Interim Results

Cyprotex PLC

("Cyprotex" or "the Company")

Interim Results 2016

Revenue growth and increase in profitability continue into 2016

Cyprotex PLC (AIM: CRX), a specialist ADME-Tox Contract Research Organisation (CRO), today reports its interim results for the half year to 30 June 2016.

Financial Highlights

· Revenues up 26% to £8.73 million (H1 2015: £6.93 million).

· Gross margins were 77.5% (H1 2015: 76.8%).

· Operating profit up significantly to £1.49 million (H1 2015: £0.36 million).

· Underlying EBITDA^ increased to £2.34 million (H1 2015: £1.10 million).

· Cash of £6.82 million (H1 2015: £4.13 million, FY 2015: £5.41 million).

^ excluding share based payment charge of £0.13 million (H1 2015: £0.08 million)

Operational Highlights

· Significant increase in new customers to 139 (H1 2015: 103).

· Watertown revenues in H1 2016, up almost 70% from the comparative period, benefitting from the general improvement in the investment environment in the East Coast of USA.

· Demand for high value drug-drug interaction packages and metabolite identification has been strong and has assisted in growing revenues ahead of expectations.

· Our presence at Alderley Park BioHub site has increased with the opening of a new bioanalytical laboratory to allow for planned expansion of these services later in the year and the expansion our toxicology facility. Proprietary 3D cellular models have been highly successful in revenue generation.

· Validation of a High Throughput (HT) ADME screening platform at our Watertown site has been completed and is supporting large scale screening contracts for the US Government and other customers.

· Upgrading of our toxicology assays at Kalamazoo to provide in vitro GLP genotoxicity services has already seen positive customer interest.

· Website upgrades and social media engagement have increased the global recognition of the Cyprotex brand.

· Revenue from the largest customer accounts for 10.3% (FY 2015: 9.6%) of total revenue and represents continuing business with a major pharmaceutical company.

Ian Johnson, Chairman of Cyprotex PLC, said:

"I am delighted to report that the progress made in 2015 has continued into 2016 and, as previously flagged to the market, we are substantially ahead of our expectations. The growth of the business is global and from an increasingly wide range of industries and sectors. Investment in all sites, which commenced in 2014, continues and is delivering high quality new services which contributed to the increase in revenue in H1 2016. Watertown and both UK sites have grown revenues and consequently operational profitability. The Kalamazoo site has received considerable investment to launch a suite of GLP genotoxicity services which we expect will drive revenue growth for the site in the second half of the year. Of note is the collaboration with Cytocentrics announced in February 2016 where we are developing a full range of ion channel services to meet the expected regulatory changes in cardiac safety testing as a consequence of the CiPA initiative. The second half has started well and the Board looks forward to the remainder of the year with continued confidence."

This announcement contains inside information for the purposes of Article 7 of EU regulation 596/2014.

For further information:

About Cyprotex PLC

Cyprotex is listed on the AIM market of the London Stock Exchange (CRX). It has sites at Macclesfield and Alderley Park, both of which are near Manchester in the UK, and at Watertown, MA and Kalamazoo, MI in the US. The Company was established in 1999 and works with more than 1400 partners within the pharmaceutical and biotech industry, cosmetics and personal care industry and the chemical industry. Cyprotex acquired Apredica and the assets of Cellumen, Inc. in August 2010 and the combined business provides support for a wide range of experimental and computational ADME-Tox and PK services. The acquisition of the assets and business of CeeTox in January 2014 has enabled Cyprotex to expand its range of services to target the personal care, cosmetics and chemical industries. In 2015, Cyprotex launched its new bioscience division to expand its capabilities into phenotypic and target based screening. The Company's core capabilities include high quality in vitro ADME services, mechanistic toxicology and high content toxicology screening services, including our proprietary CellCiphr® toxicity prediction technology, bioscience services, predictive modelling solutions including Cloe® PK, chemPK™, chemTarget and chemTox, and a range of skin, ocular and endocrine disruption services. For more information, please visit www.cyprotex.com

Chairman and Chief Executive Officer's Statement

The Company has made an excellent start to the year reporting a 26% increase in revenues and a four-fold increase in operational profitability over the corresponding period last year. This growth continues the strong operational performance observed during 2015.

