development of drug and vaccine delivery systems and proprietary products in the fields of protein drugs, vaccines and oncology. 

The principal activity of the Company during the year was to act as a holding company.

The Company changed its name from Lipoxen plc to Xenetic Biosciences plc pursuant to a shareholder resolution passed at an Extraordinary General Meeting ("EGM") of the Company held in London on 2nd September 2011.

RESEARCH AND DEVELOPMENT

Research and development is an integral part of the Group's operations and it intends to maintain this commitment in the future. The Group's research and development activities are more fully described in the Chairman's statement.

REVIEW OF THE BUSINESS

A full review of the business and of future prospects is contained in the Chairman's Statement which accompanies these financial statements.

The Board considers that the primary key performance indicators ("KPIs") are non-financial and relate to the progress of the scientific programs which are discussed in the Chairman's Statement. The most important financial KPIs are the cash and cash equivalents position and the annual net cash spend which are also discussed in the Chairman's Statement.

The Board considers that the principal risks and uncertainties facing the Group may be summarised as follows:

a)   that the scientific programmes may not successfully complete clinical trials and regulatory approval processes;

b)   potential loss of key scientific staff; and

c)   the ability to raise finance in a timely and cost-effective manner.

GOING CONCERN

The Directors have prepared and reviewed financial forecasts. After due consideration of these forecasts and current cash resources, the Directors consider that the Company and the Group have adequate financial resources to continue in operation for the foreseeable future (being a period of at least twelve months from the date of this report). The Directors have therefore prepared the financial statements on a going concern basis.

POST BALANCE SHEET EVENTS

While the principal commercial events are set out more fully in the Chairman's Statement included within this Annual Report, the corporate offices of the Company moved in April 2012 from shared offices at 18 Pall Mall, London, SW1Y 5LU to a dedicated office at Greener House, 66-68 Haymarket, London, SW1Y 4RF.

 

While the former premises were held on an informal basis, the new premises have been secured under the terms of a new 5-year lease (with a 3 year break provision in favour of the Company) with The Crown Estates.

On 2nd March 2012, 28,082,127 new ordinary shares were issued under the terms of the Company's Joint Share Ownership Plan at a price of 10.625 pence per share. £38,753 was subscribed in cash by the beneficiaries and £2,944,973 was advanced to the Trustees of the Plan in order that the shares were issued fully paid.

RESULTS AND DIVIDENDS

The trading results for the year and the Group's financial position at the end of the year are shown in the attached financial statements.

The Directors do not recommend a dividend.

FINANCIAL INSTRUMENTS                                                                                             

The exposure of the Group to financial risk is discussed in Note 20 to the financial statements.

Given the nature of the Group's activities the main financial asset of the Group is cash and cash equivalents. The financial risk management objectives and policies are therefore focussed around ensuring that there are adequate cash and cash equivalents available to enable the Group to continue with its research and development activities.

The Group has not entered into any hedge accounting transactions.

DIRECTORS AND THEIR INTERESTS

The Directors who served the Company during the year, together with their beneficial interests in the shares of the Company, were as follows:


Ordinary Shares of 0.5p

Share options


2011 

2010

2011

2010

Sir Brian Richards

2,262,606

2,262,606

203,486

203,486

Scott Maguire

1,401,361

1,401,361

7,747,346

7,747,346

Colin W. Hill

1,825,420

1,825,420

1,547,096

1,547,096

Professor Gregory Gregoriadis

4,650,208

4,650,208

406,974

406,974

Dr Dmitry D. Genkin

-

-

-

-

Firdaus J. Dastoor                          

1,125,000

1,125,000

-

-

Igor Nikolaev (resigned 27th April 2012)   

*7,375,490

*9,249,074

 

-

 

-

* not beneficially held

Notes

1.     Roman Knyazev was appointed as a Director on 27th January 2012.

2.     Artur Isaev was appointed as a Director on 27th April 2012.



 

JOINT SHARE OWNERSHIP PLAN ("JSOP") SHARES

In 2010 the Company issued 5,318,479 ordinary shares under the terms of the Company's JSOP. The beneficiaries and their interests in the JSOP shares were as follows:


2011

2010


No. shares

No. shares

Scott Maguire

3,857,084

3,857,084

Colin W. Hill

1,461,395

1,461,395

DIRECTORS' INDEMNITIES

The Group has purchased insurance to cover its Directors and Officers against liabilities arising against them in that capacity.

CORPORATE GOVERNANCE

Although it is not a requirement for AIM-listed companies, the Company seeks within the practical confines of a smaller company to act in compliance with the principles of good governance and the code of best practice as set out in the UK Corporate Governance Code. The Audit Committee and the Remuneration Committee are chaired by Non-executive Directors. The whole Board acts as a Nomination Committee.

SUBSTANTIAL SHAREHOLDERS

The Directors are aware of the following substantial shareholdings of 3 per cent or more of the current Issued Ordinary Share Capital of 407,875,428 shares on 29th May 2012:

Ordinary Shares of 0.5p each

Number

%




SynBio LLC

184,755,238

45.30%

Serum Institute of India Limited and related parties

44,316,415

10.87%

RBC Trustees (Guernsey) Limited as  Trustees of the JSOP

33,400,606

8.19%

Dr Volker Rusch

16,344,599

4.01%

Klaus Faber AG

15,506,210

3.80%

Pershing Nominees Limited - Account WRCLT*

12,230,000

3.00%

*Excludes 1,825,420 held by Colin Hill, CFO

POLICY FOR PAYMENT OF CREDITORS

It is the Company's policy to settle all agreed transactions within the terms established with suppliers. Trade creditors at the year-end amounted to 67 days (2010 - 47 days) of average supplies.


STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have, as required by the AIM rules of the London Stock Exchange, elected to prepare the Group and Company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the Directors must not approve the financial statements unless they are satisfied that they present fairly the financial position and cash flows of the Group and Company and of the financial performance of the Group for that year. In preparing these financial statements, the Directors are required to:

·    select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently;

 

·    make judgments and accounting estimates that are reasonable and prudent;

 

·    state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements;

 

·    provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable the users to understand the impact of particular transactions, other events and conditions on the financial position and financial performance;

 

·    present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

 

·    prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the financial statements comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the Group's web site and legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.


DISCLOSURE OF INFORMATION TO AUDITOR

Each Director has confirmed that:

·    so far as the Director is aware, there is no relevant audit information of which the Group's auditor is unaware; and

 

·    he has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Group's auditor is aware of that information.

This confirmation is given in accordance with Section 418 of the Companies Act 2006.

AUDITOR

In 2011 the Committee recommended to the Board that a review of the current audit arrangements be undertaken. On approval of this by the Board, a review process was implemented, overseen by the Committee and supported by management, and audit firms presented their proposals to the Audit Committee for the 2011 audit. Following the competitive tender, the Audit Committee recommended to the Board, and the Board approved, that a resolution be put to members at the 2011 General Meeting to appoint Ernst & Young LLP as the Group's auditor from 2011. The resolution was duly carried.

