Oxonica Shareholders’ Action Group

THE Oxonica Shareholders’ Action Group (OXONSAG) represents the interests of private investors who have lost money as a result of an investment in Oxonica PLC.

OXONSAG is particularly concerned about the lack of information given to shareholders over the last two years. This is set out in some detail below but, briefly, it appears that the shareholders were being encouraged to buy shares in Oxonica despite the fact that a crucial supply agreement with Petrol Ofisi was far from secure and despite the fact that the company was embroiled in a legal dispute with Neuftec Limited, which ended up going to trial in early June 2008.

OXONSAG is open to any shareholder, past or present, who wishes to examine the legal and regulatory routes available to limit and recover the losses that they have suffered.

OXONSAG has been overwhelmed by pledges of support from private shareholders for the idea of forming one group which can act quickly and talk as one.

Our first objective is to collate a group of shareholders (10% minimum) that will call an Extraordinary General Meeting pursuant to sections 303 & 304 of the Companies Act 2006, to discuss the removal of the board and a suitable replacement.

Please consider joining OXONSAG, or email us, if you would like to discuss your situation with Oxonica PLC.

Oxonica PLC commenced trading on the Alternative Investment Market on 20th July 2005.
In a press release dated 16th August 2006 Oxonica announced that it had “reached agreement with Petrol Ofisi A.S., the leading national oil company in Turkey with sales of US$8.8 billion in 2005, to supply its EnviroxTM fuel borne nanocatalyst, for use in diesel fuel across Petrol Ofisi’s nationwide distribution network The agreement provides for an initial supply of Envirox(TM) which will be used by Petrol Ofisi to evaluate market acceptance of the new enhanced fuel within its national market.”

Oxonica did not make any mention of technical verification trials in its press release of 16th August 2006.

On 27th April 2007, Oxonica PLC requested a temporary suspension of trading of its shares on AIM, pending further talks with Petrol Ofisi on the planned termination of the Envirox supply agreement and clarification of its financial position. Oxonica explained that the cancellation of the Petrol Ofisi supply agreement was due to “inconclusive” trials of Petrol Ofisi diesel in Turkey.

On 23rd February 2007, Oxonica Energy Limited filed a claim in the Patents Court for declarations against Neuftec Limited that it was not obliged to pay royalties on the sale of an alleged alternative formulation that was sold to Petrol Ofisi. Neuftec Limited subsequently terminated its license with Oxonica which had permitted the latter to use the Neuftec fuel additive technology.

Oxonica made no official mention of the fact that they were in litigation with Neuftec until July 2007. In a newspaper interview, Oxonica CEO Dr. Kevin Matthews said he did not deem the matter to be “material”.

In Oxonica PLC’s Admission Document relating to the AIM floatation, Oxonica had stated that they had“…in-licensed a core patent underpinning the fuel catalyst technology from Neuftec Limited and further developed a method to improve its dispersion and settling properties in diesel fuel. The Neuftec license is exclusive and runs until this patent expires (on 29 June 2021) or is revoked or the license is terminated according to its terms (further details in respect of termination are set out in Part II). The license is based on a combination of royalty and milestone payments and profit share.

Oxonica Energy has also filed additional patent submissions for product applications based around the original Neuftec license.”
It is estimated that the legal bill in respect of the Neuftec litigation is substantial. Oxonica has not given any indication as to what their exposure to losing against Neuftec would be.

On 26th February 2007, Panmure Gordon issued a “buy” recommendation. Panmure Gordon reported that Oxonica’s cash reserves at the end of 2006 were GBP 6.8 million due to higher-than-expected cash inflows, investment by Becton Dickinson and cash flows realized from the Petrol Ofisi trial. Panmure Gordon also reported that Oxonica had raised its OPEX guidance for 2007 by GBP 2.5 million, which the company would invest equally in the Biodiagnostics and Envirox units. In the recommendation Panmure Gordon also said that they expected Oxonica to achieve break even in 2008, a year later than was previously expected.

Also on the 26th February 2007, Oxonica PLC publicly announced that it had “…made the decision to increase investment to support the strategic relationships established with Petrol Ofisi and Becton Dickinson and the related development of two of its principal products, ENVIROX(TM) fuel borne catalyst and NANOPLEX(TM) markers for biodiagnostics. This extra investment, comprising approximately £2.5 million, is intended to accelerate the progress of these two products in future years, although it should be noted that it will be expensed in the current financial year.”
Panmure Gordon published a further research note and “buy” recommendation on 19th March 2007, mentioning that Oxonica had announced encouraging preliminary results for 2006 with revenues ahead of the estimates. Panmure Gordon stated that the diesel fuel catalyst contributed to a majority of Oxonica’s revenues for the year on account of the company’s trial with Petrol Ofisi, and that Oxonica’s partnership with Croda, associated with the Optisol UV absorber, was tracking well.

