Replacement - Final Results

RNS Number : 5350D

Oxford Catalysts Group PLC

30 April 2013

 



30^th April 2013

The following amendment has been made to the announcement titled 'Final Results for the Year Ended 31 December 2012' released on 26 March 2013 at 07.00 under RNS No 8354A.

In the original announcement the first bullet under Highlights read "£160 million" however this has now been amended to correctly read "US$160 million"

All other details remain unchanged.

The full amended text is shown below.

26^th March 2013

OXFORD CATALYSTS GROUP PLC

("Oxford Catalysts" or "the Group" or "the Company")

Final Results for the Year Ended 31 December 2012

Oxford Catalysts Group PLC (OCG.L), the technology innovator for smaller scale Gas-to-Liquids (GTL), is pleased to announce its final audited results for the year ended 31 December 2012.

Highlights

·     Selected for two commercial projects with potential revenues of over US$160 million

·     Partnership signed with Ventech Engineers, leaders in modular design and fabrication

·     Commercialisation process well underway

o  Field trial of commercial scale reactor successfully completed

o  Manufacturing supply chain in place

o  World-class team of partners ready to deliver complete GTL plant offering

·     Revenue increased to £7.6 million (2011: £4.7 million)

·     Raised £30.6m before expenses through an oversubscribed equity placing (post period end)

·     Cash* at period end of £9.5 million (2011: £17.1 million), before fund raising proceeds

·     Intention to consolidate the Group's brands under the Velocys name

Pierre Jungels, CBE, Chairman of Oxford Catalysts, said:

"2012 was truly a milestone year for Oxford Catalysts. The Group's unique and innovative technology has now been validated through successive field trials and through a thorough selection process for several commercial projects.

"With levels of interest in synthetic fuel production at smaller scales continuing to be strong, and a number of commercial projects progressing through engineering stages, 2013 looks set to be another pivotal year of commercial progress for the Group."

* Defined as cash, cash equivalents, short term investments and other financial assets.

There will be a conference call for analysts at 9:30 am today; details can be obtained from Lionsgate Communications (see below).

For further information, please contact:

Oxford Catalysts Roy Lipski, CEO Susan Robertson, CFO	[phone] [phone]
Lionsgate Communications Jonathan Charles / Jessica Johnson	[phone]
Cenkos Securities (Nomad and Joint Broker) Ken Fleming / Neil McDonald	[phone] [phone]/1
Numis Securities (Joint Broker) Alex Ham / Alastair Stratton	[phone]

Notes to Editors

Oxford Catalysts enables Gas-to-Liquids (GTL) plants to convert unconventional, remote and problem gas into valuable liquid fuels. Systems based on the Group's technology (marketed under the brand name Velocys) are significantly smaller than those using conventional technology, enabling modular plants that can be deployed cost effectively in remote locations and on smaller fields than is possible with competing systems. Together with world-class partners, Oxford Catalysts provides complete smaller scale modular GTL solutions that address an untapped market of up to 25 million barrels of fuel a day.

Oxford Catalysts Group PLC is listed on the AIM market of the London Stock Exchange (LSE: OCG). The Group has some 85 employees with facilities near Oxford, UK and Columbus, Ohio, USA.

www.oxfordcatalysts.com

www.velocys.com

CHAIRMAN'S STATEMENT

Pierre Jungels, CBE

The environment for synthetic fuels production has rarely been as full of possibilities as it is now. With the abundance of low priced gas, particularly in North America arising from the shale gas revolution, the opportunities for monetisation of gas remain attractive and we continue to see strong interest in our unique smaller scale modular Gas-to-Liquids (GTL) technology from a variety of major corporations, gas owners and processers, and project developers.

The Group has a healthy pipeline of opportunities, and during the year has moved a number of these forward into engineering stages. Its technology was selected for two significant commercial projects, for which the final decisions to proceed are expected in 2013. These projects alone, should they proceed, have the capability of generating upfront revenues to the Group in excess of $48 million, with a further $112 million over the first 20 years of operating life of the plants.