A resolution to re-appoint Ernst & Young LLP as auditor for the ensuing year will be proposed at the Annual General Meeting.

This report was approved by the Board on 1st June 2012 and signed on its behalf by:

                                                                             

 

Colin Hill

Chief Financial Officer

 

Company Registration Number 03213174

 


INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF XENETIC BIOSCIENCES PLC

 

We have audited the financial statements of Xenetic Biosciences plc for the year ended 31st December 2011 which comprise the consolidated statement of comprehensive loss, the consolidated and Company balance sheet, the consolidated and Company statement of cash flows, the consolidated and Company statement of changes in equity and the related notes 1 to 23. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.  Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed. 

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS

As explained more fully in the Directors' Responsibilities Statement set out on page 12, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:

·    whether the accounting policies are appropriate to the Group's and the Parent Company's circumstances and have been consistently applied and adequately disclosed;

 

·    the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements.

In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.



 

OPINION ON FINANCIAL STATEMENTS

In our opinion:

·    the financial statements give a true and fair view of the state of the Group's and the parent Company's affairs as at 31st December 2011 and of the Group's loss for the year then ended;

 

·    the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union;

 

·    the Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and

 

·    the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation.

OPINION ON OTHER MATTER PRESCRIBED BY THE COMPANIES ACT 2006

In our opinion the information given in the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION

We have nothing to report in respect of the following:

Under the Companies Act 2006 we are required to report to you if, in our opinion:

·    adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or

 

·    the Parent Company financial statements are not in agreement with the accounting records and returns; or

 

·    certain disclosures of Directors' remuneration specified by law are not made; or

 

·    we have not received all the information and explanations we require for our audit.

 

David Hales (Senior Statutory Auditor)

for and on behalf of Ernst & Young LLP, Statutory Auditor

Reading


 

CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS

FOR THE YEAR ENDED 31st DECEMBER 2011

 



2011

2010


Note

£

£













REVENUE

3

142,981

1,566,261



--------------------

--------------------

Cost of goods sold

13,735

-

Research and development expenditure

1,049,550

1,466,887

Administrative expenses

1,906,330

2,035,412



--------------------

--------------------

Total Operating Costs


2,969,615

3,502,299



--------------------

--------------------

OPERATING LOSS

4

(2,826,634)

(1,936,038)




Finance income

12,075

1,761

Finance costs - loan interest

(39,378)

-


--------------------

--------------------

LOSS BEFORE TAXATION

(2,853,937)

(1,934,277)




Income tax credit

7

173,517

-



--------------------

--------------------

LOSS AFTER TAX AND COMPREHENSIVE LOSS FOR THE YEAR ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT


(2,680,420)

(1,934,277)



================

===============




Loss per share (pence) - basic and fully diluted

9

(1.44)p

(1.13)p



===============

================

 

 

The Company has elected to take the exemption under section 408 of the Companies Act 2006 to not present the Parent Company statement of comprehensive loss.

 


CONSOLIDATED BALANCE SHEET

AS AT 31st DECEMBER 2011

 

 



2011

2010


Note

£

£

£






NON-CURRENT ASSETS





Property, plant and equipment

10


48,549

256,208

Goodwill

11


1,061,476

1,061,476



----------------------

----------------------



1,110,025

1,317,684



----------------------

----------------------

CURRENT ASSETS





Inventories

13

18,332


-

Trade and other receivables

14

784,105


344,027

Cash and cash equivalents

19

11,075,367


850,804


-----------------


-------------------


11,877,804


1,194,831

CURRENT LIABILITIES





Trade and other payables

15

(2,012,130)


(525,700)



-----------------


--------------------

NET CURRENT ASSETS


9,865,674

669,131


----------------------

----------------------

NET ASSETS

10,975,699

1,986,815




================

================











EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT





Share capital

16


3,074,661

2,519,661

Share premium account



37,609,386

26,521,349

JSOP shares reserves



(405,694)

(405,694)

Reverse acquisition reserve



(8,252,127)

(8,252,127)

Retained losses



(21,050,527)

(18,396,374)




----------------------

----------------------

TOTAL EQUITY



10,975,699

1,986,815




==================

==================

 

The financial statements were approved and authorised for issue by the Directors on 1st June 2012 and were signed on their behalf by:

 

 

 

SCOTT MAGUIRE - Director                                                   COLIN HILL - Director


CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31st DECEMBER 2011

 


 


2011

2010


Note


               £

£






Cash flows from operating activities

   18


(2,150,668)

(1,313,416)

Interest received



1,902

1,761

Taxation received



173,517

-




--------------------

-------------------

Net cash used in operating activities 



(1,975,249)

(1,311,655)




--------------------

-------------------

Cash flows from investing activities





Purchase of property, plant and equipment



(8,105)

(29,161)

Sale of property, plant and equipment



-

1,600

Loan to related party



(257,894)

-




--------------------

-------------------

Net cash used in investing activities



(265,999)

(27,561)




--------------------

-------------------

Cash flows from financing activities





Issue of equity share capital, net of expenses



11,643,037

1,172,130

Loan from related party



822,774

-




--------------------

-------------------

Net cash generated from financing activities



12,465,811

1,172,130




--------------------

-------------------

Net increase/(decrease) in cash and cash equivalents 



10,224,563

(167,086)






Cash and cash equivalents at beginning of year



850,804

1,017,890




--------------------

-------------------

Cash and cash equivalents at end of year

   19


11,075,367

850,804




===============

===============





 

 


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31st DECEMBER 2011

 


Share capital

Share premium

JSOP shares

Reverse acquisition reserve

Retained losses

Total


£

£

£

£

£

£








At 1st January 2010

2,405,486

25,057,700

-

(8,252,127)

(16,963,336)

2,247,723

Loss and total comprehensive loss for year

-

-

-

-

(1,934,277)

(1,934,277)

Shares issued for cash

87,583

 1,138,576

-

-

-

1,226,159

Shares issued under JSOP

26,592

385,590

-

-

-

412,182

Own shares held by JSOP Trustees

-

-

(405,694)

-

-

(405,694)

Share issue expenses

-

(60,517)

-

-

-

(60,517)

Share-based payments

-

 -

-

-

501,239

501,239


________

_________

_________

__________

__________

_________

At 31st December 2010

 

2,519,661

 

26,521,349

 

(405,694)

 

(8,252,127)

 

(18,396,374)

 

1,986,815

Loss and total comprehensive loss for year

-

-

-

-

(2,680,420)

(2,680,420)

Shares issued for cash

555,000

11,521,180

-

-

-

12,076,180

Share issue expenses

-

(433,143)

-

-

-

(433,143)

Share-based payments

-

 -

-

-

26,267

26,267


________

_________

_________

_________

__________

_________

At 31st December 2011

 

3,074,661

 

