PLANT
p a r t n e r
IMPACT
f o r
g r o w t h
Admission Document
10th October 2006
Nominated Adviser
Grant Thornton Corporate Finance
Broker
Fiske plc
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THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the
contents of this document or as to the action you should take, you are recommended to immediately seek your own personal financial
advice from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorised pursuant to
the Financial Services and Markets Act 2000, who specialises in advising on the acquisition of shares and other securities.
This document is an admission document and has been prepared in accordance with the rules of the AIM market of the London
Stock Exchange plc (“AIM”). This document does not comprise a prospectus for the purposes of the Prospectus Rules made by
the Financial Services Authority and it has not been seen and will not be examined or approved by the Financial Services
Authority in accordance with such rules or otherwise. This document is therefore not an approved prospectus for the purposes of
section 85 of FSMA, has not been prepared in accordance with the Prospectus Rules and has not been approved by the Financial
Services Authority or by any other authority which could be a competent authority for the purposes of the Prospectus Directive.
Copies of this document will be available free of charge to the public during normal business hours on any day (Saturdays,
Sundays and public holidays excepted) at the offices of Halliwells LLP, St James’s Court, Brown Street, Manchester M2 2JF from
the date of this document until one month from the date of Admission in accordance with rule 3 of the AIM Rules.
The Directors of the Company, whose names appear on page 12 of this document, accept responsibility individually and
collectively for all the information contained in this document. To the best of the knowledge and belief of the Directors (who
have taken all reasonable care to ensure that such is the case) the information contained in this document is in accordance with
the facts and does not omit anything likely to affect the import of such information.
No person has been authorised to give any information or make any representation other than as contained in this document
and, if given or made, such information or representations must not be relied on as having been authorised.
Application has been made for the Enlarged Share Capital to be admitted to trading on AIM. AIM is a market designed primarily
for emerging or smaller companies to which a higher investment risk tends to be attached than to larger or more established
companies. AIM securities are not admitted to the Official List of the United Kingdom Listing Authority. The rules of AIM are
less demanding than those of the Official List. It is emphasised that no application is being made for admission of the Ordinary
Shares to the Official List. A prospective investor should be aware of the risks of investing in such companies and should make the
decision to invest only after careful consideration and, if appropriate, consultation with an independent financial adviser.
Further, the London Stock Exchange has not itself examined or approved the contents of this document. It is expected that
Admission will take place, and dealings in the Ordinary Shares will commence on AIM, on 16 October 2006.
THE WHOLE TEXT OF THIS DOCUMENT SHOULD BE READ AND, IN PARTICULAR, YOUR ATTENTION IS
DRAWN TO THE SECTION ENTITLED “RISK FACTORS” IN PART 3 OF THIS DOCUMENT.
Plant Impact plc
(Incorporated and registered in England and Wales under the Companies Act 1985 with registered number 05442961)
Placing of 10,139,475 ordinary shares of 1p at a price of 38p per share
and
Admission to trading on AIM
Nominated Adviser
Grant Thornton Corporate Finance
Broker
Fiske Plc
The Placing is conditional on Admission taking place by 8.00 a.m. on 16 October 2006 (or such later date as the Company, Grant
Thornton Corporate Finance and Fiske plc agree, being not later than 16 November 2006). All of the Placing Shares will, on
Admission, rank pari passu in all respects and will rank in full for all dividends and distributions declared, paid or made in respect
of the Existing Ordinary Shares after Admission.
Grant Thornton Corporate Finance, a division of Grant Thornton UK LLP, which is authorised and regulated by the Financial
Services Authority, is acting exclusively for the Company and no one else in connection with the Placing and the proposed
Admission. Grant Thornton Corporate Finance will not regard any other person as its customer or be responsible to any other
person for providing the protections afforded to customers of Grant Thornton Corporate Finance nor for providing advice in
relation to the transactions and arrangements detailed in this document for which the Company and the Directors are solely
responsible and, without limiting the statutory rights of any recipient of this document, no liability is accepted by Grant
Thornton Corporate Finance for the accuracy of any information or opinions contained in this document or for omissions of any
material information for which it is not responsible. Grant Thornton Corporate Finance is not making any representation or
warranty, express or implied, as to the contents of this document. The responsibilities of Grant Thornton Corporate Finance as
the Company’s nominated adviser for the purposes of the AIM Rules are owed solely to the London Stock Exchange plc and are
not owed to the Company or any Director or to any other person in respect of his decision to acquire Ordinary Shares in reliance
on any parts of this document.
Fiske plc, which is authorised and regulated by the Financial Services Authority and is a member of the London Stock Exchange,
is acting exclusively for the Company and no-one else in connection with the Placing and the proposed Admission. Fiske plc will
not regard any other person as its customer or be responsible to any other person for providing the protections afforded to
customers of Fiske plc nor for providing advice in relation to the transactions or arrangements detailed in this document. The
responsibilities of Fiske plc as the Company’s broker for the purposes of the AIM Rules are owed solely to the London Stock
Exchange plc and are not owed to the Company or any Director or to any other person in respect of his decision to acquire
Ordinary Shares in reliance on any part of this document. Fiske plc is not making any representation or warranty, express or
implied, as to the contents of this document and accordingly without limiting the statutory rights of any recipient of this
document, no liability is accepted by Fiske plc for the accuracy of any information or opinions contained in this document or for
omissions of any material information for which it is not responsible.
This document does not constitute an offer to sell, or the solicitation of an offer to subscribe for or buy, shares to any person in
any jurisdiction to whom or in which such offer or solicitation is unlawful. The Ordinary Shares have not been, and will not be,
registered under the United States Securities Act of 1933, as amended, or under the securities legislation of any state of the United
States. Subject to certain exceptions, the Ordinary Shares may not, directly or indirectly, be offered or sold within Australia,
Canada, Japan, Republic of Ireland, Republic of South Africa or the United States or offered or sold to a person within Australia,
Canada, Japan, Republic of Ireland, Republic of South Africa or the United States.
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CONTENTS
Page
Placing Statistics
3
Expected Timetable
3
Key Information
4
Definitions
6
Glossary
9
Directors and Advisers
12
Part 1
Information on the Group
13
Part 2
Expert’s Report
29
Part 3
Risk Factors
103
Part 4
(i)
Accountant’s Report on the Group
107
(ii)
Financial Information on the Group
109
Part 5
Additional Information
123
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PLACING STATISTICS
Placing Price
38p
Number of Existing Ordinary Shares in issue prior to the Placing
7,987,750
Number of Conversion Shares(1)
4,334,204
Number of Ordinary Shares being issued pursuant to the Placing
10,139,475
Number of Ordinary Shares in issue immediately following Admission(2)
23,119,323
Estimated expenses of the Placing (excluding VAT) payable by the Company
£0.55 million
Estimated net proceeds of the Placing receivable by the Company
£3.30 million
Market capitalisation at the Placing Price
£8.79 million
(1)
to be issued conditional on Admission
(2)
including 657,894 Ordinary Shares into which a loan of £250,000 is to be capitalised on Admission
EXPECTED TIMETABLE
Publication of this document
2006
10 October
Admission to trading on AIM effective and commencement of
dealings in the Ordinary Shares
16 October
CREST stock accounts credited (as applicable)
16 October
Definitive share certificates despatched (as applicable)
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KEY INFORMATION
THE FOLLOWING INFORMATION IS EXTRACTED FROM, AND SHOULD BE READ AS
AN INTRODUCTION TO, THE ADMISSION DOCUMENT.
Any investment decision relating to the Placing should be based on the consideration of this
document as a whole.
The Business
Plant Impact has developed and markets a range of crop nutrients and natural pesticides that
improve the health and productivity of crops, whilst being inherently non-toxic and ecologically
sound. The Group’s products allow crops to be grown in a way that is better for the environment,
the consumer and the grower, whilst increasing yield, quality and shelf life.
The Group’s approach to product development is different to the traditional approach adopted by
many agricultural chemical companies. Plant Impact first seeks to understand the nature of the
problem to be solved, then analyses the part of the plant’s natural ability to cope with the problem
as opposed to creating numerous compounds and screening them to find a use for them.
The Market
The Directors believe that the focus of politicians, pressure groups and supermarkets on the
perceived adverse effects of pesticides and fertilizers on human health and the environment is likely
to ensure continued pressure on growers to reduce the amount of crop protection products applied
for the foreseeable future.
There are numerous highly effective products in the foliar crop protection market, but many of
these products are over twenty years old and off patent, and some are highly toxic. In many cases
safer, more environmentally acceptable products would be welcomed by food groups and
consumers. Pesticide resistance is also increasing and alternative approaches may be required in
order to provide robust control of pest species.
Plant Impact seeks to position itself to address consumer, regulatory, political and market demands
for greater food safety and sustainable agriculture by the development and introduction of
acceptable, non-threatening technology.
Products and Technologies
Plant Impact has developed six key technologies which can be divided into two distinct groups:
a)
crop nutrients, which improve plant health of which Alethea쑓, PINT, CAT and Speedo
are examples;
b)
crop protection agents or botanical pesticides, which act to control pests. BugOil쑓 and the
Group’s nematicide technology fall into this category.
The Group’s technologies are mainly for use on high value fruit and vegetable crops grown under
glass or polythene, such as tomatoes, cucumbers, strawberries and peppers.
The Group achieved sales in its crop nutrient range of products of approximately £345,000 for the
period ended 31 March 2006, mainly in the Middle East, but has recently expanded sales to Spain
and the UK. The pesticide range, which has shown great potential in early trials, is yet to be
available for sale as trials continue to be conducted and, in the case of BugOil쑓, regulatory
approvals are being sought. The Directors expect to receive regulatory approval for BugOil쑓 in the
USA and UK in the second quarter of 2008.
Business Development and Strategy
The Directors intend to commercialise the Group’s products through distribution agreements and
licensing arrangements with industrial partners, and/or, where appropriate, through its own direct
distribution channels. The focus is on sales to commercial growers of high value and protected
crops. However, there is also the possibility of entering the home and garden market.
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Plant Impact has arrangements in place with distribution partners in specific markets in the Middle
East arranged through Pi-MENA, a sales agency based in Jordan supported by the Company. In
December 2005, Plant Impact entered a further distribution agreement with Certis for its nutrient
products, covering Spain and Portugal, which has already generated modest revenues.
Intellectual Property and Product Registration
The protection of intellectual property through the submission of patents is an integral part of the
Company’s research and development strategy. Since its formation, the Company has developed
and filed eight base patent applications covering six technologies of which one, which covers
BugOil쑓, has already been granted in the UK.
Placing and Admission
Plant Impact is seeking Admission of its Ordinary Shares to trading on AIM to enable it to fund the
next growth phase of its business through a placing of 10,139,475 Ordinary Shares at the Placing
Price of 38p raising a total of £3.85 million before expenses. The Net Proceeds of the Placing of
£3.30 million will be used to fund increased product development and launch new products,
increase sales and marketing activities, assist in creating strategic partnerships and provide working
capital for the Group.
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DEFINITIONS
“Act”
the Companies Act 1985 (as amended)
“Admission”
the admission of the Existing Ordinary Shares, the Conversion
Shares and the Placing Shares to trading on AIM becoming
effective in accordance with the AIM Rules
“AIM”
AIM, a market operated by the London Stock Exchange
“AIM Rules”
the rules published by the London Stock Exchange governing
admission to, and the operation of, AIM
“Articles”
the articles of association of the Company, from time to time
“Biofutures”
Biofutures Pi Limited, a wholly owned subsidiary of the
Company
“Board” or “Directors”
the board of directors of the Company including a duly
constituted committee thereof
“CEMAS”
CEM Analytical Services Limited
“certificated” or “in
certificated form”
an Ordinary Share which is not in uncertificated form
“Certis”
Certis Europe BV
“Combined Code”
The Combined Code on Corporate Governance issued by the
Financial Reporting Council in June 2006
“Conversion Shares”
3,947,363 Ordinary Shares into which the Loan Noteholders
have irrevocably undertaken to convert their Loan Notes with
effect from Admission and 386,841 Ordinary Shares into which
the Fund Loans will convert
“the Company” or “Plant
Impact”
Plant Impact plc
“CREST”
the Relevant System (as defined in the CREST Regulations) in
respect of which CRESTCo Limited is the Operator (as defined in
the CREST Regulations) in accordance with which securities
may be held and transferred in uncertificated form
“CRESTCo”
CRESTCo Limited, a company incorporated under the laws of
England and Wales and the UK Operator of CREST
“CREST Regulations”
the Uncertificated Securities Regulations 2001 (SI 2001 No.
3755) (as amended)
“EU”
the European Union
“(” or “Euro”
the common currency of the euro area
“Enlarged Share Capital”
the issued ordinary share capital of the Company following the
Placing and Admission, comprising the Existing Ordinary
Shares, Conversion Shares, the Placing Shares and 657,894
Ordinary Shares into which a loan of £250,000 is to be
capitalised on Admission
“Excluded Territories”
Australia, Canada, Japan, the Republic of Ireland, their
respective territories
“Existing Ordinary Shares”
the 7,987,750 Ordinary Shares in issue at the date of this
document
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“Existing Share Capital”
the issued ordinary share capital of the Company at the date of
this document
“Existing Shareholders”
holders of Existing Ordinary Shares
“Experts Report”
Market and Technical Due Diligence Report dated 20 September
2006 included in Part 2 of this document
“Fiske” or “Broker”
Fiske Plc
“FSA”
Financial Services Authority
“FSMA”
Financial Services and Markets Act 2000 (as amended)
“Fund Loans”
loans totalling £147,000 made available to the Company on
9 October 2006 and which convert under the terms of the loan
agreements detailed in paragraph 9.12 of Part 5 of this document
into 386,841 Ordinary Shares on Admission
“Group”
the Company and its subsidiaries and subsidiary undertakings at
the date of this document
“HMRC”
Her Majesty’s Revenue and Customs
“IFRS”
International Financial Reporting Standards
“Loan Noteholders”
the holders of the Loan Notes
“Loan Note Instrument”
the loan note instrument constituting the Loan Notes dated
15 December 2005
“Loan Notes”
£1,000,000 convertible loan notes 2008 issued by the Company
“London Stock Exchange”
London Stock Exchange plc
“Net Proceeds of the Placing”
the gross proceeds of the Placing less the expenses of Admission
“Nominated Adviser” or
“Grant Thornton Corporate
Finance”
the corporate finance division of Grant Thornton UK LLP, which
is authorised in the United Kingdom by the Financial Services
Authority to carry out investment business
“Official List”
the Official List of the UK Listing Authority
“Option”
an option to subscribe for Ordinary Shares under the Share
Scheme
“Ordinary Shares”
ordinary shares of 1p each in the capital of the Company
“PiBioscience”
PiBioscience Limited, a wholly owned subsidiary of the
Company
“Placing”
the placing by Fiske of the Placing Shares at the Placing Price
pursuant to the Placing Agreement and as described in this
document
“Placing Agreement”
the conditional agreement dated 10 October 2006 between the
Company, the Directors, Fiske and Grant Thornton Corporate
Finance relating to the Placing, as described in paragraph 17 of
Part 5 of this document
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“Placing Price”
38p per Ordinary Share
“Placing Shares”
the 10,139,475 Ordinary Shares to be issued pursuant to the
Placing
“Prospectus Rules”
the rules made by the Financial Services Authority pursuant to
sections 73A(1) and (4) of FSMA
“Registrar”
Capita Registrars Plc, or such other registrar as may be appointed
by the Company from time to time
“Regulatory Information
Service”
a service provided by the London Stock Exchange for the
distribution to the public of announcements and included within
the list maintained at the London Stock Exchange’s website
“RisingStars Growth Fund”
RisingStars Growth Fund Limited Partnership
“Shareholders”
holders of Ordinary Shares
“Share Scheme”
the share option scheme of the Company (as amended) details of
which are set out in paragraph 11 of Part 5 of this document
“UK” or “United Kingdom”
United Kingdom of Great Britain and Northern Ireland
“UK GAAP”
UK Generally Accepted Accounting Principles
“UKLA” or “United Kingdom
Listing Authority”
The Financial Services Authority acting in its capacity as the
competent authority for the purposes of Part 8 of the Financial
Services and Markets Act 2000
“USD” or “$”
US dollars, the currency of the US
“US” or “USA”
United States of America
“VAT”
value added tax
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GLOSSARY
The following terms and abbreviations are used within this document:
Abiotic stress
Abiotic stress is stress that is not caused by a biological organism.
In crops abiotic stress is a major factor in yield and quality
variation. Abiotic stress includes stress created by: intense light,
herbicides, ozone, heat, chilling, freezing, drought, salinity,
flooding and heavy metals.
Acaricide
An acaricide is a type of pesticide that can be used to kill mites.
Acaricides can target one or more of a mite’s developmental form
including eggs, juveniles and adults.
Botanical Pesticide
A botanical pesticide is a pesticide derived from one or more
plant derived chemicals or extracts.
Calcium sink
An area of tissue with a high affinity for calcium.
CABI Bioscience
A United Nations treaty organisation dedicated to research in the
area of sustainable agriculture. CABI Bioscience has research
staff and facilities around the globe and is headquartered in
Surrey, UK.
CEMAS
A Contract Research Organisation that is GLP and GEP
compliant based in Ascot, UK. CEMAS is registered to carry out
trials and laboratory studies suitable for submission for pesticide
registration in the EU and US.
CRO
A Contract Research Organisation is an independent research
facility that can test independently of a company.
Divalent cation
A cation is an ion having a positive charge and characteristically
moving toward the negative electrode in electrolysis. Valency is
the combining capacity of an atom or radical determined by the
number of electrons that it will lose, add, or share when it reacts
with other atoms. A divalent cation has a valency of 2.
EFSA
The European Food Safety Authority is the keystone of EU risk
assessment regarding food and feed safety. In close collaboration
with national authorities and in open consultation with its
stakeholders, the EFSA provides independent scientific advice
and clear communication on existing and emerging risks.
EPA
The Environmental Protection Agency is the government body
that regulates pesticides in the USA.
Foliar crop protection
Pesticides applied to a crop’s foliage, by spraying (diluted in
water).
Fungicide
A fungicide is a pesticide used to kill fungi.
GAP
Good Agricultural Practice involves methods of land use which
can best achieve the objectives of agronomic and environmental
sustainability, is described in several different codes of practice
designed by producer organizations, importers and retailers
consortia and government bodies representing consumers (e.g.
UK Food Standards Agency). American retailers use a different
standard called SQF 2000.
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GEP
Good Experimental Practice is an internationally recognized
standard for field trials that can only be performed by accredited
organizations. All trial data submitted to governmental
registration bodies in a pesticide registration dossier must be
performed to GEP standard. Where product/technology trials are
referred to in this document, they are only to GEP standard where
specifically stated.
GLP
Good Laboratory Practice is an internationally recognized
standard for laboratory experiments that can only be performed
by accredited organizations. All laboratory work submitted to
governmental registration bodies in a pesticide registration
dossier must be performed to GLP standard. Where
product/technology trials are referred to in this document, they
are only to GLP standard where specifically stated.
GM
Genetically modified.
Homogeneity
Homogeneity is a uniform state. It is sometimes economically
beneficial to have homogeneity in a crop (colour, size, taste),
rather than having a mixed distribution.
Imidacloprid
Imidacloprid is an insectide active ingredient developed by Bayer
Crop Science and used in several Bayer Crop Science insecticides
marketed under brand names including Confidor, Calypso and
Gaucho. Imidacloprid is now off patent and is available from
generic manufacturers in China.
Impaction Technology
A technology developed by the Group which forms the basis of,
and was a forerunner to, the PiNT and CaT technologies.
Insecticide
An insecticide is a pesticide used against insects in all
developmental forms. They include ovicides and larvicides used
against the eggs and larvae of insects.
Leaching
Leaching is the movement of nutrients (both chemical and
natural sources) through the soil profile and ultimately into
groundwater. Leaching of nutrients (in particular nitrogen,
phosphorous and potassium) from agricultural land has been
responsible for environmental problems.
Micronutrient
Micronutrients are nutrients that are required by plants in very
small quantities, but if not available will restrict growth and
quality of crops. Micronutrient deficiencies are common in
agricultural crops and are corrected by application of
micronutrient fertilizers.
Moiety
A term used in patents to describe a molecule or chemical entity.
Monovalent Cation
A cation is an ion having a positive charge and characteristically
moving toward the negative electrode in electrolysis. Valency is
the combining capacity of an atom or radical determined by the
number of electrons that it will lose, add, or share when it reacts
with other atoms. A monovalent cation has a valency of 1.
MSR
A Member State Rapporteur is a national pesticide registration
body of an EU member state that pursues registration (through
mutual recognition) for a pesticide in other EU states following
granting of registration in its own state.
Mutual recognition
Mutual recognition is a system whereby once registered in one
EU state, national registration bodies in other EU member states
can accept registration of pesticides without further work.
Mutual recognition is discretionary.
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Nematicide
A nematicide is a type of pesticide used to kill nematodes (a
phylum of worms). Nematicides can target one or more of the
developmental forms in a nematode’s life cycle.
Nematodes
A nematode is a worm belonging to the Phylum Nematoda,
nematodes include animal parasites such as roundworm and also
plant parasites. Plant parasitic nematodes are microscopic and
are a major cause of economic damage to a wide range of
agricultural crops.
NPK
Nitrogen Potassium Phosphorus fertiliser.
Ovicidal
An ovicide is a chemical agent that kills eggs, especially the eggs
of insects, mites or nematodes.
PCT
The Patent Cooperation Treaty was concluded in 1970, amended
in 1979, and modified in 1984 and 2001. It is open to states party
to the Paris Convention for the Protection of Industrial Property
(1883) (“Contracting States”). The Treaty makes it possible to
seek patent protection for an invention simultaneously in each of
a large number of countries by filing an “international” patent
application. Such an application may be filed by anyone who is a
national or resident of a Contracting State. It may generally be
filed with the national patent office of the Contracting State of
which the applicant is a national or resident or, at the applicant’s
option, with the International Bureau of the World Intellectual
Property Organisation in Geneva.
PSD
The Pesticide Safety Directorate is the government body
responsible for persticide regulation in the UK.
R&D
Research and development.
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DIRECTORS AND ADVISERS
Directors
William Martin Robinson (Non-executive Chairman)
Peter Blezard (Chief Executive Officer)
David James Marks (Technical Director)
Gordon Cosworth Harman (Finance Director)
William Thompson (Non-executive Director)
Mark Andrew Wyatt (Non-executive Director)
all of:
2 Lockside Office Park
Lockside Road
Riversway
Preston
PR2 2YS
Company Secretary and
Registered Office
Gordon Harman
2 Lockside Office Park
Lockside Road
Riversway
Preston
PR2 2YS
Nominated Adviser
Grant Thornton Corporate Finance
Grant Thornton House
Melton Street
Euston Square
London NW1 2EP
Broker
Fiske Plc
Salisbury House
London Wall
London EC2M 5QS
Solicitors to the Company
Halliwells LLP
St James’s Court
Brown Street
Manchester M2 2JF
Solicitors to the Placing
Halliwells LLP
1 Threadneedle Street
London EC2R 8AW
Auditors of the Company and
Reporting Accountants
Grant Thornton UK LLP
Heron House
Albert Square
Manchester M60 8GT
Registrars
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Technical Advisers to the Company
CEM Analytical Services Limited
Glendale Park
Fernbank Road
North Ascot
Berkshire SL5 8JB
Patent Advisers
Greaves Brewster LLP
Indigo House
Cheddar Business Park
Cheddar BS27 3EB
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PART 1
Information on the Group
1.
Introduction
Plant Impact has developed and markets a range of crop nutrients and natural pesticides that
improve the health and productivity of crops, whilst being inherently non-toxic and ecologically
sound. This approach provides an alternative to industrialised agricultural practice. Plant Impact’s
strategy for growth involves developing its proprietary products in collaboration with leading
distributors and manufacturers in the agrochemicals industry and selling them through established
sales channels.
The Group’s products allow crops to be grown in a way that is better for the environment, the
consumer and the grower, whilst increasing yield, quality and shelf life.
The Group’s approach to product development is different to the traditional approach adopted by
many agricultural chemical companies. Plant Impact first seeks to understand the nature of the
problem to be solved, then analyses the part of the plant’s natural ability to cope with the problem
as opposed to creating numerous compounds and screening them to find a use for them. The Group
then identifies the ingredients with known efficacy that could be combined to enhance the plant’s
ability to overcome the problem and finally formulates them into a compound for trial. This holistic
approach has been successful in developing products which have shown encouraging results in
larger scale field trials.
Plant Impact has developed six key technologies which can be divided into two distinct groups:
(a)
crop nutrients, which improve plant health of which Alethea쑓, PINT, CAT and Speedo
are examples; and
(b)
crop protection agents or botanical pesticides, which act to control pests. BugOil쑓 and the
Group’s nematicide technology fall into this category.
The Group is progressing these technologies at different speeds in order to generate a pipeline of
products.
Development of the nutrient products is currently more advanced. Following successful trials, the
Group began marketing these products in 2003 through a distribution network in the Middle East.
The Group achieved sales of approximately £345,000 in the 15 months ended 31 March 2006 and
has recently expanded sales to Spain and the UK. The existing product range is marketed mainly for
use on high value fruit and vegetable crops grown under glass or polythene, such as tomatoes,
cucumbers, strawberries and peppers.
The Group’s pesticide products are at a less advanced stage as they are still undergoing efficacy
trials and regulatory approvals are being sought. In consequence, sales are yet to be generated from
this range of technologies.
The Group performs initial trials in its own laboratory and then uses third party laboratories to
conduct more extensive trials, moving into field trials with potential commercial partners, within or
under the protection of an evaluation agreement. Plant Impact retains ownership of the results of
these trials and uses the data to carry out further development work in conjunction with the
commercial partner.
Evaluation field trials, on both the Group’s crop nutrient and botanical pesticide products, are
being conducted by a number of multi-national agrochemical companies in America, Japan, India,
Spain and Malaysia, with a view to them entering into distribution and/or licensing agreements.
The first commercial relationship to stem from these evaluation trials was formalised in December
2005 when Certis and the Group entered into a distribution agreement covering Spain and
Portugal. Sales of approximately £43,000 under this agreement have been generated since February
2006.
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The Group seeks to protect its proprietary rights in its products through a combination of patent
filings, other registrations (such as trademarks and contractual arrangements) as well as by using
confidential information or trade secrets. The Group has developed and filed eight base patent
applications covering six technologies of which one, which covers BugOil쑓, has already been
granted in the UK.
The Directors believe that the Group’s non-toxic and ecologically sound products have the
potential for rapid and significant growth due to factors such as the requirement to reduce residues
from existing pesticides, the growth of the world’s population, consumer pressure and the need for
the agricultural chemicals industry to find replacements for products that are reaching the end of
their patents.
The Placing will provide the funds for the Group to accelerate product development and
registration, to support new and established distribution networks and to develop partnerships
with key global agricultural chemicals companies.
2.
History and Background
The Company was incorporated on 4 May 2005 and commenced trading on 24 June 2005 when it
acquired the entire issued share capital of PiBioscience Limited and Biofutures Pi Limited, the two
operating companies that now make up the Group.
PiBioscience was formed in 2003, with the backing of private investors, to bring to market a range
of nutrient products designed by the Group’s Technical Director, David Marks. Peter Blezard, the
Chief Executive Officer, and David Marks, had previously worked together at the European
subsidiary of an American agricultural chemicals company, as Managing Director and Technical
Director respectively.
PiBioscience soon established its first distribution links in the Middle East and has since extended
the network of distributors through its exclusive sales agent Pi-MENA to cover 40 territories in the
region, from which the majority of the Company’s sales to date have originated.
Biofutures, of which David Marks and Peter Blezard were also founders, was formed in 2003, with
venture capital backing, to develop BugOil쑓 and Alethea쑓. The Group’s first patent was granted in
the UK in November 2005 for BugOil쑓, a botanical pesticide product, and further patent
applications have been filed including patent applications for Alethea쑓, a nutrient product to treat
abiotic stress, and a nematicide, a botanical pesticide to treat nematodes in soil.
Since the formation of the Group in June 2005, further finance has been raised from venture capital
funds and private investors.
3.
Market Overview
The current global population is 6.5 billion people and this is projected to grow to 7.3 billion by
2016 and to 8.0 billion by 2026. Approximately 98 per cent. of suitable land is used for agriculture
at present and it is likely that the amount of land given over to agriculture is set to decrease, due to a
combination of factors including: urbanisation, soil erosion and salinity. Thus, it is important to
increase crop yield in order to feed the growing population.
Widespread use of agrochemical pesticides and fertilisers over the last fifty years has enabled
massive increases in agricultural and horticultural productivity. In addition, crops have been bred
which are responsive to chemical fertiliser inputs, but these are often more susceptible to pest and
disease attack.
The Directors believe that the focus of politicians, pressure groups and supermarkets on the
perceived adverse effects of pesticides and fertilizers on human health and the environment is likely
to ensure continued pressure on growers to reduce the amount of crop protection products applied
for the foreseeable future. This could take the form of set targets for pesticide reduction or the
introduction of sales taxes. This desire for a move away from major pesticide use has manifested
itself with national governments lending support to potential alternatives, such as reduced
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registration costs, financial support for companies producing biological products, and subsidies for
organic production. Many politicians and regulators hope to introduce the ‘substitution principle’
into EU legislation. This will allow national governments to ban individual products if they believe
a safer alternative is available.
There are numerous highly effective products in the foliar crop protection market, but many of
these products are over twenty years old and are now off patent. In many cases safer, more
environmentally acceptable products would be welcomed by food groups and consumers. Pesticide
resistance is also increasing and alternative approaches may be required in order to provide robust
control of pest species.
For the nematode market, the majority of products were introduced in the 1960s. Some products
are volatile, and widely used non-volatile compounds are highly toxic. The Directors believe that
many regulators would welcome the introduction of safer means of control.
A wide range of fertilisers is currently available to improve crop health and yields. During the
present decade, novel eco-fertilisers have been launched which use yeasts to produce nitrogen,
phosphorus and potassium at claimed self regulating rates. Other distributors provide additives
which are applied along with conventional fertilizers which seek to improve the efficiency of the
fertilisers.
Research into the use of GM crops has produced viable alternative products. The global area
planted with GM crops increased by approximately 11 per cent. from 2004 to 90 million hectares
in 2005. In total, twenty-one countries plant GM crops, with the USA accounting for virtually half,
but the top five countries – Argentina, Brazil, Canada and China, along with the USA – represent
over 85 per cent. of the area grown. In contrast, there is a vociferous lobby in Europe against the use
of chemical pesticides and GM crops, even though risk assessments demonstrate that most
products are safe to use and that crops are safe for human consumption.
Nonetheless, many supermarkets believe that they can gain a competitive advantage by
implementing a pesticide/crop protection policy, and are striving for food with ever lower levels of
residues, even if the detected levels are believed to have no detrimental effect on human health. In
addition, organic food is often purchased by consumers as it is assumed to be pesticide free. Some
supermarkets now have lists of banned products or “grower protocols” which specify limited
product choices.
Consumers and governments across Europe are aware that an abundance of food does not
necessarily equate to a healthy diet. With an increase in obesity across Europe and the US, healthy
eating messages promoting consumption, for example, of fruit and vegetables, are being heeded,
and the potential for greater production of fresh foodstuffs will increase demand for crop
protection products.
The latest published figures on the size of the agrochemical crop protection market globally in 2005
(excluding non-crop pesticide sales) range from $31.3 billion to $33.6 billion.
The top six companies in this market in 2005 were Bayer Crop Science, Syngenta, BASF, Dow,
Monsanto and DuPont and their businesses account for over 75 per cent. of global sales.
Geographically approximately 25.4 per cent. ($8.5 billion) of sales were in the US, approximately
24.3 per cent. ($8.1 billion) in Asia, approximately 21.9 per cent. ($7.4 billion) in Western Europe,
approximately 17.1 per cent. ($5.8 billion) in South America, with the rest of the world accounting
for the remaining approximately 11.3 per cent. ($3.8 billion). Herbicides account for
approximately 45.8 per cent. of agrochemicals sold globally, insecticides for approximately 26.3
per cent., fungicides for approximately 23.0 per cent. and other products for the remaining 4.9 per
cent.
The last five years have seen consolidation among the leading R&D based companies along with
growth in the number and size of generic manufacturers. The top six crop protection companies are
all R&D driven and are exclusively based in Western Europe or in the US. However, mergers
between the largest R&D driven agrochemical companies have led to anti-trust authorities forcing
the sale of some products to generic producers. Generic manufacturing is increasing, significantly in
India and China, but at present the largest eight generic agrochemical manufacturers are based in
the developed world.
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In the last few years, the introduction of new active ingredients has been in decline. This is
attributable to the increasingly complex nature of chemical pesticides, the rising cost of meeting
regulatory requirements and further industry consolidation.
The major R&D-based agrochemical companies have focused, historically, on inventing and
developing blockbuster products, but recently they have moved more towards researching niche
products in order to keep the pipeline full, given the difficulty of inventing novel broad spectrum,
safe products. However, the focus is still primarily on single, novel, patentable moieties for which
strong patent protection and broad freedom to operate can be obtained.
The success rate for the discovery of novel compounds by the agrochemical industry is approaching
one in every 100,000 compounds screened. The major R&D based companies continue to focus on
identifying, optimising and developing novel, single active ingredients while Plant Impact’s
products are based on mixtures which are generally patentable, for insect, mite and nematode
control, and products for improving plant health and yield.
Overall, the novel chemical approach is looking less attractive for many large multinational
companies and they are increasingly diverting investment away from conventional chemical
research. Monsanto has pursued this strategy for many years, but, more recently, major
agrochemical companies, such as Bayer Crop Science, DuPont and Syngenta, have all made
cutbacks in their conventional agrochemical businesses and have expanded their seed and
biotechnology operations.
Plant Impact seeks to position itself to address consumer, regulatory, political and market demands
for greater food safety and sustainable agriculture by the development and introduction of
acceptable, non-threatening technology.
4.
Plant Impact’s products and technologies
Plant Impact has developed six technologies which cover crop health and botanical pesticides, as
described below.
Crop health
CaT
Plant Impact’s Calcium Technology (“CaT”), is a patent applied for technology, filed in 2005,
supporting a calcium transportation and delivery system for plants. Plant Impact has achieved sales
in Spain, the UK and throughout the Middle East for products based on CaT chemistry and,
along with products derived from PINT and Speedo (and its forerunner) technologies, detailed
below, account for the majority of the sales historically generated by the Group.
CaT uses a new system to improve calcium uptake and retention by plants in conditions where
they are normally unable to take up or retain calcium. Calcium is used by plants for cell integrity,
cell walls and cell division. However, calcium uptake and movement within plants is erratic and
therefore some parts of plants struggle to absorb and retain calcium. This leaves them weak and
prone to infection and quality problems. Often these areas are the part of the plant which growers
wish to harvest. Many fruit and vegetable crops suffer from ‘physiological disorders’ associated
with low calcium levels.
CaT chemistry balances the plant’s calcium sinks, giving even absorption of applied calcium, and
allows the plant to keep applied calcium where it is delivered. This allows a much more efficient
treatment of physiological disorders.
CaT also allows plants to take in calcium during high and low temperatures. Plants cannot
absorb calcium when temperatures are outside their usual range as this slows down the production
of auxin, an agent required for calcium absorption. Traditional calcium fertilizers fail to be taken
up by the plant in these conditions. The plant’s growth can also be limited in hot and cold
conditions. The CaT technology allows normal growth in abnormal temperatures.
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CaT products work in tiny quantities (1ml/L), which is a much lower rate than conventional
calcium products. Trials performed by a Japanese fertiliser company show it to be greater than 20
times more active than conventional calcium products.
Unlike conventional calcium fertilizers, CaT derived products actually supply calcium to the
parts of the plant that lack it. Other products simply place more calcium where it is not actually
needed, and fail to deliver calcium to the parts of the plant where it is needed.
Increased marketable yields of 30 per cent., together with better shelf life and appearance of the
crop, have been achieved in Company trials of CaT in the Middle East and Europe.
PiNT 
Plant Impact Nitrogen Technology (“PiNT ”) controls the uptake of nitrogen by a plant. There
are three products based on this chemistry – Impact Calcium, Impact Potassium and Impact
Magnesium. These products are protected by ‘know how’ in the formulation, and also benefit from
patent protection due to the incorporation of the Company’s Speedo technology.
For example, in the case of Impact Calcium, the product reacts with calcium nitrate which
minimises leaching and slows down the natural breakdown of desirable amines and ammonium,
which can form undesirable nitrate. The product gives the plant a better root system, improved
reproductive growth and less vegetative growth. This in itself is valuable in some crops, especially
ornamentals and turf, where growers do not want ‘leggy’ growth for cosmetic reasons.
Field trials on the PiNT products have been conducted in Spain and the Middle East and have
been shown to have the following benefits:
앫
Health – crops grown using PiNT products are healthier compared to those treated with
conventional fertilizers. In addition, plants fed with PiNT products encounter less disease,
particularly fungal disease.
앫
Stress tolerance – plants fed with PiNT products are better able to cope with stressful
climatic or growing conditions. The products can be used on sick or stressed crops to help
them recover.
앫
Transplanting – Impact Calcium can help plants to grow following transplanting, a stressful
period where plants often die.
앫
Yield – crops fed with PiNT products have improved marketable yields. The plants invest
more energy in the parts of the crop that are harvested. This means, for example, more
tomatoes (less shoots), more potatoes (less shoots), more apples (less branches).
앫
Quality – crops fed with PiNT products have better homogeneity. This improves
marketable yield and reduces waste.
The PiNT products are on sale in the Middle East and more recently in Spain.
Speedo
This patent applied for product, filed in 2005, accelerates reproductive growth of the plant, with
faster colouring and increased sugar content. This leads to earlier yielding crops and thereby
enables additional or prolonged harvests.
Speedo is being used in Plant Impact’s own products to improve performance as well as being
marketed to other companies alongside Alethea쑓 in its fertilizer additives.
Speedo has been evaluated in a series of trials and excellent results have been obtained. Benefits
have been shown to include:
앫
Fast colouring of crops like strawberry, tomato and pepper, allowing growers to sell earlier,
and therefore potentially at a higher price.
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앫
Increased sugar content – allows early harvest, and potentially at a higher price.
앫
Increased flowering – more flowers create more fruit.
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Alethea쑓
This technology uses the patent applied for chemistry known as Alethea쑓 (two patents filed in 2004
and 2005). It uses a new molecule that has been designed to combat the effects of abiotic stress.
Abiotic stress is caused by extremes of temperature, water, drought, salinity, heavy metals,
herbicide and light intensity. Abiotic stress is a major problem in agriculture, limiting the ability of
crops to achieve optimum yield and quality. Abiotic stress also contributes to disease, since stressed
crops suffer from higher levels of many diseases.
Abiotic stress accounts for approximately 85 per cent. of all crop loss compared to pests and disease
(“biotic stress”) which account for less than approximately 15 per cent. of crop loss. The
$30 billion plus agricultural chemicals industry is based on approximately 15 per cent. of crop loss
due to biotic stress. The Directors believe that abiotic stress relief represents the producers’ largest
unmet need.
The Alethea쑓 chemistry promotes the maintenance of strong, healthy cell walls in conditions of
stress and reduced water availability. This then allows the cells to neutralise harmful ammonia and
oxidative toxins that accumulate in plants at times of stress. This can increase growth and reduce
disease ingress. The Directors believe that Alethea쑓 has the potential to be used on a wide variety of
crops to help with many kinds of abiotic stress.
Alethea쑓 has gone through two major independent trials:
(a)
CEMAS conducted an independent GEP trial on lettuce plants with products containing
Alethea쑓 chemistry in late 2004. The trial compared these products against a control. The
conclusion drawn from CEMAS was “when Alethea쑓 was applied to lettuce plants by root
uptake, a significant improvement in plant height and reduction of stress was seen in the
plants.”