At the beginning of 2012, we announced an order for a full-scale Fischer-Tropsch (FT) reactor (25 barrel per day) from a diversified energy company. This was installed, operated and the technology successfully demonstrated during 2012, providing the Group with an opportunity to showcase its offering in the field to a number of potential customers. We have also continued, during the year, to progress the demonstration of our integrated GTL technology at Petrobras' refinery in Brazil, and we remain on track for a successful outcome of this programme.

During 2012, we made a number of staff additions to bolster our commercial, engineering and manufacturing capabilities and expertise. We now have a world-class team, and I would like to congratulate them for their immense efforts that have taken the Group forward so successfully during the year. I was also pleased to welcome to the Board in October 2012, a new non-executive director, Sandy Shaw. Sandy brings a wealth of legal and commercial experience through her successful career in the oil and gas industry.

The Group's cash position was bolstered following completion of a £30.6 million placing which closed in January 2013. These new funds will allow us to accelerate development and fabrication, leverage our market lead and drive commercial roll out of our technology.

Group revenues for the year rose to £7.6 million (2011: £4.7 million). Cash* at period end stood at £9.5 million (2011: £17.1 million), while cash* outflow was £8.9 million (2011: £8.7 million), both excluding the impact of the fund raising.

Outlook

2012 was truly a milestone year for Oxford Catalysts, with the Group's offering emerging as the only smaller scale synthetic fuels technology to have been publically announced as selected for commercial projects. As we move into 2013, the drivers for our technology all remain strong: availability of cheap gas, particularly North American shale gas; concerns over gas flaring and energy security; and the desire for cleaner fuels. The Company has started 2013 well financed following a highly successful fundraising; with its technology well-proven and with the right partnerships and supply chain in place, as well as a strong, capable team, Oxford Catalysts is set for significant commercial progress.

* Defined as cash, cash equivalents, short term investments and other financial assets.

Chief Executive's RePORT

Roy Lipski

Introduction

Throughout 2012, the Group continued its progress to commerciality, putting in place the final pieces required to be ready to take orders for its products. The selection of the Group's technology for planned commercial projects has confirmed the Group's position as the leading technology innovator in the field of smaller scale synthetic fuels production.

Market Conditions

Interest in smaller scale synthetic fuels production continues to be high and the Group is experiencing strong levels of enquiry. The shale gas phenomenon, especially in North America, remains a driver of interest and is particularly helpful in increasing visibility of the Group's technology, as many interested parties look for ways to develop this opportunity. Beyond shale gas, further promising opportunities exist in the form of elimination of gas flaring, monetising stranded gas reserves and Waste- or Biomass-to-Liquids.

Commercialisation

The Group is commercialising a best-in-class smaller scale FT technology. During the past year, the advantages of its technology have been validated by several engineering companies and by the technology's selection for two substantial commercial projects. Compared to conventional FT technologies, the Group's FT offers attractive capital cost, operating and overall efficiency advantages at smaller scales, and can be practically installed in remote locations.

The Group has identified that a key means of getting its product quickly adopted in the market is to reduce perception of risk by potential customers. To do this, it has pursued a strategy of de-risking the overall product offering by coupling its FT with conventional front- and back-end technologies for land-based applications, and through the development of partnerships with world-class providers that enable the design, supply and support of fully integrated GTL plants.

Field Trials

At the start of 2012, the Group announced the sale of a commercial scale FT unit (25 bpd nominal capacity) to a diversified energy company located in the Asia Pacific region. The unit was started up, run and has now successfully completed the trial. Results from this unit were consistent with what was demonstrated in the laboratory and during smaller scale field trials, and provided further confirmation of the technology's performance at commercial scale. The Group was able to take a number of potential customers to visit the trial site. The unit was run to provide detailed engineering parameters for the host's own planned medium-scale modular synthetic fuels plants, which it intends to pursue. Having completed the trial, they are now understood to be progressing with the next stages of engineering.

As previously reported, the Group's integrated GTL demonstration, which includes both its Steam Methane Reforming (SMR) and FT reactors, began operations in Fortaleza, Brazil in late 2011. This project has been funded and managed by Toyo and MODEC in collaboration with Petrobras. The demonstration is scheduled to continue throughout 2013 and is expected to be finished at the end of this year. The Group has now successfully completed 3 out of 5 milestone stages, in each case receiving a milestone payment.