37,609,386

(405,694)

 

(8,252,127)

 

(21,050,527)

 

10,975,699


=============

==============

==============

================

================

===============

 

 


COMPANY BALANCE SHEET

AS AT 31st DECEMBER 2011

 



2011

2010

 


Note

£

£

£






NON-CURRENT ASSETS





Property, plant and equipment

10


-

160,000

Investments

12


9,045,030

9,045,030

Other receivables

14


9,196,771

7,974,961



----------------------

--------------------

 



18,241,801

17,179,991

 




--------------------

 

CURRENT ASSETS





Trade and other receivables

14

692,438


12,856

Cash and cash equivalents

19

11,041,792


844,939


----------------


-------------------

 


11,734,230


857,795

 

CURRENT LIABILITIES





Trade and other payables

15

1,427,498


269,840



---------------


--------------------

NET CURRENT ASSETS


10,306,732

587,955

 


----------------------

--------------------

 

NET ASSETS

28,548,533

17,767,946

 


================

================

 




 


=================

===================

 

EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY





Share capital

16


3,074,661

2,519,661

Share premium account



37,609,386

26,521,349

Retained earnings



(12,135,514)

(11,273,064)




----------------------

--------------------

TOTAL EQUITY



28,548,533

17,767,946




================

===============

 

The financial statements were approved and authorised for issue by the Directors on 1st June 2012 and were signed on their behalf by:

 

 

 

 

 

SCOTT MAGUIRE - Director                                        COLIN HILL - Director

 


 

COMPANY STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31st DECEMBER 2011

 

 


2011

2010

Note

                                                             

      £

£  





18


(791,156)

(368,200)



1,902

1,761



----------------

----------------



(789,254)

(366,439)



----------------

----------------







(1,221,810)

(958,977)



-

(405,694)



(257,894)

-



----------------

----------------



(1,479,704)

(1,364,671)



----------------

----------------







11,643,037

1,577,824 



822,774

-



----------------

----------------



12,465,811

1,577,824



----------------

----------------



10,196,853

(153,286)







844,939

998,225



----------------

----------------

19


11,041,792

844,939



==============

==============




 

 


COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31st DECEMBER 2011

 


Share capital

Share premium

Retained earnings

Total


£

£

£

£






At 1st January 2010

2,405,486

25,057,700

(10,619,541)

16,843,645

Loss and total comprehensive income for year

-

-

(653,523)

(653,523)

Shares issued for cash

87,583

1,138,576

-

1,226,159

Shares issued under JSOP

26,592

385,590

-

412,182

Share issue expenses

-

(60,517)

-

(60,517)


________

_________

__________

_________

At 31st December 2010

2,519,661

26,521,349

(11,273,064)

17,767,946

Loss and total comprehensive income for year

-

-

(862,450)

(862,450)

Shares issued for cash

555,000

11,521,180

-

12,076,180

Share issue expenses

-

(433,143)

-

(433,143)


________

_________

_________

_________

At 31st December 2011

3,074,661

37,609,386

(12,135,514)

28,548,533


=============

===============

==============

==============


NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31st DECEMBER 2011

 

1.     INTERNATIONAL FINANCIAL REPORTING STANDARDS

The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS and in accordance with the AIM Rules of the London Stock Exchange.

 

2.     ACCOUNTING POLICIES

Basis of consolidation

The Group financial statements incorporate the financial statements of the Parent Company and all of its subsidiary undertakings. The results of subsidiary undertakings acquired or disposed of during the year are included in the Group financial statements from, or up to, the date of acquisition or disposal.

The accounts of all Group entities are prepared on a basis consistent with the reporting obligations of the Parent Company.

Going Concern

As at 31st December 2011 the Group had cash at bank in excess of £11 million. The Directors, after considering the Group's cash flow requirements, have concluded that both the Company and the Group will have adequate financial resources to continue in operation for the foreseeable future. The Directors have therefore prepared the financial statements on a going concern basis.

Goodwill

Goodwill arising on consolidation represents the excess of the cost of the reverse acquisition over the net assets of Xenetic Biosciences plc at the date of the business combination. Goodwill is recognised as an asset and is reviewed for impairment at least annually. Any impairment is recognised immediately through the statement of comprehensive income and is not reversed.

Revenue

Revenue shown in the statement of comprehensive income represents the value of services provided during the year, exclusive of Value Added Tax. For contracts in progress at the balance sheet date, revenue is recognised based on the degree of completion of the project and the agreed fee for the total project. Milestone payments receivable for which the Group has no further contractual duty to perform any future services are recognised on the date that they are contractually receivable.

Interest income

Interest income is accounted for on a cash received and not on an accrual basis.

Impairment

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation or depreciation are reviewed 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 carrying amount exceeds its recoverable amount.  The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. Any impairment loss is charged to the statement of comprehensive income in the year concerned.  For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows (cash-generating units).

The expected cash flows generated by the assets are discounted using asset specific discount rates which reflect the risks associated with the groups of assets.

Property, plant and equipment

All property, plant and equipment assets are stated at cost less accumulated depreciation.

Depreciation is provided to write off the cost less the estimated residual value of property, plant and equipment on a straight line basis over their estimated useful economic lives as follows:

Laboratory equipment

-

4 years

Computer equipment

-

4 years

Plant

-

5 years

Inventories

 
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in-first-out method. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and an appropriate proportion of related production overheads.

Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

Provision is made for obsolete, slow-moving or defective items where appropriate.

        Financial instruments

Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a contractual party to the instrument.

      Financial assets other than hedging instruments can be divided into the following categories:  loans and receivables, financial assets at fair value through profit or loss, available-for-sale financial assets and held-to-maturity investments. Financial assets are assigned to the different categories by management on initial recognition, depending on the purpose for which the investments were acquired.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date which are classified as non-current assets. The Group's loans and receivables comprise 'trade debtors and other receivables' and 'cash and cash equivalents' in the balance sheet. The Group has no other financial assets.

Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Group, other than equity-settled share-based payments which are described below, are recorded at the proceeds received net of direct issue costs.

        Trade receivables

Trade receivables are measured at initial recognition at fair value and are subsequently measured at amortised cost less impairment losses. Appropriate amounts for estimated irrecoverable amounts are recognised in the statement of comprehensive income when there is objective evidence that the asset is impaired.

        Cash and cash equivalents

        Trade payables

        Trade and other payables are measured at initial recognition at fair value and are subsequently measured at amortised cost.

        Operating lease agreements

Operating lease rentals are charged in the statement of comprehensive income on a straight line basis over the lease term.

Research and development costs

Research and development costs are written off to the statement of comprehensive income as incurred, except that development expenditure incurred on an individual project is carried forward when its future recoverability can be reasonably regarded as assured. Any expenditure carried forward is amortised in line with the expected future sales from the related project.

Foreign currencies

Monetary assets and liabilities in foreign currencies are translated into sterling at the rate ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of the transaction. Exchange differences are taken into account in arriving at the operating loss.