The increase in sales is attributable to the successful continuation and expansion of several strategic ADME contracts with large pharma companies and growth of new product lines, including the ability to offer full in vitro drug-drug interaction (DDI) packages and the introduction of proprietary 3D cellular models. Revenue from our metabolite identification service continues to be strong following our investment in high resolution mass spectrometry in 2014. We have seen an increase in the general ADME and Tox outsourcing market indicating a strong investment climate in the pharma / biotech industries in Europe and the US.

Despite the ADME-Tox services market remaining fragmented and highly competitive, our expansion into high value and technically challenging new service offerings has been beneficial in gaining market share.

The investment programme that commenced in 2014 has continued into H1 2016. To support our toxicology service offerings and expand our bioscience capabilities, we have acquired a high throughput flow cytometer (iQue® Screener). This versatile cell analyser has a wide range of applications and we expect it to attract interest from customers working in the fields of immunology and oncology, in addition to other areas of research. Our expertise in 3D cellular models and high content imaging has enabled us to lead the way in an area of significant growth and is driving further R&D efforts to secure our position as a market leader. To support this growth in new services and to allow for expansion of our bioanalytical capabilities in the second half of the year, we have increased our presence at the Alderley Park BioHub site.

A key investment at our Kalamazoo site is the development of GLP compliant in vitro genotoxicity services, including the Ames test, in vitro micronucleus test and in vitro chromosomal aberration test. These tests are required for regulatory submissions in a range of different industries and therefore offer a potential large customer base. Early customer take up of these assays has been pleasing and we anticipate Genotox services to be an engine of growth at our Kalamazoo site going forward.

In February this year, we announced a strategic collaboration with Cytocentrics (a San Antonio, US based specialist ion channel company). Cytocentrics have placed two state-of-the-art Cytopatch TM4 instruments at our Watertown site and we expect to launch a full package of in vitro ion channel screening services which will form the basis of a comprehensive package of in vitro cardiac safety services in the second half of the year. This is in direct response to the ongoing CiPA initiative which is currently evaluating new regulatory cardiac safety testing approaches. In silico modelling techniques are becoming more widely accepted across a number of different industries. Our Scientific Computing Group has developed an impressive range of tools for the prediction of pharmacokinetics, toxicity and efficacy. In May 2016, a new version of chemPKTM was launched for predicting human pharmacokinetics directly from structure. The new version has enhanced functionality for different dosage routes and regimens. In June 2016, chemTarget was launched for predicting biological target interaction. chemTarget and chemPKTM are powerful virtual screening tools which can be used in combination for understanding clinically relevant efficacy of new chemical entities.

As a result of these first half initiatives and last years' new products and services, the UK and US operations have benefitted in terms of additional revenues. Growth has also come, as it did in 2015, from larger volumes serviced from existing customers. The positive impact to the Company flowing from the inter-dependency between the sites through cross selling and in our relationships with US Government agencies has continued into 2016.

Our UK sites remain the main driver for revenues and operational profits, however our Watertown site has also exhibited strong performance and excellent half year results. Our high throughput ADME screening platform at our Watertown facility has played a role in supporting this increase in business allowing us to service larger scale screening projects from the United States Environmental Protection Agency ('EPA'). Our Kalamazoo site has made a slower start to the year, however, we are confident that performance will improve in the second half through the introduction of the new genotoxicity services as well as other planned investment at the site.