On 28th March 2007, Oxonica Plc announced that it had “… received the initial results from the second data point (30,000 km) of the ENVIROX(TM) track trial being carried out in Turkey on Turkish, high-sulphur diesel fuel. The track trial is an extensive trial of 16 trucks that are representative of vehicles operating in the Turkish market. The vehicles are being driven around the service road of the Formula One track in Istanbul with fuel usage and mileage recorded and fuel efficiency calculated.

The initial data point of 20,000 km showed positive results of a 1-1.5% fuel saving, which was in the range of management expectations at that stage of the trial. The initial trial results from the second data point are currently inconclusive and it has not been possible to identify whether there has been any improvement in fuel economy. Further work will be required in order to clarify the trial results and fully evaluate all aspects of the trial design to determine whether there are any mitigating factors affecting the trial. Oxonica continues to review the progress of the trial and subsequent results with Petrol Ofisi and agree on next steps.”

This was the first time that shareholders had been made aware of such an extensive trial being conducted. It is believed that:

1. The trial must have commenced in early 2007
2. There was a risk attached to the trial
3. The survival of the Petrol Ofisi contract depended on the success of the trial

Oxonica and its advisers, including Panmure Gordon, would, or ought to have been aware of these risks before they issued public statements recommending that the public “buy” Oxonica shares.
It will be interesting to hear the directors’ explanation for this at the forthcoming AGM on 20th June 2008. It is in your interests and you are encouraged to attend the AGM.

On the 3rd May 2007, the Oxford Mail ran a story that claimed:

“HIGH-tech company Oxonica has denied a blogger’s claim that it had sacked more than 60 per cent of its Oxfordshire staff.

Spokesman Matthew Locke said that a message by a blogger on the website Interactive Investor was “misleading and incorrect”.
He said: “There haven’t been any redundancies as far as I know. The company will be making an announcement to the Stock Exchange about its cash position soon.”

However, on the same day, Oxonica issued an announcement that said:
“Further to the Company’s request to suspend trading in its shares on Friday 30 April, the Company has taken immediate steps to reduce its operating expenses.

Thirteen of the 61 employees of the Company have been advised that their roles are at risk of redundancy and appropriate consultation will follow.”
At the 2007 AGM, Oxonica’s Chairman, Christopher Moore, promised investors the right to participate in the new fundraising round:
“Well the thinking on that is that it is quite clear Oxonica needs the fundraising which needs to be done reasonably soon and it is felt absolutely critical that all shareholders are treated equally in any fundraising proposal which are conducted. It is normal for companies annually to renew a resolution which gives them discretion to place new shares to parties other than shareholders at any price they chose but I think given where we are and with the critical importance of the next fundraising it is only fair and right that we do not try to renew that resolution this year so that the practical consequence is that any fundraising proposals are, of course put to all shareholders that all shareholders have an equal chance to participate and to give their views of it.”

The subsequent placement was not, however, open to the ordinary shareholder, the reasons for this are unclear. In November 2007, Oxonica announced that it had agreed to issue equity in return for GBP 4.2 million, and that the new Chairman, Richard Farleigh, would be subscribing to GBP 1.3 million of this placement.

On 18th February 2008, Oxonica issued a press release. Oxonica claimed in its Press Release:

“In addition to the successful Stagecoach validation trial, Envirox™ has achieved further positive test results and has made significant commercial progress in mainland Europe and Russia…
A recently completed bus trial in Italy demonstrated fuel savings of 4.8% after 3 months and 10.6% after 6 months.”

Oxonica’s Italian distributor issued a press release on 25th April 2008 which said:

“Both Creuros and the bus company in question are not convinced of the fuel savings claimed by Oxonica, which were measured on a fleet size of 5 vehicles. It is the opinion of Creuros that the data produced was far too variable and inconsistent to draw any conclusions.
Creuros also took issue with the selective reporting of laboratory emission results claimed for Envirox.”

Oxonica responded with a release of the same date stating that:
“Creuros was appointed as Oxonica’s Italian distributor on 27 February 2007 and was in the very early stages of developing the Italian market with sales of less than £5,000 to date. They had not informed us of any of their concerns regarding Oxonica’s press release prior to their public statement coinciding with their appointment by Energenics.

Oxonica firmly believes that the data reported in the press release of 18 February relating to the performance of EnviroxTM in the tests conducted inItaly can be substantiated and are not misleading.”
Neuftec issued a media statement on the 12th June 2008, stating that:

“[Neuftec Limited]…commenced patent infringement litigation in the UK against Oxonica Energy Limited, a wholly owned subsidiary of Oxonica PLC.”

A UK website ran a story on 16th June 2008 claiming that:

“A number of sources have confirmed last weeks redundancies at Oxonica Inc (formerly Nanoplex) with the numbers approaching double figures.”

There are no confirmations or denials from Oxonica.