The functional and presentational currencies applied in the Group and Company's financial statements are Pounds Sterling.

Pension costs

Company contributions to money purchase pension schemes are written off to the statement of comprehensive income as incurred.

        Share based payments

In accordance with IFRS 2 "Share-based Payments", the Group measures the fair value of equity settled transactions with employees at the grant date of the equity instruments. The fair value is calculated using an appropriate valuation model and requires assumptions regarding dividend yields, risk-free interest rates, share price volatility and expected life of an employee share option, plus the likelihood of meeting other performance-related vesting objectives where applicable: further details can be found in Note 17. The arising expense is charged to the Consolidated Statement of Comprehensive Income on a straight-line basis over the expected vesting period.

Share options granted to employees are valued at the date of grant using the Black-Scholes option pricing model and are charged to the statement of comprehensive income over the vesting period of the option. A corresponding credit is recognised in the retained earnings reserve.

Shares issued under the Joint Share Ownership Plan ("JSOP") which vest immediately are valued at the date of grant using the Black-Scholes option pricing model. JSOP shares issued with share price targets are valued at the date of grant using a Monte Carlo simulation approach as this allows the fair value to reflect the interaction of the Black-Scholes formula and the performance targets. These amounts are charged to the statement of comprehensive income over the expected period to vesting of the shares.

A corresponding credit is recognised in the retained earnings reserve.

Warrants to subscribe for new equity in the Company are valued at the date of grant using the Black-Scholes option pricing model. The excess of this amount over the consideration received for the grant is charged to the statement of comprehensive income. A corresponding credit is recognised in the retained earnings reserve.

Equity

Share capital is determined using the nominal value of shares that have been issued.

The share premium account includes any premiums received on the initial issuing of the share capital. Any transaction costs associated with the issue of shares are deducted from the share premium account, net of any related income tax benefits.

The JSOP shares reserve arises when the Company issues equity share capital under its Joint Share Ownership Plan, which is held in trust by the Group's Guernsey Special Purpose Trust. The interests of the Trust are consolidated into the Group's financial statements and the relevant amount treated as a reduction in equity.

The reverse acquisition reserve arises on the restatement of the equity structure shown in the consolidated financial statements from that of Lipoxen Technologies Limited immediately after the deemed acquisition of Xenetic Biosciences plc to reflect the equity structure of the legal Parent Company.

Taxation

The tax expense recognised in the statement of comprehensive income represents the sum of the current and deferred tax.

The tax expense is based on the taxable profit for the year. Taxable profit differs from the profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Tax income arises from the UK legislation regarding the treatment of certain qualifying research and development costs, allowing for the surrender of tax losses attributable to such costs in return for a tax rebate.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised.

        New and amended standards

a)   New and amended standards and interpretations

The accounting policies adopted are consistent with those of the previous financial year, except for the following new and amended IFRS and IFRIC interpretations effective as of 1 January 2011:

•  IAS 24 Related Party Disclosures (amendment) effective 1 January 2011

•  IAS 32 Financial Instruments: Presentation - Classification of Rights Issues (Amendment) (effective 1 February 2010)

•  IFRIC 14 Prepayments of a Minimum Funding Requirement (amendment) effective 1 January 2011

•  IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (effective 1 July 2010)

•  Improvements to IFRSs (May 2010) effective 1 January 2011

Adoption of these standards did not have any effect on the financial position of the Group, or result in changes in accounting policy or additional disclosure.

b) Standards issued but not yet effective

The following Standards and Interpretations to existing standards have been published and are mandatory for the Group's accounting periods beginning on or after 1 January 2012. The Group intends to adopt these standards when they become effective.

•  IFRS 9 - Financial Instruments: Classification and Measurement (effective 1 January 2013)

•  IAS 1 - Presentation of Items of Other Comprehensive Income - Amendments to IAS 1 (effective 1 July 2012)

•  IAS 27 - Separate Financial Statements (as revised in 2011) (effective 1 January 2013)

•  IFRS 10 - Consolidated Financial Statements (effective 1 January 2013)

•  IFRS 12 - Disclosure of Involvement with Other Entities (effective 1 January 2013)

•  IFRS 13 - Fair Value Measurement (effective 1 January 2013)

•  IFRS 7 - Financial Instruments Disclosures: Enhanced Derecognition Disclosure Requirements (effective 1 July 2011)

•  IAS 19 - Employee Benefits (Amendment) (effective 1 January 2013)

The Directors do not expect that adoption of the other standards listed above will have a material impact on the financial statements of the Group in future periods.

Critical accounting judgements and key sources of estimation uncertainty

In the process of applying the Group's accounting policies, management makes estimates and assumptions that have an effect on the amounts recognised in the financial statements. Although these estimates are based on management's best knowledge of current events and actions, actual results may ultimately differ from those estimates.

          Critical accounting judgements and key sources of estimation uncertainty (continued)

The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are those relating to:

 (a)  the future recoverability of goodwill, and the corresponding review of goodwill for impairment (see Note 11); and

 (b)  the expense recognised in the comprehensive income statement in respect of share options and JSOP shares granted to employees (see Notes 16 and 17).

3.     SEGMENTAL ANALYSIS

        The revenue and loss before tax are attributable to the one principal activity of the Group. The net assets of the Group at 31st December 2011 and 31st December 2010 are wholly attributable to the principal activity. The Group comprises one operating segment for reporting purposes. Management measures performance and allocates resources based on the results of this one segment only.

        An analysis of turnover (by location of customer) is given below:


2011

2010


£

£

United States

117,420

1,442,152

Europe and Rest of the World

25,561

124,109


-------------------

-------------------


142,981

1,566,261


===============

===============

        An analysis of the Group's total net assets by location is given below:


2011

2010


£

£

United Kingdom

10,975,699

1,826,815

India

-

160,000


-------------------

-------------------


10,975,699

1,986,815


===============

===============

       The following customers accounted for greater than 10% of the Group's revenues:


2011

2010


£

£

Customer 1

-

1,423,499

Customer 2

79,768

 -

Customer 3

41,316

-

Customer 4

17,331

 -


 

4.     OPERATING LOSS

        Operating loss is stated after charging:


2011

2010


£

£




Depreciation of owned property, plant and equipment

215,764

253,535

Operating lease payments:



 - land and buildings

48,000

48,000

Net loss on foreign currency translation

77,837

15,511

Research and development costs - cash settled

1,049,550

1,466,887

Share option and JSOP expense - equity settled

26,267

134,726

Share based payment expense - Baxter warrants

-

366,513


===============

===============

The operating lease payments relate to office accommodation used by the Company until April 2012 when the arrangements were terminated by mutual agreement at no cost to the Company.  As reported under "Post Balance Sheet Events" in the Directors' Report (ante) the Company now entered into a formal lease arrangement with The Crown Estates for the lease of corporate offices in London.  The lease is for a period of 5 years with a break clause (exercisable at the sole discretion of the Company) after 3 years.