Customer Relationships

To meet our financial goals, the Company realises the importance of building on existing customer relationships as well as attracting new customers. Investment in sales and marketing has helped us achieve this goal. The upgraded Cyprotex website (www.cyprotex.com) now incorporates all the services we offer across all the sites, and enquiries directly from the website result in approximately 50% of new business generated. New customers additions totalled 139, 36 higher than the comparative period. Our new blog, launched on the Cyprotex website in 2015, along with a focus on social media, has driven a significant increase in customer enquiries through search engine optimisation and external brand awareness. We are continuing the focus on making the Cyprotex name the brand of choice for ADME -Tox screening services given that we now have over 1400 customers, including many of the major and medium sized pharmaceutical companies as well as clients in many other industry segments such as cosmetics, agrochemicals, industrial chemicals, petrochemicals and medical devices. To attract further business from industries outside the pharmaceutical industry, in March 2016, we released our new Chemical and Cosmetics Testing guide. This valuable resource features many of the services offered at our GLP Kalamazoo site, and highlights the expertise we have in this testing field.

Several of our larger customers have signed up to exclusive service contracts with Cyprotex which has benefitted us on several levels and is a reflection of the growing confidence our customers have in our ability to continuously deliver a quality service.

Expansion into the Japanese market via a local distributor has resulted in the award of several more projects from Japanese clients. Brand awareness of Cyprotex continues to be strong globally and we have noticed an increase in business from areas such as Australia and Brazil.

Financial Performance

Reported turnover increased by £1.80 million or 26% higher than the comparable period last year, with sales to North American customers accounting for £1.04 million of this increase, driven predominantly by servicing larger ADME contracts and capitalising on our recent R&D investment strategy. Revenues generated at our UK facilities, which, as last year, contribute approximately 75% of the total revenue reported, were up 20% compared with the comparative period. Revenues from the Watertown site are also markedly higher than the comparative period, up almost 70%, due in part to the R&D investments made on this site, the general improvement in the investment environment in the East Coast of the USA and the burgeoning market for our services in North America. Revenues for our Kalamazoo site were down 20% on last years' comparative period, due to the delay in our GLP genotoxicity launch, a soft second quarter and the timing of receipt of expected income from US Government agencies.

Revenue from our largest customer accounts for 10.3%, a slight increase from 9.6% in the comparative period and represents continuing trade with a major pharmaceutical company.

Gross margins have remained robust at 77.5% up from 77.3% achieved in FY 2015 and 76.8% in H1 2015.

We have continued to invest in R&D projects to be able to launch new, competitive assays to the ADME-Tox market. In terms of capital expenditure, which is undertaken to support R&D programmes and drive new efficiencies, total additions in H1 2016 were £0.88 million with total investments in laboratory equipment in the last 30 months exceeding £3.20 million. Upgrading our equipment and investment in new capabilities brings additional depreciation charges to the income statement and as a consequence the depreciation charge is 13.3% higher at £0.65 million (H1 2015: £0.57 million).

We continue to invest substantially in our internal expertise, skills and knowledge base increasing staff numbers from 116 at 30 June 2015 to 144 at 30 June 2016.

With continuing improved trading the Company reports an increase in operating profits of £1.13 million, up from £0.36 million for H1 2015 to £1.49 million for H1 2016. Similarly, underlying EBITDA has nearly doubled, increasing to £2.34 million, up £1.24 million from H1 2015. Underlying EBITDA is defined as operating profits; adjusted for depreciation, amortisation and share based payment charges.

The Company's cash balances remain robust and stood at £6.82 million at period end, up from £4.13 million at the start of the year. Principal movements are £2.40 million generated from operations, £0.88 million spent on tangible fixed assets and £0.11 million in servicing finance and hire purchase debts.

In September 2013, the Company issued Loan Notes to the value of £7.00 million, to assist with its investment strategy. One of the terms attached to the issue of these Loan Notes is that the value of an associated embedded derivative is linked to changes in the Company's share price via conversion or notional conversion rights into ordinary shares. The Loan Note holders will then ultimately effectively share with ordinary shareholders any increase in value of the Company above 60 pence per share, the share price at time of issue. At 30 June 2016, the Company's share price was 110 pence (v 122 pence at 31 December 2015). The relative decrease in share price, along with other factors such as share price volatility, has at 30 June 2016 led to a downward revision in the fair value of the embedded derivative associated with the Loan Notes by £1.98 million to £7.44 million from £9.42 million at 31 December 2015. This decrease is recorded as finance income in the income statement in H1 2016.