Catalyst

Long duration testing of our FT catalyst, which started in 2011 and progressed throughout 2012 and into 2013, now exceeding two years, continues to demonstrate the catalyst's exceptional stability and high conversion rates.

Partnerships

In November 2012, the Group announced a partnership with Ventech Engineers, global leaders in the design and fabrication of modular refineries and an early pioneer of modular GTL plants. Ventech is committed to offering modular GTL plants using the Group's technology, and during 2012 it expanded its fabrication facility in Houston to its current 200,000 sq. ft. capacity to support future orders. In addition, through its affiliate, Ventech Project Investments ("VPI"), Ventech has $200 million available to make equity investments in energy projects and expects to co-invest in initial customer GTL plants.

Under the partnership with Ventech, Oxford Catalysts became Ventech's preferred supplier of FT technology for North America, and the Group granted Ventech non-exclusive assured access to its technology for North America. Concurrently, VPI made a $2 million equity investment in the Group's shares at a price of £1.35, representing at the time a premium of 44% to the previous day's closing mid-market price. As part of the partnership arrangement, Ventech committed to placing an order with the Group for reactors sufficient for the first commercial facility, at a total price of approximately $8 million. Contracts for this order are under negotiation and the Group is hopeful of successful conclusion before long.

Also in November 2012, the Group announced that it had signed a service agreement with Mourik LP, the global leader in catalyst handling, to provide catalyst field services for the Group's commercial FT reactors. Mourik had been working closely with the Group for over a year and a half to qualify procedures for loading and unloading catalyst from the Group's commercial reactors.

Manufacturing

The Group has qualified world-class suppliers for the mass production of its proprietary FT catalyst and reactor. The qualification process has included the manufacture of catalyst in commercial scale batches and the production of a large capacity reactor, nominally 125 bpd. Quality assurance and quality control systems have been developed and are in place. The Group believes its supply chain is capable of producing high quality reactors and catalyst to meet projected demand, and is set to benefit from economies of mass manufacture as volumes increase.

Sales and Prospects

During the course of 2012, the Group's technology was selected for two significant commercial projects: GreenSky London and Calumet.

In July 2012, Oxford Catalysts was selected by project developer Solena Fuels ("Solena") to provide its FT technology to GreenSky London, Europe's first commercial scale sustainable jet fuel facility, being developed in partnership with British Airways. GreenSky London is the first of several waste-biomass to jet fuel projects planned by Solena. The plant is being designed to convert 500,000 tonnes per annum of London's waste, currently sent to landfill, into 50,000 tonnes (~1,100 bpd) of sustainable low carbon jet fuel, and 50,000 tonnes (~1,100 bpd) of ultra-low sulphur FT diesel and green naphtha, as well as renewable power. The project intends to be operational by 2015. British Airways has a stated goal of reducing its net carbon emissions by 50% by 2050.

As reported in July 2012, successful implementation of the GreenSky London project and receipt of the notice to proceed (targeted for the end of 2013) is expected to generate revenues to the Group in excess of $30 million during the construction phase (to 2015), and additional ongoing revenues of more than $50 million over the first 15 years of the plant's operation. Since the July announcement, British Airways has confirmed that it is committed to purchase the sustainable jet fuel produced by the plant for ten years (at market rates) - worth approximately $500 million (£315 million) at current prices. Barclays has been appointed as adviser on funding through export credit agencies and a competitive letter of interest has been obtained from an export credit agency to provide financing, including associated term funding. An exclusive option on a site for the facility has been signed and consent work started. Pre-front end engineering and design work for the plant has begun and the target start-up date of 2015 was reconfirmed.

In September 2012, the Group announced that its FT technology was selected by Calumet Speciality Products Partners, L.P. ("Calumet") for a commercial GTL plant being designed by Ventech to be located at its Karns City, Pennsylvania facility to provide feedstock for the production of ultra-high quality speciality products. Post year end, the Group was able to update that Ventech has now completed the plant design and provided a fixed price quote for the modules. Calumet has confirmed that the project economics look "strong" and that the technology is "fantastic". At the same time, Calumet's appointed third-party owner's engineer successfully completed a thorough review of the Group's technology, as well as Ventech's GTL design and other intended technology components. Calumet has communicated its interest in progressing with the more detailed engineering and market analysis for a plant of approximately 1,400 bpd; the exact commencement date and duration of which has yet to be finalised. At the conclusion of this study, Calumet is expected to be in a position to decide on proceeding with fabrication.