 

5.     AUDITOR'S REMUNERATION

        Services provided by the Company's auditor


2011

2010


£

£

Fees payable to the Company's auditor for the audit of the Parent Company and consolidated financial statements

5,000

4,000

Fees payable to the Company's auditor and their associates for other services:



  -  audit of the Company's subsidiary pursuant to legislation

32,500

30,750

  -  other services pursuant to legislation

5,000

7,000


===============

===============

 


 

6.     PARTICULARS OF EMPLOYEES

        The average number of staff employed by the Group during the financial year was:


2011

2010


No

No

Office and management

4

4

Research

11

18


------------------

---------------


15

22


===========

===========

        The aggregate payroll costs of the above (excluding the share option expense) were:

Group:

2011

2010


£

£

Wages and salaries

1,170,670

1,124,950

Social security costs

144,029

128,778

Other pension costs

129,518

67,222


-------------------

-------------------


1,444,217

1,320,950


===============

===============

 

Company:

2011

2010


£

£

Wages, salaries and short term employment benefits

221,200

143,000

Other pension costs

50,000

11,200


-------------------

-------------------


271,200

154,200


===============

===============

Key management personnel received compensation as follows:

Group:

2011

2010


£

£

Salaries and short-term employment benefits

956,020

714,029

Post-employment benefits

120,220

50,320

Share-based payments

8,787

128,555


-------------------

-------------------


1,085,027

892,904


===============

===============




Company:

2011

2010


£

£

Salaries and short-term employment benefits

221,200

143,000

Post-employment benefits

50,000

11,200


-------------------

-------------------


271,200

154,200


===============

===============


 

Key management comprises the Directors of the Company, those Directors of the subsidiary who are not also Directors of the Parent Company, together with the Company's senior scientific staff.

        The remuneration of the Directors was as follows:


Salaries and short-term  benefits

Share-based payments

Pension contributions

Total 2011

Total 2010


£

£

£

£

£







Sir Brian Richards

-

-

-

-

-

Scott Maguire

 452,755

6,057

55,100

513,912

398,962

Colin W. Hill

221,200

2,730

50,000

273,930

189,820

Professor Gregory Gregoriadis

95,133

-

-

95,133

85,320

Dr Dmitry D. Genkin

 -

-

-

-

-

Firdaus J. Dastoor

-

-

-

-

-

Igor Nikolaev

 -

-

-

-

-


________

_______

______

_______

_______

Total

769,088

8,787

105,100

882,975

674,102


==============

===========

==========

===========

============

        The charge in 2010 comprised salaries and short-term benefits of £525,029, share-based payments of £113,873 and pension contributions of £35,200.

        The number of Directors who accrued benefits under Company pension schemes was as follows:


2011

2010


No

No

Money purchase schemes

1

1


===============

===============

In addition to the above, the Group was charged the following amounts by Directors or by companies controlled by Directors for the provision of consultancy services:



2011

2010



£

£

Sir Brian Richards


75,000

81,250

Dr Dmitry Genkin


51,000

51,000

Igor Nikolaev


3,000

3,000



===============

===============


 

7.     INCOME TAX CREDIT

        (a) Analysis of credit in the period

 


2011

2010

 


£

£

 

Current tax:



 




UK corporation tax based on the results for the year at 26.5%  (2010 - 28%)

-

-

 

Research and Development tax credit in relation to previous years

(173,517)

-

 


-------------------

-------------------

 

Current tax for the period

(173,517)

-

 


===============

===============

       (b) Factors affecting the tax credit for the year

The tax credit for the year differs from the standard rate of 26.5% (2010 - 28%) as follows:


2011

2010


£

£





Loss on ordinary activities before tax


(2,853,937)

(1,934,277)



================

===============





Loss on ordinary activities multiplied by the standard rate of corporation tax


(756,293)

(541,598)

Effects of:




Tax effect of non deductible items


49,000

-

Unrelieved tax losses arising in the year


703,293

541,598

Research and Development tax credit


(173,517)

-

Temporary differences on which deferred tax not recognised


4,000

-



--------------------

-------------------

Current tax for the period


(173,517)

-



================

===============

 


 

       (b) Factors affecting the tax credit for the year (continued)

The Group has corporation tax losses available for offset against future profits of the same trade of £19,850,000 (2010 - £17,400,000). The deferred taxation asset not provided for in the accounts due to the uncertainty that future taxable profits will be available to allow recovery of the asset is approximately £5,400,000 (2010 - £4,950,000).

In Budget 2011 on 23rd March 2011, the Chancellor of the Exchequer announced a reduction in the UK rate of corporation tax to 26%. This reduced rate applied from 1st April 2011 and was enacted using secondary legislation, called the Provisional Collection of Taxes Act. A further 1% rate reduction to 25% was also announced and it was intended that this would be effective from 1st April 2012.

However, in his budget of 21st March 2012, the Chancellor of the Exchequer announced a number of further changes to the UK Corporation Tax rate. These included a reduction in the UK corporation tax rate from 25% to 24% effective from 1st April 2012 (and substantively enacted as of 26th March 2012 and dealt with by Resolution under the Provisional Collection of Taxes Act).

The UK government intends to further reduce the UK corporate income tax rate, to 22%, in annual increments of 1% per annum which will be enacted in successive Finance Bills. Consequently, the Company will only recognise the impact of the rate change which is substantively enacted at that time in its financial statements.

Further, from 1st April 2012, there will be a 2% reduction in the rates of capital allowances, the main rate pool going down from 20% to 18% and the special rate pool from 10% to 8%.

 

8.     LOSS ATTRIBUTABLE TO MEMBERS OF THE PARENT COMPANY

        The loss dealt with in the accounts of the Parent Company was £862,450 (2010 - £653,523).

 

9.     LOSS PER SHARE

The calculation of loss per share is based on the loss of £2,680,420 (2010 - £1,934,277) and on the number of shares in issue, being the weighted average number of shares in issue during the period of 186,134,173 ordinary 0.5p shares (2010 - 170,581,718 ordinary 0.5p shares). There is no dilutive effect of share options and warrants outstanding on the basic loss per share.