(b)
Cabi Bioscience has trialled Alethea쑓 chemistry on cocoa plants in Costa Rica during 2004/5
and 2005/6. The second year’s data produced results that are consistent with those of the first
year, and a third year trial has commenced. This independent data shows improved quality
and yield, and reduced disease incidence. The health improvements have translated into two
consecutive years of 50 per cent. yield increase. When Alethea쑓 was combined with Impact
Calcium, yield increases of 60 per cent. were observed.
Although minor sales have been made of Alethea쑓 (principally as an additive to other Plant Impact
products) the technology requires further research and testing before it is fully understood and its
full potential can be commercially exploited and significant sales generated.
Botanical pesticides
BugOil쑓
BugOil쑓 is a patented technology. The first of a family of patents was granted in the UK in
November 2005, following filing of the base patent in 2003 and corresponding patent family in
2004. It uses a synergistic blend of plant essential oils encapsulated in vegetable oil. It is designed to
act against sap-feeding pests including mites, whitefly, thrips and aphids, a market segment of an
estimated $3.6 billion annually.
The essential oils in BugOil쑓 combine to enhance the natural level of control of each oil to ensure
equivalent efficacy to leading standards on the pest at all stages of growth. This includes both
ovicidal activity and repelling of the insect, thus reducing feeding activity and damage to the crop.
Whilst there are other products in the market that use essential oils, BugOil쑓 has the advantage of a
low level of essential oils and employs a delivery system which minimises the risk of the crop being
tainted. The mode of action as to why the natural oils prevent pests is known, and is supported by
independent research, so no resistance build up is expected in respect of those pests (mites, whitefly,
aphids) on which the Group has conducted studies.
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The technology has been trialled in a number of countries and conditions worldwide to GLP and
GEP standards by CEMAS, and the results are considered by the Directors to be very promising.
This method of protection is different to that of traditional pesticides, which use synthetic
compounds to kill the pests on the plant once it is infected, rather than making the plant undesirable
to the pest.
Although the product is a food grade standard, because it is formulated from natural ingredients,
the fact that it will be marketed as a pesticide means that it is required to gain registration from the
relevant pesticide safety authorities in each country where it will be marketed. Registration in the
UK is the responsibility of the PSD, and in the USA it is the responsibility of the EPA. Registration in
the rest of Europe can be obtained following registration with the PSD under the provisions of
Mutual Recognition. Following pre submission of its registration dossier, Plant Impact is now
finalising its application for the registration of BugOil쑓. Final dossiers of information are expected
to be submitted to the PSD and EPA in early 2007. The Directors expect to receive approval in the
UK and USA by the second quarter of 2008.
Further information on the registration process is contained in paragraph 8 below.
The Company is in talks with major distributors to distribute BugOil쑓 throughout the US and
Europe, but sales can only be generated once the registration process is complete. Discussions are
also being held with potential distributors in other global markets, such as Japan and India.
BugOil쑓’s key selling points are:
앫
Strong efficacy – it has consistently performed as well as the widely used product
imidacloprid as an insecticide in independent trials, but in addition, has good acaricidal
activity.
앫
Very safe to non-target organisms – it has low risk of harm to bees, ladybirds, mammals, fish
or birds. Many existing pesticides can be harmful to insects and animals.
앫
Short pre-harvest intervals – the crop can be picked immediately after application of the
product.
앫
No undesirable residues from a consumer/supermarket perspective.
앫
Cost effective market entry – low registration cost relative to conventional products.
앫
Low likelihood of resistance developing – a major issue with competing synthetic pesticides.
앫
Strong patent with a long time to run (granted in the UK in November 2005, with additional
patents filed in 2004 to protect other upside benefits).
앫
Strong desire from food groups for green products.
앫
Wide application – good range of pests controlled (mites, whitefly, aphids and thrips).
Nematicide Technology
This technology is at an early stage of development and is currently undergoing independent trials.
A patent application was filed in May 2006. This technology is used to control nematodes which
inhabit the soil and attack plant roots.
Current nematicides are characterised as highly toxic products, whereas the products derived from
the Group’s nematicide technology are based on low toxicity compounds.
The Directors believe that there are potential collaborations with large multinational companies in
relation to products derived from this technology. Plant Impact has been approached by a number
of major companies who have expressed an ongoing interest in this technology, subject to seeing
encouraging data from Plant Impact’s screening studies.
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5.
Strategy and Business Development
The Directors intend to commercialise the Group’s products through distribution agreements and
licensing arrangements with industrial partners, and/or, where appropriate, through its own direct
distribution channels. The focus is on sales to commercial growers of high value and protected
crops. However, there is also the possibility of entering the home and garden market.
Plant Impact has arrangements in place with distribution partners in specific markets in the Middle
East. As part of the development strategy, the Directors intend to enter into agreements with
additional distribution partners with established sales and marketing channels.
Currently, all sales to the Middle East have been conducted through Pi-MENA, an independent
sales agency based in Jordan working exclusively for Plant Impact. Pi-MENA receives a
commission based on the gross margin earned on sales introduced by it in the region and additional
financial support from the Group in the form of sharing direct marketing costs, such as product
literature, and the cost of arranging sales seminars and training for local distributors.
Following successful trials on the Group’s nutrient products by Certis, in December 2005 Plant
Impact entered into a distribution agreement with Certis covering Spain and Portugal for these
products. Certis is part of the Mitsui group of companies, a $130 billion global trading company,
with annual sales in the agriscience sector in excess of $400 million. Although sales by Certis have
so far been relatively modest, the Directors believe that these will accelerate once product
recognition grows and the products are seen to be beneficial to end users.
In territories where Plant Impact identifies an industrial partner that is well placed to bring a
particular product to market and possibly share development costs, for example on toxicology
studies for pesticides, Plant Impact will seek to enter into a licensing arrangement with that partner
on a royalty basis rather than seeking to market its own products. Evaluation agreements have been
used to initiate relationships with a number of major agrochemical companies, including in Japan,
India, Europe and the USA. Product evaluation agreements cover the term and scope of the trial,
with non-analysis and confidentiality arrangements covering Plant Impact’s ownership of the
technology. Negotiations are ongoing regarding BugOil쑓, with these and other multinational
companies, in order to forge exclusive territorial agreements. Some of these companies have also
expressed interest in the Group’s nematicide technology.
The Directors intend to support the Group’s network of distributors and commercial partners by
recruiting technical sales staff in each major territory. These employees will work closely with the
Group’s commercial partners both in the evaluation and development phase, when valuable
information is gathered that can be used to enhance the benefits of the products, and to support the
partners as they launch the products into the market.
A key element for Plant Impact’s crop health products will be to develop a strategy to make the
major products into ingredient brands. Where third party products incorporating Plant Impact’s
technology are distributed or marketed by other companies, the Directors plan to put arrangements
in place to ensure that Plant Impact’s ingredient branding is an integral part of the end-product. For
example, it is believed that there is major potential for licensing the use of Speedo as an additive to
other third party products. Plant Impact has developed a way of incorporating the product into
powders for addition to powder fertilisers as well as for use in liquid fertilisers. This is also a
strategy for Alethea쑓, for which the Group has targeted the manufacturers of soluble NPK
fertilizers who could use Alethea쑓 and/or Speedo as fertilizer additives to add value to large scale,
conventional products.
6.
Product manufacture and supply chain
Plant Impact outsources the manufacture of its products to Grosvenor Chemicals Limited
(“Grosvenor”), located in Huddersfield, West Yorkshire. Grosvenor is a subsidiary of the Whyte
group of companies, a privately owned group with annual turnover of approximately
£100 million, that mixes products for a number of major agricultural chemical companies.
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Grosvenor manufactures batches of the Group’s products and holds them for use by Plant Impact.
Plant Impact ensures quality control by regular visits to Grosvenor and sampling of the products.
Grosvenor has the capacity to meet the expected growth in demand for Plant Impact’s products for
the foreseeable future.
The majority of the Group’s products are in liquid form. As part of the Group’s ongoing
development programme, it is exploring ways to supply some of the products in powder form and
to supply active ingredients from the UK to local mixing contractors. This will enable a reduction in
transportation costs to the end customer, while maintaining control of the active ingredient to
avoid the possibility of product adulteration.
The Group has no plans to invest in its own manufacturing plant.
Plant Impact’s nutrient products use commonly available raw materials in their manufacture. The
Directors do not anticipate problems in raw material sourcing as sales grow.
Plant Impact’s pesticide product, BugOil쑓, is manufactured from herbs commonly used in the food
industry and are widely available. As the crops needed also have a short life cycle, i.e. they can be
grown quickly, the Directors are confident about the Company’s ability to upscale manufacturing
to meet future demand.
7.
Research and development
Plant Impact is committed to a continued programme of research and development of its
technology, although the Company is currently focusing on development and marketing of its
existing range of products and technologies. The Directors believe that Plant Impact’s future
success will, in part, depend on its ability to maintain and improve its technology, and to identify
new opportunities.
The Group’s approach to product development is different to the traditional approach adopted by
many agricultural chemicals companies. Plant Impact first seeks to understand the nature of the
problem to be solved, and then analyses the part of the plant’s natural ability to cope with the
problem as opposed to creating numerous compounds and screening them to find a use for them.
The Group then identifies the ingredients with known efficacy that could be combined to enhance
the plant’s ability to overcome the problem and finally formulates them into a compound for trial.
This holistic approach has been successful in developing products which have shown encouraging
results in larger scale field trials.
Plant Impact works with CABI Bioscience and has entered into a memorandum of understanding
with them to conduct trials of the various technologies. Field trials are being run on two food crops
of major importance to global nutrition, namely palm oil and cocoa.
The initial stage of the development process of a product is to enter into an evaluation agreement, as
described in paragraph 5 of this Part 1, with a potential commercial partner to conduct more
extensive field trials prior to entering into a distribution or licensing agreement. The first of such
agreements was formalized in December 2005 when the Company entered into a distribution
agreement with Certis described above.
8.
Intellectual property and Product Registration
Patents
The protection of intellectual property through the submission of patents is an integral part of Plant
Impact’s research and development strategy. The Company’s patent attorneys are specialists in the
agrochemical and plant protection market, having worked previously for major agrochemicals
companies. Plant Impact’s patent portfolio aims to protect its intellectual property in plant
healthcare in order to enable it to invest further in the development of those and other products. On
occasions, and following the advice of the Group’s patent attorneys, the Directors have chosen to
protect certain products by reliance on know-how and other informal rights.
The CaT technology is included in a PCT application filed on 15 June 2006. It covers the use of an
agent to improve the uptake of calcium plants. The application covers compositions comprising a
calcium salt and the agent and formulations which include the compositions and the methods of
improving plant growth or health using compositions.
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Speedo technology is included in a priority application, filed in October 2005. The application
covers the use of a specific reagent to improve plant growth. This includes compositions comprising
the reagent and a plant nutrient, and formulations including the compositions and the methods of
improving plant growth using the compositions. A PCT application is expected to be filed by the
end of October 2006.
The Alethea쑓 patent family relates to certain novel water soluble salts which may be included in the
Alethea쑓 technology as well as formulations containing the basic combination of reagents which
form the basis of Alethea쑓, and their use in agriculture, in particular as fertilisers. A PCT
application was filed in October 2004.
Votec has been included in a priority application filed in February 2006, which covers the
formulation of nutrient salts which form the basis for a wide range of products known as Fen-Go,
Man-Go and Mag-Go. The patent application derived from the Votec technology provides
additional patent protection for BugOil쑓 when used in conjunction with nutrients.
BugOil쑓 is protected by a UK patent granted in November 2005. National and regional phase
applications have now been filed, covering 38 countries, including USA, China, Japan and India.
The patent family relates to pesticidal formulations comprising certain essential oils in low
concentrations, in an emulsified form, as well as the use of these compositions in the control of
agricultural pests.
The nematicide technology patent application, filed in May 2006, covers nematicidal compositions
which are currently under development within Plant Impact and which are based upon
combinations of various essential oils.
Full details of the Group’s patents and patent applications are set out in paragraph 12.2 of Part 5 of
this document.
Trade Marks
The Directors recognise the importance of other forms of intellectual property and Plant Impact has
a portfolio of trade marks in place. These consist of the Company house mark consisting of the
Plant Impact logo, together with the trade marks of PiNT, CaT, Speedo and Votec and the
logo and trademarks of BugOil쑓 and Alethea쑓.
Product Registration
Crop nutrient products do not go through the stringent regulatory review required for pesticides.
However, most territories where the products are sold require some form of registration. This
involves lodging an analysis of the components of each product with the appropriate regulatory
authority in each territory. Products are then tested against this specification before an import
license is granted.
Before a pesticide product, whether synthetic or naturally occurring, can be placed in the market for
use on plants to control pests, it must be registered. In Europe, registration is given under the
Council Directive 91/414/EEC. The directive is regulated in the member states of Europe under
their own national legislation. In the USA, registration is given by the EPA under the Federal
Insecticide, Fungicide and Rodenticide Act.
The Company has engaged the services of Exponent Inc., to assist with the registration process in
Europe and the USA. Exponent is a specialist regulatory consultancy, quoted on NASDAQ, with
annual turnover in excess of $150 million.
Existing active substances in Europe (those contained in the products that were already on the
European market in 1993) are currently under review for re-registration and consist of four
different lists of active substances, known as Stages 1, 2, 3 and 4.
The last list, Stage 4, contains “low risk” substances and includes various plant extracts. The
Directors believe that the Plant Impact product portfolio falls within this “low risk” or Stage 4
category. Similarly, EPA also operates a “reduced risk” policy. Substances that qualify for Stage 4
registration or reduced risk require the lowest level of investigation by the regulatory authorities
prior to registration. The Directors expect that the registration process will be completed in both
the UK and USA by the second quarter of 2008.
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BugOil쑓 is the first pesticide product for which the Group is seeking registration.
BugOil쑓 contains four different active substances: canola oil (94 per cent.), thyme oil (0.6 per
cent.), tagetes oil (0.6 per cent.) and wintergreen oil (0.001 per cent.). Canola oil is an edible
vegetable oil refined from the seeds of two rape seed plants, with low acute toxicity and rapid
degradation to harmless products. In the USA, wintergreen oil has been registered as an active
ingredient since 1992 and thyme oil has been registered as a ‘reduced risk’ pesticide since 1998.
Tagetes oil is used as a food colourant and is exempt from tolerance.
The Directors expect BugOil쑓 to be regarded as a “low risk” product in Europe, because of the long
standing safe use of its active substances. The active substances are known to be of low acute
toxicity and there is no record of any of them having an adverse effect on humans, domestic animals
or the environment.
The Directors therefore believe that data requirements and turn-around time for BugOil쑓 should be
similar to those for the Stage 4 active substances.
The mixture of the four active substances contained in BugOil쑓 has to be approved by the European
Commission in Brussels, while the formulated product containing the active substances and the
emulsifier must be authorised by the individual member states of Europe for use in their own
countries.
Plant Impact, as the applicant, has engaged the services of Exponent to submit a registration dossier
to the PSD. The dossier consists of two sets of data: Annex II data on the four active substances and
Annex III data on the formulation product. Each set of data contains documents including study
reports, reference index, summaries and detailed assessments under seven different categories.
Following pre-submission of its registration dossier, Plant Impact is now finalising its application
for registration of BugOil쑓 to the PSD, which will act as the MSR. PSD is in the process of carrying
out a completion check of the required data, evaluating the dossier, preparing a monograph and
distributing it to the other 24 European member states for discussion and recommendation by the
member state representatives in various technical committees. The EFSA will then review the
revised monograph with recommendations and make a decision. Approval is granted formally by
the European Council and, assuming approval is granted, the active substance will then be listed in
Annex I of the 91/414/EEC directive.
Once the dossier has been established as being complete, the PSD may also grant provisional
authorisation for BugOil쑓 for use in the UK for up to three years prior to the Annex I listing.
Following listing of the active substances in Annex I, the PSD can give full authorisation for the use
of the BugOil쑓 product in the UK, after completing the review of the submitted Annex III data.
Authorisation of BugOil쑓 in the UK can then lead to authorisations in other European member
states upon application to them by Plant Impact under the provisions of Mutual Recognition,
provided the product, its use and agronomic, dietary, soil, climatic and other relevant conditions
between the member states are comparable.
The strategy for the registration of BugOil쑓 in the USA is similar to that for Europe. Since 1993, it is
possible to register a pesticide product for use in the United States under a “reduced risk” claim.
BugOil쑓 is a “reduced risk” claim.
9.
Competition
Plant Impact is focused on crop problems as a solutions provider. This approach differs from the
traditional approach of creating large numbers of compounds and then screening them for an
application.
Mergers and acquisitions within the agrochemical industry have resulted in a handful of new
powerhouse companies, all of which have strong capabilities in production, marketing and sales.
The big seven agricultural chemical companies referred to above are finding it difficult to develop
enough new products to feed their production, marketing and sales-based infrastructures. As a
result, new agrochemical products have become increasingly valuable and sought after.
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The established companies are losing patents at a faster rate than new intellectual property is being
created. Additionally, they are subject to generic product pressure and there is little by way of new
products in their pipelines. This has prompted a change in industry dynamics and the Directors
believe that smaller, innovation based companies are now seen as a source of new intellectual
property.
The existing products of the major agrochemical and fertiliser companies form the bulk of the
competition for Plant Impact, but these same companies are being pursued by the Company as
collaborators and potential licensees. A product such as BugOil쑓 has the potential to penetrate the
market if it can be demonstrated that it has sufficient spectrum of activity and improved safety to
man and the environment. Initial trials on BugOil쑓 suggest that it can meet these criteria, and the
Group’s nematicide technology is being developed with the same objective.
While Plant Impact’s products in the crop protection sector are viewed as replacements, Plant
Impact’s products for the crop health market often fill a different niche, as additives to current
treatments. Thus, they are not necessarily viewed as replacements, but as opportunities to improve
the effectiveness of fertilisers currently used.
10. Financial information
A summary of the Group’s profit and loss account for the 28 months ended 31 March 2006 is set
out below.
15 months 13 months
ended
ended
31 March 31 December
2006
2004
£
£
Turnover
345,811
—
Cost of sales
(261,517)
—
Gross profit
84,294
—
Distribution costs
Administrative expenses
(149,518)
(774,055)
(24,381)
(280,405)
Operating loss
(839,279)
(304,786)
The information set out above has been extracted without material adjustment from the financial
information set out in Part 4(ii) of this document. In order to make a proper assessment of the
financial performance of the Group’s business, investors should not rely solely upon this summary
information, but should read the whole of the Financial Information and the Accountant’s Report
thereon, in Part 4 of this document.
The financial information in this document is presented in accordance with UK GAAP.
11. Current trading and prospects
Trading in the current financial year to date has been in line with the Director’s expectations.
The Directors believe that the Group is well placed to increase its revenues and to exploit the current
market opportunities that exist. Consequently, the Board views the Group’s future with
confidence. Although the Group has continued to incur losses (after tax) since 31 March 2006,
amounting to approximately £368,000 for the five month period ending 31 August 2006, the
Directors consider this is reasonable for a company at this early stage of its business cycle and are
encouraged by the trading prospects of the Group and continued growth in sales.
The Board is confident that, following Admission, the Group will be well positioned to take
advantage of the business opportunities that exist in its markets.
12. Reasons for Admission and use of proceeds
Plant Impact is seeking Admission of its Ordinary Shares to trading on AIM to enable it to fund the
next growth phase of the business. Admission is also intended to enhance the Group’s profile and
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enable the Company to access equity finance for the Company to continue its expansion, both
organically and possibly through selective acquisitions. Plant Impact will continue to invest in
developing its product capability and its global presence.
In addition, Admission is expected to enhance the Company’s credibility in the market and increase
awareness of its own brand. Furthermore, Admission will provide the Company’s employees with
the opportunity to participate in the future success of the Company through share incentive
arrangements and should help the Company to attract and retain high calibre staff.
The Company intends to apply the net proceeds of the Placing receivable by the Company
(amounting to approximately £3.30 million), as follows:
앫
to fund increased product development and the launch of new products;
앫
to increase sales and marketing activities;
앫
to assist in creating strategic partnerships; and
앫
to provide working capital for the Group.
RisingStars Growth Fund made a loan of £250,000 available to the Company in June 2005. The
terms of this loan are such that it is due for repayment on Admission. However, the Company and
RisingStars Growth Fund have agreed that it will be capitalised into 657,894 Ordinary Shares on
Admission.
13. The Placing
The Company is proposing to raise approximately £3.85 million through a conditional placing by
Fiske of 10,139,475 Placing Shares at 38p per share. In addition, the Fund Loans of £147,000,
which have been advanced to the Company prior to the date of Admission, are to be converted into
386,841 Ordinary Shares and the £147,000 will become available to the Company on Admission.
Under the Placing Agreement, Fiske has agreed to use its reasonable endeavours to procure
subscribers for the Placing Shares at the Placing Price and has conditionally placed all of these
shares at the Placing Price with institutional and other investors. The obligations of Fiske under the
Placing Agreement are conditional upon, inter alia, Admission taking place by 8.00 a.m. on
16 October 2006 (or such later time and date, being not later than 3.00 p.m. on 16 November
2006, or as the Company and Fiske shall agree). The Placing Agreement contains provisions
entitling Fiske to terminate the Placing Agreement at any time prior to Admission in certain
circumstances. If this right is exercised, the Placing will lapse. The Placing has not been
underwritten by Fiske.
The Placing is expected to raise approximately £3.85 million before expenses. The Placing Shares
will represent approximately 43.86 per cent. of the Enlarged Share Capital following Admission.
On Admission, at the Placing Price, the Company will have a market capitalisation of
approximately £8.79 million.
Following the Placing, the interests, in aggregate, of the Directors will amount to 8.58 per cent. of
the Enlarged Share Capital of the Company. Details of the Directors’ holdings of Ordinary Shares
are set out in paragraph 5 of Part 5 of this document.
The Placing Shares will, on Admission, rank pari passu in all respects with the existing Ordinary
Shares in issue, including the right to receive dividends and other distributions thereafter declared,
made or paid in respect of the ordinary share capital of the Company.
Further details of the Placing Agreement are set out in paragraph 17 of Part 5 of this document.
14. Directors
The Board comprises three Executive Directors and three Non-executive Directors (including the
Non-executive Chairman).
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Directors
Martin Robinson, Non-executive Chairman, aged 48. Martin joined the Company in June 2005
when he was appointed as non-executive Chairman. He is the Executive Chairman of Braemar
Group plc, a residential property investment fund manager whose shares are quoted on AIM and a
non-executive director of several private companies. He was formerly Chief Executive of Lloyd
Street Private Equity, an FSA regulated company that specialises in raising finance for growing
companies, Chief Executive of stockbroker and fund manager Henry Cooke Group plc and a
director of private bank Brown, Shipley & Co. Ltd. He is a Chartered Accountant.
Peter Blezard, Chief Executive Officer, aged 52. Peter is a founder shareholder and Director of the
Company. Peter is a Fellow of the Royal Society of Arts, Manufactures & Commerce. He is
responsible for all commercial issues, marketing and sales. Peter has extensive experience in
pioneering new products into new markets and in working with major companies on a global basis
at board level. Previous roles include General Manager of Pak 2000, a division of Asia Pulp and
Paper, between 1988 and 2000, where his core duties were European sales and marketing. His
responsibilities also included working with national security agencies and meeting governments in
Europe, Asia and the Far East. He also has experience in the strategic planning of new factories in
Indonesia and China, with projects to ISO9000 standards. Peter co-founded Plant Impact in 2003,
and has recently accepted the Bioentrepreneur award as sponsored by UK Trade & Investment and
London First in recognition of Plant Impact’s work to date.
David Marks, Technical Director, aged 32. David is a founder shareholder and Director of the
Company. He is the inventor of the Group’s key technologies. David is a plant and soil scientist and
a graduate in Applied Biology. He started his career with the Campden & Chorleywood Food
Research Association before joining a multinational fertiliser manufacturer as a Technical Officer,
where he organised field trials of specialty fertilisers throughout Europe and the Middle East, rising
to become a director in 2002, with responsibility for technical work and sales in Europe, the Middle
East and Africa. David co-founded Plant Impact in 2003, and has since won ‘Young
Biotechnologist of the Year’ (Bionow awards) in recognition of his scientific work with the Group.
Gordon Harman, Finance Director, aged 58. Gordon is a Chartered Accountant and joined the
Company in June 2005 as Finance Director. He is the former Finance Director of Holidaybreak plc,
having been part of the MBO team that acquired the business, and Finance Director at the time of its
flotation. He is the former Chairman of La Tasca Restaurants Limited, Finance Director of
International Life Leisure Group Limited and non-executive director of a number of other private
companies. Gordon has a part-time executive service contract with the Company, under which he
commits 12 days per month. The Directors recognise the need for a full-time Finance Director and
expect to make an appointment by mid-2007.
Bill Thompson, Non-executive Director, aged 51. Bill joined BioFutures Pi as a Non-executive
director in May 2004 and was appointed as a Non-executive Director on the formation of the
Company in June 2005. He is the Managing Director of Microcheck Technical Services, a food
testing laboratory acquired by him in 2004. He was a founder and Chief Executive of InPlanta, an
agricultural biotechnology start up company. He spent 17 years at Dow Chemicals, latterly as
Global Business Leader for Insecticides and Fungicides, where he increased sales from $65 million
to $130 million over four years.
Mark Wyatt, Non-executive Director, aged 34. Mark was appointed as a Non-executive Director
on 28 September 2006, having been an observer on behalf of the RisingStars Growth Fund, the
holder of 19.20 per cent. of the Enlarged Share Capital, at many of the board meetings of the
Company, and previously Biofutures, since their formation. Mark is employed by Enterprise
Ventures Limited, investment manager of the RisingStars Growth Fund. Prior to joining
RisingStars Growth Fund, Mark was an associate at Merlin Biosciences. He has a degree and PhD
in Pharmacology, the PhD being from the Glaxo Institute of Applied Pharmacology at Cambridge
University. He has an MBA from the University of Warwick, where he was awarded a Sainsbury
Fellowship in Life Sciences.
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Employees
As at the date of this document, the Group has the equivalent of three full time employees
(excluding Directors), engaged in sales and marketing support, administration and quality control.
15. Corporate governance and share dealing code
The Directors recognise the importance of sound corporate governance. The Directors intend to
comply with the main provisions of the Combined Code, in so far as possible and appropriate given
the Company’s size and nature.
The Directors have established an audit committee and a remuneration committee with formally
delegated rules and responsibilities.
The Company will hold at least 10 board meetings throughout the year. The Board is responsible
for formulating, reviewing and approving the Company’s strategy, budgets, major items of capital
expenditure and acquisitions.
The audit committee will meet at least twice a year and be responsible for ensuring that the financial
performance of the Company is properly reported on and monitored and for meeting the auditors
and reviewing the reports from the auditors relating to accounts and internal control systems. It will
meet once a year with the auditors without executive Board members present. The audit committee
will comprise the Non-Executive Directors of the Company and will be chaired by Martin
Robinson.
The remuneration committee will review the performance of the Executive Directors and will set
and review the scale and structure of their remuneration and the terms of their service agreements
with due regard to the interests of Shareholders. In determining the remuneration of Executive
Directors, the remuneration committee will seek to enable the Company to attract and retain
executives of the highest calibre. The remuneration committee will also make recommendations to
the Board concerning the allocation of share options to Directors and employees. No Director will
be permitted to participate in discussions or decisions concerning his own remuneration. The
remuneration committee will comprise the Non-Executive Directors and will be chaired by Martin
Robinson.
The Company has adopted a model code for Directors and key employee share dealings which is
appropriate for an AIM quoted company. The Directors will comply with Rule 21 of the AIM Rules
relating to Directors’ dealings and will take all reasonable steps to ensure compliance by the
Group’s applicable employees.
16. Dividend policy
The Directors currently intend to devote the Company’s cash resources to its operations and
therefore do not anticipate paying dividends in the near future. They will reconsider the Company’s
dividend policy as and when the Company is in a position to pay dividends. The declaration and
payment by the Company of any dividends will depend on the results of the Company’s operations,
its financial condition, cash requirements, future prospects, profits available for distribution and
other factors deemed to be relevant at the time.
17. Share option scheme
The Directors recognise the importance of ensuring that employees are well motivated and identify
closely with the success of the Group. To achieve this goal, the Company has established the Plant
Impact Share Scheme. There are currently 2,936,876 unexercised Options under the Share Scheme
representing 12.70 per cent. of the Enlarged Share Capital of which 2,904,876 have been granted to
Directors representing 12.56 per cent. of the Enlarged Share Capital and the balance of 32,000 have
been granted to employees. Further details of the Company’s Share Scheme are set out in
paragraph 11 of Part 5 of this document.
18. Taxation
General information relating to UK taxation with regard to the Ordinary Shares, the Placing and
Admission is summarised in paragraph 10 of Part 5 of this document. If you are in any doubt as to
your tax position you should consult your own independent financial adviser.
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19. Enterprise Investment Scheme and Venture Capital Trusts
HMRC provided guidance in May 2006 that, in principle, provided they receive a properly
completed EIS 1 form, the Company should be able to issue shares that are likely to attract EIS
relief. They also confirmed that the Ordinary Shares are likely to be eligible for VCT purposes.
Assuming that there have been no fundamental changes to the circumstances as outlined in the
clearance application, the guidance should still be valid. This confirmation is subject to the
Company being able to spend the funds raised within the appropriate period on qualifying
purposes.
However, it should be noted that eligibility for relief under these schemes is dependant on actual
circumstances. Although clearance has been granted, the conditions of the VCT and EIS reliefs
must be met in practice in order for the shares to qualify. These include carrying on qualifying
activities, or incurring qualifying R&D expenditure, not having gross assets of more than
£8 million post share issue, and spending 80 per cent. of the funds raised on a qualifying purpose
within a 12 month period following the issue of the shares (the balance must be spent within 24
months of the issue).
The Directors’ present understanding is that 80 per cent. of the funds may not be spent within 12
months of the issue of new shares and, consequently, unless these circumstances change, EIS and
VCT reliefs will not be available.
Any VCT investor seeking VCT relief should take their own advice.
20. Admission, Settlement and CREST
Application has been made to the London Stock Exchange for all the Ordinary Shares to be
admitted to trading on AIM.
The Articles permit the Company to issue shares in uncertificated form in accordance with the
Uncertificated Securities Regulations 2001. Application has been made by the Company’s
Registrars for the issued and to be issued Ordinary Shares to be admitted to CREST with effect from
Admission and CREST has agreed to such admission. Accordingly, settlement of transactions in
Ordinary Shares following Admission may take place within CREST if the individual Shareholders
so wish. CREST is a voluntary system and Shareholders who wish to receive and retain share
certificates will be able to do so.
It is expected that share certificates for Ordinary Shares will be despatched by the Company’s
Registrars no later than 6 November 2006 and the Ordinary Shares will be delivered into CREST
on the date of Admission.
21. Lock-in arrangements
Each of the Directors, who hold or are interested in an aggregate of 1,982,780 Ordinary Shares,
representing 8.58 per cent. of the Enlarged Share Capital, and certain other Shareholders who
together hold or are interested in an aggregate of 10,498,914 Ordinary Shares representing
45.41 per cent. of the Enlarged Share Capital, have entered into lock-in and orderly market
arrangements in respect of all of their shareholdings, the terms of which are described more fully in
paragraph 9 of Part 5 of this document.
Under the terms of these arrangements, the Directors and certain other Shareholders have,
conditional on Admission, agreed not to sell, transfer or otherwise dispose of any Ordinary Shares
held by them, other than in certain specified circumstances, for a period of 12 months following
Admission.
The Directors and certain other Shareholders have also agreed that any sale or disposal of Ordinary
Shares will be effected through the Company’s broker on a best price and execution basis for a
further 12 months.
The lock-in arrangements outlined above will apply in respect of 12,481,694 Ordinary Shares
representing 53.99 per cent. of the Enlarged Share Capital of the Company on Admission.
22. Risk factors
The Group’s business is dependent on many factors and potential investors are advised to read the
whole of this document, and in particular Part 3 entitled “Risk Factors”.
23. Further information
The attention of investors is drawn to the information contained in the remainder of this document.
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PART 2
Expert’s Report
Grant Thornton Corporate Finance
Grant Thornton House
Melton Street
London
NW1 2EP
The Directors
Plant Impact Plc
Unit 2
Lockside Office Park
Lockside Road
Riversway
Preston
PR2 2SY
10 October 2006
Dear Sir/Madam
Experts Report entitled “Plant Impact plc: Market and Technical Due Diligence Report”
(dated 20th September 2006).
CEM Analytical Services Limited (“CEMAS”) has been commissioned by Plant Impact Plc (“Plant
Impact” or “the Company”) to provide an independent market and technical due diligence report
(the “Experts Report”) or that summarises the current portfolio of Plant Impact technologies and
products, intellectual property granted/applied for, the commercial and regulatory environment,
market opportunities, third party tests and commercial trials with Plant Impact technologies,
technical factors, sales and marketing strategy, the competitive position, current trading and
prospects, key risks and opportunities, and a brief review of future R&D plans for Plant Impact’s
technology.
The Experts Report has been prepared in connection with the proposed admission of the entire
issued share capital of Plant Impact to trading on AIM, a market operated by the London Stock
Exchange, on 16 October 2006.
CEMAS has produced the review using data generated by CEMAS and by other field operators to
whom samples were provided by Plant Impact. Information on markets, competitor products and
other matters has been obtained from recent scientific publications.
CEMAS, Dr Alan Jutsum and Mr Michael Eustace are independent of the Company (and its
subsidiaries), the Directors and senior management of the Company and its other advisers. This
report is prepared in return for professional fees based upon agreed commercial rates and the
payment of these fees are in no way contingent on the results of this report or Admission.
Authors of the Experts Report
The authors of the Experts report are:
Dr Alan Jutsum and Mr Michael Eustace
Dr Jutsum has been the Managing Director of CEMAS since 2002 and is a director of the
consultancy company, tecsolve. He has an honours degree in Zoology and a doctorate in Insect
Physiology, and is a Fellow of the Royal Entomological Society, a Fellow of the Royal Society of
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Arts, Manufactures and Commerce, and a Fellow of the Royal Society of Medicine. After his PhD,
he worked at the University College of North Wales for three years and then for 23 years with
ICI/Zeneca/ AstraZeneca/Syngenta, where roles included being Technical Manager for Western
Europe, Head of Entomology, Head of Weed Science, Head of Ecology & Soil Sciences, Head of
International Field Biology & Statistics and Head of Global Standards. He has also been
chairman of ECPA committees, a member of UK government committees, an advisor to the
National Science Foundation, Washington and to the Australian Government and a referee for a
number of scientific journals as well as producing a book and over seventy scientific publications.
Mr Eustace was a co-founder of CEMAS in 1989 and is now Chairman of the company and a
Director of the consultancy company, tecsolve. He holds a BSc (Gen) Honours degree from
London University obtained while serving in the Army as a Captain. As a result of a training
accident he was invalided out of the army in 1965 and joined the Agricultural Division of ICI until
he left as an Area Manager to set up CEMAS. In addition to his duties as Chairman of CEMAS, he
is a Director and co-founder of Natural Resource Management Ltd, a laboratory with 70 staff
specialising in nutritional and inorganic analysis for the agricultural and food sectors.
Review of Admission Document
CEMAS and the authors of the Experts Report have reviewed the information contained
elsewhere in the Admission Document for Plant Impact which relates to the information
contained in the Experts Report and confirms that the information presented is accurate,
balanced and complete and is not inconsistent with the Technical Report.
Declarations
The Experts Report is complete up to and including 20th September 2006. CEMAS has provided
and not withdrawn written consent for the inclusion of the Experts Report in the Admission
Document, and to the inclusion of statements made by CEMAS and to the references of its name
in other sections of the Admission Document, in the form and context in which the report and
those statements appear.
Having taken all reasonable care to ensure that such is the case, CEMAS confirm that, to the best
of their knowledge, the information contained in the Experts Report is in accordance with the
facts, contains no omission likely to affect its import, and no change has occurred from
20th September 2006 to the date hereof that would require any amendment to the Experts
Report.
About CEMAS
CEMAS is a contract analytical company specialising in generating registration data on behalf of
the agrochemical and pharmaceutical industries and is recognised as one of the ‘Top 30’
Contract Research Organisations in the world (Agrow’s Top 30 CROs “February 2004”).
CEMAS operates competitively as a quality-assured company in the independent investigative
research and product development business in Agrochemical Residues, Pharmaceuticals,
Veterinary Medicines, Bioanalysis, Operator Exposure, Formulation Testing, Method
Development, Pesticide Efficacy and Ecotoxicology through timely delivery of superior and
reliable quality data, information, procedures and knowledge products for competitive portfolios
of compounds.
CEMAS was set up in 1989 to carry out pesticide residue analysis but, since then, the work has
expanded to include residue and formulation analysis for pesticides and pharmaceuticals,
bioanalysis and ecotoxicology along with undertaking reviews and writing scientific reports.
Clients historically have tended to be the larger international chemical manufacturers and work is
performed in compliance with the Department of Health Good Laboratory Practice (GLP) scheme
and with the Medicine and Healthcare products Regulatory Agency (MHRA) Good
Manufacturing Practice (GMP) scheme, which are internationally recognised quality assurance
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programmes. Our most recent inspection by the United Kingdom Good Laboratory Practice
Monitoring Authority was carried out in January 2006 and our GLP compliance was renewed and
a new statement of compliance in accordance with Directive 2004/9/EC was issued on
14th March 2006. The MHRA inspected CEMAS in January and confirmed on 3 March 2006 that
our operations are in general compliance with the principles and guidelines of GMP as laid down
in Commission Directive 2003/94/EC and that continued support of the CEMAS site is
recommended to the Licensing Authority.
Yours faithfully,
Dr Alan Jutsum
Mr Michael Eustace
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Plant Impact plc
Market and Technical Due Diligence Report
Authors: Alan Jutsum & Michael Eustace
20 September 2006
We declare that the information contained in this Report is, to the best of our
knowledge, in accordance with the facts and contains no omission likely to
affect its import.
Dr Alan R Jutsum
Mr Michael H Eustace
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Market and Technical Due Diligence Report for Plant Impact plc (Pi)
Contents
Executive Summary
Page Number
35
1.
Introduction
35
2.
Technology/Product Descriptions
36
2.1
Bug Oil
36
2.2
Nematicide
38
2.3
Alethea
38
2.4
PiNT
38
2.5
CaT
38
2.6
VOTEC
39
2.7
Speedo
39
3.
Intellectual Property
39
4.
Commercial Environment
39
4.1
Current Agrochemical/Crop Health Business Climate
39
4.2
Key Technology Trends
40
4.3
Potential Competing Technologies in the Market Place
41
5.
6.
7.
Regulatory Environment
42
5.1
Registration of Pesticides in Europe and the USA
42
5.2
Regulatory Status of Bug Oil
43
5.3
Strategy for the Registration of Bug Oil in Europe
44
5.4
Strategy for the Registration of Bug Oil in the USA
44
5.5
Regulatory Conclusions
45
Market Opportunities
45
6.1
Major Application Areas for Pest Control Products
45
6.2
Major Application Areas for Products Improving Crop Health
47
6.3
Major Customers/Segments and their Needs/Buying Behaviour
48
6.4
Regulatory Barriers to Entry
49
6.5
Environmental Considerations
49
6.6
Increasing Concern over Current Chemical Products/GM Crops
49
Third Party Tests and Commercial Trials with Pi Technologies
49
7.1
Bug Oil
49
7.1.1 Control of aphids on tomatoes
49
7.1.2 Control of whitefly on peppers
50
7.1.3 Control of mites on peppers
51
7.1.4 Effects on beneficial/non-target organisms
52
7.2
Nematicide
53
7.3
Alethea
53
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Contents
7.4 PiNT
8.
9.
10.
11.
12.
13.