In addition to the announced projects, the Group has a strong pipeline of opportunities and is engaged in a number of other engineering studies.

Intellectual Property

The Group owns or has exclusive licence to the world's largest microchannel patent portfolio, encompassing more than 800 patents with more than 25,000 patent claims across the globe. It continues to patent, with 95 patents having been granted in 2012. Its patents are high profile, having been cited more than 3,000 times in other people's patents, including those of: Air Liquide; Air Products; Chevron; ConocoPhillips; ExxonMobil; Linde; Marathon; Praxair; Shell; Texaco; Total/Fina; Udhe; and UOP.

The strength of the Group's IP is further proven by unsuccessful challenges. Velocys, the Group's subsidiary, has recently successfully defended 7 patents against invalidity challenges, with one additional patent still in re-examination.

These patent challenges arose as a defence by CompactGTL following a claim of infringement by Velocys against Catacel, one of CompactGTL's suppliers. The infringement case against Catacel, meanwhile, is proceeding in the US courts. As part of this case, in October 2011, the judge granted Velocys' motion for sanctions against the other side and a ruling on damages to be awarded to Velocys in relation to this is still pending at the date of this report.

On 19 March 2013, Velocys filed a case in the UK High Court against CompactGTL Limited alleging infringement of a number of the Group's UK patents. IP lies at the heart of the Group's competitiveness; whilst it has sought a business solution in preference to legal action, for its own sake and that of its partners and customers, the Group will not tolerate its intellectual property being misappropriated.

Resources

During 2012, the Group strengthened its commercial team, bringing in highly experienced new staff for business development and process engineering, as well as strengthening its manufacturing team. It intends to continue recruiting in business development, marketing and process engineering, in order to fully progress the numerous opportunities the Group currently has available to it.

The Group has completed construction of a new pilot plant at its facility in Ohio, USA. This combines the FT skid which was successfully field tested in Güssing, Austria between 2010 and 2011, and the Group's microchannel SMR and hydro-processing reactors, as well as having an alternative conventional reformer to enable different combinations of running conditions to be tested. The primary purpose of the pilot plant is to support commercial operations by enabling test run campaigns to inform customer designs, as well as by providing a training facility for future plant operators.

Brand

Since the Group's 2008 acquisition of its US subsidiary, Velocys, Inc., it has operated under two brand names: Oxford Catalysts primarily for the financial community, and Velocys primarily for industry. Recognising that this can cause some confusion in the market, the Group undertook a review and decided that as it has begun commercial roll out the time was right to consolidate under a single brand, that of Velocys. The brand consolidation is planned to be implemented during the second half of the year, with further announcements being made as appropriate.

Furthermore, to realign Oxford Catalysts amongst its peers, the Group successfully applied to have its FTSE listing reclassified under Oil Equipment & Services from its previous sub-sector of Chemicals, which took effect from 18 March 2013.

Successful Equity Placing

In December 2012, the Group announced that it had raised £30.6 million before expenses through a conditional equity placing, subsequently confirmed at a shareholder meeting on 3 January 2013. The new funds came from a combination of existing shareholders, several new institutional investors and a new strategic investor. The fund raise, which was over-subscribed, was a strong vote of confidence in the Group's business, providing Oxford Catalysts with a solid balance sheet and the resources to see it through to commerciality.

Review of Results

Revenues during the year rose to £7.6 million (2011: £4.7 million). Adjusted losses for the year were £7.9 million (2011: £7.7 million) excluding the impact of foreign exchange gains (£nil million gain; 2011: £0.2 million gain) and noncash items (depreciation, amortisation and share-based payments: £2.5 million; 2011: £2.1 million). Cash* outflow in the year, excluding the impact of the fund raising, was £8.9 million (2011: £8.7 million).