 

10.   PROPERTY, PLANT AND EQUIPMENT

Group

 Plant

Laboratory equipment

Computer equipment

Total


£

£

£

£

COST





At 1st January 2010

800,000

590,548

74,400

1,464,948

Additions       

-

21,568

7,593

29,161

Disposals

-

(10,680)

-

(10,680)


---------------

-------------------

-----------------

-----------------

At 1st January 2011

800,000

601,436

81,993

1,483,429

Additions

-

7,230

875

8,105


----------------

-------------------

-----------------

-----------------

At 31st December 2011

800,000

608,666

82,868

1,491,534


============

=============

============

=============






DEPRECIATION





At 1st January 2010              

480,000

455,678

48,688

984,366

Charge for the year

160,000

80,587

12,948

253,535

Disposals

-

(10,680)

-

(10,680)


---------------

-----------------

--------------

----------------

At 1st January 2011

640,000

525,585

61,636

1,227,221

Charge for the year

160,000

46,128

9,636

215,764


---------------

-----------------

---------------

---------------

At 31st December 2011

800,000

571,713

71,272

1,442,985


============

=============

============

============






NET BOOK VALUE





At 31st December 2011

-

36,953

11,596

48,549


============

=============

===========

===========

At 31st December 2010

160,000

75,851

20,357

256,208


============

=============

===========

===========

 

 


 

Company

Plant

Laboratory equipment

Computer equipment

Total


£

£

£

£

COST





At 1st January 2010

800,000

-

-

800,000

Additions       

-

-

-

-


--------------

---------------

-------------

--------------

At 1st January 2011

800,000

-

-

800,000

Additions

-

-

-

-


--------------

---------------

-------------

--------------

At 31st December 2011

800,000

-

-

800,000


===========

===========

==========

===========






DEPRECIATION





At 1st January 2010              

480,000

-

-

480,000

Charge for the year

160,000

-

-

160,000


--------------

---------------

-------------

--------------

At 1st January 2011

640,000

-

-

640,000

Charge for the year

160,000

-

-

160,000


--------------

---------------

-------------

---------------

At 31st December 2011

800,000

-

-

800,000


===========

===========

==========

============

NET BOOK VALUE





At 31st December 2011

-

-

-

-


===========

===========

==========

============

At 31st December 2010

160,000

-

-

160,000


===========

===========

==========

============

 

11.   GOODWILL

Group







£

COST




At 1st January 2010, 1st January 2011 and 31st December 2011



1,061,476




================

Goodwill arising on consolidation represents the excess of the cost of the reverse acquisition over the net assets of Xenetic Biosciences plc at the date of the business combination.


 

The reverse acquisition of Xenetic Biosciences plc provided Lipoxen Technologies Limited with access to the AIM market to enable it to raise funds to finance the ongoing development of its technology. This access to capital markets does not satisfy the criteria for separate recognition as an intangible asset as set out in IAS 38: Intangible assets, and is therefore treated as goodwill in these financial statements.

The Group tests annually for impairment or more frequently if there are indications that goodwill might be impaired. The impairment review has been carried out on the Group as a whole.

As primarily a research and development Group, the use of discounted cash flow or similar tools is not appropriate given the inherent risks and uncertainties in the sector and the long timespans involved. Instead the Board look at longer term indicators of impairment.

Since the date of the previous impairment review the Group has made further technical progress in the development of its PSA biopolymer and nanoparticle technologies in both preclinical and clinical trials. The revenue generating capacity of the Group has been enhanced through this progress.

In assessing the impairment, the recoverable amount has been determined as the fair value less cost to sell by reference to the Group's market capitalisation on AIM.

Consequently, it is the view of the Board that no impairment of the carrying value of the Group's goodwill or other assets has occurred during the year.

 

12.   INVESTMENTS

 

Company

Group company


£

 

COST


 

At 1st January 2010, 1st January 2011 and 31st December 2011

9,045,030

 


================

The Company owns the whole of the issued share capital of Lipoxen Technologies Limited, a company incorporated in England and Wales engaged in research into drug delivery systems.

It is the view of the Board that no impairment of the carrying value of the Company's investment has occurred during the year.

 

13.   INVENTORY

 


Group

Company


2011

2010

2011

2010


£

£

£

£

Laboratory consumables

18,332

-

-

-


================

================

================

================


 

14.   TRADE AND OTHER RECEIVABLES


Group

Company


2011

2010

2011

2010


£

£

£

£

Due in more than one year:





Receivables from subsidiaries

-

-

8,791,077  

7,569,267

Provision for impairment

-

-

-

-

Loan to JSOP Trustees

-

-

405,694

405,694


__________

__________

___________

__________


 

 

 


-

-

9,196,771     

7,974,961


================

================

==================

================

Due within one year:





Trade receivables

10,702

210,184

-

-

Provision for impairment

-

-

-

-


________

________

________

__________


 


10,702

210,184

-

-

Loan to related party

268,067

-

268,067

-

Other receivables

83,193

46,267

52,464

9,671

Prepayments and accrued income

422,143

87,576

371,907

3,185


--------------------

--------------------

----------------------

--------------------


784,105

344,027

692,438

12,856


================

================

==================

================

 

        The carrying amount of the trade receivables is denominated in currencies as follows:


2011

2010


£

£

Pounds sterling

10,702

95,455

US dollars

-

29,051

Euros

-

85,678

                                                                             

__________

_________


 

 


10,702

210,184


================

===============

 

Trade receivables are considered to be impaired if they are more than three months overdue at the date of approval of the financial statements. At 31st December 2011 trade receivables of £Nil (2010 - £Nil) were impaired and provided against.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. Neither the Group nor the Company holds any collateral as security.

It is the view of the Board that no impairment of the carrying value of the Company's trade and other receivables has occurred during the year.


 

15.   TRADE AND OTHER PAYABLES


Group

Company


2011

2010

2011

2010


£

£

£

£

Trade payables

218,957

182,663

146,958

142,877

Loan payable to related party

862,152

-

862,152

-

Social security and other taxes

35,485

36,537

-

-

Other payables

31,467

598

-

-

Accrued expenses

859,879

221,944

418,388

126,963

Deferred income

4,190

83,958

-

-


--------------------

--------------------

--------------------

--------------------


2,012,130

525,700

1,427,498

269,840


================

================

================

================

16.   SHARE CAPITAL


2011 

2010


No

£

                  No

£

Authorised share capital





Ordinary shares of 0.5p each

673,300,000

3,366,500

673,300,000

3,366,500

Deferred shares of 0.01p each

16,335,000,000

1,633,500

16,335,000,000

1,633,500



-------------------


-------------------



5,000,000


5,000,000



==============


==============

Allotted, called up and fully paid



Ordinary shares of 0.5p each

288,232,254

1,441,161

       177,232,254

886,161

Deferred shares of 0.01p each

16,335,000,000

1,633,500

  16,335,000,000

1,633,500



-------------------


-------------------



3,074,661


2,519,661



==============


==============

Following the exercise of share options, 200,000 ordinary shares of 0.5 pence each were issued on 4th July 2011 for cash of £1,473.

On 2nd December 2011, the Company issued 110,800,000 ordinary shares of 0.5 pence each to Synbio LLC for net cash of £12,074,707 before the expenses of the issue.

Share warrants

The Company has granted Synbio LLC warrant rights to subscribe for 11,080,000 ordinary shares at a price of 33.0 pence per share. These rights are exercisable for a period of three years from 2nd December 2011.

The Company has granted Serum warrant rights to subscribe for 7,500,000 ordinary shares, exercisable over a period of two years in three equal tranches of 2,500,000 shares at prices of 15 pence, 20 pence and 25 pence per share.