The carrying value of embedded derivatives associated with the Loan Notes at period end can have a significant impact on reported total equity and at 30 June 2016 we report net liabilities of £0.67 million, with the carrying value of the embedded derivatives at £7.44 million. Trident Private Equity Fund III LP which holds all of the Redeemable Loan Notes issued (3,318,718) and 74.6% of the Convertible Loan Notes issued (2,434,238) has written to the Company on 21 March 2016 confirming that in the ordinary course, it will not seek repayment, redemption or conversion of those aforementioned Loan Notes, nor seek transfer of its interest in those Loan Notes, whilst the net assets of the Company remain less than 50% of its issued share capital. Trident Private Equity Fund III LP is manged by Harwood Capital LLP. Christopher Mills, a non-executive director of the Company, is the Chief Investment Officer of Harwood Capital LLP.

Strategic Review

The Company's strategic review continues to progress.

Strategy

Our stated strategy for future growth remains dependent on three factors. The first is growing our existing service revenues by better marketing our services and by outperforming our competitors in what is still a fragmented market. The second is growing revenues by investing in targeted R&D activities to provide new services to address customer needs which will provide superior quality revenues. Finally, it is to grow the business by acquisition of selective assets or companies which are technically and philosophically aligned with the Cyprotex vision.

The investments made in the last three years in technology and services are now being actively sold to customers and have significantly strengthened the second arm of this strategy as evidenced by the results in H1 2016. We intend to prioritise this internal investment strategy for the foreseeable future.

Outlook

Our recent investment plan in new R&D to provide state-of-the-art equipment and valuable additional services is now reaching completion and these new services have been launched and well received by existing and new customers alike. Revenues from these services have contributed to the excellent growth we have seen in the first half of the year. Growth from higher value contracts, such as regulatory DDI packages and bespoke 3D cellular models, has also been noted. Our suite of GLP genotoxicity services has been recently launched and we are planning the release of additional new services throughout the rest of the year. We expect these to drive revenue growth into the second half of the year. We will continue to focus on improving operational efficiency, particularly in the US, in order to achieve our financial goals.

The Board would like to thank all of our employees for a record first half performance and look forward to being able to report a strong full year financial performance.

2 August 2016 

Consolidated interim income statement

six months to 30 June 2016

Consolidated interim statement of comprehensive income

six months to 30 June 2016

Consolidated interim statement of financial position

at 30 June 2016

Consolidated interim statement of changes in equity

six months to 30 June 2016

Consolidated interim statement of cash flows

six months to 30 June 2016

Notes to the interim condensed consolidated financial statements

six months to 30 June 2016

1. Nature of operations and general information

Cyprotex PLC ('Cyprotex') and subsidiaries' (together 'the Group') principal activity is the provision of in vitro and in silico ADMET/PK (Absorption, Distribution, Metabolism, Excretion, Toxicity, and Pharmacokinetic) information to a number of different industries including the Pharmaceutical, Biotechnology, Cosmetic, Personal Care, Agrochemical, Chemical Industries and Academia. Cyprotex's vision is to provide, in partnership with our customers in drug discovery and development, the highest quality, fastest turnaround and most cost effective ADMET and pharmacokinetic data to those customers.

Cyprotex PLC is the Group's ultimate parent company. It is incorporated and domiciled in England and Wales. The address of Cyprotex PLC's registered office is 100 Barbirolli Square, Manchester M2 3AB. The addresses of its principal places of business are 15 Beech Lane, Macclesfield, Cheshire, United Kingdom, SK10 2DR, BioHub at Alderley Park, Alderley Edge, Cheshire, SK10 4TG, 313 Pleasant Street, Watertown, Massachusetts, MA02472 USA and 4717 Campus Drive, Kalamazoo, Michigan MI49008 USA. It trades through its wholly owned subsidiaries, Cyprotex Discovery Limited based in Macclesfield and Alderley Park in the UK and Cyprotex US, LLC based in Watertown and Kalamazoo in the USA. Cyprotex PLC's shares are listed on the Alternative Investment Market of the London Stock Exchange.