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Page Number
54
7.5
CaT
57
7.6
VOTEC
57
7.7
Speedo
57
Technical Factors
58
8.1
Review of the Current Position of Pi’s Technology
58
8.2
Technical Performance of Technology
58
8.3
Review of the Benefits of the Technology
59
8.4
Limitations of Current Technology
59
Sales and Marketing Strategy
59
9.1
Distribution Partners
59
9.2
Licensing
59
Competitive Position
60
10.1 Key Factors that will Drive Success
60
10.2 Key Current Competitors and their Market Position
61
10.3 How Pi stack up against these
61
Key Risks and Opportunities
63
11.1 Early Stages of Operation
63
11.2 Dependence on Key Personnel
63
11.3 Dependence on Patents and IP
63
11.4 Regulatory Approval
63
11.5 Competition
63
11.6 Low Threshold for Market Entry
64
11.7 Policing of Product Imitation
64
11.8 Significant Market Opportunities and Options for Pi
64
Review of Future R&D Plans for Pi Technology
65
12.1 Future Applications
65
12.2 Review of Technical Potential to Address any New Markets
65
12.3 Analysis of Resources and Schedule Needed to Achieve Future Plan
65
12.4 Size and Growth of Potential Markets
66
Conclusions
66
Appendix 1:
Pi Patent Cases, 8th September 2006
67
Appendix 2:
Bug Oil – Technical and Commercial Review, January 2005
68
Appendix 3:
Glossary of Technical Terms
101
Appendix 4:
Biography of Authors
102
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Market and Technical Due Diligence Report for Plant Impact plc (Pi)
Executive Summary
Plant Impact plc (Pi) is an emerging ag-bio company engaged in the research, development and
distribution of novel pest control agents and crop yield enhancing products. The first products
discovered and developed are now in the market place and are being sold in fourteen countries –
Egypt, Iran, Jordan, Kuwait, Libya, Morocco, Oman, Qatar, Saudi Arabia, Spain, Syria, Turkey,
UK and Yemen. Initial products show great promise and are already generating income, while
further products are progressing through research and development with the objective of keeping
the pipeline full. Pi has identified an excellent niche to occupy in the market place and seems to
have the ability to develop safer, efficacious products of significant utility in agricultural and
horticultural markets. In addition, the approach is diverse with emphasis on both pest control and
improvements in crop health. The focus of Pi is to bring products to the market place much faster
and at lower cost than through classical pesticide development as practised by the agrochemical
majors.
Products currently sold/in the pipeline include:
앫
Bug Oil: a sucking pest insecticide and acaricide.
앫
Alethea technology which is aimed at improving resistance to abiotic stress.
앫
PiNT (Plant Impact Nitrogen Technology): Impact Calcium, Impact Magnesium and
Impact Potassium which are aimed at promoting plant growth.
앫
CaT (Calcium Technology): InCa and Triple C (Crop Climate Control) which are
claimed to work by helping plants absorb calcium.
앫
VOTEC (Vegetable Oil Trace Element Complex) technology: FerGo, MagGo and
ManGo which are based on the use of essential oils along with specific elements
required in different growing situations and are believed to stimulate plant growth.
앫
Speedo: a plant growth stimulant.
In addition, the product currently in R&D with the greatest market potential is the novel
nematicide. Initial laboratory studies are showing promise and, all being well, field studies will be
carried out in 2006/7.
Thus, Pi has created a platform for the development and introduction of a range of valuable core
technologies for both the crop protection and the crop health markets. The portfolio of products
already launched is very exciting and further products are being progressed through R&D.
1. Introduction
Plant Impact plc (Pi) is engaged in the research, development and distribution of novel pest
control agents and crop health products. The first products discovered and developed are now in
the market place and are being sold in fourteen countries. The aim of Pi is to become a leader in
the growing market of bioagriculture which is the use of biological and biochemical agents to
improve crop yields.
This document summarises the current portfolio of Pi technologies and products, intellectual
property granted/applied for, the commercial and regulatory environment, market opportunities,
third party tests and commercial trials with Pi technologies, technical factors, sales and marketing
strategy, the competitive position, current trading and prospects, key risks and opportunities, and
a brief review of future R&D plans for Pi’s technology.
Pi seems to have the ability to develop safer, efficacious products of significant utility in
agricultural and horticultural markets. Focus is on bringing products to the market place much
quicker than the major agrochemical companies can achieve through classical pesticide
development and this is demonstrated by the fact that Pi products are already on sale in Egypt,
Iran, Jordan, Kuwait, Libya, Morocco, Oman, Qatar, Saudi Arabia, Spain, Syria, Turkey, UK and
Yemen. Initial products show great promise and are already generating income, while in the R&D
pipeline the product with the greatest market potential is the novel nematicide which hopefully will
progress to field studies in 2006/7.
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2. Technology/Product Descriptions
Technologies being addressed by Pi can be divided into two groups: a) crop protection agents
including Bug Oil and the novel nematicide, and b) crop health technologies such as Alethea,
PiNT, CaT, VOTEC and Speedo. Pi is progressing these technologies at different speeds in order
to generate a pipeline of products. Therefore, much information is available on the earlier
products and less information on the more recent discoveries. This will be reflected in this
document where significant amounts of information will be presented on Bug Oil and limited
information presented on products such as the nematicide and some of the crop health products
2.1 Bug Oil
Bug Oil is a novel insecticide/acaricide discovered by Pi. The product is based on vegetable oil
and three naturally occurring essential oils – thyme oil, tagetes oil and wintergreen oil – from the
plant species, Thymus vulgaris, Tagetes erecta and Gaultheria procumbens, which in prescribed
proportions are synergistic and give excellent control of phytophagous mites and sucking insect
pests.
This discovery is protected by the United Kingdom Patent Number 2411117, granted on
23 November 2005, and eleven further patents on the product are still pending.
Agrochemical distributors often sell oils as additives claimed to improve the activity of pesticides
or with activity in their own right. Initially, independent scientists were sceptical about the claims
for Bug Oil, but from 2003-5 the product was tested extensively in the laboratory and in the field in
Europe, the Middle East and the Far East and is now proven to be ‘not another oil formulation’ but
one in which the blend of essential oils has been carefully selected and synergism optimised in
order to maximise activity against both Acarina and Insecta.
Overall, Bug Oil is a very promising, patented, novel agent for controlling phytophagous mites
and sucking insect pests, including aphids, whiteflies and thrips. An example of efficacy against
whitefly is shown in Photographs 1 and 2. The product has virtually no adverse phytotoxic effects
and is safer environmentally and toxicologically than most of the acaricides and insecticides
currently available in the market place. The product can be positioned effectively in a number of
crops, but key opportunities include the high value protected fruit and vegetable crops, and top
fruit such as apples and citrus.
As far as the toxicology of Bug Oil is concerned, the main ingredient, canola oil, is an edible
vegetable oil refined from the seeds of two species of rape plants, Brassica napus and Brassica
campestris, from the family Cruciferae. It appears to have no adverse effects on humans or the
environment as the material is of low toxicity and is rapidly broken down.The naturally occurring
essential oils are also relatively benign. Thyme oil is regarded as a minimum risk pesticide and
has been registered as an active ingredient since 1998, while tagetes oil is used as a food
colourant and has no tolerance limit for inclusion in food in the USA. Thyme oil and tagetes oil are
both on the 91/414/EEC List 4 for use in the EU. Wintergreen oil has been registered as an active
ingredient since 1992 and biodegrades readily. This oil is regarded as toxic in large quantities, but
this is not relevant to Bug Oil as the product only contains 0.001% w/w of the oil. In fact,
wintergreen oil is used in significantly greater quantities in some toothpastes and soft drinks. If
the toxicology of Bug Oil as a complete formulation is tested, extremely promising results are
obtained as the acute oral LD50 on female mice was 쏜300mg/kg, no skin irritation was observed
in tests on male rabbits, and the Ames test used for showing mutagenicity was negative.
Bug Oil has been evaluated in the USA, Europe, Asia and the Middle East and is already on sale
in Oman.
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Photograph 1. Tobacco leaf treated with Bug Oil at 10mL product/Land free of whitefly.
Photograph 2. Untreated tobacco leaf showing whitefly infestation.
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2.2 Nematicide
Pi is currently undertaking a research programme with novel nematicides based on combinations
of natural products which could provide crop protection particularly against the key damaging
targets – root knot nematodes and cyst nematodes. Initial laboratory studies are showing
promise and hopefully products will be progressed for field trials during 2006/7.
2.3 Alethea
Alethea technology was developed with the aim of enhancing the ability of a crop to overcome
abiotic stresses such as high and low temperatures, drought, flooding and salinity, as these are
major problems which limit the ability of crops to produce optimum yields. Alethea is claimed to
mop up damaging reactive oxygen species and ammonia which accumulate during abiotic stress
and allows crops to grow in conditions where normally, growth would be reduced. It is also
claimed to permit the plant to maintain strong cell walls which can reduce disease entry, further
improving yield and the quality of crop shelf life. It is clear that if proven successful, Alethea
technology will be cheap and safe, and could have widespread use.
Five technologies are currently available including four which incorporate various elements of
benefit to plant health:
앫
Impaction DF: Dry flowable micronutrient fertiliser claimed to confer stress tolerance
and resistance to some fungal diseases
앫
Impaction Fe: Iron based derivative of Maxi DF specifically designed for iron deficient
soils
앫
Impaction Mn: Manganese based derivative of Maxi DF specifically designed for
manganese deficient soils
앫
Impaction Zn: Zinc based derivative of Maxi DF specifically designed for zinc deficient
soils
앫
Impaction Ca: Calcium based derivative of Maxi DF specifically designed for calcium
deficient soils
The products are being marketed in Oman, Saudi Arabia and Spain.
2.4 PiNT
PiNT (Plant Impact Nitrogen Technology) is used to promote superior plant growth for greater
yields with less inputs. Nitrogen is taken up by plants in three forms – nitrate, amine and
ammonium. Conventional amine/ammonium fertiliser products can be broken down to nitrates by
bacteria present in the soil. The nitrates produced are vulnerable to leaching from the soil into
water courses, whilst ammonia and amine forms of nitrogen do not leach.
PiNT technology is claimed to provide a solution to this breakdown process by stabilising amines
and ammonia and reducing nitrate production. This is believed to be attributable to combining
urea in an organic acid cation complex. Three products are currently available into which are
incorporated various elements of benefit to plant health:
앫
Impact Calcium
앫
Impact Magnesium
앫
Impact Potassium
These products are already being sold for use on fruit crops (pome fruit, stone fruit, citrus) and on
protected crops in Egypt, Iran, Jordan, Kuwait, Libya, Morocco, Oman, Qatar, Saudi Arabia,
Spain, Syria, Turkey, UK and Yemen.
2.5 CaT
CaT (Calcium Technology) is claimed to work by helping plants absorb calcium for example in
conditions where the plant normally has restricted absorption. Major target markets include
higher value crops and two products are currently available:
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앫
CaT InCa, which is claimed to improve cell strength and reduce physiological
disorders such as drop off and blossom end rot
앫
Hot Grow/Cold Grow, which are believed to combat stress in extreme temperature
conditions
These products are also claimed to improve fruit set/retention and extend shelf life, and are being
marketed in Qatar, Saudi Arabia, UK and Spain.
2.6 VOTEC
VOTEC (Vegetable Oil Trace Element Complex) technology is based on the use of essential oils
along with specific elements required in different growing situations and is believed to stimulate
plant growth. Three products are currently available:
앫
FerGo, utilises essential oils and iron which is required by the plant for the production
of chlorophyll and to reduce chlorosis
앫
MagGo, utilises essential oils and magnesium which is involved in respiration and
prevents premature leaf abscision
앫
ManGo, utilises essential oils and manganese which is involved in photosynthesis
The products have been evaluated in a range of countries in situations where there is nutrient
deficiency and will go on sale shortly.
2.7 Speedo
Speedo is a plant growth stimulant which has been added to other Pi products and is claimed to
give good results, accelerating development of flowers, colour and reproductive (but not
vegetative) growth.
The product is now being sold in Iran, Libya, Morocco, Saudi Arabia and Syria.
3. Intellectual Property
Pi has understood fully the importance of protecting new technologies by patents and is utilising
the patent system in an informed manner with clear commercial goals and consequently has a
portfolio of patent and trade mark applications relating to their products. One patent has been
granted on Bug Oil and this has matured through other applications into a patent family providing
protection specifically for Bug Oil. Patent applications have also been filed to cover products
acting as fertilisers/improving plant health. In addition, some technologies have been treated as
trade secrets as this was considered to be the best form of protection in these specific situations.
Pi is also very aware of the importance of other types of intellectual property and has filed a
number of trade mark applications.
The status of Pi’s intellectual property (as of 8th September 2006) in terms of patents
filed/granted is summarised in Appendix 1. In total, twelve patents have been filed on Bug Oil and
a further seven on other Pi discoveries.
4.
Commercial Environment
4.1 Current Agrochemical/Crop Health Business Climate
The total agrochemical market globally is expected to plateau or even reduce in size and, in
company terms, further mergers and acquisitions will occur. Around forty significant mergers,
acquisitions or alliances occurred in the last year while approximately twenty five major product
acquisition or licensing/supply deals were agreed (Beer, A: Multinationals Divest and Deal,
Agrow Magazine, March 2006). Thus, companies have joined forces and larger companies have
acquired products to complement their product range and these trends will continue for the
foreseeable future.
As fewer products are being launched and many commonly used products are getting older, the
market value of generic active ingredients is increasing and, in fact, exceeded that of proprietary
active ingredients for the first time in 2002 as many high value actives such as
lambda-cyhalothrin, imidacloprid and abamectin came off patent. Further important active
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ingredients will come off patent in the coming years and this, together with the decline in the
introduction of novel compounds will increase the opportunity for Pi products such as Bug Oil and
potentially, the novel nematicide.
During the next ten years, concerns regarding environmental impact and the safety of chemical
pesticides will increase and even stricter regulatory processes will be introduced for conventional
agrochemical products. This will involve the de-registration of some current pesticides and
increasing regulatory constraints with residues. Politicians, growers and consumers will drive the
introduction of more sustainable forms of agriculture using safer, more environmentally benign
crop protection products. There will probably be a reduction in the number of chemical pesticides
available, particularly for minor crops and significant opportunities will materialise for companies
such as Pi which can offer a portfolio of environmentally benign and safe agronomic products
such as biofertilisers and biopesticides and novel chemistry/mixtures based on innovations with
natural product chemistry.
The combined influence of the food industry/regulators/environmentalists/ consumer groups in
developed societies will push insect and mite control more in the direction of integrated
management and fertiliser use will increase in response to the need to raise crop yields to feed
the ever increasing human population. World population will continue to increase along with
demands for higher quality and variety of diet, especially in developing countries. Demands must
be met on roughly the existing hectarage of agricultural land or slightly higher.
As world population increases, many inhabitants will migrate into urban areas and exacerbate
food shortages due to problems with distribution rather than necessarily with production. There
are many feasible scenarios for change including one in which land use in developed countries
becomes less agricultural and more pastoral/leisure related, with corresponding intensification of
food production for export in developing countries. Such production will become more input
intensive creating increased opportunities for the use of effective, safer products to protect plants
and to improve crop health.
4.2 Key Technology Trends
The major R&D-based agrochemical companies have focused historically on inventing and
developing blockbusters, but recently they have moved more towards researching niche
products in order to keep the pipeline full, given the difficulty of inventing novel broad spectrum,
safe, products. However, the focus is still primarily on single, novel, patentable moieties for which
strong patent protection and broad freedom to operate can be obtained.
The success rate for the discovery of novel compounds by the agrochemical industry is
approaching one in every 100,000 compounds screened. The major R&D based companies
continue to focus on identifying, optimising and developing novel, single active ingredients while
Pi is filling a different niche as products are based on mixtures, that is, patentable cocktails for
insect, mite and nematode control, and products improving plant health and yield. This should
prove to be a niche that Pi can exploit and one that the major agrochemical companies are less
interested in pursuing with in-house research. Pi should position itself to address consumer,
regulatory, political and market demands for greater food safety and sustainable agriculture
which reflect the development and introduction of acceptable, non-threatening technology.
Overall, the novel chemical approach is looking less attractive for many large multinational
companies and they are increasingly diverting investment away from conventional chemical
research. Monsanto has pursued this strategy for many years but during the last couple of years,
major agrochemical companies such as Bayer CropScience, DuPont and Syngenta have all
made cutbacks in their conventional agrochemical businesses and have expanded their seed
and biotechnology operations. Thus, the environment is quite favourable for companies such as
Pi to enter the market and to out-licence or directly sell their products extremely effectively.
Biotechnology advances will have an accelerating impact on the traditionally large chemical
insect control markets and it is projected that on a global basis, Lepidoptera and Coleoptera will
be controlled more by genes. For example, in genetically modified maize, the focus is for the
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expression of the Bacillus thuringiensis Cry1Ab toxin for corn borer (Lepidoptera) control and the
Cry3A toxin for controlling corn rootworm (Coleoptera). Correspondingly less chemicals will be
used against these two orders of insects, whereas most sucking pests will still be controlled by
chemicals.
The drivers of global change in insect control include:
앫
Climate, eg. Global warming
앫
Biotechnology
앫
Precision agriculture
앫
Integrated Pest Management (IPM)/Integrated Crop Management (ICM)
앫
Information technology
앫
Vertical integration in the food industry
앫
National and international legislation and politics
앫
Land use policies
앫
Consumer attitudes to residues, genetic engineering and environmental protection
Of the drivers for change for the next ten years, the increasing power of the food industry and
regulatory policy will have the most significant impact on crop protection, in terms of the relative
importance of various pest species, available control technologies, and the economic justification
for preventing their damaging effect on the quality and quantity of food and fibre production.
The major crop drivers for the next ten years are technology shifts, changes in dietary patterns
and renewable energy.
In North and South America, there will be a strong biotechnology impact, while in Asia the key
characteristics are the fast population growth and rising buyer power along with a change in
dietary patterns. Europe, the largest market, has different key characteristics including an
aversion to GM technology and influences such as middle and eastern European countries
joining the EU.
4.3 Potential Competing Technologies in the Market Place
In the foliar crop protection market, Pi has focused on the control of mites and sucking insect
pests such as aphids, whiteflies and thrips, while in the soil applied markets, effort is being
concentrated on nematode control. In the former market there are many highly effective products
including avermectins, pyrethroids and neonicitinoids, but many of these products are over
twenty years old and in many cases safer, more environmentally acceptable products would be
welcomed. Pesticide resistance is also increasing, for example to pyrethroids, and alternative
approaches may be required in order to provide robust control of pest species.
For the nematode market, the majority of products were introduced in the 1960s. Products which
are volatile such as methyl bromide are already out of favour, and widely used, non-volatile
compounds such as aldicarb and oxamyl are highly toxic. The introduction of safer means of
control would have an enormous impact and significant sales. Genetic approaches are being
researched and will yield usable technology, but this is likely to be expressed in major crops such
as sugar beet and potatoes rather than the very large number of fruit and vegetable crops on
which the Pi product could initially be applied. Thus, GM products will be competitors to
nematicides and insecticides for aphid and whitefly control in some crops in the future, but not
until the next decade, particularly bearing in mind the aversion to biotechnology in Europe.
On the crop health front, a wide range of fertilisers is available, but during the present decade,
novel eco-fertilisers have been launched which use yeasts to produce nitrogen, phosphorus and
potassium at claimed self regulating rates. These are used for example on golf courses. Other
distributors provide additives which are applied along with conventional fertilisers, but Pi is
focusing initially on the high priced protected crop market and significant inroads have already
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been made. If Alethea is taken as an example, there is no single product on the market which has
been shown effectively to address abiotic stress per se. Previous strategies have focused on
breeding crops that can cope better, or more recently, the development of GM plants which are
more stress tolerant. However this is usually focused on one type of stress, not general abiotic
stress. It is clear that if proven successful, Alethea will be a cheap, safe product which could have
widespread use and possibly be more generally acceptable than a GM approach.
5. Regulatory Environment
Crop health products do not go through the stringent regulatory review required for pesticides,
but an understanding of the regulatory environment in key geographic areas such as Europe and
the USA is of paramount importance in determining speed to market and general implications for
Bug Oil and the novel nematicide. Much is known about Bug Oil so this will be used as the
example. However, the nematicide is expected to have similar toxicology and ecotoxicology
properties to Bug Oil and therefore the same general conclusions should apply. Two specific
aspects are of importance:
a)
The registration of pesticide products in Europe and the USA including objective,
process, data requirements, time, cost, and new and existing products reviews.
b)
Understanding how plant extracts and ‘organic’ products are perceived favourably
compared to synthetic chemicals (in respect of safety, environmental persistence
and pest resistance from over-use), and how the properties and long standing safe
use of Bug Oil may fit in as a ‘low risk’ product for reduced data and faster registration.
5.1 Registration of Pesticides in Europe and the USA
Before a pesticide product – whether synthetic or naturally occurring – can be placed in the
market for use on plants to control pests, it must be registered. In Europe, registration is given
under the Council Directive 91/414/EEC. The directive is regulated in the member states of
Europe under their own national legislation. In the USA, registration is given by the
Environmental Protection Agency (EPA) under the Federal Insecticide, Fungicide and
Rodenticide Act (FIFRA).
Registration can only be granted if (i) the product is sufficiently effective for the proposed use(s)
on the target pest(s), (ii) it is not phytotoxic, (iii) it does not cause unnecessary pain and suffering
to vertebrate animals, (iv) it does not have harmful effects on human or animal health, and (v) it
does not have unacceptable influence in the environment including groundwater, drinking water
and impact on non-target species. If the benefits of the product in its proposed uses clearly
outweigh the risks, the product is registered for use for a specified period (usually 10 years) in
accordance with the product label containing hazard classification, use recommendations,
precautions, and First Aid measures in cases of accident. Extensive laboratory and field studies
with the active substance and the formulated product containing the active substance are
required to be carried out by the applicant according to Good Laboratory Practices (GLP) and
European and Mediterranean Plant Protection Organisation (EPPO) guidelines for registration.
The data so generated, with summaries and risk assessments, are reported as a technical
dossier for presentation to the regulatory authorities for their evaluation and approval. This
dossier consists of seven different chapters:앫
Identity of the active substance and composition of the formulated product, impurities
in the technical material from the representative production batches, nature and
effects of formulants (solvents, surfactants, stabilisers), proposed uses on specified
crops and pests (insects, fungi or weeds), mode of action and likely occurrence of
resistance.
앫
Biological efficacy of the product against the pests in the greenhouse and field
compared to the appropriate current standards, yield and any phytotoxicity.
앫
Analytical methods for the determination of the active substance and relevant
metabolites or breakdown products in the manufactured technical material,
formulation, harvested crops or stored produce (e.g. tomatoes or grain), processed
commodities (e.g. tomato purée or flour), soil, water, air and edible animal products
(e.g. milk, meat and eggs) and animal tissues (blood and urine).
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앫
Residue chemistry: Plant metabolism on representative crops using appropriately
radiolabelled active substance, supervised residue trials on crops in the glasshouse
and field according to Good Agricultural Practices (GAP) in the appropriate regions to
determine maximum residues from the proposed application rates at different
pre-harvest intervals, stability and processing studies to determine shelf-life and
establish residue concentration during industrial processing or home cooking; animal
metabolism using radiolabelled active substance on livestock (in the goat and poultry
to determine fate in animals) and residue transfer studies (in the cow, to determine
residues in animal feed transferring into edible products (for example milk and meat));
set Maximum Residue Levels (MRL, or tolerance) at the appropriate Pre-harvest
Intervals (PHI or withdrawal period) for food and feed; and dietary risk assessment.
앫
Environmental fate in soil, water and air from the proposed uses including events
such as drift, rain, surface run-off into the watercourse and leaching potential for
groundwater contamination; monitoring of residues in drinking water where
appropriate; and risk assessment using predicted concentrations of residues in
different environmental compartments.
앫
Mammalian toxicology including metabolism and pharmacokinetics, acute toxicity,
sub-chronic and chronic toxicity, genotoxicity, reproductive toxicity (developmental
and multi-generation) and operator and worker exposure studies or calculations
based on simulated models to assess risk to formulators, sprayers and bystanders.
앫
Ecotoxicology to determine the effects on non-target micro- and macro-organisms
such as birds, fish, daphnids, algae and other aquatic organisms, and beneficial
arthropods such as bees and earthworms; and assess risk to each of these
organisms.
Risk assessments using the appropriate end-points of the studies in various computer-assisted
mathematical models and risk management strategies play a vital part for label approval, or label
modification to reduce the risks. In the last 30 years, the registration process has become
progressively more complex and resource consuming. Data requirements have evolved and
undergone continuous changes in step with progress in scientific knowledge, experience and
methodologies. It can now take 3-5 years from submission to first registration. Data requirements
in Europe and the USA are currently being harmonised by the Organisation of Economic
Co-operation and Development (OECD).
Evaluation of pesticides is carried out by the European Commission and the US EPA for new
active substances and formulated products, and periodically, re-registrations for the existing
active substances and their representative formulated products in the market.
Existing active substances in Europe (i.e. those contained in the products that were already on
the European market in 1993) are currently under review for re-registration and consist of four
different lists of active substances (Stages 1-4). The last list (Stage 4) contains ‘low risk’
substances and includes various plant extracts.
Similarly, EPA also operates the ‘reduced risk’ policy and Bug Oil is ideally suited for such a
‘reduced risk’ claim.
5.2 Regulatory Status of Bug Oil
Bug Oil contains four different active substances: canola oil (94%), thyme oil (0.6%), tagetes oil
(0.6%) and wintergreen oil (0.001%).
The major ingredient of Bug Oil is canola oil, an edible vegetable oil refined from the seeds of two
rape seed plant seeds, with low acute toxicity and rapid degradation to harmless products.
In the USA, wintergreen oil has been registered as an active ingredient since 1992 and thyme oil
registered as a ‘reduced risk’ pesticide since 1998. Tagetes oil is used as a food colourant and is
exempt from tolerance.
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In Europe, two of the active substances of Bug Oil are ‘new’ while the other two (thyme oil and
marigold extract (wintergreen)) are currently being evaluated under the Stage 4 ‘existing active
substances’ review.
Bug Oil is expected to be regarded as a ‘low risk’ product in Europe because of the long standing
safe use of its active substances. The active substances are known to be of low acute toxicity,
they are expected to break down rapidly to innocuous polar fragments and ultimately to water and
carbon dioxide, and there is no record of any of them having an adverse effect on humans,
domestic animals or the environment.
Data requirements and turn-around time for Bug Oil should therefore be similar to those for the
Stage 4 active substances.
Bug Oil may also qualify for uses in organic production under the European Council Regulation
(EEC) No. 2092/91.
5.3 Strategy for the Registration of Bug Oil in Europe
Registration of Bug Oil for use in agriculture for the control of insect and mite pests by spraying on
growing crops or post-harvest treatment would fall under the Plant Protection Products Directive
91/414/EEC.
The mixture of four active substances contained in Bug Oil would have to be approved by the
European Commission in Brussels while the formulated product containing the active
substances and the emulsifier would be authorised by the member states of Europe for use in
their own countries.
Pi, as the applicant, must submit the registration ‘dossier’ to a European member state which will
act as the member state rapporteur (MSR). The dossier consists of two sets of data: Annex II data
on the four active substances and Annex III data on the formulation product (Bug Oil). Each set of
data contains documents including study reports, reference index, summaries and detailed
assessments under the seven different categories described in Section 5.1
Pi is planning to submit the dossier on Bug Oil, containing Annex II and Annex III data, to the UK
Pesticides Safety Directorate (PSD) who would act as the MSR. The MSR will carry out a
‘completion check’ of the required data, evaluate the dossier, prepare a ‘monograph’ and
distribute it to the other 24 European member states for discussion and recommendation by the
member state representatives in various technical committees. The European Food Safety
Agency (EFSA) will then review the revised monograph with recommendations and make a
decision (i.e. that the active substance should be approved (‘listed in Annex I’ of the Directive),
that additional information is necessary, that the proposed use label should be changed to reduce
risk, or that the application should be rejected). Approval will be formally granted by the European
Council by vote according to the rules of ‘Qualified Majority’ and the active substance then listed
in Annex I of the 91/414/EEC directive.
Once the dossier has been established as being ‘complete’, PSD may also grant provisional
authorisation for Bug Oil for use in the UK for up to three years prior to the Annex I listing.
Following listing of the active substances in Annex I, PSD can give full authorisation for the use of
Bug Oil product in the UK after completing the review of the submitted Annex III data.
Authorisation of Bug Oil in the UK can then lead to authorisations in other European member
states upon application to them by Pi under the provisions of ‘Mutual Recognition’ provided the
product, its use and agronomic, dietary, soil, climatic and other relevant conditions between the
member states are comparable.
5.4 Strategy for the Registration of Bug Oil in the USA
The strategy for the registration of Bug Oil in USA is similar to that for Europe. Since 1993, it is
possible to register a pesticide product for use in the United States under a ‘reduced risk’ claim.
The onus is on the applicant to substantiate the claim for reduced risk, for instance its inherent
safety to humans, non-target organisms and the environment compared to competitive
alternative products in the market and its applicability in integrated pest management strategies.
Bug Oil is ideally suited for the ‘reduced risk’ claim.
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5.5 Regulatory Conclusions
Use of plant extracts as ‘low risk’ pesticide products is encouraged by regulatory authorities in
Europe and the USA who are prepared to accept reduced data for their registration. Bug Oil
belongs to this category so that this product has the potential for a reduced and less costly data
package as well as a faster review and turnaround time.
Three of the four active substances of Bug Oil are edible vegetable oils and the fourth is a
botanical food colourant. They all have a long history of safety to man and the environment. In the
USA, two of the active substances have been approved by the EPA and the third is exempt from
tolerance requirement. In Europe, two of the active substances are currently under the Stage 4
existing substances review as ‘low risk’ substances. Bug Oil is therefore expected to require the
same data package as those for a ‘low risk’ product in Europe or a ‘reduced risk’ product in USA
and should not need to go through the protracted process required for conventional chemical
pesticides.
Pi is in the process of preparing and submitting a dossier on Bug Oil to the UK PSD with a reduced
data package as a ‘low risk’ product. A faster turnaround time, i.e. 1-2 years, can be expected
from submission to the first registration of Bug Oil for use in the UK.
6. Market Opportunities
Widespread use of agrochemical pesticides and fertilisers over the last fifty years has resulted in
massive increases in agricultural and horticultural productivity. This has been achieved through
the use of insecticides, acaricides, nematicides, fungicides, and selective and non-selective
herbicides. In addition, crops have been bred which are responsive to chemical fertiliser inputs,
but these are often more susceptible to pest and disease attack.
Market opportunities for pesticides and fertilisers are difficult to quantify and predict with
accuracy and there is no single database from which the information can be retrieved. Market
research in the crop protection area is undertaken on a crop and country basis to ascertain the
sales and market shares of the agrochemicals applied and market figures have to be produced
using data, knowledge and judgment. The data on the sales of agrochemical products come
predominantly from panel based market research undertaken within each country, a second
database tracks the relative importance of each pest within each crop sector by country, and the
judgment comes from assessing the value of any given brand that is attributable to any single
pest within the complex of pests treated.
6.1 Major Application Areas for Pest Control Products
The latest published figures on the size of the agrochemical crop protection market globally in
2005 (excluding non-crop pesticide sales) range from $31,310 million (Phillips McDougall
AgriService, cited in Agrow No 487, January 14th 2006) to $33,576 million (Agrochemicals –
Executive Review, 17th Edition, 2006). This represents a 3% decrease in global sales in real
terms compared to the previous year, 2004, which was the first year to show real growth since
1998. However, in dollar terms, the continued weakening of the currency contributed to a 1.9%
increase in crop protection sales.
The top six companies were Bayer, Syngenta, BASF, Dow, Monsanto and DuPont and their
business accounts for over 75% of global sales. Geographically 25.4% ($8,520 million) of sales
were in North America (USA and Canada), 24.3% ($8,162 million) in Asia, 21.9% ($7,363 million)
in Western Europe (EU-15 plus Switzerland/Norway), 17.1% ($5,752 million) in South America
(Rest of Americas), with the rest of the world (Eastern Europe/Russia, Africa, Middle East)
accounting for the remaining 11.3% ($3,779 million). Herbicides account for 45.8% of
agrochemicals sold globally, insecticides for 26.3%, fungicides for 23.0% and other products for
the remaining 4.8% (Agrochemicals – Executive Review, 17th Edition, 2006).
The last five years have seen unprecedented consolidation among the leading R&D-based
companies along with growth in the number and size of generic manufacturers. The top six crop
protection companies are all R&D driven and are exclusively based in Western Europe or in the
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USA. However, mergers between the largest R&D driven agrochemical companies have led to
anti-trust authorities enforcing the sale of some products to generic producers. Generic
manufacturing is increasing significantly in India and China, but at present the largest eight
generic agrochemical manufacturers are based in the developed world.
In the last few years, the introduction of new active ingredients has been in decline. This is
attributable to the increasingly complex nature of chemical pesticides, the rising cost of meeting
regulatory requirements, further industry consolidation and the overall plateauing/shrinking of
the agrochemical market, even though an upturn was observed in 2004.
However, Pi is focusing initially on the lucrative fruit and vegetable market which was worth
$9,810 million in 2005 and is predicted to reach $10,768 million in 2010 (Agrochemicals –
Executive Review, 17th Edition, 2006). The first product, Bug Oil, would enter the insecticide
market which is currently valued at $8,836 million of which $2,947 million of sales were on fruit
and vegetables. Looking ahead, the total insecticide market is expected to grow to $9,368 million
in the next five years. The total specific sucking pest and acaricide markets in 2005 were worth
$3,078 million and $620 million respectively, but the combined market is predicted to increase to
$3,962 million by 2010. Thus Bug Oil, with proven activity in the field on both mites and sucking
insect pests, should do well in this particular sector.
The major chemicals used in sucking insect control are:
앫
Neonicotinoids such as imidacloprid and thiamethoxam
앫
Thioureas such as diafenthiuron
앫
Triazinones such as pymetrozine
앫
Thiadiazines such as buprofezin for whitefly and hopper control
앫
Juvenile hormone mimics including pyriproxyfen and fenoxycarb which have broad
spectrum activity
앫
Organophosphates such as profenophos which have broad spectrum activity
앫
Carbamates such as thiodicarb which have broad spectrum activity
앫
Pyrethroids such as lambda-cyhalothrin which have broad spectrum activity
The major chemicals used in mite control are:
앫
Avermectins such as abamectin
앫
Organophosphates such as dimethoate
앫
Organochlorines such as dicofol
앫
Carbamates such as hexythiazox
앫
Carbazates such as bifenazate
앫
Organotins such as hexakis
앫
Pyridazinones such as pyridaben
앫
Tetrazines such as clofentezine
앫
Pyrethroids such as fenpropathrin
Predictions from current markets indicate that the major sector for growth in the next 5-10 years is
fruit and vegetables. In recent years, this sector has shown market growth below the average, but
it is anticipated that this will flourish and exhibit above average market growth at least until 2010.
Other sectors predicted to grow faster than the average market growth are cereals, rape and
non-crop.
The second major crop protection area in which Pi is investing is that of nematode control.
Research is at an early stage, but the monetary value of success in this sector would be
immense. Control of nematodes is a stand-alone market opportunity of significant value as plant
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parasitic nematodes cause damage estimated globally at $80 billion annually and nematicide
sales in 2005 were $816 million. The market for nematicides is estimated to be $864 million per
annum by 2010, but given safer, effective control methods, the market could become a
multi-billion dollar market.
Plant parasitic nematodes are tiny thread-like worms which cause significant yield loss to a very
wide range of agricultural and horticultural crops. Crops suffering major economic losses include
potatoes, peppers, carrots, tomatoes, strawberries, citrus, soybean, cotton, coffee, bananas, turf
and ornamental plants. The major method of control is through chemical applications using
volatile or non-volatile nematicides. Some of these are extremely toxic to man and the
environment and the volatile products are usually applied by registered application experts. The
discovery and development of a safer product would have a significant impact in the market place
and would benefit from significant market penetration. Current fumigant compounds used
include methyl bromide, chloropicrin and telone, while the major non-volatile compounds include
aldicarb, carbofuran, ethoprop, oxamyl and fenamiphos.
The key nematode species to control are:
앫
Root knot nematodes, Meloidogyne species
앫
Cyst nematodes, Heterodera species and Globodera species
Other targets include:
앫
Lesion nematodes, Pratylenchus species
앫
Burrowing nematodes, Rhadopholus species
앫
Citrus nematode, Tylenchulus semipenetrans
앫
Stem nematodes, Ditylenchus species
앫
Lance, Reniform, Sting, Spiral, Dagger nematodes
In the insecticide/acaricide/nematicide markets, there is high growth potential given innovative
solutions. Estimates of market growth are around 2% per annum. However, as mature ‘old’
chemistry is substituted and regulatory pressure and resistance issues lead to a demand for new
modes of action, new classes of products are expected to grow by more than 5% each year.
6.2 Major Application Areas for Products Improving Crop Health
The world fertiliser market is estimated to be worth around $15 billion per annum and at the
current growth rate, the world population will place ever increasing demands on efficient food
production. The current global population is 6.5 billion people and this is projected to grow to 7.3
billion by 2016 and to 8.0 billion by 2026 (US Census Bureau, January 2006). 98% of suitable
land is used for agriculture at present and it is likely that the amount of land given over to
agriculture is set to decrease, due to a combination of factors including urbanisation, soil erosion
and salinity. Thus, it is important to increase crop yield in order to feed the growing population.
Pi has developed and is continuing to research products which have utility in improving crop
health. Take as an example, abiotic stresses, including temperature, water, drought, salinity,
heavy metals and light intensity, which are a significant limiting factor in crop production. In fact,
average losses due to abiotic stress in the USA (the world’s highest input, and most advanced
agricultural producer) average between 60 and 70%. Abiotic stress is believed to be the largest
limiting factor in crop production and many current approaches to deal with this focus on genetic
modification and breeding strategies. However, genetic approaches typically concentrate on
modulating a specific pathway within the plant and do not deal with abiotic stress in general. Pi
has developed, and is selling, Alethea which is a product claimed to improve the ability of a crop to
cope with abiotic stress generally and hence increase yield substantially.
Fertilisers are widely used to improve crop quality and yield. However, nitrogen fertiliser prices
are closely linked to the price of gas and the nitrogen directive, which becomes law from 2007, is
legally limiting nitrogen use, for example in broad acre crops in the EU. Thus, products which can
improve the efficiency of nitrogen uptake and use by plants will be in great demand and the stable
of Pi products could prove invaluable.
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6.3 Major Customers/Segments and their Needs/Buying Behaviours
One of the major markets which is highly attractive for Pi’s portfolio of products is the high value
protected crop market in Europe which is estimated to be worth around $300 million per annum.
Protected crops include fruit, vegetables, ornamentals and propagation materials along with
crops such as mushrooms and Christmas trees. The list of fruit and vegetables is enormous and
includes melons, water melons, strawberries, bush fruit, tomatoes, peppers, cucumbers,
rhubarb, lettuces, celery, radishes, aubergines, courgettes, cauliflowers and beans. Propagation
plants cover trees, vines, tobacco, ornamentals and vegetables such as brassicae and lettuce.
Protected crops are an ideal market for the exploitation of Pi’s portfolio of crop protection and crop
health improvement products. The market in Western Europe is dominated by three countries –
Spain, Italy and Holland. In terms of land area, the dominant market is Spain, making up
approximately 40% of the total area. This is primarily for growing fruit and vegetables, but often
under rudimentary plastic structures. Italy is the second largest market, with 21% of the cropped
area, the largest proportion being in vegetables, but with sizeable markets in fruit and
ornamentals. Holland accounts for 19% of the cropping area but this figure is distorted by the fact
that two thirds of that is used in bulb production, the remainder of the land primarily producing
ornamentals and vegetables. In Europe, the Dutch protected crops sector is identified as the
most sophisticated and high tech with the majority of production being under modern glass
structures.
The largest crop group in Europe is vegetables accounting for 44% of the total hectares and
around $120 million of sales on crop protection inputs. This market is dominated by Spain.
Ornamentals make up the second largest crop group with 29% of treated hectares, but with a
value of $140 million, although this figure includes outdoor production of bulbs and hardy
ornamental nursery stock. Fruit is the third largest crop group at 22% of the protected hectares
and a value of $40 million in crop protection inputs. Again this market is dominated by Spain.