During 2010 the Company granted Baxter International Inc. ("Baxter") warrant rights entitling Baxter to subscribe for up to 14,338,430 ordinary shares until 30th June 2015 at an exercise price of 9.02 pence per share.

Shares issued under the Joint Share Ownership Plan (JSOP)

In 2010 the Company issued 5,318,479 ordinary shares under the terms of the Company's JSOP. The estimated fair values of the JSOP shares granted, and the vesting conditions applying to the grants, are as follows:

Vesting conditions

Number of shares

Fair value per share




Vested immediately

614,575

3.1543p

Vest when share price exceeds 20p

1,567,967

2.8290p

Vest when share price exceeds 40p

1,567,967

1.9480p

Vest when share price exceeds 100p

1,567,970

0.8270p

Disclosure of the valuation assumptions for the Monte-Carlo model used to value the JSOP shares issued with share price targets, has not been made on the basis that the related IFRS 2 charge is immaterial.

       Deferred shares

       The rights attached to the deferred shares are as follows:

(a)   no entitlement to any dividend;

(b)   on a winding-up, an entitlement to receive an amount equal to the nominal value of each share, but only after an amount of £50,000,000 per share has been paid to the holders of the issued and fully paid ordinary 0.5 pence shares;

(c)   no right to attend or vote at a general meeting; and

(d)   an obligation to permit the Company to transfer the shares to such person as the Company may determine, without receiving any payment.


 

17.   SHARE OPTIONS

The Company utilises two forms of share option plan, being:

1.   the Lipoxen plc Unapproved Share Option Plan (the "Unapproved Plan"); and,

 

2.   the Lipoxen plc 2007 Share Option Scheme incorporating Enterprise Management Incentives (EMI) provisions ("the EMI Plan).

Share options are held by option holders in either the Unapproved Plan or the EMI plan. All options in both plans are settled in equity when the options are exercised. Since the formal adoption of the 2007 Scheme at the Company's AGM held in July 2009 employee awards have been made only under the more recent plan by virtue of the favourable tax treatment that this plan can confer on both the Company and awardees.

Options under both plans vest based on one or more of: time employed at Xenetic, individual performance, and market performance.  The maximum term of options is 10 years. The IFRS2 share option charge for the year was £26,267 (2010: £134,726)

Movements in the aggregate number of share options, and their weighted average exercise prices, in issue during the year were as follows:

 

 

Number

Weighted avg exercise price

Number

Weighted avg exercise price


2011

2011

2010

2010






At 1st January

12,371,411

5.9729p

9,177,219

6.0565p

Granted

840,000

9.0000p

3,594,192

10.4088p

Exercised

(200,000)

0.7371p

-

-

Expired

(298,837)

13.0666p

(400,000)

47.7500p


-------------------------------------------


--------------------------------------------


At 31st December

12,712,574

6.0882p

12,371,411

5.9729p

Exercisable at 31  December

8,016,486


11,286,970


      

At 31st December 2011, the weighted average remaining contractual life of options exercisable was 5.54 years (2010 - 6.22 years). The weighted average fair value of options granted, estimated using the Black-Scholes option-pricing model, was 2.0808 pence (2010 - 3.654 pence). The estimated fair values are based on the following weighted average assumptions:


   2011

         2010




Share price

8.1300p

7.2806p

Exercise price

9.0000p

10.4088p

Expected volatility

35.00%

60.00%

Expected life

3 years

5 years

Expected dividend yield

Nil

Nil

Risk free interest rate

2.00%

2.40%


===============

===============


 

The expected volatility is determined by using as a base the share price movements recorded since the share placing on AIM on 16th January 2006.

Options outstanding at 31st December 2011 were exercisable as follows:

 

Range of exercise prices

Number

Weighted avg exercise price

Number

Weighted avg exercise price


2011

2011

2010

2010






£0 - £0.01

7,716,478

£0.0096

7,916,478

£0.0095

£0.0101 - £0.10

1,140,000

£0.0841

500,000

£0.0675

£0.1001 - £0.30

3,444,192

£0.1288

3,543,029

£0.1324

£0.03001 - £0.50

411,904

£0.3904

411,904

£0.3904


-------------------------------------------


--------------------------------------------


Total

12,712,574

£0.0609

12,371,411

£0.0597

18.   RECONCILIATION OF LOSS BEFORE TAXATION TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES

Group

2011

2010


£

£

Loss before taxation

(2,853,937)

(1,934,277)

Adjustments for:



Equity-settled share options

26,267

134,726

Share based payment expense - Baxter warrants

-

366,513

Depreciation

215,764

253,535

Profit on disposal of property, plant and equipment

-

(1,600)

Investment income

(12,075)

(1,761)

Finance costs

39,378

-


--------------------

--------------------


(2,584,603)

(1,182,864)

Increase in inventories

(18,332)

-

Increase in receivables

(172,011)

(108,535)

Increase/(decrease) in payables

624,278

(22,017)


--------------------

--------------------

Net cash outflow from operating activities

(2,150,668)

(1,313,416)


================

================

 

Company

2011

2010


£

£

Loss before taxation

(862,450)

(653,523)

Adjustments for:



Depreciation

160,000

160,000

Investment income

(12,075)

(1,761)

Finance costs

39,378

-


--------------------

--------------------


(675,147)

(495,284)

Decrease/(increase) in receivables

(411,515)

435

Increase/(decrease) in payables

295,506

126,649


--------------------

--------------------

Net cash outflow from operating activities

(791,156)

(368,200)


================

================

 

19.  CASH AND CASH EQUIVALENTS


2011

2010


£

£

Group



Cash and cash equivalents at beginning of year

850,804

1,017,890

Net movement in cash and cash equivalents in the year

10,224,563

(167,086)


--------------------

--------------------

Cash and cash equivalents at end of year

11,075,367

850,804


================

================

Company



Cash and cash equivalents at beginning of year

844,939

998,225

Net movement in cash and cash equivalents in the year

10,196,853

(153,286)


--------------------

--------------------

Cash and cash equivalents at end of year

11,041,792

844,939


================

================



 

 

20.  FINANCIAL INSTRUMENTS

       Financial assets and liabilities were held as follows:  


Group

Company


2011

2010

2011

2010

Assets

£

£

£

£

Loans and receivables:





Receivables from subsidiaries

-

-

8,791,077

7,569,267

Loan to JSOP Trustees

-

-

405,694

405,694

Trade receivables

10,702

210,184

-

-

Loan to related party

268,067

-

268,067

-

Cash and cash equivalents

11,075,367

850,804

11,041,792

844,939


--------------------

--------------------

--------------------

--------------------

Total financial assets

11,354,136

1,060,988

20,506,630

8,819,900


================

================

================

================

Liabilities





Financial liabilities measured at amortised cost:





Trade payables

218,957

182,663

146,958

142,877

Loan from related party

862,152

-

862,152

-

Accrued expenses

859,879

221,944

418,388

126,963

Deferred income

4,190

83,958

-

-


-------------------

-------------------

--------------------

--------------------

Total financial liabilities

1,945,178

488,565

1,427,498

269,840


================

================

================

================

 The Group is engaged in the development of drug delivery systems and proprietary products in the fields of protein drugs, vaccines and oncology. Whilst it is therefore exposed to some financial risk this is significantly less than a trading company which has significant receivables, payables and inventories.