Cyprotex's interim condensed consolidated financial statements ('the interim financial statements') are presented in Pounds Sterling (£), which is also the functional currency of the parent company. These interim financial statements have been approved for issue by the Board of Directors on 2 August 2016.

The financial information for the year ended 31 December 2015 set out in these interim financial statements does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 December 2015 have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain statements under section 498(2) or section 498(3) of the Companies Act 2006.

2. Basis of preparation, going concern and accounting policies

Basis of preparation

For the purpose of preparing the December 2015 Annual financial statements the Directors used IFRS as adopted by the EU and in accordance with the AIM Rules issued by the London Stock Exchange. In preparing these interim financial statements for the six months to 30 June 2016, the same accounting policies have been used as set out in the Group's Annual Report for the year ended 31 December 2015. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the annual consolidated financial statements of the Group for the year ended 31 December 2015. The Group has not applied IAS 34 Interim Financial Reporting, which is not mandatory for AIM companies, in the preparation of these interim financial statements.

Going concern

The carrying value of embedded derivatives associated with the Loan Notes at period end can have a significant impact on reported total equity and at 30 June 2016 we report net liabilities of £0.67 million, with the carrying value of the embedded derivatives at £7.44 million. Trident Private Equity Fund III LP which holds all of the Redeemable Loan Notes issued (3,318,718) and 74.6% of the Convertible Loan Notes issued (2,434,238) has written to the Company on 21 March 2016 confirming that in the ordinary course, it will not seek repayment, redemption or conversion of those aforementioned Loan Notes, nor seek transfer of its interest in those Loan Notes, whilst the net assets of the Company remain less than 50% of its issued share capital. Trident Private Equity Fund III LP is manged by Harwood Capital LLP. Christopher Mills, a non-executive director of the Company, is the Chief Investment Officer of Harwood Capital LLP.

The Directors have reviewed the budget, financial forecast including cash flow forecasts including sensitivities and other relevant information. They believe that the Group has adequate resources to continue in operation for the foreseeable future.

Accounting policies -

New standards, interpretations and amendments adopted by the Group

The accounting policies adopted in the preparation of the interim financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2015, except for the adoption of new standards and interpretations effective as of 1 January 2016.

The Directors do not consider that the adoption of these standards and interpretations have had a material impact on the consolidated or company financial statements in the period of initial application.

3. Seasonal fluctuations

Historically revenues are strongest in the second half of the year. Revenues slow following the Christmas and New Year holidays, and again during the summer holidays, particularly from European clients.

The provision of ADMET services is subject to seasonal fluctuations, historically with peak demand in the second half of each year. For the six months ended 30 June 2016, revenues represented 55.9% of the annual level of revenues in the year ended 31 December 2015.

4. Segmental information

The Group has a single operating and reporting segment, that of providing in vitro and in silico ADMET/PK (Absorption, Distribution, Metabolism, Excretion, Toxicity, and Pharmacokinetic) information to a number of different industries including the Pharmaceutical, Biotechnology, Cosmetic, Personal Care, Agrochemical, Chemical Industries and Academia. The revenue and operating profit or loss for the periods are derived from the Group's single operating and reportable segment. This has been determined by reference to the information that the Chief Operating Decision Maker receives about the Group.

The Group gives a geographic analysis of revenue by destination. Key markets for the Group are identified as North America, Mainland Europe and the United Kingdom.