At the year end, the Group had £9.5 million of cash* (2011: £17.1 million) which excludes the £29.3 net proceeds from the equity placing which were received on 4 January 2013.

* Defined as cash, cash equivalents, short term investments and other financial assets.

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2012

	Note		2012 £'000		2011 £'000
Revenue		2		7,632	4,722
Cost of sales				(4,769)	(3,253)
Gross profit				2,863	1,469
Unfunded research and development costs				(7,088)	(6,890)
Share-based payments				(1,341)	(841)
Other administrative expenses				(5,369)	(4,561)
Total administrative expenses				(13,798)	(12,292)
Operating loss				(10,935)	(10,823)
Finance income				152	441
Finance costs				(53)	(55)
Finance income, net				99	386
Loss before income tax				(10,836)	(10,437)
Income tax credit				437	793
Loss for the financial year attributable to the owners of the Company				(10,399)	(9,644)
Loss per share attributable to the owners of the Company
Basic and diluted loss per share (pence)		3		(11.47)	(11.39)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2012

			2012 £'000		2011 £'000
Loss for the year				(10,399)	(9,644)
Other comprehensive expense
Foreign currency translation differences				(1,269)	263
Total comprehensive expense for the year				(11,668)	(9,381)

CONSOLIDATED BALANCE SHEET 

AS AT 31 DECEMBER 2012

	Note	2012 £'000	2011 £'000
Non-current assets
Intangible assets		25,205	26,066
Property, plant and equipment		1,896	2,330
		27,101	28,396
Current assets
Trade and other receivables		1,592	1,501
Current income tax asset		600	550
Inventory		330	308
Financial assets - restricted access escrow account	4	-	531
Short term investments - funds held on deposit	4	-	5,941
Cash and cash equivalents	4	9,451	10,579
		11,973	19,410
Total assets		39,074	47,806
Current liabilities
Trade and other payables		(3,927)	(3,571)
Borrowings		(74)	(93)
		(4,001)	(3,664)
Non-current liabilities
Trade and other payables		(147)	(190)
Borrowings		(1,181)	(1,284)
		(1,328)	(1,474)
Total liabilities		(5,329)	(5,138)
Net assets		33,745	42,668
Capital and reserves attributable to owners of the Company
Called up share capital		914	902
Share premium account		66,662	65,270
Merger reserve		369	369
Share-based payment reserve		7,031	5,690
Accumulated losses		(41,231)	(29,563)
Total equity		33,745	42,668

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2012

	Called up share capital £'000	Share premium £'000	Share-based payments £'000	Merger reserve £'000	Accumulated losses £'000	Total £'000
Balance at 1 January 2011	638	45,469	4,849	369	(20,182)	31,143
Comprehensive income
Loss for the year	-	-	-	-	(9,644)	(9,644)
Other comprehensive income
Foreign currency translation differences	-	-	-	-	263	263
Total comprehensive expense	-	-	-	-	(9,381)	(9,381)
Transactions with owners
Share-based payments - value of employee services	-	-	841	-	-	841
Proceeds from share issues	264	19,801	-	-	-	20,065
Total transactions with owners	264	19,801	841	-	-	20,906
Balance at 31 December 2011	902	65,270	5,690	369	(29,563)	42,668
Comprehensive income
Loss for the year	-	-	-	-	(10,399)	(10,399)
Other comprehensive income
Foreign currency translation differences	-	-	-	-	(1,269)	(1,269)
Total comprehensive expense	-	-	-	-	(11,668)	(11,668)
Transactions with owners
Share-based payments - value of employee services	-	-	1,341	-	-	1,341
Proceeds from share issues	12	1,392	-	-	-	1,404
Total transactions with owners	12	1,392	1,341	-	-	2,745
Balance at 31 December 2012	914	66,662	7,031	369	(41,231)	33,745