Currently the major agrochemical companies are not perceived as having a coherent structure
for development of sales into protected crops outside of Holland although individual product
opportunities such as the sale of spinosad by Dow AgroSciences have been effectively exploited.
Companies such as BASF and Syngenta are gaining a stronger position either through direct
sales or via distributors in protected crops. Syngenta Bio-Line also accesses the speciality fruit
and vegetable sector through beneficial insects and it is expected that the Syngenta business will
be restructured to improve their approach in terms of Integrated Pest Management. It is possible
such agrochemical majors will be interested in acquiring or distributing Pi products, but it is more
probable that companies outside the top six, including speciality companies, will want to
negotiate access to Pi products.
In the EU, the impact of the accession countries: Cyprus, Czech Republic, Estonia, Hungary,
Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia is unlikely to have a large effect on the
protected crop market. With the exception of Cyprus, none of these countries has a particularly
large production base or history of export. However, more open borders could stimulate greater
trade and increased demand for fresh produce from the current member states. In fact, the
activities of Turkey and Morocco are of greater significance as both have important protected
crop businesses and the EU is their major market for sales of vegetables and floriculture.
However, both countries are currently handicapped by poor economies and limited
infrastructure, as well as strong competition from EU producers.
Organic food and the impact of GM crops must also be considered. At present, major GM
developments in protected crops are 5-10 years away, but the technology will become more
widely accepted, particularly in Europe, yet compounds like Bug Oil should still be important
products to have in the armoury. Organic food production will continue to increase as long as
consumers demand freedom of choice and believe that such products are healthier and better for
the environment. As Pi’s product range is based primarily on naturally occurring ingredients, it is
believed that the products could have significant acceptance in organic production. This should
be regarded as an upside to conventional uses for example in protected crop situations.
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6.4 Regulatory Barriers to Entry
The regulatory environment was reviewed in Section 5 and under the ongoing review of all
pesticide products by Member States under 91/414/EEC, over half of the products on the list are
no longer registered. In addition, the high threshold to market entry in terms of costs and resource
for a chemical pesticide requiring full registration mean that few companies are prepared to make
the necessary investment. This creates opportunities for companies such as Pi to develop
alternative pest control products, for example ones that have fast track registration and have an
IPM fit alongside conventional synthetic chemicals and beneficial insects.
6.5 Environmental Considerations
The pre-occupation of some politicians, pressure groups and supermarkets with the perceived
effects of pesticides on human health and the environment will ensure constant pressure to
reduce the amount of crop protection products applied. This can take the form of set targets for
pesticide reduction or the introduction of sales taxes. This desire for a move away from major
pesticide use has manifested itself with National Governments lending support to potential
alternatives, such as reduced registration costs, financial support for companies producing
biological products, and subsidies for organic production. Many politicians and regulators hope to
introduce the ‘substitution principle’ into EU legislation. This will allow national governments to
ban individual products if they believe a safer alternative is available. In markets, such as
protected crops, where there are a greater number of older pesticides, this could have a
significant effect when newer products are introduced.
6.6 Increasing Concern over Current Chemical Products/GM Crops
The global area planted with genetically modified (GM) crops increased by 11% from 2004 to 90
million hectares in 2005 (International Service for the Acquisition of Agri-biotech Applications
(ISAAA) cited in Agrow No. 488, January 27th 2006). In total, twenty-one countries plant GM
crops with the USA accounting for virtually half, but the top five countries – Argentina, Brasil,
Canada and China, along with the USA – represent over 85% of the area grown. In contrast, there
is a vociferous lobby in Europe against the use of chemical pesticides and GM crops, even
though risk assessments demonstrate that most products are safe to use and that crops are safe
for human consumption.
Nonetheless, many supermarkets believe that they can gain a competitive advantage by
implementing a pesticide/crop protection policy, and constantly striving for food with ever lower
levels of residues, even if the detected levels have no detrimental effect on human health. Even in
the absence of consumer demand for such policies, organic food is often purchased as it is
assumed to be pesticide free. Certainly some supermarkets now have lists of banned products or
grower protocols which specify limited product choices. This mind set of low pesticide input is
now also being applied to floriculture which up until recently has been free from such concerns.
Consumers and Governments across Europe are aware that an abundance of food does not
necessarily equate to a healthy diet. With an increase in obesity across Europe, healthy eating
messages promoting consumption, for example, of fruit and vegetables, are being heeded, and
the potential for greater production of fresh foodstuffs will increase demand for crop protection
products.
7. Third Party Tests and Commercial Trials with Pi Technologies
7.1 Bug Oil
Bug Oil has been tested extensively in 2003, 2004 and 2005 in the laboratory and in the field in
Europe, the Middle East and the Far East and full details are included in Appendix 2. Examples of
activity obtained from trials in Spain on the three major targets – aphids, whitefly and mites – are
described below.
7.1.1 Control of aphids on tomatoes
The objective of this trial was to determine the efficacy of different rates of Bug Oil against aphids,
Aphis gossypii, on tomatoes, variety Boludo, in a commercial tomato growing area in Mazarrón,
Murcia, Spain. A randomised block design was used, with four replicates per treatment. All plots
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were 20 m2 large, with 13 plants per plot. Confidor (Imidacloprid 20% LS) was used as a reference
product. One single foliar application was applied using a knapsack backpack with engine
(Maruyama) and the trial was started when the level of motile forms per leaf was 5.4, which is a
typical infestation level in the area selected and for this crop. Five assessments were performed
at 0, 1, 3, 7 and 14 days after application with 10 leaves per plot being selected in each
assessment. The number of motile forms was recorded at each assessment and
Henderson-Tilton % efficacy calculated (Figure 1).
Figure 1. Percentage control of aphids compared to untreated
100
90
% Efficacy
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70
60
Bug Oil 10m L/L
50
Bug Oil 20m L/L
40
Confidor 20LS 0.75m L/L
30
20
10
0
1 DAA
3 DAA
7 DAA
14 DAA
Overall, Bug Oil, at the rates tested, showed an excellent efficacy for the control of Aphis gossypii
in tomato crops as foliar applications. It also gave an excellent knock-down effect against aphids
with pest levels decreased virtually to zero at 1 and 3 DAA in treated plots.
The efficacy of Bug Oil (10 and 20 mL/L) is similar to that obtained with the standard Confidor
(Avinent, L, 2004: Efficacy of Bug Oil against aphids on tomatoes under glass/plastic in south
east area of Spain 2004, CEMAS 101-04-SRF-I).
7.1.2 Control of whitefly on peppers
The objective of this trial was to determine the efficacy of Bug Oil against whitefly, Trialeurodes
vaporariorum, on peppers, variety Italiano, in Mazarrón, Murcia, Spain. A randomised block
design was used with four replicates per treatment. All plots were 10m2 with 22 plants per plot in
double rows. Confidor (Imidacloprid 20% LS) was used as a reference product. One single foliar
application was applied using a knapsack backpack with engine (Maruyama) and the trial started
when the level of adults was 0.7 per leaf, which is a typical low infestation level in the area
selected and for this crop. Five assessments were performed at 0, 1, 3, 7 and 14 days after
application and 10 leaves per plot were selected in each assessment to count the number of
adults and scales per leaf (scales were counted in the laboratory using a binocular microscope).
The Henderson-Tilton efficacy was calculated.
In this study, the number of motile forms (adults and scales) was not very high, reaching 1.5
adults per leaf with very few immature stages present during the trial. However, this is a typical
population for commercial peppers grown in this area. Under these conditions, Bug Oil showed a
good efficacy for the control of Trialeurodes vaporariorum in pepper crops. Bug Oil worked well
against adults one day after application, achieving 100% control at both rates. The higher rate of
Bug Oil gave total control throughout the 14-day test (Figure 2) and at all time points, Bug Oil at 10
and 20 mL/L was superior numerically to the standard, Confidor (Avinent, L, 2004: Efficacy of Bug
Oil for Trialeurodes vaporariorum control on peppers under glass/plastic in south east area of
Spain 2004, CEMAS 099-04-SRF-I).
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7.1.3 Control of mites on peppers
The efficacy and field performance of Bug Oil for the control of Red Spider Mite (Tetranychus
urticae) on greenhouse peppers (Capsicum annuum), variety Herminio, was evaluated on a site
in Blanca, Murcia, Spain. The greenhouse was typical for the region (covered with plastic film,
about 4 m high) and a randomised block design was used with four replicates per treatment. All
plots were 10m2 with 25 plants per plot. Sanmite (piridaben 20% WP) was used as a reference
product. One single foliar application was applied using a knapsack backpack with engine
(Maruyama) and the trial started when the level of motiles was around 20 per leaf. Five
assessments were completed at 0, 1, 3, 7 and 14 DAA (Days After Treatment) and 10 leaves per
plot were selected in each assessment to count the number of motiles per leaf.
Figure 2. Percentage control of whiteflies compared to untreated
100
% Efficacy
90
80
70
60
Bug Oil 10m L/L
50
Bug Oil 20m L/L
40
Confidor 20LS 0.75m L/L
30
20
10
0
1 DAA
3 DAA
7 DAA
14 DAA
Bug Oil performed well in controlling high infestations of mites (around 40 motiles/ leaf, 14 DAA)
on peppers and was fast acting giving 92% and 97% control at 10 and 20 mL/L respectively at 1
DAA and gave control equivalent to Sanmite at 1, 3 and 14 DAA (Figure 3). However, control was
slightly inferior numerically to the standard at 7 DAA (Avinent, L, 2004: Efficacy of Bug Oil for
Tetranychus urticae control on peppers in Spain 2004, CEMAS 102-04-SRF-A).
Figure 3. Percentage control of mites compared to untreated
100
90
% Efficacy
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30
20
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3 DAA
7 DAA
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Many trials have also been undertaken in other countries on a range of insect and mite pests.
Results from an example of a trial performed in Japan in 2004 on the citrus red mite (Panonychus
citri) on citrus variety Okituwase are shown in Table 1.
This demonstrates that Bug Oil provides quicker and more persistent control of citrus red mites
than either of the leading standards used.
Table 1: Efficacy of Bug Oil against citrus red mite (Panonychus citri) on citrus
No. of female adults on 50 leaves/ tree
(mean of two replicates)
Days after treatment
Treatment
0
1
2
8
14
21
28
35
42
49
56
Bug oil 10mL/L
83
0
0
2
0
0
5
3
8
22
12
Acequinocyl 15%SC
82
3
0
4
4
6
17
46
28
43
42
Propyleneglycol fattyacid 70%EC
1mL/L
80
4
2
14
10
37
94 203 88 206 151
Water only
83
52
62
85
97 137 210 596 354 553 559
7.1.4 Effects on beneficial/non-target organisms
Bug Oil has been tested on a range of beneficial/non-target organisms and although it was toxic
to parasitic wasps and predatory mites (predictably as an acaricide), promising results were
obtained with ladybirds, bees and earthworms.
For ladybirds, Coccinella septempunctata L. (Coleoptera: Coccinellidae), Bug Oil was evaluated
at two nominal rates of 2 and 4 L/ha and was tested alongside a control (water only) and a toxic
reference treatment (dimethoate 40% EC) applied at a rate of 15 mL product/ha.In terms of
mortality, leaves treated with Bug Oil significantly increased the mortality of the ladybirds
compared to the control at the rates of 2 and 4 L/ha, but the mortality of the ladybirds at these rates
was not greater than the 50% trigger value given in ESCORT 2 (Candolfi, M P, Barrett, K L,
Campbell, P J, Forster, R, Grandy, N, M, Huet, M-C, Lewis, G, Oomen, P A, Schmuck, R, and
Vogt, H (Eds.), 2001: Guidance document on regulatory testing and risk assessment procedures
for plant protection products with non-target arthropods. Proceedings from the ESCORT 2
Workshop (European Standard Characteristics Of beneficials Regulatory Testing) Wageningen.
The Netherlands, 21-23 March 2000. SETAC, Pensacola). In terms of reproduction, Bug Oil at 2
L/ha caused a reduction compared to the control treatment in the number of viable eggs per
female per day of 16.1% but Bug Oil at 4 L/ha caused an increase in the number of viable eggs per
female per day of 12.7%. This means that Bug Oil had no effect on reproduction of the surviving
ladybirds at either 2 or 4 litres of Bug Oil/ha (Davies, N A, 2004: A tier 1 laboratory test to
determine the effect of Bug Oil on the ladybird, Coccinella septempunctata, CEMR-2372).
For bees, a Hazard Quotient (HQ) was calculated to be 쏝5.1 for oral applications and 쏝4 for
contact applications (Halsall, N, 2004: Acute oral toxicity of Bug Oil to the honeybee, Apis
mellifera, GLP-04-14). This means that Bug Oil at an application rate of 4 litres of product/ha can
be considered to be of low risk to bees (EPPO, 1993: Decision-making scheme for the
environmental risk assessment of plant protection products. EPPO Bulletin 23, Chapter 10,
Honeybees). In fact, as the oral and contact HQ is 쏝50, no further testing is required and there is
plenty of room for manoeuvre with higher (up to nearly 10x) application rates whilst still
maintaining low risks to bees.
For the earthworm, Eisenia foetida, a 14-day replicated acute toxicity study based on OECD Test
Guideline 207 (1984) was carried out using Bug Oil. The concentration used was 0.0053 mL
product/kg dry soil, which is equivalent to 4.0 litres of Bug Oil/ha, assuming a soil density of
1.5 g/cm3 (dry weight) and a uniform incorporation to a depth of 5 cm. No mortality was observed
with Bug Oil at 0.0053 mL product/kg dry soil, so the product can be regarded as safe to
earthworms at the recommended use rate. The reference item chloroacetamide used in a
reference study had a 14-day LC50 of 47.9 mg 2-chloroacetamide/kg dry soil (Davies, N A 2004:
Bug Oil – Earthworm screening at one rate, CEMR-2371).
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The key characteristics of the product are summarised below:
a)
Bug Oil is extremely effective in controlling pests such as whitefly, aphids and
phytophagous mites at rates of 10-20 mL/L. Mechanism of action is primarily curative,
but there is some preventative action, including repellency against adult whitefly and
the potential to reduce virus transmission in a wide range of crop systems. The
product offers great promise for use alone and should also be used effectively in tank
mixes.
b)
The product does not cause phytotoxicity to the major varieties of fruit and vegetable
crops tested.
c)
The product is environmentally benign and can be used in integrated practices.
d)
The mode of action includes a physical element and the product is less likely to cause
pesticide resistance associated with commercialised synthetic products.
It is illuminating to compare Bug Oil with the leading products, imidacloprid and abamectin which
have global sales of hundreds of millions of dollars per year. Bug Oil is as good an acaricide as
abamectin and is equivalent to imidacloprid as an insecticide. The product is also safer to
mammals, earthworms, non-target arthropods and bees than the two leading standards. Thus
effectiveness is similar, but Bug Oil is safer and environmentally more benign.
Further details on the activity of Bug Oil can be found in Appendix 2.
7.2 Nematicide
Development of a novel nematicide is in its early stages, but activity has been confirmed in an
independent laboratory and hopefully tests will be performed in the field in Europe during 2006/7.
These initial trials are planned to focus on the application of the nematicide via drip irrigation to
high value protected crops.
7.3 Alethea
Alethea technology has been evaluated in a number of tests on fruit, vegetables and
ornamentals. Beneficial effects observed following soil applications equivalent to
14mg/plant/day include:
앫
a 20% increase in plant height in heat stressed petunias
앫
a 60% decrease in phytotoxicity in heat stressed tomatoes
These results were significantly different (P쏝/=0.05) from control plants based on a two-tailed
test (Riches, M N 2006: Alethea – Alleviation of heat and cold stress in five plant species,
CEMR-2677).
The Impaction technology is being evaluated during 2004-2006 in conjunction with CABI
Bioscience (memorandum of understanding signed in 2003) on three crops – Banana, Palm Oil
and Cocoa. Encouraging data have been obtained for example on Cocoa with two trials
conducted in CATIE’s La Lola Research Station, Costa Rica, over two complete production
cycles. The trials were peformed on flat and uniform terrains, planted with cocoa hybrids in 1992
at 3m 쎸 3m spacing. A completely randomised design with five replicates was used. In Year 1,
8 쎸 8 plots were used consisting of one surrounding border row, a 6 쎸 6 plot of sprayed trees with
an inner 4 쎸 4 plot of sprayed trees that were assessed. In Year 2, larger 9 쎸 9 plots also
consisted of one surrounding border row, a 7 쎸 7 plot of sprayed trees with an inner 5 쎸 5 plot of
sprayed trees that were assessed. Thus, each assessed tree was surrounded only by sprayed
trees, and treatments were separated by at least two non-treated border rows.
Eleven and nine applications, respectively, were made at monthly intervals in Years 1 and 2 using
a hydraulic knapsack sprayer (Carpi ‘Spray-Mec’, Agrosuperior S.A., San Jose, Costa Rica)
fitted with D2-45 hollow cone nozzles (Spraying Systems Co., Wheaton IL, USA). At 300 kPa this
nozzle has a measured flow rate of 765 mL/min, and typically produces a spray with a volume
median diameter of 170 µm in a 40쎷 cone, desirable characteristics for applications to cocoa
trees.
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Treatments were compared with untreated control plots of the same size. Application of 0.5% v/v
Impactioncombined with 1% v/v Impact Calcium increased the number of healthy pods per plot
significantly (P = 0.027) from 3,812 to 5,832. This increase was accompanied by a significant (P =
0.018) augmentation of seed yield from 173 kg/ha/yr to 269 kg/ha/yr, which is a yield
improvement of 55%. Products are also in large-scale trials in Saudi Arabia on wheat with central
pivot irrigation. Overall, this ‘anti-stress chemistry’ needs a lot more research before it is fully
understood and its full potential exploited. However, the results obtained to date are very
encouraging.
7.4 PiNT
PiNT has been evaluated in the laboratory and in the field in the Middle East and Spain and good
results have been claimed on crops grown in saline soil or with low grade irrigation water, when
Impact Calcium has been applied. In addition, three field trials were conducted in 2005 to
demonstrate the effect of applications of the Pi products, ‘Impact Calcium’ and ‘Impact
Potassium’, on the growth and yield of cucumbers, peppers and tomatoes grown under plastic in
Andalusia, Spain. The Pi products were added into the drip-irrigation system alongside the
reference fertiliser (a system known as ‘fertigation’) and were applied every seven days at a rate
of 5L/ha. The reference fertiliser alone and a water-only control were also tested. Assessments of
vigour, colour, phytotoxicity and internode distance were made at the start and the end of harvest
and quantitative assessments of yield (number and weight of fruits) were made at each harvest
date.There was a marked observable enhancement of both colour and vigour of cucumber and
pepper plants treated with the Pi products when compared with the water-only controls, as
illustrated by the photographs for peppers and cucumbers in Photographs 3 and 4.
Treatment of cucumbers with Impact Calcium and Impact Potassium resulted in consistently
shorter internode lengths, when compared with the water-only controls and, in the case of Impact
Potassium, also with the reference fertiliser, both at the beginning and at the end of harvest
(Table 2).
Table 2: Internode length of treated cucumber plants compared with water-only controls
Reduction in internode length (cm)* compared with water-only control
At first
harvest
(10th
internode)
At final
harvest
(18th
internode)
Impact Calcium
1.0
1.0
Impact Potassium
0.7
1.6
InCA
0.3
1.3
Reference fertiliser only
0.3
1.3
0
0
Treatment
Water only control
*
Mean internode distance of 15 plants per treatment
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Photograph 3: The effect of Plant Impact products upon the colour and vigour of treated peppers
(Spain, 2005)
Water only
Reference fertiliser
Impact Potassium
Impact Calcium
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Photograph 4: The effect of Plant Impact products upon the colour and vigour of treated
cucumbers (Spain 2005)
Water only
Reference fertiliser
Impact Calcium
Impact Potassium
InCA
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The yield of cucumbers in the Impact Calcium and Impact Potassium treated plots was
consistently higher than those of the water-only treatments, both in terms of number and weight
of fruit at each harvest timing. In addition, there is an increase in the average number and weight
of cucumbers produced early in the season compared to the water only and reference fertiliser
treatments and there appears to be an apparent ‘prolongation’ of yield as a result of treatment
with the Pi products, manifest at the later harvest timings in both the numbers and weight of
cucumbers again when compared with the yield of the reference fertiliser and water only
treatments.
7.5 CaT
InCa was also included in season-long trials described in 7.4 and data and photographs are
presented (see Table 1 and Photograph 4) to show effects on plant health and internode
distances. Like Impact Potassium and Impact Calcium, InCa also increased early yield and
prolonged yield during the season compared with the yield of the reference fertiliser and water
only treatments, both in terms of the numbers and weight of cucumbers produced.
CaT is also believed to help with physiological disorders such as Blossom end rot (tomato), tip
burn (lettuce) and bitter pit (apples) and can help prevent crop damage from high or low
temperatures. Excellent results are claimed on strawberry and outdoor tomato (cold stress), and
squash (heat stress). Successful trials have also been undertaken in Spain on lettuce,
strawberry, pepper and tomato and CaT products are now on sale in that country.
An example of results obtained with cold stress at Al Nemr Farms, Madaba, Jordan is shown
below with InCa applied to protected strawberries (in a poly-tunnel) as a foliar spray (1mL/L spray
solution, sprayed to runoff). Maximum day time temperatures ranged from 8 to12쎷C with night
time temperatures below zero for 7 nights at -2 to -6쎷C. Two InCa applications increased the
number of stems by 26%, the crown diameter by 50%, the leaf size by 15% and the leaf thickness
by 10%. Examples of the effect on the crop is shown in Photograph 5.
7.6 VOTEC
VOTEC has been evaluated in the field in the Middle East and is reported to be stable and provide
beneficial plant effects, valuable protection against a similar spectrum of insects and mites to that
obtained with Bug Oil, and does not cause phytotoxicity.
7.7 Speedo
Speedo has been evaluated in a series of trials and excellent results have been obtained on
strawberries, tomatoes, grapes and peppers. For example, effects observed following
application of a foliar spray (3mL/L spray solution, sprayed to run off) to protected Bell Peppers
(Table 3) and tomatoes (Table 4) show acceleration of colour change over a two day period.
Photograph 5: The effect of InCa on strawberries during cold stress (Jordan, 2005)
Control
InCa
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InCa
Table 3: Colour change in bell peppers following Speedo treatment
Colour score
(mean of 10 plants)*
Treatment
0 DAT
2DAT
Speedo
0.5
7.5
Untreated
0.5
2.0
*0=100% green; 5=50% yellow; 10=100% yellow
Table 4: Colour change in tomatoes following Speedo treatment
Colour score
(mean of 10 plants)*
Treatment
0 DAT
2DAT
Speedo
0.0
2.5
Untreated
0.0
0.0
*0=100% green; 5=50% red; 10=100% red
8. Technical Factors
8.1 Review of the Current Position of Pi’s Technology
Pi’s technology focus is primarily on the use of natural products in efficacious mixtures to improve
crop health or to protect crop plants from attack by pests. On the crop health front, progress to
market is fast and the initial products developed are reported to give excellent improvements in
plant health and crop yield, particularly under adverse conditions. Significant advances have
been made and research is continuing to identify and develop even better products. On the crop
protection front, the major agrochemical companies spend many years researching and
developing novel toxophores and it often takes over a decade for a product to become cash
neutral and start to show a profit, having repaid all the discovery, development and registration
costs. The approach adopted by Pi is very positive and significantly reduces the cost and
shortens the timeline to product launch compared to the timeframe for ‘classical’ pesticides.
8.2 Technical Performance of Technology
Laboratory and field studies to date have demonstrated robust performance for crop protection
agents such as Bug Oil, while the products for improving crop health have shown good activity
under different growing conditions in the field and are well received by farmers and growers in a
number of countries who already purchase Pi products.
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The significance of Integrated Crop Management (ICM) and Integrated Pest Management (IPM)
which rely on a range of cultural, chemical and biological approaches is now well recognised and
Pi products are valuable additions to the range of tools available to the farmer and grower. In fact,
the value of the products being developed by Pi has been recognised by the leading not-for-profit
organisation CAB International (CABI). CABI are focused on creating and collating knowledge in
agriculture and related fields and do not tend to engage with industry. However, they have been
impressed by the products under development by Pi and have signed up to their very first
industrial development partnership.
8.3 Review of the Benefits of the Technology
Bug Oil (and possibly at a later date, the new nematicide) is an efficacious yet environmentally
and toxicologically benign product which should make significant in-roads into a market
dominated by often quite toxic chemicals. It is a ‘soft’ product based on naturally occurring
products in which rates of mixing in the cocktail have been scientifically investigated in order to
maximise activity through synergy on both mites and key sucking insect pest such as aphids,
whiteflies and thrips. Bug Oil is not only effective and safe compared to currently sold products, it
should also importantly overcome pesticide resistance problems which are prevalent in many
markets. In addition, such a product should progress to sales and be accepted much more
quickly than traditional chemical pesticides and can be used effectively in integrated
management programmes.
The technology exploited in order to improve crop health has many applications as exemplified
by the wide range of products already marketed by Pi. Some of the products are supplements
which are added to conventional fertilisers to improve performance or overcome abiotic stress
and the importance of such products will increase particularly if energy prices increase markedly,
as is predicted. One of the more recent discoveries, Speedo, should be widely accepted as it
works quickly and, for example, provides colour enhancement in canning tomatoes which is
highly attractive to food processors. Unilever has expressed an interest in trialling this use.
8.4 Limitations of Current Technology
Pi technologies for crop protection and crop health improvement have few limitations apart from
the breadth of crops targeted. The current strategy does not include broad acre crops as a target,
but this could be considered at a later date when the markets for early entry, such as protected
crops, have been satisfied.
9. Sales and Marketing Strategy
Pi will commercialise its products through licensing arrangements with industrial partners, and/or
where appropriate through its own distribution channels.
9.1 Distribution Partners
Pi has arrangements in place with distribution partners in the Middle East in specific markets.
These include MABA in Egypt, AMC in Saudi Arabia, Qatar and Kuwait, Al Kuzbari Int. in Syria
and the Yemen Agricultural Evolution Office in Yemen. Other countries where Pi products are
already sold include Iran, Jordan, Libya, Morocco, Oman, Spain, Turkey and the UK. As part of
the development strategy, Pi will enter into agreements with additional distribution partners with
established sales and marketing channels. However, Pi aims to always provide ready-to-use
products for distribution and therefore there is no formulating in country which minimises the
possibility of product adulteration.
9.2 Licensing
In territories where Pi identifies an industrial partner who is well placed to bring a particular
product to market and possibly share expenditure costs, for example on toxicology studies for
pesticides, Pi will seek to enter into a licensing arrangement with that partner on a royalty basis
rather than seeking to market its own products. The target companies that might be interested in
Bug Oil include the largest companies, for example BASF, Bayer, Syngenta and Dow, and the
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large out of patent producer Makteshim-Agan along with companies outside the top ten, such as
Mitsui, Gowan and Arysta. Negotiations are ongoing regarding Bug Oil with a number of
multinational companies in order to forge exclusive territorial agreements. Some of these
companies are so impressed with Bug Oil that they are already requesting access to the novel
nematicide.
A key element for Pi crop health will be to develop a strategy to make the major products into
ingredient brands. Where third party products incorporating Pi’s technology are
distributed/marketed by other companies, it is essential that arrangements are put in place to
ensure that Pi’s ingredient branding is an integral part of the end-product. For example, it is
believed that there is major potential for Speedo by licensing it for use as an additive for other
products, as Pi has developed a way of incorporating the product into powders for addition to
powder fertilisers as well as for use in liquid fertilisers. This is also a strategy for Alethea
chemistry. Similarly with VOTEC, there is the potential for Pi to licence the manufacturing
process for use not only with insecticidal plant extracts but also with fungicidal plant extracts.
10. Competitive Position
10.1 Key Factors that will Drive Success
Pi is in a good position in that it is operating in both the crop protection arena and in the crop health
improvement market. On the crop protection front, Bug Oil is a very promising, novel agent for
controlling phytophagous mites and sucking insect pests which is safer than many of the
acaricides and insecticides currently available in the market place. Market leaders in key crops
include abamectin in the acaricide sector and imidacloprid in the insecticide sector.
The total potential market for an acaricide/sucking pest insecticide consists of major crops which
include wheat, barley, rice, maize, sugar beet, oil seed rape and plantation species, together with
fruit, vegetables and ornamentals. All these crops are attacked by sucking insects and mites
which not only weaken the plant but also, in some cases, act as vectors for disease. Initially Bug
Oil should be sold at a premium and the market restricted to high value crops consisting largely of
vegetables, fruit and ornamentals. These crops will be either grown in a protected environment or
on a field scale and Pi believes that a limited penetration of the market could yield over $100
million of business annually, from the total global insecticide market which is valued at $8,836
million. This figure would be increased if multiple applications were applied to any crop. In
addition, it is also anticipated that the organic movement will provide a market which will include
recreational gardening.
A robust use rate for Bug Oil for insect and mite control is in the range 10-20 ml/l at an application
volume of 200-400 l/ha. However, higher application volumes will be required in some larger
protected crops, but lower rates of product will be acceptable in some situations. Some of the key
factors that will drive success for Bug Oil compared to a leading sucking pest insecticide,
imidacloprid, and a leading acaricide, abamectin, are shown in Table 5.
Table 5. Relative properties of Bug Oil, Imidacloprid and Abamectin
Safety to
bees
Safety to
earthworms
and
non-target
arthropods
Ease of
registration
Safety to
mammals
Length of
patent
Efficacy
against
mites
Efficacy
against
sucking
insects
*****
*****
*****
*****
****
*****
*****
Imidacloprid
*
*
*****
***
**
**
****
Abamectin
*
*****
***
*
**
**
**
Product
Bug Oil
***** = excellent
* = poor
A range of Pi products is already sold in the crop health improvement market and these appear to
be adding significant value particularly when used as supplements to other commercial fertiliser
products. Properties attributable to the Pi crop health product range which will drive success
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include compatability with existing delivery systems and technologies, the ability of selected
products, such as the Impaction range, to improve resistance to abiotic stress and minimise crop
variability, thereby reducing yield, and the potential to improve the efficiency of current fertiliser
strategies by allowing reductions in application rates which will yield benefits both in terms of cost
and environmental impact.
10.2 Key Current Competitors and their Market Position
The major agrochemical and fertiliser companies form the bulk of the competition for Pi, but these
same companies could also form an effective distribution route. Key competitive acaricides,
sucking pest insecticides and nematicides are listed in Section 6.1, but these markets will be
readily penetrated by products with sufficient spectrum of activity and improved safety to man
and the environment. This has been achieved with Bug Oil and is the objective for the novel
nematicide. As far as Bug Oil is concerned, it is interesting to observe that Makhteshim-Agan
Industries, which are ranked as the seventh largest agrochemical company globally, have
recently signed an exclusive deal with a South Korean company to distribute their new mineral
oil-based insecticide/acaricide. This is viewed as an important addition to Makhteshim-Agan
Industries’ portfolio of environmentally friendly and non-toxic products, but it is anticipated that
Bug Oil will be superior to this product.
While Pi products in the crop protection sector are viewed as replacements, Pi products for the
crop health market often fill a different niche as additives to current treatments. Thus, they are not
necessarily viewed as replacements, but as opportunities to improve the effectiveness of
fertilisers currently used.
10.3 How Pi stacks up against these
Comparisons between products can be made readily for crop protection agents and as significant
amounts of data are available for Bug Oil this is used as an example. Essential/desired technical
profiles can be generated for the ideal properties of any novel product and the table below
demonstrates the suitability of Bug Oil for use in the sucking insect/mite market on fruit and
vegetables.
Characteristic
Properties
Bug Oil match
Spectrum
Essential: aphids, including
Myzus persicae and Aphis
gossypii; whitefly, including
Bemisia and Trialeurodes
species; mites including
Tetranychus species and
Panonychus species
Achieved
Desirable: thrips, including
Good control of thrips. Activity
Thrips palmi, Thrips tabaci,
on other species unknown
stinkbugs, plantbugs & jassids
Potency/Cost
Competitive with pyrethroids
organophosphates and
neonicitinoids
Achieved
Mode of use
Foliar application using
hydraulic sprayers
Achieved
Mode of action
Ideally different to current
leading standards
Achieved
Resistance
Essential that there is no
Achieved
cross-resistance to pyrethroids,
neonicitinoids or
organophosphates
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Characteristic
Properties
Speed of effect
Fast acting preferred. Reduced Speed of action acceptable.
transmission of persistent and Effects on virus transmission
semi-persistent viruses
claimed in field
desirable
Persistence of effect
Equivalent to leading
Achieved in most cases
standards. Short PHI preferred Short PHI expected
for some vegetables
Formulation
Stable, versatile over wide
range of application volumes.
Cheap
Performed OK to date
Achieved
Compatability
Compatible with fungicides,
insecticides, acaricides and
adjuvants
No problems reported
Mammalian toxicity
No worse than pyrethroid
market leaders
Short re-entry period essential
Oral MLD 쏜mg/kg in rats and
mice
Zero/moderate skin
sensitisation
Zero/moderate skin and eye
irritation
No mutagenecity
Achieved
Low bird tox, 쏜2000mg/kg
Expected based on individual
components
Achieved – no mortality at
recommended rates
Achieved: Daphnia magna 48 h
EC50 1 mg/L; algal growth
inhibition 72h EC50 쏜1 mg/L
Generally acceptable: low risk
to bees, no effect on ladybird
reproduction, but predictably
toxic to predatory mites and to
parasitic wasps
Ecotoxicity
Bug Oil match
Low earthworm tox
Low aquatic tox: Daphnia,
Algae
Low risk to beneficial
organisms
Residues/Metabolites
No ADI problems, minimal
residues at harvest
Expected
Oral MLD 쏜300mg/kg in female
mice
Expected
Not a skin irritant in the rabbit
Not mutagenic
Expected to be OK based on
individual components
Bug Oil will be particularly attractive to vendors with a strong presence in the market who need an
environmentally friendly product which is effective and is less likely to engender resistance. For
example, one of the major sucking insect pests in a range of agronomic and horticultural cropping
systems is Bemisia tabaci Gennadius, the Sweet Potato Whitefly or Tobacco Whitefly.
This important pest has developed high levels of resistance to many chemical classes of
insecticides including organophosphates, carbamates, pyrethroids, neonicotinoids and insect
growth regulators such as buprofezin and pyriproxyfen. In southern Spain, the favourable climate
and continuous production cycle has allowed B. tabaci to reach extremely high densities leading
to direct damage through feeding and by transmitting virus diseases to cucurbits, peppers and
tomatoes. Many insecticides have been lost as a result of resistance and products like Bug Oil
may be the solution required to overcome this major problem.
In summary, Bug Oil compares extremely favourably with competitor products and should be
positioned as follows:
a)
Use against mites and sucking insect pests of all major world crops, initially focusing
on high value opportunities in fruit, vegetables and ornamentals
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b)
Use in transgenic crops designed to be resistant to lepidopterous pests where there
are mite or sucking pest infestations
c)
Use as part of an Integrated Pest Management programme
d)
Use in organic agriculture
e)
Use in Home and Garden markets given the low toxicity to mammals and
environmental acceptability
f)
Use pro-actively for resistance management
11. Key Risks and Opportunities
11.1 Early Stages of Operation
Pi is successfully selling its early products into selected countries, for example in the Middle East,
and generating good business. This is an effective strategy as income is obtained for funding
further research and products are being sold and better understood in parallel with producing
dossiers for using the same products in developed countries with greater regulatory demands.
The initial products launched have been well received which demonstrates at this early stage that
valuable pest control and crop health products have been developed.
11.2 Dependence on Key Personnel
Although Pi has made successful sales of its initial products, others are at an early stage of
development and the key is to maintain a full and exciting pipeline of products. Currently the
success of the company depends heavily on the expertise of two directors – Mr Peter Blezard and
Mr David Marks. It is critical that Pi is able to retain their services and, as the company grows, to
be able to recruit sufficient suitable skilled scientists to enable Pi to grow its business significantly.
11.3 Dependence on Patents and IP
Pi is operating in a field which is highly dependent on intellectual property. One patent has
already been granted to Pi, but no assurance can be given that all eighteen pending patent
applications or any future patent applications will necessarily result in granted patents. However,
while the company must rely on patents to protect its assets, the granting of a patent only
prevents a competitor copying the discovery and does not prevent the competitor from
independently developing products that perform the same functions. Thus, whilst patents will be
exemplified as fully as possible in order to maximise cover, no assurance can be given that third
parties will not develop or acquire products with similar properties.
11.4 Regulatory Approval
Pi products are already sold in countries such as Egypt, Jordan, Saudi Arabia, Syria, Turkey and
Yemen. However, acceptance, for example in the USA and EU is more demanding. Obtaining
regulatory approval for the types of products that Pi work on is not an issue. However, the speed
of obtaining registration is important and the earlier that registration can be obtained in major
markets, the better for the Pi cash flow. Nonetheless, the view expressed in Section 5 is that Bug
Oil (and the potential nematicide based on plant extracts) should be regarded as a ‘low risk’
product in Europe or a ‘reduced risk’ product in USA. This means that a reduced data package is
required and only 1-2 years will be required in order to get the product registered, for example in
the UK.
11.5 Competition
Pi do not necessarily view the major agrochemical companies as competitors regarding the Pi
products being developed, rather they are being pursued as collaborators and potential
licencees who have the marketing clout to ensure that Pi products make significant in-roads in
key markets. Historically, the major multinationals have implemented a successful strategy of
inventing and developing blockbusters such as the photostable pyrethroids, avermectins and
strobilurins which are based on natural products. Other companies are also developing crop
management products based on natural ingredients, although the Pi focus is on utilising natural
products in mixture rather than selling a specific natural product or developing derivatives of
single components.
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11.6 Low Threshold for Market Entry
The Pi strategy is to combine the early establishment of sales and infrastructure alongside the
cost effective development of high value proprietary products. This is the basis of an attractive
risk/reward strategy. The Pi product range is aimed at a low threshold for market entry with
products aimed at improving crop health entering the market place quickly, while Pi crop
protection agents based on natural products should obtain registration and sales much faster that
conventional chemical pesticides.
11.7 Policing of Product Imitation
Successful inventions will always be copied and Pi has a very positive approach to obtaining
patent protection for all key products. One patent has already been granted and others are
pending. Importantly, Pi is investing in developing techniques which will allow competitor
products to be tested in order to determine if they infringe granted patents. Methods have already
been developed, for example for Bug Oil, and similar approaches will be followed for all Pi
products in order to avoid fraudulent sales of a Pi product protected by patent.
11.8 Significant Market Opportunities and Options for Pi
Pi is already successfully selling products in fourteen countries. Crop health products have been
launched with alacrity and are already recognised as valuable products by many farmers and
growers and there are significant markets which will benefit from the technology offered.
However, the successful introduction of Bug Oil will be the most significant step forward for Pi as
the market potential is enormous. The product is already sold in the Middle East, but registration
and sale of product in European countries and in the USA will create significant sales, profits from
which can be used in part to fund the development of further products.
Strategically Bug Oil will be invaluable in an integrated spray programme. The following four
specific qualities of Bug Oil will influence the market penetration, but the most important factor of
all will be the quality and quantity of marketing which will depend on the vendor of Bug Oil.
a)
Efficacy – It is an effective product and can be compared favourably with the best
conventional synthetic pesticides.
b)
Environmentally benign – Bug Oil has a good environmental profile so it will not
contaminate the land on which it is manufactured or used. There is no known risk from
storing the product, spraying the crop, re-entry by growers into treated greenhouses,
harvesting, eating the sprayed crop or disposing of the containers.
c)
Bug Oil has a quick knockdown effect and a very short pre-harvest interval so it could
be used as the final spray before harvesting. Fortunately, Bug Oil can enhance the
appearance of produce by giving it a slight lustrous appearance, but there is no taint
or smell.
d)
The mode of action includes a physical element and resistance to Bug Oil is less likely
to develop.