5. Finance income and finance cost

Finance income comprises the following:

Finance cost comprises the following:

The Group entered into a Subscription Agreement on 21 August 2013 with Trident Private Equity Fund III LP, the ultimate outcome of which was the issue of £3 million of unsecured Redeemable Loan Notes ("Redeemables") and £4 million of unsecured Convertible Loan Notes ("Convertibles") in September 2013. By way of an Open Offer the Company issued £4 million nominal value of Convertible Loan Notes at par. Additionally it also, by way of subscription, issued £3 million nominal value of Redeemable Loan Notes at par. Details of this fundraising were sent to all shareholders by way of a circular. Both instruments pay interest in the form of 'payment in kind' ('PIK') notes at the rate of 5% per annum on a compound basis, payable on each anniversary of issue for a period of five years.

Convertible Loan Notes were offered and issued such that each shareholder would be entitled to 0.01783003 of nominal value £1.00 Convertible Loan Notes. Convertible Loan Notes are convertible at 6 pence per share, now 60 pence following a ten for one share consolidation in July 2014. Redeemable Loan Notes were issued subject to a notional conversion price of 6 pence per ordinary share, now 60 pence following a ten for one share consolidation in July 2014. Issue costs associated with this fundraising amounted to £122,000. Net proceeds from the issue of Loan Notes amounted to £6,878,000.

The Convertible Loan Notes and associated PIK notes can be converted at the election of the holders of Convertible Loan Notes into ordinary shares of the Company on 30 September 2014 and/or on each anniversary of that date. Subject to conversion rights being exercised by the Noteholder, Loan Notes are repayable by the Company on the earlier of:

· the Offer Date where there is a change in control of the Company or a scheme of arrangement put in place.

· the Maturity Date (30 September 2018). The Maturity Date in respect of the Convertible Loan Notes and Redeemable Loan Notes may also be extended by up to two years at the option of a 50% majority of the holders of Convertible Loan Notes and Redeemable Loan Notes respectively.

The amount to be paid by the Company in respect of the redemption of the Loan Notes will be the greater of:

i) the nominal amount of the Loan Notes and the PIK Notes: and

ii) where a change in control of the Company or a scheme of arrangement is put in place, the amount calculated by applying the Offer Price per ordinary share applicable to the Offer to the number of Ordinary Shares represented by the Notes on the assumption that the nominal value of the Loan Notes then in issue (including any PIK notes issued or to be issued on or immediately prior to the Offer Date) had been converted in to Ordinary Shares at the Conversion Price (60 pence) or Notional Conversion Price (60 pence), as the case may be, on the Offer Date: and

iii) where the Loan Notes are redeemed on the Maturity Date the amount calculated by applying the average mid-market closing price of the Ordinary Shares in the 30 Business days prior to the Maturity Date to the number of Ordinary shares represented by the Loan Notes on the assumption that the nominal value of the Loan Notes then in issue (including any PIK notes issued or to be issued on or immediately prior to the Maturity Date) had been converted into Ordinary shares at the Conversion Price (60 pence) or Notional Conversion price (60 pence) on the Maturity date (30 September 2018).

The Convertible Loan Notes and Redeemable Loan Notes are subject to a multiplier based upon the increase in share price from the Conversion or Nominal Conversion price of 60 pence. In both cases any increase in the average mid-market closing price of Cyprotex shares from a nominal base of 60 pence in the 30 prior market dealing days leads to a broadly proportionate increase in the amount of potential Loan Note related debt repayable on maturity. This increase in debt, relating to share price movements of the Company, is accounted for under International Financial Reporting Standards ("IFRS") as an additional finance cost in the income statement. Any decrease in debt, relating to share price movements of the Company, is accounted for under International Financial Reporting Standards ("IFRS") as an additional finance income in the income statement.

The Convertible Loan Notes have three separate economic components as follows:

· a liability component being a discounted fixed rate debt;

· an equity component due to the holders right to convert into Ordinary shares; and

· an embedded derivative due to conversion rights being linked to the Company's share price.

Each of these components was measured to fair value at the issue date.

This results in recognition of £164,496 (net of associated issue costs) as an equity component and the initial recognition of the debt component.