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2012

		2012 £'000	2011 £'000
Cash flows from operating activities
Operating loss before taxation		(10,935)	(10,823)
Depreciation and amortisation		1,170	1,306
Share-based payments		1,341	841
Changes in working capital (excluding the effects of exchange differences on consolidation)
-Trade and other receivables		(234)	(319)
-Trade and other payables		441	614
-Inventory		(34)	(308)
Tax credit received		387	590
Other		-	4
Net cash used in operating activities		(7,864)	(8,095)
Cash flows from investing activities
Purchases of property, plant and equipment		(696)	(866)
Purchase of intangible fixed assets		(358)	(437)
Interest received		225	132
Interest paid		(53)	(55)
Increase (decrease) in funds placed on deposit and restricted access escrow account		6,459	(5,141)
Net cash from (used in) investing activities		5,577	(6,367)
Cash flows from financing activities
Proceeds of issuance of ordinary shares		1,404	20,065
(Decrease) increase in borrowing		(63)	304
Net cash from financing activities		1,341	20,369
Net (decrease) increase in cash and cash equivalents		(946)	5,907
Cash and cash equivalents at beginning of year		10,579	4,406
Exchange (losses) gains on cash and cash equivalents		(182)	266
Cash and cash equivalents at end of year		9,451	10,579

NOTES TO THE ACCOUNTS

FOR THE YEAR ENDED 31 DECEMBER 2012

1.   PRINCIPAL ACCOUNTING Policies

Basis of Preparation

The financial information presented by the Directors in this statement is derived from the Group financial statements for the year ended 31 December 2012 that have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU), IFRIC Interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention, as modified for fair value under IFRS 13 'Fair value measurement'.

The accounting policies adopted are consistent with those disclosed in the Group's statutory accounts for the year ended 31 December 2012.

These accounts have been audited and the audit report is unqualified and does not contain a statement under section 237 of the Companies Act. The accounts will be delivered to the Registrar of Companies following the Company's Annual General Meeting on 12^th June 2013.

Functional Currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in UK sterling (£), which is the Company's functional and the Group's presentation currency.

2.   SEGMENTAL REPORTING

The chief operating decision-maker has been identified as the Senior Management Team ("SMT"). This committee reviews the Group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.

The SMT considers that the business comprises a single activity which is the design and development of technology for synthetic fuels production. The SMT reviews the Group's profit or loss and its cash flows, assets and liabilities on a group-wide basis. In carrying out these reviews, the SMT considers all material items of income and expenditure that are directly attributable to individual programmes. The internal management reports do not allocate assets and liabilities or shared overheads to individual products or projects.

Based on the above considerations, there is considered to be one reportable segment, synthetic fuels. The business is segmented on the basis that the key end use market is that of synthetic fuels production. At this stage, the synthetic fuels segment represents over 90% of the business and is therefore the only material segment.

Internal and external reporting is on a consolidated basis, with purchases and sales between subsidiaries eliminated on consolidation. Therefore, the segment and financial information is the same as that set out in the consolidated income statement, consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of cash flows and the consolidated statement of changes in equity.

The SMT assesses the performance of the operating segment based on a measure of operating loss.

The Group's operating segment operates in three main geographical areas. Revenue is allocated based on the country in which the customer is located.

	2012			2011
	Europe £'000	Americas £'000	Asia Pacific £'000	Europe £'000	Americas £'000	Asia Pacific £'000
Total revenue	194	3,329	4,109	1,389	1,463	1,870

All revenues during the year are generated in the United States.

Non-current assets, consisting primarily of goodwill, other intangible assets and property, plant and equipment, totalling £26,045,000 (2011: £27,388,000) were located in the United States of America. All other non-current assets are held in the United Kingdom.

3.   LOSS PER SHARE

The basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year.

	2012	2011
Loss attributable to equity owners of the Company (£'000s)	(10,399)	(9,644)
Weighted average number of ordinary shares in issue	90,659,989	84,681,033
Basic and diluted loss per share (pence)	(11.47)	(11.39)

4.   SHORT TERM INVESTMENTS, CASH EQUIVALENTS AND RESTRICTED ASSETS

	2012 £'000	2011 £'000
Financial assets - restricted access escrow account	-	531
Short term investments - funds held on deposit	-	5,941
Cash and cash equivalents	9,451	10,579
Total	9,451	17,051

Under IFRS 7, cash held on long-term deposit greater than three months has been classified as a short term investment.