The main competitors to Bug Oil are likely to be avermectins such as abamectin, which is sold
under trade names such as Dynamec and Abacide, and imidacloprid which is sold under trade
names such as Confidor and Gaucho. Five of the key indicators for these two leading products
are discussed in comparison to Bug Oil below.
a)
Resistance. These compounds have been widely and intensively used and
resistance is building up worldwide. Incidentally, in some of the Pi field trials in Spain
all the pests were resistant to standard materials such as imidacloprid. This creates
an excellent opportunity for Bug Oil.
b)
Length of patent protection. Bug Oil has only just been patented and so will enjoy the
full period of protection, whilst the avermectins and imidacloprid are already off patent
and will soon suffer significantly from generic competition.
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c)
Ecotoxicology. Bees are recognised by the general public and most farmers and
growers as being wholly beneficial to the environment. Bee mortality attributable to
pesticides is easy to identify and a public outcry generally ensues as has happened in
Canada and France. It is particularly fortunate that Bug Oil is not harmful to bees in
any normal circumstances in comparison with abamectin which is toxic and
imidacloprid which is harmful when sprayed on any flowering crops or verges. In
addition, Bug Oil, unlike abamectin and imidacloprid, causes no mortality in
earthworms.
d)
Legislation. Some governments enforce/are considering the use of a pesticide tax to
encourage farmers and growers to use less synthetic agrochemicals and control mite
and insect pests by cultural farming methods and the use of natural products which
are assumed to be less toxic. Bug Oil is likely to avoid any pesticide tax as it is
relatively benign and comprises natural constituents. Likewise if constraints are
made on the number of spray applications that can be made of synthetic compounds,
Bug Oil may not be counted as a chemical application.
e)
Transportation. If there is a spillage of Bug Oil it will not generate an emergency as
there will be no major environmental catastrophe.
Thus, Bug Oil has great potential as a proven, innovative, effective and safe replacement for
many current pesticide applications in major food and agricultural commodity crops globally.
12. Review of Future R&D Plans for Pi’s Technology
12.1 Future Applications
The early introduction of Pi’s crop health products has been successful as farmers and growers
are made aware of the company and its products and the ease of market entry has, and will,
markedly assist cash flow. The product range consists mainly of speciality fertilisers positioned
on high value fruit and vegetables where crop quality is paramount. The crop health products
bring benefit as additives to conventional fertilisers, for example giving rapid visual effects,
increasing yield or lengthening harvest times. Energy costs are predicted to increase markedly in
the coming years and the cost of production of fertilisers, such as ammonium nitrate, will increase
in line with the higher cost of energy. Therefore, further areas for exploitation could include the
addition of crop health products to reduced rates of fertilisers.
On the crop protection front, Bug Oil has the potential to be a very successful product which can
be broadened into virtually any crop attacked by mites and sucking insects. The ability to control
pest species which are resistant to conventional acaricides and insecticides is a significant
upside which should be exploited. In addition, given the effectiveness of the product in agriculture
and horticulture, Bug Oil may also find applications for the control of mites in non-agricultural
situations and of ticks.
12.2 Review of Technical Potential to Address any New Markets
Bug Oil, is an excellent product on which Pi can build and develop the company and effort is being
addressed to filling the pipeline with a range of valuable products including nematicides,
fertilisers and plant physiological active products. Pi has already successfully identified,
evaluated and developed new crop health and crop protection products and has the potential to
develop further products of value in improving plant quality or providing protection from pest
attack. Research ideas abound in Pi, the company is expanding and given effective investment
and a strong commitment to aggressive marketing and the building of appropriate alliances
globally, Pi – with a range of products starting with Bug Oil – will be extremely successful.
12.3 Analysis of Resources and Schedule needed to achieve Future Plan
Pi has made tremendous headway with quite limited resource and in order to service sales of
current fertilisers and pesticides and to develop novel products for the future it is essential that
investment is made in growing the company and in particular its research base. Effort can then be
addressed to developing further aids for crop improvement and to broadening crop protection
research to foliar pests other than mites and sucking insects and to increase efforts to develop a
nematicide and ideally, in the future, a soil insecticide.
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12.4 Size and Growth of Potential Markets
In 2005 the size of the global agrochemical crop protection market (excluding non-crop pesticide
sales) was $33,576 million (Agrochemicals – Executive Review, 17th Edition, 2006), while the
world fertiliser market was estimated to be worth around $15,000 million per annum. Given the
rapidly growing world population, it is important that crop yields can be increased in order to feed
an ever increasing number of people, and fertiliser inputs will surely increase. However, the
agrochemical crop protection market will probably decline as inroads are made for example by
genetically modified crops. Nonetheless, there will be a major requirement for agrochemicals for
the foreseeable future, but there will be a shift towards safer, more environmentally friendly
products.
13. Conclusions
Pi’s overall future market position is robust given the ongoing/increasing need for products
improving crop health and the requirement on the crop protection side for novel products which
are efficacious and safe, and are not affected by pesticide resistance. Given the properties of Bug
Oil, Pi expects to obtain an attractive royalty rate for the product in addition to selling directly
through distributors in some territories.
Pi is well positioned to continue to undertake research and development of products capable of
improving crop health and providing crop protection, but in addition to being a discovery
company, it should retain flexibility to develop a specific out-licensing/marketing strategy for each
product, as having the ability to sell early in selected countries will significantly enhance the cash
flow position. It should therefore position itself in the agrochemical sector focusing on providing
healthier crops in a sustainable manner through the provision of safe, effective, environmentally
benign technology.
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Appendix 1: Pi Patent Cases, 8th September 2006
Patent Case
ref
Subject
Application No.
Filing Date
P/252/BRW
Bug Oil
PI 0417150-0
02 December 2004
P/252/CNW
Bug Oil
200480041121.5
02 December 2004
P
P/252/EPW
Bug Oil
04801259.5
02 December 2004
P
P/252/GBW
Bug Oil
0512866.5
02 December 2004
P/252/INW
Bug Oil
1499/KOL NP/06
02 December 2004
P
P/252/JPW
Bug Oil
Not yet known
02 December 2004
P
P/252/KRW
Bug Oil
10-2006-7012492
02 December 2004
P
P/252/MXW
Bug Oil
PA/a/2006/006119
02 December 2004
P
P/252/RUW
Bug Oil
2006123422
02 December 2004
P
P/252/USW
Bug Oil
10/541,740
02 December 2004
P
P/252/WOD
Bug Oil
PCT/GB2004/005063
02 December 2004
P
P/252/ZAW
Bug Oil
2006/04489
02 December 2004
P
P/253/WOD
Alethea
PCT/GB2005/001562
22 April 2005
P
P/313/WOD
CAT Technology
PCT/GB2006/002185
15 June 2006
P
P/314/GBA
Patent No
Grant date
Status
P
2411117
23 November
2005
G
Impaction
0520726.1
12 October 2005
P
Plant Growth
Enhancement
PCT/GB2006/000882
13 March 2006
P
P/380/GBA
Speedo
0521993.6
28 October 2005
P
P/436/GBA
Votec Technology
0603468.0
22 February 2006
P
P/446/GBA
Nematicidal
Composition
0609436.1
12 May 2006
P
P/317/WOD
Status of Applications/Patents
G = Granted
P = Pending
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Appendix 2: Bug Oil – Technical and Commercial Review, January 2005
Contents
1.
Executive Summary
69
2.
Introduction
69
3.
General Properties of Bug Oil
69
4.
Biological Evaluation
70
4.1
Spectrum of Activity
70
4.1.1
Insects
70
4.1.2
Mites
74
4.2
Synergistic Effects
77
4.3
Mobility
79
4.4
Field Activity
80
4.4.1
Sucking insects
80
4.4.1.1 Aphids on tomatoes
80
4.4.1.2 Whitefly on tomatoes
81
4.4.1.3 Whitefly on peppers
83
4.4.1.4 Whitefly on zucchini
84
4.4.1.5 Whitefly on cucumbers
85
Mites
85
4.4.2.1 Mites on tomatoes
85
4.4.2.2 Mites on peppers
86
4.4.2.3 Mites on cucumbers
87
4.4.2.4 Mites on beans
88
4.4.2.5 Mites on apples
89
4.4.2.6 Mites on lemons
90
Other species
91
4.4.2
4.4.3
5.
Crop Safety
91
6.
Environmental Acceptability to Beneficial Organisms
92
6.1
Coccinella septempunctata
92
6.2
Aphidius rhopalosiphi
92
6.3
Typhlodromus pyri
93
6.4
Bees
94
6.5
Earthworms
95
7.
Recommended Field Use
96
8.
Positioning in the Market Place
96
9.
Competitive Characteristics
96
10.
Strategic Advantages
96
11.
Competition
97
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1. Executive Summary
Bug Oil is a very promising, patented, novel agent, based on vegetable oils and naturally
occurring essential oils, for controlling phytophagous mites and sucking insect pests. The
product has no adverse phytotoxic effects and is safer environmentally and toxicologically than
most of the acaricides and insecticides currently available in the market place. The product can
be positioned effectively in a number of crops, but key opportunities include the high value
protected fruit and vegetable crops, and top fruit such as apples and citrus.
The key characteristics of the product are summarised below:
a)
Bug Oil is extremely effective in controlling pests such as whitefly, aphids and
phytophagous mites at rates of 10-20 ml/l. Mechanism of action is primarily curative,
but there is some preventative action, including repellency against adult whitefly.
Activity also increases with temperature. The product offers great promise for use
alone and should also be used effectively in tank mixes.
b)
The product does not cause phytotoxicity to any of the fruit and vegetable crops
tested.
c)
The mode of action includes a physical element and the product is less likely to cause
pesticide resistance associated with commercialised synthetic products.
d)
There is no known competition at present, but simple vegetable oils are sold as
adjuvants and insecticides, but are less effective than Bug Oil.
e)
The market potential is enormous, but the product should be launched first in high
value fruit and vegetable crops, and should penetrate the market particularly well
where there is resistance to conventional pesticides.
f)
Bug Oil will be highly attractive to vendors with a strong presence in the market who
need an environmentally friendly product which is effective and is less likely to
engender resistance.
2. Introduction
Bug Oil is a novel insecticide/acaricide discovered by BioFutures PI Limited. The product
consists of essential oils from three plant species – Thymus vulgaris, Tagetes erecta and
Gaultheria procumbens – which in prescribed proportions are synergistic and give excellent
control of phytophagous mites and sucking insect pests. This discovery is protected by the British
Patent Application Number 0327864.5, filed on 02 December 2003 and the International Patent
Application Number PCT/GB2004/005063 filed on 02 December 2004.
During 2003/4 the product has been tested extensively in the laboratory and in the field in Europe,
the Middle East and the Far East, and data particularly from laboratory tests and commercial
glasshouse and field studies in Europe are summarised in Sections 4-6 of this document. Options
for the positioning of Bug Oil are summarised in Sections 7-11.
3. General Properties of Bug Oil
Bug Oil is a formulation nominally containing 93.899% w/w canola oil, 0.600% w/w tagetes oil,
0.600% w/w thyme oil and 0.001% w/w wintergreen oil. The formulation is a non-viscous yellow
liquid comprising the three essential oils in canola oil plus 4.900% w/w emulsifier
(polyoxyethylene sorbitan monolaurate).
The main ingredient, canola oil, is an edible vegetable oil refined from the seeds of two species of
rape plants, Brassica napus and Brassica campestris, from the family Cruciferae. It appears to
have no adverse effects on humans or the environment as the material is of low toxicity and is
rapidly broken down.
Thyme oil is of low acute toxicity in rats and rabbits treated dermally and rats treated orally. In
addition, studies involving repeated oral administration of thyme oil to mice showed no overt
adverse effects and the LD50 (intragastric intubation) for thyme oil against rats is 2840 mg/kg,
while the dermal LD50 is 쏜5000 mg/kg. In the USA, thyme oil is regarded as a minimum risk
pesticide and has been registered as an active ingredient since 1998.
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Tagetes oil has low oral and dermal toxicity and is regarded as non-toxic, non-irritant and
non-sensitising. The oral LD50 in rats is 3700 mg/kg and the dermal LD50 in rats is 쏜5000 mg/kg.
The oil is used as a food colourant and has no tolerance limit for inclusion in food in the USA.
Wintergreen oil has been registered as an active ingredient in the USA since 1992 and
biodegrades readily. The compound is regarded as toxic in large quantities, but this is not
relevant to Bug Oil as the product only contains 0.001% w/w of the oil. In fact, wintergreen oil is
used in significantly greater quantities in some toothpastes and soft drinks.
4. Biological Evaluation
4.1 Spectrum of Activity
4.1.1 Insects
Whitefly:
The aim of these studies was to determine the efficacy of Bug Oil on separate life stages of the
glasshouse whitefly (Trialeurodes vaporariorum). Three studies were undertaken, the first of
which was to determine the efficacy of Bug Oil as an ovicide in both protectant and curative
treatments. The second test was to determine the efficacy of Bug Oil as a curative treatment
against whitefly nymphs and the third test was to determine the effects of Bug Oil as a (repellent)
protectant spray against whitefly adults.
All treatments were applied to tobacco plants (Tobacco nicotiana) using a hand-held atomiser to
incipient run-off. Replicate plants were sprayed for each treatment. For the ovicide test, plants
were treated (both infested and uninfested with eggs). For the curative test, leaf discs were taken
and egg numbers counted. For the protectant test, treated plants were infested after treatment,
then leaf discs were taken with known numbers of eggs. Assessments of egg hatch were made at
3, 6 and 11 days after treatment (DAT). For the curative nymph test, leaves with nymphs 7-12
days old were treated and assessments of mortality made at 4, 7 and 10 days after application.
The adult protectant test, assessed the numbers of living adults on treated leaves after
immersion in an adult whitefly infested chamber
The results of the assessments are summarised in the Tables 1-4.
Table 1: RESULTS FOR OVICIDE PROTECTANT TEST
Mean percentage whitefly egg hatch
Assessment time-days after
application (DAT)
Treatment
*
†
1
3
7
Control (water)
0.0
0.0
100.0
Bug Oil @ 0.5 ml/l
0.0
0.0
100.0
Bug Oil @ 1 ml/l
0.0
0.0
100.0
Bug Oil @ 2 ml/l
0.0
0.0
100.0
Bug Oil @ 10 ml/l
0.0
0.0
0*
Bug Oil @ 50 ml/l
0.0
0.0
36.4†
Imidacloprid @ 0.15 gai/l
0.0
0.0
0.0
No eggs laid
low numbers of eggs laid
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Table 2: RESULTS FOR OVICIDE CURATIVE TEST
Mean percentage whitefly egg hatch
Assessment time-days after
application (DAA)
Treatment
1
3
7
Control (water)
0.0
95.5
100.0
Bug Oil @ 0.5 ml/l
0.0
90.4
100.0
Bug Oil @ 1 ml/l
0.0
98.7
100.0
Bug Oil @ 2 ml/l
0.0
97.6
100.0
Bug Oil @ 10 ml/l
0.0
100.0
100.0
Bug Oil @ 50 ml/l
0.0
98.7
99.2
Imidacloprid @ 0.15 gai/l
0.0
75.2
91.4
Table 3: RESULTS FOR NYMPH CURATIVE TEST
Mean percentage whitefly nymph mortality
Assessment time-days after
application (DAA)
Treatment
4
7
10
Control (water)
0.0
0.0
0.0
Bug Oil @ 0.5 ml/l
0.0
0.0
0.0
Bug Oil @ 1 ml/l
0.0
81.5
81.5
Bug Oil @ 2 ml/l
0.0
72.6
72.6
Bug Oil @ 10 ml/l
0.0
88.6
88.6
Bug Oil @ 50 ml/l
84.6
98.7
98.7
100.0
100.0
100.0
Imidacloprid @ 0.15 gai/l
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Photographs of tobacco leaf treated with Bug Oil at 10ml product/l and free of whitefly (top) and untreated tobacco leaf
showing whitefly infestation (bottom).
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Table 4: RESULTS FOR ADULT REPELLENCE TEST
Mean number of adult whitefly per leaf
Assessment
time-days after
application (DAA)
Treatment
15
18
Control (water)
37
144
Bug Oil @ 0.5 ml/l
50
143
Bug Oil @ 1 ml/l
42
195
Bug Oil @ 2 ml/l
70
132
Bug Oil @ 10 ml/l
1
3
Bug Oil @ 50 ml/l
2
2
Imidacloprid @ 0.15 gai/l
0
0
These results show that Bug Oil gave excellent preventative egg control (reduced lay/hatch)
similar to imidacloprid, when applied as a preventative spray at rates of 10 and 50 ml/l.
Bug Oil rates of 1 to 50 ml/l also gave excellent control of nymphs and repelled adults from treated
leaves at rates of 10 and 50 ml product /l. Bug Oil applied at 10 ml/l as a curative treatment is as
effective as the leading standard, imidacloprid, on nymphs and adults. Bug Oil even has some
activity at 2 ml/l, but like the standard has no curative ovicidal activity at any rate tested.
Interestingly, the product has excellent repellent activity against adults at 10 and 50 ml/l (Riches,
2004a).
Aphids:
The aim of these replicated studies was to determine the efficacy of Bug Oil against the
Peach/Potato Aphid (Myzus persicae (Sulzer)) in experiments to determine efficacy as a
protectant spray and efficacy by curative application. Bug Oil was applied at rates of 50, 10, 2, 1
and 0.5 ml product/l of spray solution and was compared to Aphox (Pirimicarb) at the rate of
0.5g/l. Controls were sprayed with deionised water only. Application of the spray solutions was to
the upper (dorsal) surface of excised Chinese cabbage leaves, variety Blues F1, using a
Conveyer Sprayer with a mean application rate of 398 l/ha. For the protectant test, the plants
were infested by transferring aphids from stock plants on to the leaves manually using a fine paint
brush. For the curative test, leaves were selected from culture plants that were pre-infested with
aphids.
Results from these tests show that Bug Oil did not control Myzus persicae when applied as a
protectant spray at rates up to 50 ml/l, but Bug Oil applied at 50 ml/l as a curative treatment is as
effective as the leading standard, Aphox, and some control is provided at a rate of 10ml/l.
(Riches, 2004b)
Thrips:
The aim of these replicated studies was to determine the efficacy of the test item on the Western
Flower Thrip, Frankliniella occidentalis. Two studies were undertaken – the first to determine the
efficacy of Bug Oil as a protectant spray and the second to determine efficacy by curative action.
Protectant efficacy was tested by applying the treatment to the top (dorsal) surface of a French
Bean (variety The Prince) leaf disc using a Potter Tower sprayer with an application rate of 411
l/ha. When the leaf discs had dried, thrips were transferred by pooter to the treated surface.
Assessments of mortality and thrip numbers were made at one, two and five days after
infestation. Dynamec at an application rate of 0.5 ml/l was sprayed as a reference treatment. The
curative study was as for the protectant study except the French Bean leaf discs were
pre-infested before application. At all assessment timings, feeding damage to the leaf discs was
also assessed. The application rates of Bug Oil in both the protectant and curative studies were
50, 10, 2, 1 and 0.5 ml product/l.
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Bug Oil applied at 50 ml/l as a curative treatment gave useful control of thrips, but was inferior to
the leading standard, Dynamec. Bug Oil gave 80% control, while Dynamec gave total control, but
it should be noted that Bug Oil was much faster acting and may have utility in the field for clean-up
under short pre-harvest intervals (Riches, 2004c).
4.1.2 Mites
The aim of these replicated studies was to determine the efficacy of Bug Oil against the mite
Tetranychus urticae. Bug Oil was assessed at application rates of 50, 10, 2, 1, and 0.5 ml
product/l, along with a water-only control and a reference item (Dynamec) sprayed at 0.5 g
product/l.
All treatments were applied to the dwarf French Bean leaf discs (var. The Prince) using a Potter
Tower sprayer delivering a spray volume of 393.8 l/ha. At each of the assessment times, leaf
discs were cut and placed, treated surface uppermost, in petri dishes containing water-saturated
cotton wool. The discs were infested with mite adults, nymphs or eggs. Assessments of mortality
were carried out at one, three and seven days after application.
The results of the assessments for mortality are summarised in the Tables 5 – 10.
Table 5: RESULTS FOR OVICIDE PROTECTANT TEST
Mean percentage mite egg hatch
Assessment time-days after
application (DAA)
Treatment
1
3
7
Control (water only)
16.7
50.0
100.0
Bug Oil @ 0.5 ml/l
10.0
63.3
100.0
Bug Oil @ 1 ml/l
20.0
70.0
100.0
Bug Oil @ 2 ml/l
7.9
18.4
94.7
Bug Oil @ 10 ml/l
9.7
45.2
45.2
Bug Oil @ 50 ml/l
6.5
32.3
32.3
Dynamec @ 0.5 g/l
9.7
32.3
100.0
Table 6: RESULTS FOR NYMPH PROTECTANT TEST
Mean percentage mite nymph mortality
Assessment
time-days after
application (DAA)
Treatment
1
3
Control (water only)
2.9
2.9
Bug Oil @ 0.5 ml/l
0.0
42.3
Bug Oil @ 1 ml/l
13.0
17.4
Bug Oil @ 2 ml/l
34.5
51.7
Bug Oil @ 10 ml/l
85.7
89.3
Bug Oil @ 50 ml/l
96.7
100.0
100.0
100.0
Dynamec @ 0.5 g/l
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Photographs of French Bean leaf treated with Bug Oil at 10ml product/l and free of mites (top) and untreated French Bean
leaf showing mite infestation (bottom).
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Table 7: RESULTS FOR ADULT PROTECTANT TEST
Mean percentage mite adult mortality
Assessment
time-days after
application (DAA)
Treatment
1
3
Control (water only)
0.0
13.3
Bug Oil @ 0.5 ml/l
3.3
30.0
Bug Oil @ 1 ml/l
6.7
30.0
Bug Oil @ 2 ml/l
16.7
23.3
Bug Oil @ 10 ml/l
80.0
100.0
Bug Oil @ 50 ml/l
96.7
100.0
100.0
100.0
Dynamec @ 0.5 g/l
Table 8: RESULTS FOR OVICIDE CURATIVE TEST
Mean percentage mite egg hatch
Assessment time-days after
application (DAA)
Treatment
1
3
7
Control (water only)
5.1
56.0
100.0
Bug Oil @ 0.5 ml/l
3.8
69.9
100.0
Bug Oil @ 1 ml/l
7.4
68.7
100.0
Bug Oil @ 2 ml/l
0.0
28.1
100.0
Bug Oil @ 10 ml/l
1.2
13.0
10.9
Bug Oil @ 50 ml/l
0.0
2.5
10.5
Dynamec @ 0.5 g/l
0.0
3.0
39.1
Table 9: RESULTS FOR NYMPH CURATIVE TEST
Mean percentage mite nymph mortality
Assessment
time-days after
application (DAA)
Treatment
1
3
0.0
0.0
13.1
55.1
Bug Oil @ 1 ml/l
8.3
34.5
Bug Oil @ 2 ml/l
9.6
36.2
Bug Oil @ 10 ml/l
77.6
89.5
Bug Oil @ 50 ml/l
94.2
100.0
100.0
100.0
Control (water only)
Bug Oil @ 0.5 ml/l
Dynamec @ 0.5 g/l
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Table 10: RESULTS FOR ADULT CURATIVE TEST
Mean percentage mite adult mortality
Assessment
time-days after
application (DAA)
Treatment
1
3
0.0
2.4
10.7
17.9
Bug Oil @ 1 ml/l
3.1
21.9
Bug Oil @ 2 ml/l
13.6
36.4
Bug Oil @ 10 ml/l
57.1
92.9
Bug Oil @ 50 ml/l
88.9
100.0
100.0
100.0
Control (water only)
Bug Oil @ 0.5 ml/l
Dynamec @ 0.5 g/l
The following conclusions can be drawn:
Protectant treatment
1.
Ovicide: Bug Oil reduced egg hatch from rates of 2 ml product/l at 7 DAA while
Dynamec gave no egg mortality at 7 DAT.
2.
Nymphicide: Bug Oil gave similar control to Dynamec at 10 and 50 ml/l. Bug Oil at 50
ml/l and Dynamec both provided 100% control at 3DAT.
3.
Adult mortality: Bug Oil at 50 and 10 ml/l gave similar control to Dynamec at 3DAT.
Curative treatment
4.
Ovicide: Bug Oil is a better ovicide (90% control) than Dynamec at rates of 10 and 50
ml/l while Dynamec only gave 71% control at 7DAT.
5.
Nymphicide: Bug Oil gave similar control to Dynamec at 50 ml/l (both gave 100%
control at 3 DAT) with Bug Oil even providing 55% mortality at 0.5 ml/l.
6.
Adult mortality: Bug Oil at 50 ml/l gave similar control to Dynamec (100%) at 3 DAT
and even provided 18% mortality at 0.5 ml/l (3DAT).
These results show that Bug Oil had superior mite egg control than Dynamec when applied as a
curative spray at rates of 10 and 50 ml/l. Bug Oil rates of 10 and 50 ml/l also gave excellent control
of nymphs and adults in both curative and protectant tests (Riches, 2004d).
4.2 Synergistic Effects
Mites
The aim of these studies was to determine the extent of synergism between the three active
components in Bug Oil and to find the best optimisation for the active components against mites.
Three separate formulations, each containing an active constituent of Bug Oil namely Tagetes,
Thyme and Wintergreen oils were tested alone and in combination (ratios of 1:1, 1:3 and 3:1) to
assess their efficacy against motile stages of the mite, Tetranychus urticae. In an initial study, the
samples were tested alone at the following rates – 20, 10, 5, 2.5 and 1.25 ml product /l, along with
a water only control to determine the relative activity of the samples and the optimum rates to be
tested in the definitive study. In the definitive study, the samples were again tested alone at the
following rates – 30, 10, 3.33, 1.11 and 0.37 ml product/l. Combinations of the formulations of 1:1,
3:1 and 1:3 were also tested at rates of 30, 10, 3.33, 1.11 and 0.37 ml product/l to determine their
relative LC50 values.
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All treatments were applied to French Bean (variety The Prince) leaf discs (previously infested
with Tetranychus urticae) using a Potter Tower sprayer. Leaf discs were sprayed at an
application rate of 400l/ha to ensure adequate coverage. Replicate discs were sprayed for each
treatment.
At each of the assessment times (pre-treatment, and one and three days after treatment (DAT)),
the leaf discs were examined under a binocular microscope for living motile mites and LC50
values were calculated using ToxCalc V5.0 (1999) using the statistical model with the best fit for
the data.
The LC50 values are summarised in Table 11.
Table 11: RESULTS FOR DEFINITIVE STUDY WITH
BUG OIL FORMULATIONS v T. urticae MOTILES
Treatment
LC50 ml
product /l
Method of analysis (method selected as
one best fitting data)
Bug Oil Batch 002 3 way mix
4.97
Maximum Likelihood-Probit
Tagetes
4.53
Maximum Likelihood-Angular
Wintergreen
4.13
Maximum Likelihood-Probit
Thymus
5.41
Maximum Likelihood-Probit
Tagetes/Thymus 1:1
5.65
Maximum Likelihood-Probit
Tagetes/Thymus 3:1
2.78
Maximum Likelihood-Probit
Tagetes/Thymus 1:3
3.34
Maximum Likelihood-Probit
Tagetes/Wintergreen 1:1
1.49
Maximum Likelihood-Probit
Tagetes/Wintergreen 3:1
2.61
Maximum Likelihood-Probit
Tagetes/Wintergreen 1:3
3.66
Maximum Likelihood-Probit
Thymus/Wintergreen 1:1
3.65
Maximum Likelihood-Probit
Thymus/Wintergreen 3:1
5.87
Trimmed Spearman-Karber
Thymus/Wintergreen 1:3
3.82
Maximum Likelihood-Probit
All formulations of Tagetes, Wintergreen, Thymus and Bug Oil were effective at controlling
motiles of Tetranychus urticae with the Wintergreen formulation the most effective – giving 100%
mortality at 10 l product/l. In the definitive study, ToxCalc V5.0 was used to determine EC50
values for each formulation mix. Both the Tagetes/Wintergreen formulation mixes (1:1 and 3:1
ratio) were significantly more effective than the standard three way mix used in Bug Oil.
In the definitive study, the Tagetes/Wintergreen (1:1 and 3:1 ratio) mixture was most effective at
controlling motile mites, both being significantly more active than the Bug Oil, (three oil mix)
formulation. In addition, the Tagetes/Wintergreen 1:1 mixture was 2.8 times more active than the
Wintergreen alone formulation and three times as active as the Tagetes oil alone formulation
(Riches, 2004e).
Whitefly
The aim of these studies was to determine the extent of synergism between the three active
components in Bug Oil and to find the best optimisation for the active components against
whitefly.
Three separate formulations, each containing an active constituent of Bug Oil namely Tagetes,
Thymus and Wintergreen oils were tested alone and in combination (ratios of 1:1, 1:3 and 3:1) to
assess their efficacy against nymphs (scales) of whitefly (Trialeurodes vaporariorum). Samples
were again tested alone at the following rates – 30, 10, 3.33, 1.11 and 0.37 ml product/l.
Combinations of the formulations of 1:1, 3:1 and 1:3 were also tested at rates of 30, 10, 3.33, 1.11
and 0.37 ml product/l to determine their relative LC50 values.
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All treatments were applied to French Bean leaf discs (previously infested with Trialeurodes
vaporariorum as eggs and then developed to scales) using a Potter Tower sprayer. Leaf discs
were sprayed at an application rate of 400 l/ha to ensure adequate coverage. Replicate discs
were sprayed for each treatment. At each of the assessment times, (pre-treatment, and four and
seven days after treatment (DAT)), the leaf discs were examined under a binocular microscope
for numbers of living scales and LC50 values were calculated using ToxCalc V5.0 (1999) using the
statistical model with the best fit for the data.
The LC50 values are summarised in Table 12.
TABLE 12: RESULTS FOR BUG OIL FORMULATIONS v
Trialeurodes vaporariorum SCALES
LC50 values and method of analysis used.
LC50 ml
product /l
Method of analysis (method selected as
one best fitting data)
Bug Oil Batch B002, 3 way mix
1.78
Maximum Likelihood-Probit
Tagetes
4.08
Maximum Likelihood-Probit
Wintergreen
3.38
Maximum Likelihood-Probit
Thymus
0.38
Maximum Likelihood-Probit
Tagetes/Thymus 1:1
0.29
Maximum Likelihood-Probit
Tagetes/Thymus 3:1
0.27
Maximum Likelihood-Probit
Tagetes/Thymus 1:3
1.70
Maximum Likelihood-Probit
Tagetes/Wintergreen 1:1
1.81
Maximum Likelihood-Probit
Tagetes/Wintergreen 3:1
3.76
Maximum Likelihood-Probit
Tagetes/Wintergreen 1:3
3.09
Maximum Likelihood-Probit
Thymus/Wintergreen 1:1
0.15
Maximum Likelihood-Probit
Thymus/Wintergreen 3:1
0.83
Maximum Likelihood-Probit
Thymus/Wintergreen 1:3
0.95
Maximum Likelihood-Probit
Treatment
All formulations were effective at controlling Trialeurodes vaporariorum scales. The Thymus
formulation was the most effective single active formulation with an LC50 of 0.38 ml product /l
compared to 3.38 and 4.08 ml product/l for the Wintergreen and Tagetes formulations
respectively and 1.78 ml product/l for Bug Oil, three oil mix formulation. In addition, the
Tagetes/Thymus 1:1 and 3:1 mixtures and the Thymus alone formulation were also more active
than the three oil mixture. The Thymus/Wintergreen 1:1 formulation was the most efficacious of
all the formulations tested with an LC50 of 0.15 ml product/l (Riches, 2004f).
General conclusion
The best combination of oils for mite control is the Tagetes/Wintergreen (1:1 and 3:1 ratio)
mixture while for sucking insect control the most efficacious mixture is the Thymus/Wintergreen
1:1 formulation. Nonetheless, for robust, reproducible control of both phytophagous mites and
sucking insect pests, the three way mixture of essential oils as used in Bug Oil is best.
4.3 Mobility
The aim of these studies was to determine the efficacy of Bug Oil on the Red Spider Mite,
Tetranychus urticae, following mobility and transfer in dwarf French Bean plants. Three methods
of transfer of the test item were assessed: translaminar (from the dorsal surface to the ventral
surface of the leaf), xylem (via root uptake) and volatility (from sprayed to unsprayed plants). In
each method, Bug Oil was assessed at one rate, along with a water only control and a reference
item (Dynamec).
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Translaminar transfer was tested by applying the treatment to the top (dorsal) surface of leaves,
the underside (ventral) surface of which had previously been infested with mites. The Bug Oil was
assessed at 10 ml/l and Dynamec was applied at 0.5 ml/l. The control was treated with deionised
water. The mortality of the mites was assessed one and three days after treatment (DAT).
Root uptake (xylem transport) was assessed by growing French Bean plants in vermiculite and
applying the treatments directly to the vermiculite when the plants had reached the two-leaf stage
(25 ml of the treatment was applied to each plant). Two days after application, the plants were
infested with mites and the mortality of the mites was assessed three and six days after treatment
(one and four days after infestation). Bug Oil was used at 50 ml/l and Dynamec at 0.5 ml/l. The
controls were treated with deionised water.
Volatility was assessed by spraying two plants with each treatment and confining these sprayed
plants with two unsprayed plants that were previously infested with mites in a transparent box. All
treatments were sprayed to incipient run-off. Bug Oil was sprayed at 50 ml/l, Dynamec was
sprayed at 50 ml/l and the controls were sprayed with deionised water. The efficacy of the volatile
component of Bug Oil was assessed at two temperatures, 20쎷C and 32쎷C. For the test at 20쎷C,
the mortality of the mites on the unsprayed plants was assessed at one and three days after
treatment. For the test at 32쎷C, the number of mites alive was assessed at one, two and five DAT.
In these studies, Bug Oil exhibited no systemic or translaminar activity, but Dynamec did provide
83% control in the translaminar test. Neither Bug Oil nor Dynamec provided any control through
volatility at 20쎷C, but activity was observed with both products at 32쎷C through volatility, with Bug
Oil giving 32% control of mites by 1 DAT (Davies, 2004a).
4.4 Field Activity
4.4.1 Sucking Insects
4.4.1.1 Aphids on tomatoes
The objective of this trial was to determine the efficacy of the different rates of Bug Oil (2.5, 5, 10
and 20 ml/l) against aphids, Aphis gossypii, on tomatoes, variety Boludo, in a commercial tomato
growing area in Mazarrón, Murcia, Spain.
A randomised block design was used, with four replicates per treatment. Alll plots were 20 m2
large, with 13 plants per plot. Confidor (Imidacloprid 20% LS) was used as a reference product.
One single foliar application was applied using a knapsack backpack with engine (Maruyama)
and hand-gun at 8 atm. pressure and 1000 l/ha water volume.
The trial started when the level of motile forms per leaf was 5.4, which is a typical infestation level
in the area selected and for this crop. Five assessments were done at 0, 1, 3, 7 and 14 days after
application with 10 leaves per plot being selected in each assessment. The number of motile
forms was recorded at each assessment and Henderson-Tilton efficacy calculated.
Overall, Bug Oil, at the rates tested, showed an excellent efficacy for the control of Aphis gossypii
in tomato crops as foliar applications. It also gave an excellent knock-down effect against aphids
with pest levels decreased virtually to zero at 1 and 3 DAT in treated plots. The efficacy of the high
rates of Bug Oil (10 and 20 ml/l) is similar to that obtained with the standard Confidor (쏜95%, 3
days after application). The lower rates of Bug Oil (2.5 and 5 ml/l) provided about 90% control
from three days after spraying until the end of the trial. The population of aphids on the control
plots was decreased by 14 DAT, but this was believed to be attributable to lower temperatures
(Avinent, 2004a).
In addition, the rapid action of Bug Oil, linked with repellency effects observed in a number of
species, may mean that the product has potential for reducing/preventing the transmission of
plant viruses by insect vectors.
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Evolution of aphid population
Graph I. Evolution of aphids on tomatoes.
Efficacy of Bug Oil against Aphids
Graph II. Henderson-Tilton efficacy
4.4.1.2 Whitefly on tomatoes
The efficacy and field performance of Bug Oil for the control of whitefly (Trialeurodes
vaporariorum) on tomatoes (Lycopersicon esculentum), was evaluated in a field trial near Los
Palacios, Sevilla, Andalucia, Spain. The greenhouse was typical for the region (covered with
plastic film, about 4 m high) and the test crop was the tomato variety Optima which was cultivated
in the greenhouse according to the local agricultural practices. The trial design was a randomised
complete block with four replicates. Each plot consisted of two rows with a width of 2.0 m and a
length of 4.0 m – this gave an area of 8.0 m2. Each plot comprised 16 plants.
Material was applied using a motor backpack sprayer with a water volume of 2000 l/ha for all
treatments, as tests showed that this provided a good coverage without run off. Public drinking
water with a medium hardness was used. Assessments were made on 10 leaves/plot with the
total number of adult stages per plot being recorded at 0, 1, 3, 7 and 14 DAT (Days After
Treatment) and scale numbers assessed at 14 DAT.
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At the 0 DAT assessment, the population of whitefly was high and uniform in the different
treatments with between 92 and 126 adults per 10 leaves. At the 1 DAT assessment, Bug Oil at
2.5-20.0 ml/l demonstrated excellent activity and was clearly superior to the standard Calypso,
(Thiachloprid 48% SC) at 0.225 ml/l, with the lowest rate of Bug Oil performing similarly to the
standard. At the 3, 7,and 14 DAT assessments, all rates of Bug Oil gave some control, but only
the rate of 20ml/l was as good as, or better, than the standard treatment. Bug Oil applied at 20ml/l
also gave excellent scale control equivalent to that obtained with the standard of 쏜80%
reduction. Thus, Bug Oil at 20ml/l was equivalent to the standard, Calypso, for 14 days against
both whitefly scales and adults, but was significantly faster acting than the standard on adult
stages (Schroth, 2004a).
A further trial to determine the efficacy of the different rates of Bug Oil (2.5, 5, 10 and 20 ml/l)
against whitefly, Trialeurodes vaporariorum, on tomatoes in Spain was set up in Ramonete,
Lorca (Murcia) on the tomato variety Boludo. A randomised block design was used, with four
replicates per treatment. Each test plot was 9m2, with 12 plants per plot. Confidor (Imidacloprid
20% LS) was used as reference product.
One single foliar application was applied using a knapsack backpack with engine (Maruyama)
with hand-gun at 8 bar pressure and 1200 l/ha water volume. The trial started when the level of
adults was 4.7 per leaf and the level of scales reached 10.6 per leaf. Five assessments were done
at 0, 1, 3, 7 and 13 days after treatment, with 10 leaves per plot being taken to evaluate the adult
and scale level. The number of motile forms (adults and scales) was recorded and % control
obtained against adult whitefly is shown over.
Graph III. H-T efficacy for Whitefly adult control
100
90
80
% Efficacy
70
60
50
40
30
20
10
0
1 DALA
3 DALA
7 DALA
13 DALA
ID del Ensayo: CEMS-100-04-SRF-I (BIS)
Bug Oil 2.5 ML/L
Bug Oil 5 ML/L
Bug Oil 10 ML/L
Bug Oil 20 ML/L
Confidor 75 ML/100 L
Results indicate that a high level of pests, either adults or scales, was observed at the end of the
trial, with 6.5 adults per leaf and 38.7 scales per leaf in untreated plots. Bug Oil, at 20 ml/l, gave
control similar to that obtained with Confidor against adults of Trialeurodes vaporariorum in
protected tomatoes as foliar applications, with a single application and with these initial pest
infestation levels. However, Bug Oil applied at 20 ml/l provided markedly better control of scales
(larvae) than Confidor at 1, 3 and 7 DAT and performed similarly at 13 DAT. Activity nearly as
good as the standard was obtained with Bug Oil at a rate of 10 ml/l (Avinent, 2004b).