The Directors consider that the carrying value of the financial assets and financial liabilities approximates their fair value.

The loans to and from related parties are denominated in US dollars.

The credit risk and foreign currency risk of trade receivables are considered in Note 14.

All financial liabilities are payable within 12 months.

Cash and cash equivalents comprise cash on hand of £416 and balances at bank of £11,074,951, of which £29,988 is held in a US dollar denominated account.  Whilst the bank balances are held with a reputable financial institution, the maximum exposure to credit risk is the carrying value of the balances as disclosed above.

A 5% increase or decrease in the US dollar/sterling exchange rate would have increased or decreased the reported sterling carrying amount of the US dollar denominated financial assets by approximately £15,000 and the US dollar financial liabilities by approximately £37,500.

The trade payables are considered to have a maturity date of 3 months or less.


 

Foreign currency risk

Foreign currency risk refers to the risk that the value of a financial commitment or recognised asset or liability will fluctuate due to changes in foreign currency exchange rates. The Group monitors its foreign currency risk through cash flow forecasting and currency is held in foreign currency bank accounts only to the extent that it is required for clinical development purposes.

Interest rate risk

Interest rate risk is the risk that the value of a financial instrument or cash flows associated with it will fluctuate due to changes in market interest rates.

The Group has financial assets in the form of trade receivables and cash and cash equivalents. These are considered to be short term liquid assets and as a result the exposure to interest rate risk is not considered to be significant.

On this basis no sensitivity analysis has been prepared on the grounds that there would not be a material impact on either the carrying values of the respective assets, the net loss for the year or the equity at the end of the period.

Liquidity risk

The Group maintains sufficient cash and cash equivalents. Management reviews cashflow forecasts to determine whether the Group has sufficient cash reserves to continue with its research and development activities. The Group has no significant financial liabilities and no borrowings.

Capital management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern and to provide a means of attracting investors. The Group has no debt and does not therefore have a strategy in terms of maintaining a certain debt to equity ratio. Rather capital is managed with a view to generating further cash and cash equivalents which can be used in the furtherance of the Group's aims and objectives.

 

21.  RELATED PARTY TRANSACTIONS

The Group and Company was charged the following amounts by Directors or by companies controlled by Directors for the provision of consultancy services:      



2011

2010



£

£

Sir Brian Richards


75,000

81,250

Dr Dmitry Genkin


51,000

51,000

Igor Nikolaev


3,000

3,000

At 31st December 2011, the balance owed to Dr Genkin by the Company and the Group was £37,619.


 

The Company charged a management charge of £120,000 (2010 - £120,000) to the subsidiary during the year. The Company continued to advance monies to the subsidiary during the year to fund the ongoing development of the Group's technology. The balance receivable from the subsidiary at 31st December 2011 was £8,791,077 (2010 - £7,569,267).

During the year the Company negotiated a short term unsecured loan facility of up to $1.70 million from Synbio LLC, a company which is now a substantial shareholder in the Company. This loan bears interest (rolled up) at 0.67% per month and is repayable in June 2012 - or otherwise by agreement between the parties. The balance owed to Synbio LLC at 31st December 2011 was £862,152.

During the year the Company has advanced monies on loan to SymbioTec GmbH. SymbioTec is a related party because one of its shareholders is a company controlled by Dr Dmitry Genkin. This loan bears interest (rolled up) at 0.85% per month and is repayable upon demand at any time after completion of the acquisition. The balance owed by SymbioTec GmbH at 31st December 2011 was £268,067 which sum may also be assigned to SynBio LLC at the sole discretion of the Company.

 

22.  EVENTS AFTER THE REPORTING PERIOD

On 17th January 2012 the Company completed the acquisition of the entire issued share capital of SymbioTec GmbH, a company registered in Germany which is principally involved with early stage clinical trials for its patent-protected drug candidate, OncoHist®. The consideration for the acquisition was the issue to the vendors of 80,000,000 ordinary shares in the Company.


£



Fair value of ordinary shares issued on acquisition

6,100,000


===============

The Directors consider that the disclosure of the financial effects to be impracticable as the purchase price allocation, including the fair value of individual assets and liabilities has not been finalised.

On 16th January 2012 the Company concluded the proposed Master Agreement with Serum Institute of India Limited ("Serum") in order to consolidate and refine the Group's commercial arrangements with Serum. Under the terms of the Agreement, Serum surrendered back to the Company the development rights to up to fourteen drug candidates and uplifted the Company's economic interests in ErepoXen®. In consideration for this, the Company has allotted 9,000,000 new ordinary shares as fully paid. Serum has also subscribed for 2,500,000 new ordinary shares at a price of 11 pence each, raising £275,000 in cash.  Serum was also granted 7,500,000 warrants rights as more fully described in the "Share warrants" section of Note 16 (ante).


 

22.  EVENTS AFTER THE REPORTING PERIOD

On 2nd March 2012 a further 28,082,127 ordinary shares were issued under the terms of the JSOP at a price of 10.625 pence per share. £38,753 was subscribed in cash by the beneficiaries and £2,944,973 was advanced to the Trustees of the Plan in order that the shares were issued fully paid.

The Company entered into new corporate office lease arrangements as more fully described under "Post balance Sheet Events" in the Directors' Report (ante).

 

23.  GENERAL INFORMATION

Xenetic Biosciences plc and its subsidiary, Lipoxen Technologies Limited, are principally engaged in the development of drug delivery systems and proprietary products in the fields of protein drugs, vaccines and oncology.

SynBio LLC ("SynBio"), a company incorporated in Russia, was the Company's Ultimate Controlling Party as at 31st December 2011, holding at that date 50.24% of the Company's issued and fully paid ordinary share capital.

This position arose temporarily due the Company's fiscal year end falling on a date when a broad set of transactions was in course of completion. These Proposals (as set out in the Shareholder Circular dated 4th August 2011 and as approved by shareholders at the Company's EGM held on 2nd September 2011) would result in SynBio holding less than a controlling equity stake in the Company.  As noted earlier in the "Post Balance Sheet events" section of the Chairman's Statement (ante) certain transactions were completed in January 2012 which resulted in the SynBio equity holding falling, first to 48.65% and later, at the date of these Financial Statements, to 45.30%.

Xenetic Biosciences plc, a public limited company incorporated and domiciled in England and Wales, has its registered office and the principal place of business at The London BioScience Innovation Centre, 2 Royal College Street, London NW1 0NH.

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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