At 31 December 2011, the financial assets - restricted access escrow account is the balance held in an escrow account which relates to the State of Ohio loan. Generally, assets acquired under the State of Ohio's R&D Loan program must remain in the state of Ohio. The Company's wholly owned subsidiary, Velocys, Inc., and the State of Ohio agreed as part of the loan terms and conditions that Velocys could use a portion of the proceeds to fund the purchase of certain assets to be located outside of the United States for approximately one year if Velocys agreed to place a sum in an escrow account. During 2011 and 2012, Velocys agreed amendments to its agreement with the State of Ohio and as a consequence, at 31 December 2012, the Company had drawn the remainder of the loan funding including all funds in the escrow account. At 31 December 2011 amounts which were not secured against specific assets of £531,000 remained in this escrow account.

All short term investments are in UK sterling denominated accounts. The restricted access escrow account is denominated in US dollars. Cash is held in both US dollars and UK sterling denominated accounts as follows.

	2012 £'000	2011 £'000
UK Sterling denominated:
Short term investments - funds held on deposit	-	4,000
Cash and cash equivalents	6,596	6,837
Total	6,596	10,837
US Dollar denominated:
Financial assets - restricted access escrow account	-	531
Short term investments - funds held on deposit	-	1,941
Cash and cash equivalents	2,855	3,742
Total	2,855	6,214

5.   CONTINGENT LIABILITIES

During the first half of 2010, the Group's US subsidiary, Velocys, Inc. ("Velocys") received notification of the results of an audit by the US Defense Contract Audit Agency. The audit relates to an examination of amounts billed to the US Government for a period ending 30 September 2005. This report details amounts of $1,267,000 which are stated as not being compliant with the terms of the contract. In early 2013, Velocys received notification from the primary contractor of a demand letter for repayment of unallowable costs for $1,406,000. The Directors strongly refute the audit findings and believe they have evidence to support the amounts billed. Velocys is in the process of preparing its response and plans to work with the Department of the Air Force to resolve this issue.

Furthermore, the contract relates to the period prior to acquisition of Velocys. Under the terms and conditions of the sale and purchase agreement for Velocys, there are warranty provisions which trigger a payment from the former owner of Velocys, the Battelle Memorial Institute, for the entire amount of claims which exceed $250,000.

Based on this, the Directors have not recognised any liability in respect of the above.

In April 2010, Velocys filed a lawsuit in the US against Catacel Corp. ("Catacel"), a supplier of catalysts to CompactGTL Limited ("CompactGTL"), claiming infringement of several of the Group's microchannel related patents. In October 2011, the judge on this case granted Velocys' motion for sanctions against the other side. A ruling on the damages to be awarded to Velocys in relation to this is still awaited at the date of these financial statements.

In response, CompactGTL has challenged the validity of a small number of the Group's patents in both the USA and UK. One of the challenged patents is included within the lawsuit against Catacel.

As at the date of these financial statements, of the 8 patents challenged by CompactGTL in the USA, 7 have already successfully passed re-examination (which includes the one also included within the Catacel lawsuit) and none have been revoked. One of these patents is still pending in the US Patent and Trademark office.

Costs incurred to date responding to this challenge have been expensed. Given the nature of defending UK patent challenges, should its defence be unsuccessful, the Group may be liable for some of CompactGTL's UK legal costs. The Directors consider this situation to be unlikely, particularly given the successful defence in the US and the fact that CompactGTL have left the case on hold for more than 2 years. On this basis, no provision has been recognised in respect of this action.

The Group's policy is to always explore licensing opportunities for its IP where possible. Management will continue to seek business solutions that forward the Group's interests, in preference to resolution through legal means.

6.   STATUTORY INFORMATION

Copies of the 2012 Annual Report will be posted to shareholders at least 21 days before the Company's annual general meeting and may be obtained from the date of posting for one month free of charge from the registered office of the Company, 115e Milton Park, Oxford, OX14 4RZ, as well as from the Company's web site www.oxfordcatalysts.com.

7.   ANNUAL GENERAL MEETING

The annual general meeting ("AGM") is to be held on 12^th June 2013. Notice of the AGM will be dispatched to shareholders with the Group's report and accounts.

 

END

 

 

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