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Graph IV. H-T efficacy for Whitefly larvae control
100
90
80
% Efficacy
70
60
50
40
30
20
10
0
1 DA-A
3 DA-A
7 DA-A
13 DA-A
ID del Ensayo: CEMS-100-04-SRF-I (BIS)
Bug Oil 2.5 ML/L
Bug Oil 5 ML/L
Bug Oil 10 ML/L
Bug Oil 20 ML/L
Confidor 75 ML/100 L
4.4.1.3 Whitefly on peppers
The objective of this trial was to determine the efficacy of the different rates of Bug Oil (2.5, 5, 10
and 20 ml/l) against whitefly, Trialeurodes vaporariorum, on peppers, variety Italiano, in
Mazarrón, Murcia, Spain. A randomised block design was used with four replicates per
treatment. All plots were 10m2 with 22 plants per plot in double rows. Confidor (Imidacloprid 20%
LS) was used as a reference product.
One single foliar application was applied using a knapsack backpack with engine (Maruyama)
and a hand-gun at 8 atm. pressure and 1000 l/ha water volume. The trial started when the level of
adults was 0.7 per leaf, which is a typical low infestation level in the area selected and for this
crop. Five assessments were done at 0, 1, 3, 7 and 14 days after application and 10 leaves per
plot were selected in each assessment to count the number of adults and scales per leaf (scales
were counted in the laboratory using a binocular microscope). The Henderson-Tilton efficacy
was calculated.
In this study, the number of motile forms (adults and scales) was not very high, reaching 1.5
adults per leaf with very few immature stages present during the trial. However, this is a typical
population for commercial peppers grown in this area. Under these conditions, Bug Oil showed a
good efficacy for the control of Trialeurodes vaporariorum in pepper crops. Bug Oil worked well
against adults one day after application, achieving nearly 90% control at all the rates. Three days
after application, efficacy levels reached 100% at rates of 5, 10 and 20 ml/l, and up to 90% at 2.5
ml/l. Seven days after application 100% control was obtained all the rates of Bug Oil. Fourteen
days after application the efficacy levels decreased at the rates of 2,5 and 5 ml/l, but over 90%
control was maintained at the rates of 10 and 20 ml/l. At all time points, Bug Oil at 10 and 20 ml/l
was superior numerically to the standard, Confidor (Avinent, 2004c).
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Evolution of adult population of whitefly
Efficacy of Bug Oil against Whitefly
4.4.1.4 Whitefly on zucchini
The effect of Bug Oil against whitefly (Trialeurodes vaporariorum) on zucchini, variety Irida, was
evaluated at a test site located near to Los Palacios, Sevilla, Andalucia, Spain. The greenhouse
was typical for the region (covered with plastic film, about 4 m high) and the zucchini was
cultivated in the greenhouse according to the local agricultural practices.
Material was applied using a motor backpack sprayer with a water volume of 2000 l/ha for all
treatments, as tests showed that this provided a good coverage without run off. Public drinking
water with a medium hardness was used. Assessments were made on 10 pre-marked leaves at
each assessment time and due to the fast growth of the crop, medium sized leaves were chosen.
The number of adults per leaf was recorded at 0, 1, 3, 7 and 13 DAT (Days After Treatment). At 13
DAT the number of scales per 10 leaves (area of 25 cm2/leaf) was also assessed.
The very high, and therefore suitable, temperatures for pest development caused a high
multiplication rate of the whitefly and at the 0 DAT assessment, the population was uniform
between 116 and 152 adults per 10 leaves. At the 1 and 3 DAT assessments, Bug Oil at 10-20 ml/l
gave similar good levels of control to the standard, Calypso (Thiachloprid 48% SC) applied at
0.15 ml/l, while at the 7 and 13 DAT assessments, no significant differences were observed
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between the standard and the treatments of Bug Oil from 5.0 to 20.0 ml/l. The Bug Oil treatments
at rates of 10 and 20 ml/l also showed a good potential for scale reduction, but were numerically
inferior to the level of scale control provided by the standard (Schroth, 2004b).
4.4.1.5 Whitefly on cucumbers
Bug Oil has also been evaluated under plastic in Kraimeh, Jordan in a trial not performed to GEP.
In this study, Bug Oil applied at 2 ml/l gave total control of whitefly when applied in an application
volume of 200 l/ha which was similar to that obtained with Confidor. Excellent repellency of adult
whitefly from plots treated with Bug Oil was also observed (P Blezard, personal communication).
4.4.2 Mites
4.4.2.1 Mites on tomatoes
The efficacy and field performance of Bug Oil for the control of Red Spider Mite (Tetranychus
urticae) on greenhouse tomato (Lycopersicon esculentum), was evaluated on a site near to
Utrera, Sevilla, Andalucia, Spain. The greenhouse was typical for the region (covered with plastic
film, about 4 m high) and the tomato plants were cultivated in 0.20 m pots according to the local
agricultural practices. In order to get a homogenous and high Red Spider Mite infestation, the
tomato plants were infested with approx. 300 Tetranychus urticae – motile stages per plant
(provided by Kopper Sistemas Biológicos SL, Aguilas, Murcia, Spain), eight days before
application. Material was applied using a motor backpack sprayer with a water volume of 1000
l/ha for all treatments, as tests showed that this provided a good coverage without run off. Public
drinking water with a medium hardness was used. Assessments were made on 10 leaves/plot
with the total number of motile stages per plot being recorded. Assessments were made at 0, 1, 3,
7 and 14 DAT (Days After Treatment).
At the 0 DAT assessment, the population of Red Spider Mite was uniform in the different
treatments with between 35 and 55 motile stages per 10 leaves. At the 1 DAT assessment, the
population on the untreated plot increased considerably and all the plots treated with the different
rates of Bug Oil (2.5-20.0 ml/l) demonstrated good Red Spider Mite control with some rate
response (77 – 94% efficacy). At high rates, the Bug Oil efficacy reached the excellent
performance achieved with the standard Vamectin (Abamectin 1.8 EC) at 1.0 ml/l. At the 3 and 7
DAT assessments, the different Bug Oil rates demonstrated a clear rate response. With the
highest rate (20 ml/l) there was no significant difference with the standard Vamectin, which
demonstrated nearly total control (at the 7 DAT assessment, Bug Oil at 20 ml/l gave 쏜98%
control). At the 14 DAT assessment, a general Red Spider Mite population decrease was
observed, but mite populations were significantly lower on plants treated with Bug Oil compared
to the control. However, at the 7 DAT assessment, an initial population of Macrolophus
caliginosus was observed and at the 14 DAT assessment, the M. caliginosus population was very
high and caused a marked reduction of the Red Spider Mite population. However, Bug Oil
performance at 5.0–20.0 ml/l against motile stages was good to excellent, with a significant rate
response. Control obtained at 20 ml/l of Bug Oil was equivalent to that provided by the standard,
and Bug Oil at 10ml/l gave 쏜75% control throughout (Schroth, 2004c).
A further trial was performed on tomatoes under glass in Corton, Wiltshire, UK. The tomato
plants, variety Ailsa Craig, were infected with Red Spider Mite and allowed to develop for twelve
days.
A single application of each of eight treatments in a randomised complete block was applied
using a precision plot sprayer. Non-destructive assessments were conducted at daily intervals
consisting of four counts per plot. The five rates of Bug Oil (2.5 – 40.0 ml/l), applied at an
application volume of 300 l/ha, all showed a statistically significant level of control of the target
pest, equal to the conventional standards at 5 DAT. By 7 DAT, the lowest rate of Bug Oil (2.5 ml/l)
was not very effective. All other rates of Bug Oil continued to give significant pest control, equal to
the standard products – bifenthrin at 2.67 l/ha and rote at 2.34 l/ha – used in this trial (Nears,
2004a).
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4.4.2.2 Mites on peppers
The efficacy and field performance of Bug Oil for the control of Red Spider Mite (Tetranychus
urticae) on greenhouse peppers (Capsicum annuum), variety Herminio, was evaluated on a site
in Blanca, Murcia, Spain. The greenhouse was typical for the region (covered with plastic film,
about 4 m high) and a randomised block design was used with four replicates per treatment. All
plots were 10m2 with 25 plants per plot. Sanmite (piridaben 20% WP) was used as a reference
product.
One single foliar application was applied using a knapsack backpack with engine (Maruyama)
and a hand-gun at 8 atm. pressure and 1000 l/ha water volume. The trial started when the level of
motiles was around 20 per leaf.
Five assessments were done at 0, 1, 3, 7 and 14 DAT (Days After Treatment) and 10 leaves per
plot were selected in each assessment to count the number of motiles per leaf
Bug Oil performed well in controlling high infestations of mites (around 40 motiles/leaf, 14 DAT)
on peppers at rates of 10 and 20 ml/l. Bug Oil was fast acting giving 92% and 97% control at 10
and 20 ml/l respectively at 1 DAT and at these two rates gave control equivalent to Sanmite at 1, 3
and 14 DAT. However, control was slightly inferior numerically to the standard at 7 DAT (Avinent,
2004d).
Evolution of Tetranychus population
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Efficacy (H&T) on Tetranychus control
4.4.2.3 Mites on cucumbers
The efficacy and field performance of Bug Oil for the control of Red Spider Mite (Tetranychus
urticae) on greenhouse cucumbers (Capsicum annuum), variety Long Green Ridge, was
evaluated under glass in Corton, Wiltshire, UK. A single application of each of eight treatments in
a randomised complete block was applied using a precision plot sprayer. Non-destructive
assessments were conducted at daily intervals consisting of four counts per plot.
The five rates of Bug Oil (2.5 – 40.0 ml/l), applied at an application volume of 300 l/ha, all showed
a statistically significant level of control of the target pest, similar to the conventional standards at
2 DAT. By the final assessment date, 10 DAT, all rates of Bug Oil continued to give significant pest
control, equal to the standard products – bifenthrin at 2.67 l/ha and rote at 2.34 l/ha – used in this
trial. It can be concluded that Bug Oil at 10ml/l ultimately gave equivalent control to both bifenthrin
and rote, but was superior in that it was faster acting (Nears, 2004b).
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Bug Oil has also been evaluated under plastic in Kraimeh, Jordan in a trial not performed to GEP.
In this study, Bug Oil applied at 2 ml/l gave total control of mites when applied in an application
volume of 200 l/ha. A similar level of control was obtained with the locally recommended Mosbilan
and Evermectine mixture (P Blezard, personal communication).
4.4.2.4 Mites on beans
The efficacy and field performance of Bug Oil for the control of Red Spider Mite (Tetranychus
urticae) on greenhouse bean (Phaseolus vulgaris), was evaluated in a field trial near Los
Palacios, Sevilla, Andalucia, Spain. The greenhouse was typical for the region (covered with
plastic film, about 4 m high) and the zucchini was cultivated in the greenhouse according to the
local agricultural practices. Material was applied using a motor backpack sprayer with a water
volume of 2000 l/ha for all treatments, as tests showed that this provided a good coverage without
run off. Public drinking water with a medium hardness was used. Assessments were made on 10
leaves/plot with the total number of motile stages per plot being recorded. Assessments were
made at 0, 1, 3, 7 and 14 DAT (Days After Treatment).
The very high and therefore suitable temperatures for the pest development caused a very high
multiplication rate of the Red Spider Mites. At the 0 DAT assessment, the population of Red
Spider Mites was very uniform in the different treatments with a population between 145 and 198
motile stages per 10 leaves. At the 1 DAT assessment, the population on the untreated plot
increased slightly. All the plots treated with the different rates of Bug Oil from 2.5 to 20.0 ml/l
demonstrated considerable efficacy without rate response, although inferior to the standard,
Vamectin (Abamectin 1.8 EC,) applied at 0.5 ml/l. At the 3 and 7 DAT assessments, Bug Oil at 20
ml/l gave excellent control similar to the standard, but by the 14 DAT assessment, Bug Oil only
gave 76% control of mites, while control obtained with Vamectin remained close to 100%
(Schroth, 2004d).
A further trial was undertaken under glass in Corton, Wiltshire, UK. French Bean plants, variety
Golden Butter, were used and were artificially infested with Red Spider Mite and after twelve days
a single application was made using a precision plot sprayer. A randomised block design was
used with eight treatments and with four replicates per treatment. Non-destructive assessments
were made at twenty-four hour intervals consisting of population counts per plot.
The five rates of Bug Oil (2.5 – 40.0 ml/l), applied at an application volume of 300 l/ha, all showed
a statistically significant level of control of the target pest, equal to the conventional standards,
bifenthrin and rote, 72 hours after application. By the final assessment date, 14 days after
application, Bug Oil at all rates evaluated and the two standards all gave 쏜75% control of mites
(Nears, 2004c).
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Red Spider Mite population on Frech Bean
25
Population (Motiles per Leaf)
Job: 14126H--
20
15
10
5
0
0
24
48
72
96
120
168
216
264
288
336
Count Timing Hours After Application
Bug Oil 2.5 ML/L
Bug Oil 5 ML/L
Bug Oil 10 ML/L
Bug Oil 20 ML/L
Bug Oil 40 ML/L
Bifenthrin 2.678 L/HA
Rotenone 2.34375 L/HA
UTC
4.4.2.5 Mites on apples
The aim of this study was to determine the efficacy of Bug Oil against mites infesting apple trees.
Bug Oil was assessed at application rates of 2.5, 5, 10 and 20 ml product /l, along with a water
only control and a reference item (Dynamec) sprayed at 0.5 ml product /l.
All treatments were applied to apple tree branches using a hand held single nozzle sprayer.
Leaves were sprayed on both sides to “run off”. Four replicate branches, each containing
between 100 and 200 leaves, were sprayed for each treatment. At each of the assessment times,
leaves were removed from the branches and examined under a binocular microscope for living
motile mites. Assessments of mite numbers were carried out at pre-treatment, 1, 3, 7 and 14 days
after treatment.
The results of the assessments for mite numbers are summarised in Table 13.
Table 13: RESULTS FOR MITE CURATIVE TEST
Mite numbers per leaf (mean of four replicates).
Assessment time days after treatment (DAT)
Treatment
PreApplication
1
3
7
14
4.65
2.20
1.53
1.35
1.83
Bug Oil @ 2.5 ml/l
3.3
1.15
1.58
1.15
2.10
Bug Oil @ 5 ml/l
2.6
0.55
1.18
0.85
1.45
Bug Oil @ 10 ml/l
3.15
0.35
0.35
0.68
0.78
Bug Oil @ 20 ml/l
3.2
0.33
0.13
0.50
1.48
3
0.03
0.00
0.00
0.28
Control (water only)
Dynamec @ 0.5 ml/l
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Bug Oil vs P. ulmi and Tetranychus spp on apple
CEMS-2463
6
5
Number of mites per leaf (mean of 10 leaves)
Job: 14126H--
Bug Oil @2.5 mL/L
Bug Oil @5 mL/L
Bug Oil @10 mL/L
Bug Oil @20 mL/L
4
[email protected]/l
Untreated
3
2
1
0
-2
0
2
4
6
8
10
12
14
16
Time relative to application
Bug Oil was most effective at controlling mites at rates of 20 and 10 ml product /l, and the 20 ml
product /l rate was only slightly less effective than Dynamec at 0.5 ml product/l at 1 and 3 DAT
(Riches, 2004g).
4.4.2.6 Mites on lemons
The objective of this trial was to determine the efficacy of the different rates of Bug Oil (2.5, 5, 10
and 20 ml/l) against Panonychus citri on citrus lemon variety Fino in Fortuna, Murcia, Spain. A
randomised block design was used, with four replicates per treatment. All plots were 70m2 with 2
plants per plot. Sanmite (Piridaben 20% WP) was used as reference product.
A single foliar application was applied using a knapsack backpack with engine (Maruyama) and
hand-gun at 9 bar pressure and 600 l/ha water volume. The trial started when the level of motile
individuals was 3.4 per leaf. Five assessments were done at 0, 1, 3, 7 and 14 days after
application on 10 leaves per plot.
Results indicate pest infestation levels of 7.4 motile forms per leaf in untreated plots at the end of
the trial. One day after treatment a good dose response was obtained with Bug Oil, with the
highest tested rate (20 ml/l) and Sanmite, giving 90.5 and 92.5% control respectively, compared
to 59.1% control provided by the lowest rate tested (2.5 ml/l). By 3 DAT, Bug Oil at the highest rate
and Sanmite gave good control, but this reduced by 7 DAT to 54.3 and 74.2% respectively for Bug
Oil at 20ml/l and the standard. Neither product gave particularly useful control at 14 DAT
(Avinent, 2004e).
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Graph I. Evolution of Panonychus citri population
8
7
No. of Mites/leaf
6
5
4
3
2
1
0
0 DA-A
1 DA-A
3 DA-A
7 DA-A
14 DA-A
ID del Ensayo: CEMS-104-04-SRF-A
Bug Oil 2.5 ML/L
Bug Oil 5 ML/L
Bug Oil 10 ML/L
Bug Oil 20 ML/L
Sanmite 1 G/L
Untreated
Graph II. H-T efficacy for Panonychus citri control
100
90
80
% Efficacy
70
60
50
40
30
20
10
0
1 DA-A
3 DA-A
7 DA-A
14 DA-A
ID del Ensayo: CEMS-104-04-SRF-A
Bug Oil 2.5 ML/L
Bug Oil 5 ML/L
Bug Oil 10 ML/L
Bug Oil 20 ML/L
Sanmite 1 G/L
4.4.3 Other Species
Bug Oil has also been evaluated in limited tests against Lepidoptera and additional sucking
insect pests. In a field test, Bug Oil only had limited efficacy against the Cabbage White Butterfly
(Pieris brassicae), but had useful curative activity against a range of sucking insects including
Silverleaf Whitefly (Bemisia argentifolii), the Melon Thrip (Thrips palmi) and the Western Flower
Thrip (Frankliniella occidentalis).
5. Crop Safety
Bug Oil has been evaluated against a wide range of plants in the laboratory and field including
tomatoes, peppers, cucumber, beans, zucchini, deciduous fruit and citrus, and is safe to all plant
species tested to date at 50ml/l.
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6. Environmental Acceptability to Beneficial Organisms
6.1 Coccinella septempunctata
The aim of this study was to determine whether Bug Oil was harmful to the ladybird, Coccinella
septempunctata L. (Coleoptera: Coccinellidae). Bug Oil was evaluated at two nominal rates of 2
and 4 l/ha and was tested alongside a control (water only) and a toxic reference treatment
(dimethoate 40% EC). Dimethoate was applied at a rate of 15 ml product/ha.
All treatments were applied to glass plates using a conveyor sprayer calibrated to deliver an
application rate of 200 l/ha. Three day old larvae were individually confined on the glass plates
and the larvae were fed every one to two days with an excess of aphids (Rhopalosiphum padi).
Assessments of effect were made until adult emergence had occurred. In addition, in order to
determine if the reproduction of the adults was affected, egg laying (fecundity) and hatch rate
(fertility) of the adults was also assessed (see Table 14).
Table 14: Pre-imaginal mortality and reproductive assessments
Treatment
l/ha
Control Water only (200l/ha)
Mean
number of
viable eggs
per female
per day
Percentage
difference
from the
control
0
N/A
12.7
N/A
Bug Oil 2 l/ha
12.5*
12.5
10.6
앏16.1
Bug Oil 4 l/ha
20.0*
20.0
14.3
쎴12.7
100.0*
100.0
N/C
N/C
Dimethoate 15 ml product/ha
*
Mortality
(%)
Abbott
corrected
mortality
(%)
= statistically significant from the control (P 압0.05, Fishers Exact Test),
N/A = not applicable, N/C = not carried out
In terms of mortality, Bug Oil treated leaves significantly increased the mortality of the ladybirds
compared to the control at the rates of 2 and 4 l/ha, but the mortality of the ladybirds at these rates
was not greater than the 50% trigger value given in ESCORT 2 (Candolfi et al 2001). In terms of
reproduction, Bug Oil at 2 l/ha caused a reduction compared to the control treatment in the
number of viable eggs per female per day of 16.1% but Bug Oil at 4 l/ha caused an increase in the
number of viable eggs per female per day of 12.7%. This means that Bug Oil had no effect on
reproduction of the surviving ladybirds at either 2 or 4 l Bug Oil/ha (Davies, 2004b).
6.2 Aphidius rhopalosiphi
The aim of this study was to determine, under Tier 1 laboratory conditions, the effects of Bug Oil
on the parasitic wasp Aphidius rhopalosiphi at rates of 2 and 4 l product/ha. The product was
tested alongside an untreated (water only) control and Dimethoate 40% EC at 10 ml/ha as the
toxic reference.
All treatments were applied to glass slides using a Potter Tower laboratory sprayer at an
application rate of 200 l/ha. When the glass plates were dry, two glass plates were sandwiched
around a metal frame and held in place with bulldog clips. Air was circulated through the test units
via a series of tubes. Each treatment was replicated four times with ten newly emerged wasps
(less than 48h old, and at least five females) per replicate. Assessments of mortality effects were
made over a 48-hour period. As there was less than 50% (Abbott corrected) survival in the Bug
Oil treatments, the fecundity phase was not carried out. The results of the mortality assessments
are summarised in Table 15.
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Table 15: Summary of results for mortality.
Mortality
at 48 HAI
(%)
Abbott
corrected
mortality
(%)
7.5
N/A
Bug Oil 2 l/ha
80.0*
78.4
Bug Oil 4 l/ha
95.0*
94.6
100.0*
100.0
Treatment and rate tested
Control (water only at 200 l/ha)
Dimethoate 40% EC 10 ml product/ha
Notes:
*
= statistically significant from the control based on a one-tailed test (P 압0.05).
N/A = not applicable, HAI = hours after infestation
There was statistically significant mortality of adult wasps in the Bug Oil treatment at the rates of 2
and 4 l Bug Oil/ha (actual mortality was 78.4% and 94.6% Abbott corrected, at the rates of 2 and 4
l Bug Oil/ha respectively, based on Dunnett’s test, one-tailed, P 압0.05). The reference treatment
also caused a significant increase in mortality (t-test in excel, one-tailed, P 압0.05) (100%
mortality).
Due to the high mortality of the adult wasps in the Bug Oil treatments in the exposure phase, no
fecundity assessments were carried out (Davies, 2004c).
6.3 Typhlodromus pyri
The aim of this study was to determine, in a Tier 1 study, the effects of Bug Oil on mortality and
fecundity in the predatory mite Typhlodromus pyri Scheuten (Acari: Phytoseiidae). Bug Oil was
evaluated at two rates equivalent to 2 and 4 l/ha and the product was tested alongside an
untreated (water only) control and Dimethoate 40% EC at 15 ml/ha as the toxic reference.
All treatments were applied to glass slides using a Potter Tower laboratory sprayer at an
application rate of 200 l/ha. When the glass slides had dried 20 protonymphal Typhlodromus pyri
were confined to the surface and fed with pollen. Each treatment was replicated five times.
Assessments of mortality were made at timings of one and seven days after application (see
Table 16). As there was less than 50% survival of the mites in the Bug Oil treatments (Abbott
corrected) no fecundity phase was carried out.
Table 16: Summary of results for mortality.
Mean
mortality
at 7 DAA
(%)
Abbott
corrected
mortality
(%)
6.0
N/A
Bug Oil 2 l/ha
98.0*
97.9
Bug Oil 4 l/ha
99.0*
98.9
100.0*
100.00
Treatment and rate tested
Control (water only at 200 l/ha)
Dimethoate 40% EC at 15 ml product/ha
Notes:
*
significantly different from the control based on one-tailed test (P 압0.05),
N/A not applicable
In terms of mortality, Bug Oil treated slides significantly increased the mortality of the mites
compared to the control at the rates of 2 and 4 l/ha, with 97.9 and 98.9% mortality respectively,
(Abbott corrected) based on Dunnett’s test (one-tailed, P 압0.05) (Davies, 2004d). The mortality
of the mites at these rates was greater than the 50% trigger value (Abbott corrected) given in
ESCORT 2 (Candolfi et al, 2001).
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6.4 Bees
The aim of this study was to determine, the acute oral toxicity of Bug Oil to the honeybee, Apis
mellifera, under laboratory conditions. The test methods used were in line with EPPO guideline
No. 170 (EPPO, 1992) and OECD guideline No. 213 (1998).
Bees were held in groups of 10 in ventilated acrylic cages. To dose the bees, each cage was
presented with 0.22 ml of a 50% w/v sucrose solution with the test item suspended in it. Providing
0.22 ml ensured that 0.20 ml was actually available for consumption since some solution was left
as a residue in and on the feeding tube. It was assumed that the bees would share the dose
equally between them, therefore each bee would consume 20 µl of the treated sucrose solution.
The test solutions were pipetted into the feeding tubes, which were then weighed. The tubes were
inserted through the top bung in each cage and inspected at hourly intervals (approximately) to
check whether the doses had been consumed. When the bees had taken all of the test solution,
the feeding tubes were replaced with ones containing untreated 50% w/v sucrose solution for the
remainder of the study. The mortality of the bees was assessed 24 and 48 hours after treatment.
A range-finding test was conducted in which Bug Oil was evaluated at four rates equivalent to
0.01201, 0.1201, 1.201, and 12.01 µg a.i./20 µl. A sucrose control treatment was also included.
Based on the results of the range finding test, the definitive bioassay took the form of a limit test in
which bees were dosed with 12.01 µg a.i./20 µl and 1.201 µg a.i./20 µl.In order to ascertain
whether the bees were of a suitable sensitivity (according to Gough et al., 1994) a validation study
was conducted alongside the definitive bioassay. For this, technical grade dimethoate at doses of
0.10, 0.15, and 0.20 µg a.i./20 µl was provided in the feeding tubes. An acetone sucrose solution
was included as a control treatment since the dimethoate was diluted in this solvent. Results are
shown below.
Mean dose
consumed
(µg a.i./bee)
Mean
mortality at
48 h (%)
Sucrose control
1.201 µg a.i./20 µl
12.01 µg a.i./20 µL
–
1.1902
9.4014
0
0
0
Toxic reference validation:
Acetone sucrose control
0.10 mg dimethoate/20 mL
0.15 mg dimethoate/20 mL
0.20 mg dimethoate/20 mL
–
0.0970
0.1371
0.2032
0
43
50
83
Dose provided
Note: The dose provided is given in terms of µg a.i./20 µl since it was assumed that each bee would consume 20 µl of the test
dose. a.i. = combined active ingredient in the test item, Bug Oil.
Since the mean % mortality at 48 h was 0%, of the bees which consumed 9.4 µg a.i./bee, the LD50
for Bug Oil can be estimated to be 쏜 9.4 µg a.i./bee.
The hazard quotient (EPPO, 2002) for Bug Oil was calculated from:
Recommended application rate of Bug Oil (µg a.i./ha) = 48* = 쏝5.1
LD50 (µg a.i./bee)
9.4
(Halsall, 2004a)
Validity criteria
The test met all validity criteria as the mean mortality at 48 h did not exceed 10% for any of the
controls, and the LD50 for dimethoate was 0.12 µg a.i./bee, i.e., within the acceptable range
indicative of suitable bee sensitivity according to Gough et al, (1994).
The aim of the second study was to determine the acute contact toxicity of Bug Oil to the
honeybee, Apis mellifera, under laboratory conditions. The test methods were in line with EPPO
guideline No. 170 (EPPO, 1992) and OECD guideline No. 214.
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A range-finding test was conducted in which Bug Oil was evaluated at four rates equivalent to
0.01201, 0.1201, 1.201, and 12.01 µg a.i./bee. Control treatments of deionised water and a 0.1%
solution of a wetting agent (Triton쏐X-114 (SIGMA쏐)) were also included. Based on the results of
the range finding test, the definitive bioassay took the form of a limit test in which bees were dosed
with 12.01µg a.i./bee (i.e. a 1 µl droplet of the undiluted test substance). A control treatment of
deionised water was included in the definitive bioassay.
Bees were held in groups of 10 in ventilated acrylic cages. To dose the bees, they were
anaesthetised using humidified CO2 and a 1µl droplet of the test material was placed on the
dorsal thorax of each bee using a Hamilton syringe. The mortality of the bees was assessed 24
and 48 hours after treatment.
In order to ascertain whether the bees were of a suitable sensitivity (according to Gough et al.,
1994) a validation study was conducted alongside the definitive bioassay. For this, technical
grade dimethoate at doses of 0.10, 0.15, and 0.20 µg a.i./µl was applied. Acetone was included
as a control treatment since the dimethoate was diluted in this solvent.
Results
Mean
mortality at
48 hrs (%)
Treatment
Water control
12.01 mg a.i./bee (i.e. a 1 ml drop of undiluted Bug Oil/bee)
0
22
Toxic reference validation:
Acetone control
0.10 µg dimethoate/µl
0.15 µg dimethoate/µl
0.20 µg dimethoate/µl
0
3
40
70
Since the mean % mortality at 48 h was 22%, the LD50 for Bug Oil can be estimated to be 쏜 12.01
µg a.i./bee.
The hazard quotient (EPPO, 2002) for Bug Oil was calculated from:
Recommended application rate of Bug Oil (g a.i./ha) = 48* = 쏝4
LD50 (mg a.i./bee)
12
(Halsall, (2004b).
Validity criteria
The test met all validity criteria as the mean mortality at 48 h did not exceed 10% for any of the
controls, and the LD50 for the dimethoate was 0.17 mg a.i./bee, i.e., within the acceptable range
indicative of suitable bee sensitivity according to Gough et al, (1994).
Bee conclusions
With a Hazard Quotient (HQ) calculated to be 쏝5.1 for oral applications and 쏝4 for contact
applications, Bug Oil at an application rate of 4 l product/ha can be considered to be of low risk to
bees (EPPO, 1993). In fact, as the oral and contact HQ is 쏝50, no further testing is required and
there is plenty of room for manoeuvre with higher (up to nearly 10x) application rates whilst still
maintaining low risks to bees.
6.5 Earthworms
A 14-day replicated acute toxicity study with the earthworm, Eisenia foetida, based on OECD
Test Guideline 207 (1984) was carried out using Bug Oil. The concentration used was 0.0053 ml
product/kg dry soil, which is equivalent to 4.0 l of Bug Oil/ha, assuming a soil density of 1.5 g/cm3
(dry weight) and a uniform incorporation to a depth of 5 cm. No mortality was observed with Bug
Oil at 0.0053 ml product/kg dry soil, so the product can be regarded as safe to earthworms at the
recommended use rate. The reference item chloroacetamide used in a reference study had a
14-day LC50 of 47.9 mg 2-chloroacetamide/kg dry soil (Davies, 2004e).
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7. Recommended Field Use
Bug Oil has been tested widely during 2003/4 at a range of rates and application volumes in a
number of different environmental conditions and under high and low levels of pest pressure.
Generally a robust rate for insect and mite control is in the range 10-20 ml/l at an application
volume of 200-400 l/ha. However, higher application volumes will be required in some larger
protected crops, but lower rates of product will be acceptable in some situations.
8. Positioning in the Market Place
Bug Oil is a very promising novel agent for controlling phytophagous mites and sucking insect
pests which is safer than many of the acaricides and insecticides currently available in the market
place. The product can be positioned effectively in a number of crops, but key opportunities
include the high value protected fruit and vegetable crops, and top fruit such as apples and citrus.
Market leaders in key crops are abamectin, sold as Vamectin and Dynamec, in the acaricide
sector and imidacloprid, sold as Gaucho and Confidor, in the insecticide sector. The potential for
Bug Oil to compete with such products is addressed in Section 9.
The total potential market for an acaricide/sucking pest insecticide consists of major crops which
include wheat, barley, rice, maize, sugar beet, oil seed rape and plantation species, together with
fruit and vegetables. All these crops are attacked by sucking insects and mites which not only
weaken the plant but also, in some cases, act as vectors for disease. Thus, all crops will benefit
from protection from sucking pests, but the economic benefit will depend on the price that Bug Oil
is marketed. The potential market for Bug Oil covers all agricultural geographic areas – Western
Europe, Asia, North America, South America and Rest of the World (ROW). It is assumed that
initially Bug Oil will be sold at a premium and so the market will be restricted to high value crops
consisting largely of vegetables, fruit and ornamentals. These crops will be either grown in a
protected environment or on a field scale. Market analysis indicates that a 1% penetration of the
market using a base case of 4 l/ha would yield nearly $200 million of business annually and this
figure would be increased if multiple applications were applied to any crop.
It is also anticipated that the organic movement will remain vocal and continue to provide a small
market which will include recreational gardening.
9. Competitive Characteristics
The characteristics of Bug Oil are quantified in the Sections 4-6, but it may be useful to compare
Bug Oil qualitatively with the leading products, imidacloprid and abamectin as shown in the table
below. Both of these compounds are widely sold and are understood to have global sales of
$450,000,000 million per year.
Safety to
earthworms
and
non-target
arthropods
Efficacy
against
mites
Efficacy
against
sucking
insects
*****
*****
*****
*****
****
*****
*****
Imidacloprid
*
*
*****
***
**
**
****
Abamectin
*
*****
***
*
**
**
**
Product
Bug Oil
***** = excellent
Length of
patent
Safety to
bees
Ease of
registration
Safety to
mammals
* = poor
As can be seen from the summary, Bug Oil performs at least as well as the best of the
conventional pesticides and has the bonus of being environmentally benign.
10. Strategic Advantages
Before proposing a figure for possible market penetration, it is worth considering the possible
benefits of Bug Oil and thus, how the product might fit into an integrated spray programme. The
following four specific qualities of Bug Oil will influence the market penetration, but the most
important factor of all will be the quality and quantity of marketing which will depend on the vendor
of Bug Oil.
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Efficacy – It is an effective product and can be compared favourably with the best
conventional synthetic pesticides.
앫
Environmentally benign – Bug Oil has a good environmental profile so it will not
contaminate the land on which it is manufactured or used. There is no risk from
storing the product, spraying the crop, re-entry by growers into treated greenhouses,
harvesting, eating the sprayed crop or disposing of the containers.
앫
Bug Oil has a quick knockdown effect and a very short pre-harvest interval so it could
be used as the final spray before harvesting. Fortunately, Bug Oil can enhance the
appearance of produce by giving it a slight lustrous appearance, but there is no taint
or smell (D Marks, personal communication).
앫
The mode of action includes a physical element and resistance to Bug Oil is less likely
to develop.
Markets that can profitably utilise any of the above characteristics are all candidates for Bug Oil.
The degree of penetration will depend on the characteristics of Bug Oil, the marketing effort that is
employed and the relative cost of the product compared to other pesticides. As a working
hypothesis, a 1% penetration of the fruit, vegetable and ornamental market is suggested overall.
However it is appreciated that the figure of 1% is a base case which potential vendors can modify
in light of local circumstances.
11. Competition
Vegetable oils have been used for many years as pesticides against aphids and as adjuvants for
a number of agrochemicals. However the main competitors are likely to be avermectins such as
abamectin, which was reported in 1981 and is sold under trade names such as Dynamec and
Abacide, and imidacloprid which was reported in 1990 and is sold under trade names such as
Confidor or Gaucho. Six of the key indicators for these two leading products are discussed in
comparison to Bug Oil below.
앫
Resistance. These compounds have been widely and intensively used and
resistance is building up worldwide. Incidentally in one of our own field trials in Spain
all the controls were resistant to imidacloprid and the trial had to be repeated with
another comparative control.
앫
Length of patent protection. Bug Oil has only just been patented and so will enjoy the
full period of protection, whilst avermectin was reported in 1981 and imidacloprid in
1990, and will soon suffer from generic competition.
앫
Registration. As the ingredients of Bug Oil are benign, the regulatory authorities are
keen to promote Bug Oil and, for example in the UK, have offered a fast and cheap
registration process. Our experience is that the PSD will not offer the same package
for compounds similar to abamectin or imidacloprid.
In addition, it is believed that registration could be rapid and cheap in the USA if a
FIFRA 25b EPA exemption can be obtained. This means that Bug Oil could be sold in
individual states within three months of filing a state registration and this would allow
large markets to be entered extremely quickly.
It is also believed that many countries in central and southern America, such as
Mexico, Venezeula and Colombia, will accept the product easily.
앫
Ecotoxicology.
Unlike abamectin and imidacloprid, Bug Oil causes no mortality in earthworms.
Bees are recognised by the general public and most farmers and growers as being
wholly beneficial to the environment. Bee mortality attributable to pesticides is easy to
identify and a public outcry generally ensues as happened in Canada and France. It is
particularly fortunate that Bug Oil is not harmful to bees in any normal circumstances
in comparison with abamectin which is toxic and imidacloprid which is harmful when
sprayed on any flowering crops or verges.
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Legislation. Some governments enforce/are considering the use of a pesticide tax to
encourage farmers and growers to use less synthetic agrochemicals and control mite
and insect pests by cultural farming methods and the use of natural products which
are assumed to be less toxic. Bug Oil is likely to avoid any pesticide tax as it is benign
and comprises natural constituents. Likewise if constraints are made on the number
of spray applications that can be made of synthetic compounds, Bug Oil may not be
counted as a chemical application.
앫
Transportation. If there is a spillage of Bug Oil it will not generate an emergency as
there will be no environmental catastrophe and the only loss will be the loss of the
product.
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References
Avinent, L (2004a) Efficacy of Bug Oil against aphids on tomatoes under glass/plastic in south
east area of Spain 2004, CEMAS 101-04-SRF-I
Avinent, L (2004b) Efficacy of Bug Oil for Trialeurodes vaporariorum control on tomato crop
under glass/plastic in south east area of Spain 2004, CEMAS 100-04-SRF-I
Avinent, L (2004c) Efficacy of Bug Oil for Trialeurodes vaporariorum control on peppers under
glass/plastic in south east area of Spain 2004, CEMAS 099-04-SRF-I
Avinent, L (2004d) Efficacy of Bug Oil for Tetranychus urticae control on peppers in Spain 2004,
CEMAS 102-04-SRF-A
Avinent, L (2004e) Efficacy of Bug Oil for Panonychus citri control on citrus lemon crop in south
east area of Spain 2004, CEMAS 104-04-SRF-A
Candolfi, M P, Barrett, K L, Campbell, P J, Forster, R, Grandy, N, M, Huet, M-C, Lewis, G, Oomen,
P A, Schmuck, R, and Vogt, H (Eds.). (2001) Guidance document on regulatory testing and risk
assessment procedures for plant protection products with non-target arthropods. Proceedings
from the ESCORT 2 Workshop (European Standard Characteristics Of beneficials Regulatory
Testing) Wageningen. The Netherlands, 21-23 March 2000. SETAC, Pensacola.
Davies, N A (2004a) Bug Oil – Evaluation of mobility (translaminar, xylem and volatility),
CEMR-2236
Davies, N A (2004b) A tier 1 laboratory test to determine the effect of Bug Oil on the ladybird,
Coccinella septempunctata, CEMR-2372
Davies, N A (2004c) A tier 1 laboratory test to determine the effect of Bug Oil on the parasitic
wasp, Aphidius rhopalosiphi, CEMR-2374
Davies, N A (2004d) A tier 1 laboratory test to determine the effect of Bug Oil on the predatory
mite, Typhlodromus pyri, CEMR-2373
Davies, N A (2004e) Bug Oil: Earthworm screening at one rate, CEMR-2371
EPPO (1992) Guideline on test methods for evaluating the side-effects of plant protection
products on honeybees. No. 170. EPPO Bulletin 22, 203-215.
EPPO (1993) Decision-making scheme for the environmental risk assessment of plant protection
products. EPPO Bulletin 23, Chapter 10, Honeybees.
EPPO (2002) Environmental Risk Assessment Scheme for Plant Products. Chapter 11,
Honeybees. EPPO Bulletin (in preparation)
Gough, H.J., McIndoe, E.C., & Lewis, G.B. (1994) The use of dimethoate as a reference
compound in laboratory acute toxicity tests on honeybees (Apis mellifera L.) 1981-1992. Journal
of Apicultural Research 33, 119-125.