The Redeemable Loan Notes have two separate economic components as follows:

· a liability component being a discounted fixed rate debt; and

· an embedded derivative due to conversion rights being linked to the Company's share price via a notional issue price.

Each of these components was measured to fair value at the issue date and a gain of £122,734 is deferred in respect of differences in market and coupon rates at the date of issue.

Subsequently, the liability components of both the Convertible and Redeemable Loan Notes are recorded at amortised cost using the effective interest method, with interest-related charges recognised as an expense in finance cost in the income statement. The embedded derivatives associated with the Convertible and Redeemable Loan Notes are subsequently measured at fair value at each balance sheet date, and the gain or loss on re-measurement to fair value is recognised as finance income/cost in the income statement.

The carrying value attributed to the Loan Notes are as follows:

A summary of the components of the finance costs/(income) associated with the issue of Redeemable and Convertible Loan Notes is as follows:

The number of Redeemable Loan Notes in issue is as follows:

The number of Convertible Loan Notes in issue is as follows:

In the case of the embedded derivatives, in calculating their values, principal assumptions used were a share price volatility of 32.5%, a credit spread of 15% and a risk free rate of 0.88%.

6. Profit/(loss) per share

The calculation of the basic profit/(loss) per share is based on the profit/(loss) attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period.

The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue of shares and the post tax effect of dividends and/or interest, on the assumed conversion of all dilutive options and other dilutive potential ordinary shares.

Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below.

In both of the prior comparative periods a loss is reported for the period and the weighted average number of ordinary shares in issue, for the purpose of calculating diluted earnings/loss per share, is the same as that used for the basic earnings/loss per share calculation. This is because outstanding share options and Loan Note conversions would have the effect of reducing a loss and an adjusted loss per ordinary share and would therefore not be dilutive.

7. Share issues

No shares were issued in the 6 month period to 30 June 2016 or 6 months to 30 June 2015.

During the year ended 31 December 2015, 25,641 ordinary shares were issued pursuant to the conversion of Convertible Loan Notes at 60 pence per share. The share issues in exchange for the cancellation of Convertible Loan Notes yielded £nil in cash and increased equity by £15,384. The share price at the date of conversion was 64.5 pence.

Shares issued and movements in share capital may be summarised as follows:

The Company has only one class of shares.

8. Share based payment

The Company adopted a Long Term Incentive Plan ('LTIP') on 22 January 2014. The purpose was to allow participants, who are executives in the Company, to potentially share in the creation of value for shareholders. A total of 3,333,331 share options under the LTIP have been awarded. The vesting of these executive options is on grant, at an exercise price of 60 pence per share, and are exercisable only upon change of control of the Company within a ten year period.

In order to calculate the fair value of potential awards a Monte Carlo simulation was used. The principal inputs to the valuation model were as follows:

The amounts charged to the income statement in respect of these awards, is as follows:

9. Additions and disposals of property, plant and equipment

The following tables show additions and disposals of property, plant and equipment:

10. Intangible fixed assets

The following tables show the movement on intangible fixed assets:

11. Contingent consideration

On 1 January 2014 the Group's US subsidiary, Cyprotex US, LLC, under an asset purchase agreement ('APA'), purchased certain assets and trade of CeeTox, Inc. ('CeeTox') from North American Science Associates, Inc ('NAMSA'). CeeTox is based in Kalamazoo, Michigan, USA. The initial purchase price of £0.84 million was paid on completion. There was potentially further consideration payable to NAMSA at a rate of 5% of net sales until 31 December 2015 if sales of certain identified assays exceed the level achieved in the year to 30 September 2013, from 1 January 2014 in two subsequent 12 month periods to a maximum of £3.1 million. On 1 January 2014, management estimated the amount of contingent consideration that would be payable at £0.04 million and the table below details movements on that provision:

12. Taxation

At 30 June 2016, the Group has tax losses and tax deductibles of approximately £6.1 million that are available for offset against future profits arising from the same trade.