Halsall, N (2004a) Acute oral toxicity of Bug Oil to the honeybee, Apis mellifera, GLP-04-14
Halsall, N (2004b) Acute oral toxicity of Bug Oil to the honeybee, Apis mellifera, GLP-04-13
Nears, A (2004a) Efficacy of Bug Oil against Red Spider Mite (Tetranychus urticae) on tomato
under glass/plastic, CEMAS-107-04-SRUK-A
Nears, A (2004b) Efficacy of Bug Oil against Red Spider Mite (Tetranychus urticae) on cucumber
under glass/plastic, CEMAS-108-04-SRUK-A
Nears, A (2004c) Efficacy of Bug Oil against Red Spider Mite (Tetranychus urticae) on French
Bean under glass/plastic, CEMAS-106-04-SRUK-A
OECD guidelines for the testing of chemicals, 213 (1998) – Honeybees, acute oral toxicity test.
Riches, M N (2004a) Bug Oil – Evaluation for control of whitefly (both protectant and curative),
CEMR 2233
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Riches, M N (2004b) Bug Oil – Evaluation as an aphicide (both protectant and curative),
CEMR-2232
Riches, M N (2004c) Bug Oil – Evaluation for control of thrip (both protectant and curative),
CEMR 2234
Riches, M N (2004d) Bug Oil – Evaluation as a miticide (both protectant and curative),
CEMR-2231
Riches, M N (2004e) Bug Oil synergism and active component optimisation using the mite
Tetranychus urticae as a bio-indicator, CEMR-2370
Riches, M N (2004f) Bug Oil active component, synergism on whitefly (Trialeurodes
vaporariorum), CEMR-2533
Riches, M N (2004g) Bug Oil – Field evaluation as a miticide on apple leaves, CEMR-2463
Schroth, E (2004a) Efficacy and optimum rate of Bug Oil against whitefly (Trialeurodes
vaporariorum) after one application on greenhouse tomato, Spain, 2004, CEMAS-04-TOM-001
Schroth, E (2004b) Efficacy and optimum rate of Bug Oil against whitefly (Trialeurodes
vaporariorum) after one application on greenhouse zucchini, Spain, 2004, CEMAS-04-CAL-003
Schroth, E (2004c) Efficacy and optimum rate of Bug Oil against Red Spider Mite (Tetranychus
urticae) after one application on greenhouse tomato (Lycopersicon esculentum), Spain, 2004,
CEMAS-04-TOM-002
Schroth, E (2004d) Efficacy and optimum rate of Bug Oil against Red Spider Mite (Tetranychus
urticae) after one application on greenhouse bean (Phaseolus vulgaris), Spain, 2004,
CEMAS-04-JUD-004
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Appendix 3: Glossary of Technical Terms
Mites
ADI
Average Daily Intake
Bug Oil
Novel insecticide/acaricide
CaT
Calcium Technology
Coleoptera
An order of insects including beetles and weevils
EC50
Concentration killing 50% of a population
GM
Genetically modified
ha
hectares
HQ
Hazard Quotient
Insecta
Class of insects
L
litres
Lepidoptera
An order of insects including butterflies and moths
MLD
Median Lethal Dose
MRL
Maximum Residue Level
MSR
Member State Rapporteur
Nematicide
Product used to control nematodes
P
Probability
PHI
Pre-harvest interval
Pi
Plant Impact plc
PiNT
Plant Impact Nitrogen Technology
Synergism
The working together of two or more chemicals, etc to produce an
effect greater than the sum of their individual effects
VOTEC
Vegetable Oil Trace Element Complex
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Appendix 4: Biography of Authors
Dr Alan Jutsum has been the Managing Director of CEMAS (CEM Analytical Services) since
2002 and is a Director of the Consultancy Company, tecsolve. He has an honours degree in
Zoology and a doctorate in Insect Physiology, and is a Fellow of the Royal Entomological Society,
a Fellow of the Royal Society of Arts, Manufactures and Commerce, and a Fellow of the Royal
Society of Medicine. After his PhD, he worked at the University College of North Wales for three
years and then for 23 years with ICI/Zeneca/AstraZeneca/Syngenta, where roles included being
Technical Manager for Western Europe, Head of Entomology, Head of Weed Science, Head of
Ecology & Soil Sciences, Head of International Field Biology & Statistics and Head of Global
Standards. He has also been chairman of ECPA committees, a member of UK government
committees, an advisor to the National Science Foundation, Washington and to the Australian
Government and a referee for a number of scientific journals as well as producing a book and
over seventy scientific publications.
Mr Michael Eustace was a co-founder of CEMAS (CEM Analytical Services) in 1989 and is now
Chairman of the company and a Director of the Consultancy Company, tecsolve. He holds a BSc
(Gen) Honours degree from London University obtained while serving in the Army as a Captain.
As a result of a training accident he was invalided out of the army in 1965 and joined ICI
Agricultural Division until he left as an Area Manager to set up CEMAS. In addition to his duties as
Chairman with responsibility for finance and marketing at CEMAS, he is a Director and
co-founder of Natural Resource Management Ltd, a laboratory with 70 staff specialising in
nutritional and inorganic analysis for the agricultural and food sectors.
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PART 3
Risk Factors
In addition to the other relevant information set out in this document, the following specific factors
should be considered carefully in evaluating whether to make an investment in the Company. This
is a high risk investment and investors may lose a substantial proportion or even all of the money
they invest in the Company. If you are in any doubt about the contents of this document or the
action you should take, you should consult an appropriate independent professional adviser
authorised under the Financial Services and Markets Act 2000 who specialises in advising on the
acquisition of shares and other securities.
The Directors believe the risks set out below to be the most significant for potential investors. The
risks listed, however, do not necessarily comprise all those associated with an investment in the
Company and are not intended to be presented in any assumed order of priority. In particular, the
Company’s performance may be affected by changes in legal, regulatory and tax requirements in
any of the jurisdictions in which it or its subsidiary companies operate or intend to operate as well as
overall global financial conditions.
Any persons considering whether to acquire Ordinary Shares should take their own tax advice as to
the consequences of their owning shares in the Company as well as receiving returns from it. Tax
commentary in this document is provided for information only and no representation or warranty,
express or implied, is given to any recipient of this document as to the tax consequences of
acquiring, owning or disposing of any shares in the Company and neither the Company, the
Directors, the Broker nor the Nominated Adviser will be responsible for any tax consequences of
any investment in the Company.
The Company’s intellectual property rights may not provide meaningful commercial protection for
its products
Failure to protect the Company’s intellectual property rights may result in another party copying or
otherwise obtaining and using its proprietary technology without authorisation. There may not be
adequate protection for intellectual property rights in every country in which the Company’s
products are made available and policing unauthorised use of proprietary information is difficult
and expensive.
Due to the Company’s size and limited cash resources, it may not be able to detect and prevent
infringement of its intellectual property rights.
Plant Impact may need to initiate legal proceedings to protect or enforce its patents or other
proprietary rights
The Company may need to take legal action to enforce its intellectual property rights, to protect
trade secrets or know-how or to determine the validity or scope of the proprietary rights of others.
Litigation relating to the Company’s intellectual property, whether instigated by the Company to
protect its rights or arising out of alleged infringement of third party rights, may result in substantial
costs and the diversion of resources and management attention and there can be no guarantees as to
the outcome of such litigation. These proceedings would put the Company’s patents at risk of being
invalidated or interpreted narrowly and put the Company’s patent applications at risk of not being
granted. Third parties, particularly its large competitor companies, are likely to have access to
substantially greater financial resources than Plant Impact has to conduct such litigation.
Additionally, the Company may suffer reduced sales and/or licence revenue as a result of pending
proceedings or following final resolution of lawsuits. Further, these lawsuits may also provoke
these third parties to assert claims against the Company. Attempts to enforce the Company’s
patents may trigger third party claims that the Company’s patents are invalid. The patent position
of technology and companies can be highly uncertain, it involves complex legal and factual
questions and it continues to be the subject of much litigation. The Company cannot provide
assurance that it will prevail in any of these suits if brought or that the damages or other remedies
awarded to Plant Impact, if any, as a result of such suits will be commercially valuable.
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During the course of these suits, there may be public announcements of results of hearings, motions
and other interim proceedings or developments in the litigation. If securities analysts or others
perceive any of these results to be negative, it could cause the Company’s share price to decline.
The Company may be accused of infringing intellectual property rights of third parties
A granted patent gives its owner a right for a limited period to prevent other persons from carrying
out certain acts or making certain products which come within the scope of the patent in the
territory for which it is granted. It does not give its owner the right to carry out such acts or make
such products if to do so would infringe a third party’s patent. Although the Directors are not aware
of any third party patent to which the Company would require a licence to exploit any of its
technologies, such third party patents or patent applications may exist. The Company may incur
substantial costs if required to defend against third party claims of infringement, especially if such
third parties have greater financial resources than the Company. In addition, litigation is time
consuming and could divert management attention and resources away from the Company’s
business. If the Company does not prevail in litigation, it may have to pay substantial damages for
past infringement, and the court may prohibit the Company from selling or licensing the product
that infringes the patent unless the patent holder licences the patent to the Company.
The patent holder is not required to grant such a licence. Even if a licence is available, it may not be
available on acceptable terms. Failure to obtain a required licence could result in delays in product
development while the Company attempts to design around the patent. If the Company were
unable to cost-effectively redesign its products so they do not infringe a patent, it might be unable to
sell some of its products. The Company’s methods of and procedures for protecting the concepts,
ideas, proprietary know- how and documentation of its proprietary technology may not afford the
Company complete protection, and there can be no assurance that others will not obtain access to
the Company’s know-how or concepts, ideas and documentation. Furthermore, there can be no
assurance that confidentiality arrangements with the Company’s directors, employees, consultants,
manufacturers, suppliers and prospective licences will adequately protect the Company’s trade
secrets. Technology protected by way of trade secrets only retains its commercial value for as long
as it remains confidential and the disclosure of its trade secrets could have an adverse effect on the
Company.
Intellectual property applications may not be successful or valid
Since its formation in March 2003, Group companies have developed and filed eight base patent
applications covering six novel technologies of which one, which covers BugOil쑓, has already been
granted in the UK. The patent positions of technology-based enterprises, such as the Company, are,
however, subject to complex factual and legal issues that may give rise to uncertainty as to the
validity, scope, enforceability and priority of a particular patent.
When a patent application is made, the patent office examiner will seek to find out what
information regarding technology in the same general area has been published before the original
filing date of the application and so form part of the state of the art, referred to as “prior art”. The
examiner will consider how broad the claims of the patent should be having regard to how much the
inventor has contributed to knowledge in the art. Consideration should be given to any new
citations of prior art which arise during prosecution of the patent. While Plant Impact has a detailed
understanding of the prior art relating to its main patent applications, as with all patent
applications, the possibility always remains that other relevant prior art may be discovered in the
future.
A patent once granted is not guaranteed to be valid. The validity of a patent, if challenged, is
ultimately determined by the courts. Following the grant of a patent, third parties may seek to
challenge its validity either before the Patent Office or in the courts. A patent may be partially or
wholly invalid because searches have not revealed items of prior art which the examiner did not find
or know about, or because the examiner may not have given appropriate attention to the prior art
cited during the original prosecution of the patent application. In addition, the examiner is
normally looking only at published material and he may have no knowledge of activities that could
amount to a prior use of the invention.
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Accordingly, there can be no assurance that patent applications that have been made but which are
pending, or which the Company will make in the future, will be granted, that the scope of the
exclusive right sought in the current applications will not need to be narrowed, or that patents
granted to the Company will not be successfully challenged. Furthermore, there is no assurance that
the Company’s existing or future patent rights will afford adequate protection to the Company
against unauthorised use of its technology by others. The Company may incur substantial costs if
required to enforce its patents against third parties, especially if such third parties have greater
financial resources than the Company. The Directors recognise that there are certain jurisdictions
where the Company has not obtained patent protection and where no patent protection may be
available. The Company’s ability to market its products or technology in these jurisdictions by way
of licensing arrangements may be limited.
Dependence on key personnel and importance of hiring additional skilled personnel
The Company’s success is largely dependent on the performance of its key management and
technical personnel – in particular David Marks and Peter Blezard. The loss of one or more of these
people could adversely affect the Company’s business. Much of the Company’s technology has
been originated by its key employees/management. Additionally, in order to successfully
implement the Company’s anticipated growth, the Company will be dependent on its ability to hire
(in a timely manner) and retain additional skilled and qualified personnel, particularly in relation to
technological development and also in relation to management, sales support, marketing and
technical personnel. There can be no assurance that Plant Impact will be able to retain or hire
necessary personnel.
Commercial and strategic relationships
The Company has relationships with a number of companies and other organisations, including
third party laboratories which it uses to conduct more extensive trials after initial trials have been
performed by the Company, multi-national agrochemical companies which are conducting field
trials with a view to entering into distribution and/or licensing agreements and also marketing
relationships.
The success of the Company will depend on its ability to maintain these relationships and also
initiate, develop and maintain beneficial commercial relationships with other parties. The
successful realisation of the Company’s business model requires the establishment and
maintenance of beneficial commercial and strategic relationships with other parties in the industry.
Currently, a significant proportion of the Company’s revenues are generated in the Middle East
through an exclusive sales agency agreement with Pi-MENA. The loss of this contract could lead to
a significant reduction in the Company’s sales.
Potential requirement for further investment
The Company may require additional capital in the future for expansion, activities and/or business
development, whether from equity or debt sources. There can be no guarantee that the necessary
funds will be available on a timely basis, on favourable terms, or at all, or that such funds if raised,
would be sufficient. If additional funds are raised by issuing equity securities, dilution to the then
existing shareholdings may result. The level and timing of future expenditure will depend on a
number of factors, many of which are outside of the Company’s control. If the Company is not able
to obtain additional capital on acceptable terms, or at all, it may be forced to curtail or abandon
such expansion, activities and/or business development.
Plant Impact is an early stage development company
Plant Impact’s business is in the early stage of development and has not yet generated significant
revenues. Its proposed operations are subject to all of the risks inherent in a start-up or developing
business enterprise, including the likelihood of continued operating losses. The likelihood of Plant
Impact’s business success must be considered in the light of the problems, expenses, difficulties,
complications, and delays frequently encountered in connection with the growth of an existing
business, the development of products and channels of distribution, and current and future
development in several key technical fields, as well as the competitive and regulatory environment
in which the Company operates.
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Competing Technologies
Plant Impact is not aware of any company with technology which would render its technology
obsolete or otherwise non-competitive. However, competitors may develop technologies which are
more effective or economic than those of the Company. In addition, current and potential
competitors may have substantially greater financial, technical and marketing resources, longer
operating histories, larger customer bases, greater name recognition and more established
relationships than the Group and so may be better able to compete in the Company’s target
markets.
Dependence on limited products and services
Plant Impact has a limited product line and is therefore reliant on niche businesses and needs to
constantly market its products and pursue opportunities. If the Company is not able to do this, then
its business is unlikely to continue its present rate of development.
Manufacturing
The Company will use contract manufacturers for all medium and high volume production of its
products. If the Company succeeds as expected in developing commercially viable products, these
products will need to be manufactured in commercial quantities, in compliance with regulatory
requirements and at acceptable costs. The Company may not be able to secure or maintain
competent contract manufacturers to deliver products on time, with the required quality levels or at
a cost that is competitive with the products of its rivals or competitive with the incumbent
technologies it intends to displace.
Market acceptance
Whilst the Directors believe a viable market for the Company’s products will develop in the future,
there can be no assurance that its products will succeed as an alternative to conventional or other
new products. The development of a market for the products is affected by many factors, some of
which are beyond its control, including the emergence of newer, more successful technologies and
products, the cost of the Company’s products themselves, regulatory requirements including any
regulatory changes, consumer perceptions and consumer reluctance to buy a new product.
If a market fails to develop or develops more slowly than anticipated, the Company may be unable
to recover the losses it will have incurred in the development of its products and may never achieve
profitability. In addition, the Directors cannot guarantee that the Company will continue to
develop, manufacture or market its products or components if market conditions do not support
the continuation of the product or component.
AIM Market Risks
Application will be made for the Ordinary Shares to be admitted to AIM, a market designed
primarily for emerging or smaller companies to which a higher investment risk tends to be attached
than to larger or more established companies. An investment in shares quoted on AIM may carry a
higher risk than an investment in shares quoted on the Official List of the United Kingdom Listing
Authority. AIM has been in existence since June 1995 and its future success cannot be guaranteed.
Lack of liquidity of the Company’s Ordinary Shares
Although the Company has applied for the Ordinary Shares to be admitted to trading on AIM, no
assurance can be given that at any time after Admission that a liquid market for the Ordinary Shares
will develop.
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PART 4
Part 4(i): Accountant’s Report on the Group
The Directors
Plant Impact plc
2 Lockside Office Park
Lockside Road
Riversway
Preston
PR2 2YS
10 October 2006
Dear Sirs
Plant Impact plc
We report on the financial information set out in Part 4(ii) of the Admission Document dated
10 October 2006. This financial information has been prepared for inclusion in the AIM
Admission Document of Plant Impact plc on the basis of the accounting policies set out in Note 4.1
of Part 4(ii) of the Admission Document.
Responsibilities
This report is required by Paragraph (a) of Schedule Two of the AIM Rules and is given for the
purpose of complying with that regulation and for no other purpose.
Save for any responsibility arising under Paragraph (a) of Schedule Two of the AIM Rules to any
person as and to the extent provided, to the fullest extent permitted by law we do not assume any
responsibility and will not accept any responsibility to any other person for any loss suffered by any
such other person as a result of, arising out of, or in connection with this report consenting to its
inclusion in AIM Admission Document.
The Directors of Plant Impact plc are responsible for preparing the financial information on the
basis of the accounting policies set out in Note 4.1 to the financial information and in accordance
with the applicable financial reporting standards.
It is our responsibility to form an opinion on the financial information as to whether the financial
information gives a true and fair view, for the purposes of the Admission Document, and to report
our opinion to you.
Basis of opinion
We conducted our work in accordance with the Standards for Investment Reporting issued by the
Auditing Practices Board in the United Kingdom. Our work included an assessment of evidence
relevant to the amounts and disclosures in the financial information. It also included an assessment
of the significant estimates and judgements made by those responsible for the preparation of the
financial information and whether the accounting policies are appropriate to the entity’s
circumstances, consistently applied and adequately disclosed.
We planned and performed our work so as to obtain all the information and explanations which we
considered necessary in order to provide us with sufficient evidence to give reasonable assurance
that the financial information is free from material misstatement, whether caused by fraud or other
irregularity or error.
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Opinion
In our opinion, the financial information gives, for the purposes of the Admission Document dated
10 October 2006, a true and fair view of the state of affairs of Plant Impact plc as at the dates stated
and of its losses and cash flows for the periods then ended in accordance with the basis of the
accounting policies set out in note 4.1 of Part 4(ii) of the Admission Document and in accordance
with the applicable reporting framework and has been prepared in a form that is consistent with the
accounting policies adopted in Plant Impact plc’s latest annual accounts
Declaration
For the purposes of Paragraph (a) of Schedule Two of the AIM Rules we are responsible for this
report as part of the AIM Admission Document and declare that we have taken all reasonable care
to ensure that the information contained in this report is, to the best of our knowledge, in
accordance with the facts and contains no omission likely to affect its import. This declaration is
included in the AIM Admission Document in compliance with Schedule Two of the AIM Rules.
Yours faithfully
GRANT THORNTON UK LLP
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Part 4 (ii): Financial Information on the Group
1.
Profit and loss accounts
15 months
ended
31 March
2006
£
13 months
ended
31 December
2004
£
—
345,811
—
—
4.2
4.3
345,811
(261,517)
—
—
4.3
4.3
84,294
(149,518)
(774,055)
—
(24,381)
(280,405)
Operating loss
– continuing operations
– acquisitions
(196,001)
(643,278)
(304,786)
—
Net interest
4.4
(839,279)
(140,294)
(304,786)
—
Loss on ordinary activities before taxation
Tax on loss on ordinary activities
4.2
4.6
(979,573)
(4,024)
(304,786)
—
4.20
(983,597)
(304,786)
4.7
(1.61)
(0.64)
Note
Turnover
– continuing operations
– acquisitions
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Loss on ordinary activities after taxation
Basic and diluted loss per share
There are no recognised gains or losses other than the loss in each period.
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Balance sheets
Fixed assets
Intangible assets
Tangible assets
Current assets
Stocks
Debtors
Cash at bank and in hand
Note
At
31 March
2006
£
At
31 December
2004
£
4.8
4.9
585,383
3,746
15,523
—
589,129
15,523
7,831
425,509
446,770
—
25,952
6,007
880,110
(670,717)
31,959
(272,208)
209,393
(240,249)
798,522
(979,323)
(224,726)
—
(180,801)
(224,726)
4.19/4.20
4.20
4.20
4.20
79,878
844,812
182,892
(1,288,383)
4,778
—
75,282
(304,786)
4.20
(180,801)
(224,726)
4.10
4.11
Creditors: amounts falling due within one year
4.12
Net current assets/(liabilities)
Total assets less current liabilities
Creditors: amounts falling due after more than one year
Capital and reserves
Called up share capital
Share premium account
Merger reserve
Profit and loss account
Shareholders’ deficit
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Cash flow statements
Cash outflow from operating activities
Note
15 months
ended
31 March
2006
£
4.16
(1,173,043)
13 months
ended
31 December
2004
£
(308,530)
Returns on investments and servicing of finance
Interest received
Interest paid
6,166
(40,539)
—
—
Net cash outflow from returns on investments and
servicing of finance
(34,373)
—
Capital expenditure and financial investment
Payments to acquire intangible fixed assets
Payments to acquire tangible fixed assets
—
(2,495)
(15,523)
—
Net cash outflow from capital expenditure and financial
investment
(2,495)
(15,523)
Acquisitions and disposals
Net cash acquired with subsidiaries
33,961
—
Net cash inflow from acquisitions and disposals
33,961
—
Net outflow before financing
(1,175,950)
Financing
Issue of shares
Issue of loan notes
Receipt from borrowings
Net cash inflow from financing
Increase in cash in the period
4.17
111
(324,053)
730,172
870,985
15,556
80,060
—
250,000
1,616,713
330,060
440,763
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Notes to the Financial information
4.1 Principal Accounting Policies
The financial information on the Group has been prepared solely for the purpose of the Admission
Document and does not constitute audited statutory accounts within the meaning of Section 240 of
the Companies Act 1985.
Basis of accounting
The financial information has been prepared under the historical cost convention and in
accordance with applicable accounting standards.
Changes in accounting policies
In preparing the financial information, the Group has adopted the following Financial Reporting
Standards:
앫
FRS 21 ‘Events after the Balance Sheet date (IAS 10)’
앫
the presentation requirements of FRS 25 ‘Financial Instruments: Disclosure and Presentation
(IAS 32)’
FRS 21 ‘Events after the Balance Sheet date (IAS 10)’
The adoption of FRS 21 has resulted in a change in accounting policy in respect of proposed equity
dividends although there has been no impact on the Group. If the Group declares dividends to the
holders of equity instruments after the balance sheet date, the Group does not recognise those
dividends as a liability at the balance sheet date.
FRS 25 ‘Financial Instruments: Disclosure and Presentation (IAS 32)’
Financial liabilities and equity instruments are classified according to the substance of the
contractual arrangements entered into. An equity instrument is any contract that evidences a
residual interest in the assets of the entity after deducting all of its financial liabilities.
Where the contractual obligations of financial instruments (including share capital) are equivalent
to a similar debt instrument, those financial instruments are classed as financial liabilities. Financial
liabilities are presented as such in the balance sheet. Finance costs and gains or losses relating to
financial liabilities are included in the profit and loss account. Finance costs are calculated so as to
produce a constant rate of return on the outstanding liability.
Where the contractual terms of share capital do not have any terms meeting the definition of a
financial liability then this is classed as an equity instrument. Dividends and distributions relating to
equity instruments are debited direct to equity.
Basis of consolidation
The consolidated financial information incorporates the financial information of the Company and
all Group undertakings.
Acquisitions are accounted for under the acquisition method and goodwill on consolidation is
capitalised and written off over its estimated useful economic life. The results of companies
acquired or disposed of are included in the profit and loss account after or up to the date that control
passes respectively.
The Group’s financial information consolidates the financial information of the Company and its
subsidiary undertakings.
On 24 June 2005 the Company acquired the entire share capital of Biofutures in exchange for the
issue of ordinary shares. This group reconstruction has been accounted for in accordance with the
principles of merger accounting set out in FRS 6. The financial information is therefore presented as
if Biofutures had been owned and controlled by the Company throughout the periods ended
31 December 2004 and 31 March 2006.
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In addition, on 24 June 2005 the Group acquired the entire share capital of PiBiosciences. This
acquisition has been accounted for using the acquisition method of accounting.
Turnover
Turnover is the total amount receivable by the Group for goods supplied and services provided,
excluding VAT and trade discounts. Turnover for goods supplied is recognised on proof of delivery
by the customer.
Intangible fixed assets
Patents are included at cost and amortised over their useful economic life.
Goodwill
Goodwill arising on acquisitions is capitalised and classified as an asset on the balance sheet and is
amortised on a straight line basis over its estimated useful economic life up to a maximum of 20
years. Goodwill is reviewed for impairment at the end of the first full financial year following each
acquisition and subsequently as and when necessary if circumstances emerge that indicate that the
carrying value may not be recoverable.
Tangible fixed assets and depreciation
Tangible fixed assets are stated at cost or valuation, net of depreciation.
Depreciation is calculated to write down the cost of all tangible fixed assets by equal annual
instalments over their expected useful economic lives. The rates generally applicable are:
Laboratory equipment
Fixtures, fittings and equipment
33.3 per cent. per annum, straight line method
15 per cent. per annum, reducing balance method
Investments
Investments in subsidiary companies are held at cost.
Stocks
Stocks are stated at the lower of cost and net realisable value, after making due allowance for
obsolete and slow moving items.
Leased assets
Payments made under operating leases are charged to the profit and loss account on a straight line
basis over the lease term.
Research and development
Research and development expenditure is charged to the profit and loss account in the period in
which it is incurred.
Deferred taxation
Deferred tax is recognised on all timing differences where the transactions or events that give the
Group an obligation to pay more tax in the future, or a right to pay less tax in the future, have
occurred by the balance sheet date. Deferred tax assets are recognised when it is more likely than
not that they will be recovered. Deferred tax is measured using rates of tax that have been enacted or
substantively enacted by the balance sheet date.
Foreign currency
Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are
reported at the rates of exchange prevailing at that date. Any gain or loss arising from a change in
exchange rates subsequent to the date of the transaction is included as an exchange gain or loss in
the profit and loss account.
Transactions in foreign currencies are recorded at the rate of exchange at the date of the
transaction.
Deferred government grants
Deferred government grants in respect of capital expenditure are treated as deferred income and are
credited to the profit and loss account over the expected useful lives of the assets to which they
relate.
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4.2 Turnover and loss on ordinary activities before taxation
The turnover and loss on ordinary activities before taxation is attributable to the principal activity
of the Group, being the development and marketing of crop nutrients and natural pesticides.
The analysis of turnover by destination is as follows:
Continuing
Acquisitions
2006
2006
£
£
United Kingdom
Europe
Rest of the world
Total
2006
£
Total
2004
£
—
—
—
—
20,880
324,931
—
20,880
324,931
—
—
—
—
345,811
345,811
—
Substantially all products and services are supplied from the United Kingdom.
The loss on ordinary activities before taxation is stated after charging/(crediting):
Auditors’ remuneration
– audit services
Depreciation
Operating lease rentals:
– land and buildings
Amortisation of goodwill
Amortisation of patents
Research and development
Release of grant income
Foreign exchange differences
4.3
2006
£
2004
£
10,000
3,058
—
—
14,879
22,807
15,523
148,123
(3,273)
(3,736)
—
—
—
167,613
—
—
Analysis of cost of sales and other operating expenses
Continuing
Acquisitions
£
£
Cost of sales
Total
Total
2006
£
2004
£
—
261,517
261,517
—
10,408
139,110
149,518
24,381
185,593
588,462
774,055
280,405
2006
£
2004
£
On bank loans
Other loan interest
Convertible loan note interest
2,539
38,000
105,921
—
—
—
Interest receivable
146,460
(6,166)
—
—
140,294
—
Distribution costs
Administrative expenses
4.4
Net interest
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4.5 Directors and employees
The total employee costs during each period was as follows:
Wages and salaries
Social security costs
2006
£
2004
£
251,072
19,537
—
—
270,609
—
2006
No
2004
No
1
3
2
—
2
1
6
3
2006
£
2004
£
199,549
—
—
71,250
199,549
71,250
The average number of employees during each period was:
Administration
Management
Research and development
The total amounts for directors’ remuneration and other benefits were as follows:
Directors’ remuneration
Directors’ fees
During each of the periods to 31 December 2004 and 31 March 2006 no directors participated in
any pension schemes provided by the Group.
4.6
Tax on loss on ordinary activities
The taxation charge is based on the loss in the period and represents:
United Kingdom corporation tax at 30 per cent. (2004: 30 per cent.)
2006
£
2004
£
4,024
—
Factors affecting the tax charge for the period
The tax assessed for each period differs from the standard rate of corporation tax in the United
Kingdom of 30 per cent. The differences are explained as follows:
2006
£
2004
£
Loss on ordinary activities before taxation
(979,573)
(304,786)
Loss on ordinary activities before taxation multiplied by standard rate
of corporation tax in the United Kingdom of 30 per cent.
(2004: 30 per cent.)
(293,872)
(91,436)
Effect of:
Expenses not deductible for tax purposes
Difference between capital allowances for the period and depreciation
Other timing differences
Unrelieved tax losses
Losses carried back
31,476
777
7,853
257,790
—
3,633
—
—
84,125
3,678
4,024
—
Total current tax
Unrelieved tax losses of £1,321,492 (2004: £280,417) remain available to offset against future
taxable trading profits. There is a potential deferred tax asset of £387,818 which has not been
recognised in the financial information in respect of these trade losses carried forward.
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4.7 Loss per share
The basic and diluted loss per share is calculated below:
2006
Loss
£
Basic and diluted loss
per share
Weighted
average
ordinary
shares in
issue
Number
(983,597) 612,820
Loss per
ordinary
share
£
2004
Loss
£
Weighted
average
ordinary
shares in
issue
Number
(1.61) (304,786) 477,800
Loss per
ordinary
share
£
(0.64)
The share options are anti-dilutive in respect of the basic loss per share calculation.
4.8
Intangible fixed assets
Goodwill
£
Patents
£
Total
£
Cost
At 10 December 2003
Additions
—
—
—
15,523
—
15,523
At 31 December 2004
Acquisition
—
608,190
15,523
—
15,523
608,190
At 31 March 2006
608,190
15,523
623,713
Amortisation
At 10 December 2003
Provided in the period
—
—
—
—
—
—
At 31 December 2004
Provided in the period
—
22,807
—
15,523
—
38,330
At 31 March 2006
22,807
15,523
38,330
Net book amount
At 31 March 2006
585,383
—
585,383
—
15,523
15,523
At 31 December 2004
Goodwill arose on the acquisition of PiBioscience and is being amortised over its useful life of 20
years.
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Tangible fixed assets
Plant and
machinery
£
Cost
At 10 December 2003
—
At 31 December 2004
Acquisition
Additions
—
4,309
2,495
At 31 March 2006
6,804
Depreciation
At 10 December 2003
—
At 31 December 2004
Provided in the period
—
3,058
At 31 March 2006
3,058
Net book amount
At 31 March 2006
3,746
At 31 December 2004
—
4.10 Stocks
Finished goods
2006
£
2004
£
7,831
—
2006
£
2004
£
202,995
194,384
28,130
—
25,952
—
425,509
25,952
2006
£
2004
£
15,556
250,000
190,124
98,580
4,024
—
112,433
—
250,000
12,818
—
—
9,390
—
670,717
272,208
2006
£
2004
£
979,323
—
4.11 Debtors
Trade debtors
Other debtors
Prepayments and accrued income
4.12 Creditors: amounts falling due within one year
Bank loans
Other loans
Trade creditors
Other taxation and social security
Corporation tax
Other creditors
Accruals and deferred income
4.13 Creditors: amounts falling due after more than one year
Convertible loan notes 2008
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Convertible loan notes 2008
During the period ended 31 March 2006, the Group raised £900,000 by way of loan notes,
convertible into equity on the next round of future equity investment or on sale or flotation of the
Group. In the absence of any of these events, the loan notes will mature on 31 December 2008.
The loan notes represent a financial liability in accordance with FRS 25. The loan notes are
redeemable at a premium and the amount of the premium varies with the length of time the loan
notes have been outstanding. The premium constitutes a further financial liability and in
accordance with FRS 25 has been classified within creditors.
The loan notes carry interest at a rate equivalent to the EU reference rate, however the interest is
only payable when the loan notes are redeemed or converted. In addition, the loan notes are secured
on the Intellectual Property of the Group.
4.14 Deferred taxation
The unprovided deferred taxation asset calculated at a tax rate of 30 per cent. (2004: 30 per cent.)
is set out below:
2006
£
Accelerated capital allowances
Other timing differences
Trade losses
2004
£
(777)
(7,853)
396,448
—
—
84,125
387,818
84,125
4.15 Acquisition
On 24 June 2005, the Group acquired the entire share capital of PiBioscience. The acquisition has
been accounted for using the acquisition method of accounting and the consolidated assets and
liabilities of the company when acquired were as follows:
Book and
fair values
£
Tangible fixed assets
Stock
Debtors
Cash at bank
Creditors
Accruals and deferred income
4,309
5,000
136,080
33,961
(486,915)
(3,273)
Net liabilities
Goodwill (note 4.8)
(310,838)
608,190
Cost of acquisition
297,352
Satisfied by:
98,949 10p ordinary shares allotted at 300.51p
297,352
In the last financial period to 31 March 2005, PiBioscience made a loss after tax of £257,360. For
the period since this date to the date of acquisition, the management accounts of the company were
as follows:
£
Turnover
Cost of sales
104,607
(82,580)
Gross profit
Operating charges
22,027
(155,250)
Operating loss and loss attributable to shareholders
(133,223)
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There were no material recognised gains and losses in the period to the date of acquisition other
than the loss for the period.
The acquired business made the following contributions to, and utilisations of, group cash flow:
£
Net cash outflow from operating activities
Net cash outflow from servicing finance
Net cash outflow from capital expenditure
(950,561)
(2,539)
(2,495)
Decrease in cash
(955,595)
4.16 Reconciliation of operating loss to operating cash flows
2006
£
Operating loss
Depreciation
Amortisation of goodwill
Amortisation of patents
Release of grant income
Increase in stocks
(Increase)/Decrease in debtors
(Decrease)/Increase in creditors
Net cash outflow from operating activities
2004
£
(839,279)
3,058
22,807
15,523
(3,273)
(2,831)
(263,477)
(105,571)
(304,786)
—
—
—
—
—
(25,952)
22,208
(1,173,043)
(308,530)
4.17 Reconciliation of net cash flow to movement in net debt
2006
£
2004
£
Increase in cash in the period
Issue of loan notes
Increase in borrowings
440,763
(870,985)
(15,556)
6,007
—
(250,000)
Increase in net debt resulting from cash flows
Other non-cash items
(445,778)
(108,338)
(243,993)
—
Movement in net debt in the period
Opening net debt
(554,116)
(243,993)
Closing net debt
(798,109)
—
—
(243,993)
4.18 Analysis of changes in net debt
At
10 December
2003
£
Cashflow
£
Cash in hand and at bank
—
6,007
Cash and cash equivalents
Bank loans
Convertible loan notes
Other loans
—
—
—
—
6,007
—
—
(250,000)
—
—
—
—
6,007
—
—
(250,000)
—
(243,993)
—
(243,993)
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non-cash 31 December
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2004
£
£
—
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1 January
2005
£
6,007
Cash in hand and at bank
Cash and cash equivalents
Bank loans
Convertible loan notes
Other loans
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Cashflow
£
Other
non-cash
changes
£
At
31 March
2006
£
440,763
—
446,770
6,007
—
—
(250,000)
440,763
(15,556)
(870,985)
—
—
—
(108,338)
—
446,770
(15,556)
(979,323)
(250,000)
(243,993)
(445,778)
(108,338)
(798,109)
The non-cash movements relates to accrued loan note interest and amortisation of deferred
arrangement costs.
4.19 Share capital
Authorised
1,000 Ordinary shares of £1 each
250,000 Redeemable Preference shares of £1 each
1,000,000 Ordinary shares of 10p each
Allotted, called up and fully paid
100 Ordinary shares of £1 each
Adjustment on merger
798,775 Ordinary shares of 10p each
2006
£
2004
£
—
—
100,000
1,000
250,000
—
—
—
100
4,678
—
79,878
4,778
—
Allotments during the period ended 31 December 2004
In March 2004 Biofutures issued 60 ordinary shares at par, and a further 40 shares were issued at
£2,000 per share. The difference between the total consideration of £80,060 and the total nominal
value of £100 has been credited to the share premium account.
The authorised share capital was increased to £251,000 by the creation of 250,000 £1 redeemable
preference shares.
Allotments during the period ended 31 March 2006
On 24 June 2005, the following transactions took place:
The existing two issued and the 99,998 authorised but unissued ordinary shares of £1 each in the
capital of the Plant Impact Plc were sub-divided into 10 ordinary shares of 10 pence each subject to
the rights set out in the articles of association of the company.
501,681 10 pence ordinary shares were allotted at par value, on the merger with Biofutures, on a
share for share exchange with the existing shareholders of Biofutures.
198,145 10 pence ordinary shares were issued at 300.51p per share. The difference between the
total consideration of £595,447 and the total nominal value of £19,815 has been credited to the
share premium account.
98,949 10 pence ordinary shares were allotted, on the acquisition of PiBioscience, at a value of
300.51p per share, on a share for share exchange with the existing shareholders of PiBioscience.
The difference between the total consideration of £297,352 and the total nominal value of £9,895
has been credited to the share premium account.
The company acquired 250,000 £1 preference shares in Biofutures. The consideration was an
interest free, unsecured loan of £250,000.
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4.20 Capital and reserves
Called up
share
capital
£
Share
premium
account
£
Merger
reserve
£
100
—
79,960
—
—
—
Issue of share capital
Loss for the financial period
At 31 December 2004
Adjustment on merger
Reserves of merged company
As restated at 31 December
2004
Acquisition of shares in
Biofutures
Issue of shares in Biofutures
Issue of ordinary shares
Issue of redeemable preference
shares
Issue of shares on the
acquisition of PIBiosciences
Settlement of redeemable
preference shares by unsecured
loan
Share issue costs
Loss for the financial period
At 31 March 2006
100
4,678
—
79,960
—
(79,960)
4,778
—
45,390
—
19,815
—
—
575,632
—
9,895
—
(304,786)
80,060
(304,786)
—
(4,678)
79,960
(304,786)
—
—
(224,726)
—
—
75,282
(304,786)
(224,726)
(45,390)
153,000
—
—
—
—
—
153,000
595,447
—
250,000
—
250,000
287,457
—
—
297,352
—
—
—
79,878
Profit
and loss Shareholders’
deficit
account
£
£
—
(18,277)
—
844,812
(250,000)
—
—
—
—
(983,597)
(250,000)
(18,277)
(983,597)
182,892 (1,288,383)
(180,801)
The balance on the share premium account may not be distributed legally under section 263 of the
Companies Act 1985.
4.21 Leasing commitments
Operating lease payments amounting to £20,000 as at 31 March 2006 (2004: £Nil) are due within
one year. The leases to which these accounts relate expire as follows:
Land and buildings
Operating leases which expire:
– within five years
2006
£
2004
£
20,000
—
4.22 Related party transactions
The following directors had interest free loans and are included within other debtors. The details
are as follows:
At
10 December
2003
£
P Blezard
D J Marks
At
Maximum 31 December
in period
2004
£
£
Maximum
in period
£
At
31 March
2006
£
—
—
15
15
15
15
7,890
7,890
7,890
7,890
—
30
30
15,780
15,780
The Group has taken advantage of the exemption in Financial Reporting Standard No. 8 “Related
party disclosures” and has not disclosed transactions with Group undertakings.
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For the period ended 31 December 2004, the following related party transactions occurred:
The Group was related to PiBioscience by virtue of common directors and shareholders. The Group
provided PiBioscience with working capital of £18,500 in the period. The balance owed to the
Group at 31 December 2004 was £18,500. This amount was repaid after the year end. During the
period, PiBioscience charged a total of £3,600 to the Group, in respect of administrative services
provided.
Rising Stars Growth Fund, a shareholder, provided the Group with £250,000 as working capital in
the period. This amount is included in other loans at 31 December 2004.
P Blezard and D Marks each charged the Company a total of £30,000 in the period in respect of
consultancy services provided. W Thompson is also a director of Quevedo Services Limited,
Quevedo Services Limited charged Biofutures a total of £11,250 during the period in respect of
consultancy services provided by W Thompson.
4.23 Post balance sheet events
On 9 October 2006, the board passed resolutions to seek admission of the Company’s shares to
trading on AIM, a market operated by the London Stock Exchange plc and issue new Ordinary
Shares by way of a placing to raise £3.85 million, before costs of issue, and for which irrevocable
letters of support had been received from the placees.
At the same time of passing the resolutions to seek admission and authorise the placing the holders
of the Convertible Loan Notes 2008 irrevocably undertook to convert their Loan Notes, including
redemption premium, into Ordinary Shares in the Company.
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PART 5
Additional Information
1.
Responsibility
The Directors whose names appear on page 12, and the Company, accept responsibility for the
information contained in this document. To the best of the knowledge of the Directors and the
Company (who have taken all reasonable care to ensure that such is the case), the information
contained in this document is in accordance with the facts and does not omit anything likely to
affect the import of such information.
2.
2.1
The Group
The Company was incorporated and registered in England and Wales on 4 May 2005 under
the Act as a public company limited by shares and with registration number 5442961. On
1 July 2005 the Company obtained a trading certificate pursuant to section 117 of the Act.
2.2
The principal legislation under which the Company operates is the Act and the regulations
made under it.
2.3
The Company’s registered office, head office and principal place of business is at 2 Lockside
Office Park, Lockside Road, Riversway, Preston, Lancashire PR2 2YS. The telephone
number at the registered office is 01772 733744. The ISIN number of the Ordinary Shares is
GB00B1F4K366.
2.4
The Company has two wholly owned direct or indirect subsidiaries which are registered in
England and Wales, details of each of which are as follows:
Company
Activity
PI Bioscience Limited
Marketing of crop nutrients and natural
pesticides
Research and development on natural sciences
and engineering
Biofutures PI Limited
Ownership
100%
100%
3.
3.1
Share Capital
On incorporation, the authorised share capital of the Company was £50,000 divided into
50,000 ordinary shares of £1 each, two of which were issued credited as fully paid to the
subscribers to the Company’s Memorandum of Association.
3.2
On 24 June 2005, by or pursuant to resolutions passed by the Company on that date:
3.2.1
the authorised share capital of the Company was increased from £50,000 to
£100,000 by the creation of an additional 50,000 ordinary shares of £1 each; and
3.2.2
each ordinary share of £1 each was sub-divided into 10 ordinary shares of 10p each.
3.3
On 12 December 2005, by or pursuant to resolutions of the Company passed on that date
the Directors were generally and unconditionally authorised pursuant to sections 80 and 95
of the Act to exercise all and any powers of the Company to issue and allot shares in the
capital of the Company pursuant to and as required by the terms of the Loan Notes.
3.4
On 28 September 2006, by or pursuant to a resolution of the Company passed on that date,
conditional on Admission taking place by 28 February 2007:
3.4.1
each existing issued and unissued ordinary share of 10p each in the capital of the
Company was sub-divided into 10 Ordinary Shares subject to the rights set out in
the new articles of association of the Company adopted pursuant to the same
resolution (and as detailed below);
3.4.2
the authorised share capital of the Company was increased from £100,000 to
£500,000 by the creation of 40,000,000 new Ordinary Shares;
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3.4.3
for the purposes of and pursuant to section 80(1) of the Act, the Directors were
generally and unconditionally authorised to exercise all and any powers of the
Company to allot relevant securities (as defined in section 80(2) of the Act) up to an
aggregate nominal amount equal to £230,000 (subject always to the articles of
association of the Company) with that authority and power expiring at the
conclusion of the next annual general meeting of the Company or 15 months from
the date of the resolution (whichever is the earlier) and provided further that the
Company will be able, at any time prior to the expiry of the authority, to make any
offer, agreement or arrangement which would or might require relevant securities
to be allotted after expiry of such period and the Directors may then allot relevant
securities in pursuance of any such offer, agreement or arrangement as if the
authority or power conferred had not expired;
3.4.4
for the purposes of and pursuant to section 95(1) of the Act, the Directors were
authorised and empowered (with such power expiring at the same time as the
authority referred to in paragraph 3.4.3 above (the “Section 80 Authority”)) to
allot equity securities (as defined in section 94(2) of the Act) for cash pursuant to the
Section 80 Authority as if section 89(1) of the Act did not apply to any such
allotment save that the power is limited to:
3.4.5
(a)
the allotment of equity securities pursuant to a rights issue or similar offer to
shareholders of the Company where the interests of all shareholders of the
Company were proportionate or as nearly proportionate as practical to the
numbers of Ordinary Shares held by them;
(b)
the allotment of equity securities up to £120,000 in nominal value pursuant to
the Placing; and
(c)
the allotment (otherwise than pursuant to paragraphs 3.4.4 (a) and (b) above)
for cash of equity securities up to an aggregate nominal amount of £52,500;
and
the Company adopted new articles of association.
3.5
The Directors intend to exercise the authorities described in paragraphs 3.4.3 and 3.4.4
above to issue the Placing Shares (representing 43.86 per cent. of the Enlarged Share
Capital) and the Ordinary Shares to be issued as detailed in paragraphs 9.9 and 9.12 below.
3.6
The Placing will result in the issue of 10,139,475 new Ordinary Shares. A further 4,334,204
Ordinary Shares will be issued on conversion of the Loan Notes and the Fund Loans, and a
further 657,894 Ordinary Shares will be issued on capitalisation of the RisingStars Growth
Fund loan of £250,000, each such issue conditional on Admission. Assuming that the
resolution detailed in paragraph 3.4 above had been passed unconditionally, the Company’s
authorised and issued share capital, at the date of this document is and it is expected to be
immediately following Admission:
Amount
Authorised
Issued and fully paid
3.7
£100,000
£79,877.50
At the date of
this document
Number of
Ordinary
Shares
Following Admission
Number of
Ordinary
Amount
Shares
10,000,000
£500,000
7,987,750 £231,193.23
50,000,000
23,119,323
Share Capital Reconciliation
Issued Ordinary Shares
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Reconciliation of Ordinary Shares under option pursuant to the Share Scheme
Martin Robinson
Peter Blezard
Gordon Harman
David Marks
William Thompson
At Incorporation
Following Admission
Nil
Nil
Nil
Nil
Nil
90,440
1,196,063
271,290
1,196,063
151,020
3.9
On Admission, Existing Shareholders who do not, or are not eligible to, participate pro rata in
each of the Placing, Loan Notes conversion, Fund Loans conversion and Loan capitalisation
will suffer an immediate dilution of 65.45 per cent. of their interests in the Company.
3.10
The provisions of section 89(1) of the Act (which confer on shareholders rights of
pre-emption in respect of the allotment of equity securities which are, or are to be, paid up in
cash other than by way of allotment to employees under an employees’ share scheme as
defined in section 743 of the Act) will apply to the authorised but unissued share capital of
the Company to the extent not disapplied as described in paragraph 3.4.4 above.
3.11
Save for the Loan Notes and the Fund Loans which the Loan Noteholders and the lenders of
the Fund Loans, conditionally on Admission, have irrevocably undertaken (in the case of the
Loan Notes) and agreed (in the case of the Fund Loans) to convert into the Conversion
Shares, the Company does not have in issue any securities not representing share capital and
there are no outstanding convertible securities issued or proposed to be issued by the
Company.
4.
Memorandum and Articles of Association and Mandatory Bids
Memorandum of Association
4.1
The objects of the Company are set out in full in clause 4 of its Memorandum of Association and
include the carrying on of business as a general commercial company and the carrying on of any
other trade or business which may seem to the Company and the directors to be advantageous
and to directly or indirectly enhance any or all of the business of the Company.
Articles of Association
4.2
The articles of association of the Company which were adopted pursuant to a resolution of
the Company as described in paragraph 3.4.5 contain provisions, inter alia, in respect of the
Ordinary Shares, general meetings of the Company and the directors to the following effect:
4.2.1
Voting Rights
Subject to any rights or restrictions attached to the shares (including as a result of
unpaid calls) and/or as mentioned below, on a show of hands every member who
(being an individual) is present in person or (being a corporation) is present by a
duly authorised representative and is entitled to have a vote shall have one vote and
on a poll every member who is present in person or by proxy and entitled to vote
shall have one vote for every share of which he is the holder. Where, in respect of any
shares, any registered holder or any other person appearing to be interested in such
shares fails to comply with any notice given by the Company under section 212 of
the Act, then not earlier than 14 days after service of such notice the shares in
question may be disenfranchised.
4.2.2
Major Shareholders
Nothing in the Articles confers on major shareholders in the Company any voting
rights which are different to those conferred on the holders of Ordinary Shares as
described in paragraph 4.2.1 above.
Pursuant to section 198 of the Act, holders of three per cent. or more of the nominal
value of the Company’s share capital are required to notify their interest in writing
to the Company. To the extent that persons who already hold at least three per cent.
or more of the nominal value of the Company’s share capital increase or decrease
their holding, section 198 of the Act requires that this is also notified to the
Company by the shareholder.
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Pursuant to section 212 of the Act, the Company may by notice in writing require a
person whom the Company knows or has reasonable cause to believe to be or, at
any time during the three years immediately preceding the date on which the notice
is issued, to have been interested in shares comprised in the Company’s issued share
capital, to confirm that fact or (as the case may be) to indicate whether or not it is the
case, and where that person holds, or has during that time held an interest in shares
so comprised, to give such further information as may be required in accordance
with section 212(2) of the Act.
4.2.3
General Meetings
An annual general meeting shall be held once a year, within 15 months of the
previous annual general meeting.
Subject to a member’s right to requisition an extraordinary general meeting
pursuant to section 368 of the Act, general meetings of the Company are convened
at the discretion of the board, and with the exception of the annual general meeting,
all such general meetings of the Company shall be extraordinary general meetings.
An annual general meeting and any extraordinary general meeting at which it is
proposed to pass a special resolution or (except as provided by statute) a resolution
of which special notice has been given to the Company, shall be called by at least 21
clear days’ notice in writing. Any other extraordinary general meeting shall be
called by at least 14 clear days’ notice. Notice may be via a website where the
member agrees and is informed that the notice has been published on the web site,
the address of which is known to him. Notice shall be given to all members and the
directors and the auditors.
Every notice calling a general meeting shall specify the place, day and hour of the
meeting. Every notice must include a reasonably prominent statement that a
member entitled to attend and vote is entitled to appoint a proxy or proxies to
attend and, on a poll, vote instead of him and that a proxy need not be a member of
the Company.
A general meeting may be called by shorter notice if it is agreed: (i) in the case of an
annual general meeting, by all the members entitled to attend and vote; and (ii) in
the case of an extraordinary general meeting, by a majority in the number of the
members having a right to attend and vote, being a majority together holding at
least 95 per cent. in nominal value of the shares giving that right.
4.2.4
Changes in capital
The Company may from time to time by ordinary resolution increase its share
capital, consolidate and divide all or any of its share capital into shares of a larger
amount, sub-divide all or any of its shares into shares of a smaller amount and
cancel any shares not taken or agreed to be taken by any person.
The Company may by ordinary resolution cancel any shares which have not been
taken (or are subject to agreement to take) and diminish the amount of its share
capital by the nominal amount of the shares so cancelled.
The Company may, subject to the provisions of the Act, by special resolution reduce
its share capital, any capital redemption reserve and any share premium account.
Subject to and in accordance with the provisions of the Act, the Company may
purchase its own shares (including redeemable shares).
4.2.5
Variation of Rights
Subject to the Act and every other statute for the time being in force concerning
companies and affecting the Company (the “Statutes”), if at any time the capital of
the Company is divided into different classes of shares, all or any of the rights and
privileges attached to any class of share may be varied or abrogated either (i) in such
a manner (if any) as may be provided by the rights attaching to such class or (ii) in
the absence of any such provision, with the consent in writing of the holders of at
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least 75 per cent. of the nominal amount of the issued shares of the relevant class or
with the sanction of an extraordinary resolution passed at a separate meeting of the
holders of the shares of the relevant class. At any such separate meeting the holders
present in person or by proxy of one third of the issued shares of the class in question
shall be a quorum. Unless otherwise provided by the rights attaching to any shares,
these rights shall be deemed to be varied by the creation or issue of further shares
ranking in any respect in priority thereto.
4.2.6
Alteration of Capital
The Company may from time to time by ordinary resolution increase its share
capital, consolidate and divide all or any of its share capital into shares of a larger
amount, sub-divide all or any of its shares into shares of a smaller amount and
cancel any shares not taken or agreed to be taken by any person.
The Company may, subject to the Statutes, by special resolution reduce its share
capital, any capital redemption reserve and any share premium account. Subject to
and in accordance with the provisions of the Statutes, the Company may purchase
its own shares (including redeemable shares).
4.2.7
Redemption
The Company may, by special resolution and subject to the Statutes, create shares
which are liable to be redeemed. As at the date of this document, there are no shares
in issue which are capable of being redeemed by the Company.
4.2.8
Conversion
The Company may, by ordinary resolution and subject to the Statutes, convert all or
any of its fully-paid shares into stock of the same class and denomination and
reconvert such stock into fully paid up shares of the same class and denomination.
4.2.9
Distribution of assets on a winding up
In the event of liquidation of the Company the holders of shares are entitled pari
passu to any surplus dividends. A liquidator may, with the sanction of an
extraordinary resolution, divide the assets among the members in specie.
4.2.10 Transfer of Shares
The Ordinary Shares are in registered form and may be in certificated or
uncertificated form. Shares in uncertificated form may be transferred otherwise
than by written instrument in accordance with the Statutes and relevant
subordinate legislation. Transfers of shares in certificated form may be effected by
instrument in writing in any usual or common form or in any other form acceptable
to the directors. Any instrument of transfer shall be signed by or on behalf of the
transferor and (except in the case of fully paid shares) by or on behalf of the
transferee. The transferor shall be deemed to remain the holder of the shares until
the name of the transferee is entered in the Company’s register of members.
The Directors may refuse to register the transfer of a share which is in respect of a
share which is not fully paid, or which is in favour of more than four transferees or
which is in respect of more than one class of shares or which has not been presented
for registration duly stamped accompanied by the share certificates for the shares to
which the transfer relates and such other evidence as the Directors may reasonably
require to show the right of the transferor to make the transfer.
Where in respect of any shares any registered holder or any other person appearing
to be interested in such shares fails to comply with any notice given by the Company
under section 212 of the Act, then the Company may prohibit transfers of such
shares otherwise than following a sale shown to the satisfaction of the directors to
be of the full legal and beneficial ownership of such shares at arm’s length. The
registration of transfers may be suspended by the Directors for any period not
exceeding 30 days in a year.
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4.2.11 Dividends and other distributions
Subject to the provisions of the Statutes, the Company may by ordinary resolution
declare dividends in accordance with the respective rights of the members, but not
exceeding the amount recommended by the directors. The directors may pay
interim dividends if it appears to them that they are justified by the profits of the
Company. Except as otherwise provided by the Articles or the rights attached to any
shares issued by the Company, the holders of shares are entitled pari passu amongst
themselves to share in the whole of the profits of the Company paid out as dividends
and the whole of any surplus in the event of liquidation of the Company. A
liquidator may, with the sanction of an extraordinary resolution, divide the assets
among the members in specie. The directors may, with the sanction of an ordinary
resolution, offer the shareholders or any class of them (other than those not entitled
to the relevant dividend or dividends) the right to elect to receive Ordinary Shares,
credited as fully paid, instead of cash in respect of the whole or part of any dividend
or dividends which are the subject of the ordinary resolution.
Where, in respect of any shares, any registered holder or any other person appearing
to be interested in shares of the Company fails to comply with any notice given by
the Company under section 212 of the Companies Act, then, provided that the
shares concerned represent at least 0.25 per cent. in nominal amount of the issued
shares of the relevant class, the Company may withhold dividends on such shares.
All unclaimed dividends may be invested or otherwise made use of by the Directors
for the benefit of the Company until claimed and the Company shall not be
constituted a trustee in respect thereof. Any dividend which is unclaimed for a
period of 12 years from the date on which the dividend became due for payment
shall be forfeited and cease to remain owing by the Company.
4.2.12 Borrowing Powers
Subject to the provisions of the Act and as provided in the Articles, the directors may
exercise all the powers of the Company to borrow money, to mortgage or charge its
undertaking, property and assets (present and future) and uncalled capital, and to
issue debentures and other securities, whether outright or as collateral security for
any debt, liability or obligation of the Company or any third party. The directors
shall restrict the borrowings of the Company and the borrowings of any other
companies within the Group so as to secure that the aggregate amount for the time
being outstanding (after adjustments provided for in the Articles) at any one time
owing by the Group in respect of monies borrowed, determined in accordance with
the Articles, shall not without the previous sanction of an ordinary resolution of the
Company exceed an amount equal to £5,000,000.
4.2.13 Constitution of board of directors
The minimum number of directors shall not be less than two and unless and until
otherwise determined by the Company in general meeting shall not be more than
nine. No shareholder qualification is required of any director.
4.2.14 Retirement of directors by rotation
The Articles do not contain any provision to exclude the operations of section
293(2) of the Act and, accordingly, special notice will be required of any resolution
appointing or approving the appointment of a director who has attained the age of
70.
At every annual general meeting of the Company one third of the directors or the
number nearest to but not exceeding one third shall retire by rotation and be eligible
for re-election. The directors to retire will be those who have been longest in office
or, in the case of those who were appointed or re-appointed on the same day, will
(unless they otherwise agree) be determined by lot.
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4.2.15 Remuneration of directors
The fees to be paid to the directors shall be determined by the Remuneration
Committee of the Company from time to time.
Each director may also be paid all travelling, hotel and other expenses properly
incurred by him in connection with his attendance at meetings of the directors of the
Company or otherwise in the discharge of his duties as a director. Any director who
holds any executive office or who serves on any committee or who devotes special
attention to the business of the Company or who otherwise performs services
which, in the opinion of the directors, are outside the scope of the ordinary duties of
a director, may be paid such extra remuneration by way of salary, lump sum,
participation in profits or otherwise as the directors determine.
4.2.16 Permitted interests of directors
Subject to the provisions of the Statutes, a director is not disqualified by his office
from contracting with the Company in any manner, nor is any contract in which he
is interested liable to be avoided, and any director who is so interested is not liable to
account to the Company for any profit realised by the contract, by reason of the
director holding that office or of the fiduciary relationship thereby established.
A director may hold any other office or place of profit with the Company (except
that of auditor) in conjunction with his office of director and may act in a
professional capacity for the Company (other than as auditor) on such terms as to
tenure of office, remuneration or otherwise as the directors may determine. A
director may also hold office as a director or other officer or be otherwise interested
in any other company of which the Company is a member or in which the Company
is otherwise interested and shall not be liable to account to the Company for any
remuneration or other benefits received by him from that company.
4.2.17 Restrictions on voting by directors
Save as provided below, a director shall not vote on or in respect of any contract or
arrangement or any other proposal in which he has an interest which is to his
knowledge a material interest otherwise than by virtue of his interest in shares or
debentures or other securities of or otherwise in or through the Company. A
director shall not be counted in the quorum at a meeting in relation to any
resolution on which he is debarred from voting.
A director shall (in the absence of some other material interest than is indicated
below) be entitled to vote and be counted in the quorum in respect of any resolution
concerning any of the following matters:
(a) the giving of any security, guarantee or indemnity in respect of money lent or
obligations incurred by him at the request of or for the benefit of the Company
or any of its subsidiary undertakings;
(b)
the giving of any security, guarantee or indemnity to a third party in respect of
a debt or obligation of the Company or any of its subsidiary undertakings for
which he has assumed responsibility in whole or in part under a guarantee or
indemnity or by the giving of security;
(c)
any proposal concerning a placing of shares or debentures or other securities
of or by the Company or any of its subsidiary undertakings for subscription or
purchase in which placing he is or is to be interested as a holder of securities or
as a participant in the undertaking or sub-underwriting thereof;
(d)
any proposal concerning any other company in which he does not to his
knowledge hold directly or indirectly an interest in shares representing one
per cent. or more of any class of the equity share capital or voting rights;
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(e)
4.3
5.
5.1
any arrangement for the benefit of employees of the Company and its
subsidiary undertakings which does not award him any privilege or benefit
not generally awarded to the employees to whom such arrangement relates;
and
(f)
any contract for the purchase or maintenance of insurance against any
liability of any directors.
Mandatory bids, squeeze-out and sell-out rules relating to the Ordinary Shares
4.3.1 Mandatory bid
The City Code on Takeovers and Mergers (the “City Code”) applies to the
Company. Under the City Code, if an acquisition of Ordinary Shares were to
increase the aggregate holding of the acquiror and its concert parties to shares
carrying 30 per cent. or more of the voting rights in the Company, the acquiror and,
depending on the circumstances, its concert parties, would be required (except with
the consent of the Panel on Takeovers and Mergers) to make a cash offer for the
outstanding shares in the Company at a price not less than the highest price paid for
the Ordinary Shares by the acquiror or its concert parties during the previous 12
months. This requirement would also be triggered by any acquisition of shares by a
person holding (together with its concert parties) shares carrying between 30 and 50
per cent. of the voting rights in the Company if the effect of such acquisition were to
increase that person’s percentage of the voting rights.
4.3.2
Squeeze-out
Under the Act, if an offeror were to acquire 90 per cent. of the Ordinary Shares
within four months of making its offer, it could then compulsorily acquire the
remaining 10 per cent. It would do so by sending a notice to outstanding
Shareholders telling them that it will compulsorily acquire their shares and then, six
weeks later, it would execute a transfer of the outstanding shares in its favour and
pay the consideration to the Company, which would hold the consideration on trust
for outstanding Shareholders. The consideration offered to the Shareholders whose
shares are compulsorily acquired under the Act must, in general, be the same as the
consideration that was available under the takeover offer.
4.3.3
Sell-out
The Act would also give minority Shareholders in the Company a right to be bought
out in certain circumstances by an offeror who had made a takeover offer. If a
takeover offer related to all the Ordinary Shares and at any time before the end of
the period within which the offer could be accepted the offeror held or had agreed to
acquire not less than 90 per cent. of the Ordinary Shares, any holder of shares to
which the offer related who had not accepted the offer could by a written
communication to the offeror require it to acquire those shares.
The offeror would be required to give any Shareholder notice of his right to be
bought out within one month of that right arising. The offeror may impose a time
limit on the rights of minority Shareholders to be bought out, but that period cannot
end less than three months after the end of the acceptance period. If a Shareholder
exercises his/her rights, the offeror is bound to acquire those shares on the terms of
the offer or on such other terms as may be agreed.
Directors’ Interests
The following persons are directors of the Company:
Martin Robinson (Non-Executive Chairman)
Peter Blezard (Chief Executive Officer)
Gordon Harman (Finance Director)
David Marks (Chief Technical Officer)
William Thompson (Non-Executive Director)
Mark Wyatt (Non-Executive Director)
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5.2
The business address of all of the Directors is the registered office of the Company.
5.3
The interests of the Directors (all of which are beneficial) in the issued share capital of the
Company as at 9 October 2006 (being the latest practicable business day prior to the date of
this document), such interests being those which are required to be notified by each Director
to the Company under the provisions of section 324 or 328 of the Act or which are required
to be entered in the register of interests required to be maintained pursuant to section 325 of
the Act or which are interests of persons connected with the Director within the meaning of
section 346 of the Act, the existence of which is known or which could, with reasonable
diligence, be ascertained by a Director are:
Director
Martin Robinson(1)
Peter Blezard
Gordon Harman
David Marks
William Thompson
Mark Wyatt
Current
Number of
% of
Ordinary
Existing
Shares Share Capital
49,910
716,860
499,150
716,860
Nil
Nil
0.65
8.97
6.25
8.97
Nil
Nil
Following Admission
Number of
% of
Ordinary
Enlarged
Shares Share Capital
49,910
716,860
499,150
716,860
Nil
Nil
0.22
3.10
2.16
3.10
Nil
Nil
Note: This table assumes that the resolution detailed in paragraph 3.4 above had been passed unconditionally.
(1) Included in the holding of Martin Robinson are 16,640 Ordinary Shares held as trustee for the P H Robinson Will Trust, of
which Martin Robinson is not a beneficiary.
5.4
In addition, the following Directors have been granted Options over the following number
of Ordinary Shares. Further details of the Share Scheme is set out in paragraph 11 of Part 5 of
this document.
Director
Martin Robinson
Peter Blezard
Gordon Harman
David Marks
William Thompson
No or Ordinary
Shares under
Option
Exercise Price
90,440
271,290
924,773
271,290
271,290
924,773
151,020
29.48p
29.48p
38p
29.48p
29.48p
38p
1p
Note: This table assumes that the resolution detailed in paragraph 3.4 above had been passed unconditionally.
5.5
Since 1 January 2006, no Ordinary Shares have been issued to the Directors pursuant to the
exercise of Options.
5.6
Including the arrangements described in paragraph 5.4 above, Options over 1,881,546
Ordinary Shares are held by employees under the Share Scheme which are exercisable at 38p
each.
5.7
Save in the case of Mark Wyatt, who is an employee of Enterprise Ventures Limited, the
investment manager of the RisingStars Growth Fund, in respect of each Director, there are
no conflicts of interest between any duties they have to the Company and the private
interests and/or other duties they may also have.
5.8
There are no outstanding loans granted by any member of the Group to the Directors or any
guarantees provided by any member of the Group for the benefit of the Directors.
5.9
No Director has or has had any interest in any transaction which is or was unusual in its
nature or conditions or which is or was significant to the business of the Group and which
was effected by the Company during the current or immediately preceding financial year, or
which was effected during an earlier financial year and remains in any respect outstanding or
unperformed.
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Substantial Shareholders
Insofar as is known to the Company and in addition to the interests of the Directors
disclosed in paragraph 5 above, the following persons are, at the date of this document, and
are expected, following Admission, to be interested directly or indirectly in 3 per cent. or
more of the Enlarged Share Capital:
Current
Number of
% of
Ordinary
Existing
Shares Share Capital
Shareholder
RisingStars Growth Fund
2,728,160
John Jackson
1,468,620
Majedie Investments plc
Nil
Gartmore Investment
Management plc
Nil
Lancashire County Developments
(Investments) Limited
Nil
YFM Private Equity Limited
Nil
Peter Betts
716,860
Ian Mainman
716,860
Following Admission
Number of
% of
Ordinary
Enlarged
Shares Share Capital
34.15
18.39
Nil
4,438,684
1,468,620
1,050,000
19.20
6.35
4.54
Nil
1,050,000
4.54
Nil
Nil
8.97
8.97
913,157
869,473
716,860
716,860
3.95
3.76
3.10
3.10
None of the Company’s major holders of Ordinary Shares listed above has voting rights
different from the other holders of Ordinary Shares.
6.2
Save as disclosed in paragraph 5 above and in this paragraph 6, and insofar as the Company
has the information, the Directors are not aware of any person or persons who either alone
or, if connected, jointly following Admission, is or will be interested (within the meaning of
the Act) directly or indirectly in 3 per cent or more of the issued Ordinary Share capital of the
Company.
6.3
Save as disclosed in paragraph 5 above and in this paragraph 6, and insofar as the Company
has the information, the Directors are not aware of any person or persons who either alone
or, if connected, jointly following Admission, will (directly or indirectly) exercise or could
exercise control over the Company.
7.
7.1
Additional Information on the Directors
Other than directorships of Group companies, the Directors have held the following
directorships or been partners in the following partnerships within the five years prior to the
date of this document:
Director
Current
Past
Peter Blezard
None
Stoller International Limited
Stoller (UK) Limited
Spare Company Limited
Gordon Harman
None
CAB Holdings Limited
Firstserve Group Holdings Limited
International Life Leisure
Limited
The International Life Leisure
Group Limited
Speedier Scaffolding Limited
David Marks
None
Spare Company Limited
Stoller International Limited
Martin Robinson
ACA Limited
Alec Finch Group Limited
Braemar Group plc
Braemar Securities Limited
Brown Shipley & Co Limited
CPC Group Limited
Exchange Information Systems
Ltd
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7.3
7.4
7.5
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Past
Henry Cooke, Estridge,
Chartered Accountants’
Thomson’s Limited
Trustees Limited
Henry Cooke Group Limited
Coronation General
Henry Cooke Managed Services
Partner Limited
Coronation Nominee Limited Ltd
Coronation II General Partner Lloyd Street Directors Limited
Lloyd Street Private Equity
Limited
Coronation II Nominee Limited Holdings Limited
Coronation III General Partner Lloyd Street Private Equity
Limited
Limited
Pro.Manchester Limited
Coronation III
Sea Shell Trustee Limited
Nominee Limited
The Private Capital Club
FCA Limited
Limited
Heath Road Investments
Venturia plc
Limited
The Muse Corporation Limited
William Thompson
Microcheck Technical Services
Limited
Quevedo Services Limited
Mark Wyatt
None
None
Peter Blezard entered into an Individual Voluntary Arrangement (“IVA”) approved at a
meeting of creditors on 29 April 1998 at which time he owned £70,021 to creditors.
Mr Blezard complied fully with the terms and conditions of the IVA and he was discharged,
having paid off all outstanding liabilities, on 30 April 2003.
CPC Group Limited, a company of which Martin Robinson was a director, was placed in
creditors voluntary liquidation on 14 April 2000 with an estimated surplus as regards
preferential creditors of £74,479, an estimated deficiency to non-preferential creditors of
£323,414 and an estimated deficiency to members of £973,413. Mr Robinson ceased to be a
director of this company on 11 January 2000.
Sky Balloons Limited, a company of which Gordon Harman was a director, was placed in
creditors voluntary liquidation on 4 May 1999 with an estimated deficiency as regards
preferential creditors of £15,481, an estimated deficiency of assets available to
non-preferential creditors of £49,819, an estimated deficiency to creditors of £257,995 and
an estimated deficiency to members of £440,940. This Company was dissolved on
21 December 2000.
Save as disclosed above, none of the Directors has:
7.5.1 any unspent convictions in relation to indictable offences;
7.5.2 had any bankruptcy order made against him or entered into any voluntary
arrangements;
7.5.3 been a director of a company which has been placed in receivership, compulsory
liquidation, administration, been subject to a voluntary arrangement or any
composition or arrangement with its creditors generally or any class of its creditors,
whilst he was a director of that company or within the 12 months after he had
ceased to be a director of that company;
7.5.4 been a partner in any partnership which has been placed in compulsory liquidation,
administration or been the subject of a partnership voluntary arrangement, whilst
he was a partner in that partnership or within the 12 months after he ceased to be a
partner in that partnership;
7.5.5 been the owner of any asset which has been placed in receivership or a partner in any
partnership which has been placed in receivership whilst he was a partner in that
partnership or within the 12 months after he ceased to be a partner in that
partnership;
Martin Robinson
(continued)
7.2
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7.5.6
been officially publicly criticised, incriminated or sanctioned by any statutory or
regulatory authorities (including designated professional bodies); or
7.5.7
been disqualified by a court from acting as a member of the administrative,
management or supervisory bodies of any company or from acting in the
management or conduct of the affairs of a company in the five years preceding the
date of this document.
7.6
Save as disclosed in this document, no Director has or has had any interest in any transaction
which is or was significant in relation to the business of the Group and which was effected
during the current or immediately preceding financial period or which was effected during
an earlier financial period and remains outstanding or unperformed.
8.
8.1
Directors’ Remuneration
Details of the Directors’ service contracts/non-executive letters of appointment are as
follows:
Directors
Peter Blezard(1)
David Marks(1)
Gordon Harman(1)
Martin Robinson
William Thompson
Mark Wyatt
(1)
Date of
contract
Notice
period
from the
Company
(months)
Notice
period
to the
Company
(months)
Annual
Salary
/fee
(£)
10 October 2006
10 October 2006
10 October 2006
24 June 2005
24 June 2005
28 September 2006
12
12
6
3
3
3
12
12
6
3
3
3
£105,000
£105,000
£65,000
£25,000
£15,000
£15,000
Each of the service contracts of Gordon Harman, Peter Blezard and David Marks are conditional upon, and effective
from, Admission.
The Directors receive no Ordinary Shares or Options over Ordinary Shares in lieu of
remuneration or as any form of compensation. The share option grants disclosed in
paragraph 5.4 above are made in addition to the remuneration packages disclosed above.
Other than as disclosed in this paragraph 8, no member of the Group is party to any service
contract with any of the Group’s senior management which provides for benefits on the
termination of any such arrangement.
No Director has any accrued pension benefits.
The Company has agreed to pay to Braemar Securities Limited, a subsidiary of Braemar
Group plc, of which Martin Robinson is Chairman, a fee of £25,000 (plus VAT) for
additional work undertaken in the period prior to Admission.
The £15,000 annual fee payable to Mark Wyatt in respect of his engagement as a Director of
the Company will be paid to Enterprise Ventures Limited, the investment manager of the
RisingStars Growth Fund.
8.2
There is no arrangement under which any Director has waived or agreed to waive future
emoluments.
8.3
Save as disclosed in this paragraph 8 there are no existing or proposed service or consultancy
agreements between any Director and any member of the Group.
8.4
In the period ended 31 March 2006 the total aggregate remuneration paid, and
benefits-in-kind granted, to the Directors was £199,549. The amounts payable to the
Directors by the Group under the arrangements in force at the date of this document in
respect of the year ending 31 March 2007 are estimated to be £290,625 (excluding any
discretionary payments which may be made under these arrangements).
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9.
Material Contracts
The following contracts, not being contracts entered into in the ordinary course of business, have
been entered into by the Group within the two years immediately preceding the date of this
document and are, or may be, material or are, or may, contain provisions under which any member
of the Group has an obligation or entitlement which is material to the Group:
9.1
the Placing Agreement, further details of which are contained in paragraph 17 of this Part 5;
9.2
an agreement dated 16 August 2006 made between (1) the Company and (2) Fiske, whereby
Fiske has agreed to act as broker to the Company for an annual fee of £15,000 plus VAT. In
addition, Fiske is to receive by way of commission, specifically in relation to the Placing, the
sum of £58,380 as a corporate advisory fee and the sum of £154,120 as a placing fee, being
4 per cent. of funds raised in the Placing. The agreement may be terminated by either party
on receipt by the other of not less than one month’s written notice;
9.3
an engagement letter dated 14 September 2006 made between (1) the Company and (2)
Grant Thornton Corporate Finance for a minimum period of one year from Admission,
whereby, conditional on Admission, Grant Thornton Corporate Finance has agreed to act
as nominated adviser to the Company. The agreement is subject to termination on 30 days’
written notice at any time after the initial one year period;
9.4
the Loan Note Instrument pursuant to which the Loan Noteholders may convert the Loan
Notes to Ordinary Shares whereby the number of Ordinary Shares into which such Loan
Notes convert are calculated on the basis of £1.50 of Ordinary Shares at the Placing Price per
share for each £1 of Loan Notes held;
9.5
the Loan Noteholders have irrevocably undertaken to convert their Loan Notes into
Conversion Shares with effect from Admission;
9.6
the Company has secured payment of all sums due to Loan Noteholders in respect of the
Loan Notes by way of a fixed and floating charge dated 15 December 2005 granted over its
intellectual property rights (the “Charge”). The Charge will be released on Admission;
9.7
a consultancy agreement dated 3 November 2005 made between (1) PiBioscience and (2)
Adnan Zurba (the “Consultant”) for an initial term of 5 years, whereby the Consultant has
been appointed to manage existing distribtors in Algeria, Egypt, Iran, Kuwait, Morocco,
Oman, Qatar, Saudi Arabia, Sudan, Syria, Tunisia, UAE and Yemen. The agreement is
subject to termination on 12 months’ notice at any time after the initial 5 year period.
Commission of 40 per cent. of the mark-up arising under the sale of any products of
PiBioscience is payable to the Consultant;
9.8
an agreement dated 9 November 2005 made between (1) PiBioscience and (2) the
Consultant, wherby PiBioscience has agreed to make available to the Consultant an
unsecured term loan in the principal sum of £70,000 to help fund the acquisition by the
Consultant of the entire issued share capital of IMA (Innovative Marketing Association)
Limited not already owned by him. This loan is to be repaid to PiBioscience by way of set off
against commissions payable to the Consultant on the basis of (1) 20 per cent. of any
commission paid to the Consultant in year 1 and (2) 50 per cent. of any commission paid to
the Consultant in year 2;
9.9
an agreement dated 24 June 2005 made between (1) certain shareholders of Biofutures (the
“Vendors”) and (2) the Company whereby the Vendors agreed to sell the shares (other than
preference shares) in Biofutures held by them in exchange for shares in the capital of the
Company. Pursuant to this agreement £250,000 payable in respect of the preference shares
of £1 each in the capital of Biofutures held by the Fund was left outstanding as an interest
free loan from the Fund to the Company (“the Loan”) which is repayable on the first to
occur of:
9.9.1
a winding up of the Company; and
9.9.2
a sale or Admission of the Company valuing the Company at an amount in excess of
£2,400,000.
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It has been agreed that the Loan will be capitalised into 657,894 Ordinary Shares on
Admission;
9.10
PiBioscience has entered into a small firms loan guarantee scheme with National
Westminster Bank plc for the sum of £40,000. Repayment is made in 24 monthly
instalments of £1,666.66 and a final payment of £1,666.82 is due on 14 October 2006;
9.11
each of the Directors and certain other Shareholders, who together hold or are interested in
an aggregate of 53.99 per cent. of the Enlarged Share Capital, have, conditional on
Admission, undertaken not to sell, transfer or otherwise dispose of any Ordinary Shares
held by them for 12 months following Admission and for the following 12 months to deal in
them only through the Company’s broker (so as to maintain an orderly market) subject to
certain usual and limited exceptions;
9.12
the Company entered into agreements with RisingStars Growth Fund and Lancashire
County Developments (Investments) Limited in respect of the Fund Loans on 9 October
2006 pursuant to which £147,000 was loaned to the Company, with such loans converting
into 386,841 Ordinary Shares on Admission. The Fund Loans are repayable on demand if
Admission has not taken place by 20 October 2006.
10.
United Kingdom Taxation
The following paragraphs, which are based on current legislation, summarise the position of
shareholders who are ordinarily resident in the UK for taxation purposes and who hold their shares
as an investment.
10.1
Taxation of dividends
No tax will be withheld by the Company when it pays a dividend.
A UK resident individual shareholder who receives a dividend from the Company will be
entitled to a tax credit, currently at the rate of 1/9th of the cash dividend paid (or 10 per cent.
of the aggregate of the net dividend and related tax credit). The individual is treated as
receiving for tax purposes gross income equal to the cash dividend plus the tax credit. The
tax credit is set against the individual’s tax liability on that gross income. The lower rate of
income tax on dividend income is currently 10 per cent.
An individual shareholder who is not liable to income tax at a rate greater than the basic rate
(currently 22 per cent.) will have no income tax to pay in respect of the dividend.
The higher rate of income tax on dividends is currently 32.5 per cent. This means that a
shareholder who is a higher rate taxpayer (currently 40 per cent.) will have further income
tax to pay at a rate of 22.5 per cent. of the cash dividend paid plus the related tax credit (or
25 per cent. of the net dividend). For example, a dividend of £90 will carry a tax credit of
£10. The income tax payable by a higher rate taxpayer would be 32.5 per cent. of £100,
namely £32.50 less the tax credit of £10 leaving a net tax liability of £22.50.
UK resident shareholders who do not pay income tax or whose liability to income tax on the
dividend and related tax credit is less than the tax credit, including pension funds, charities
and certain individuals are not generally entitled to claim repayment of any part of the tax
credit associated with the dividend from the Inland Revenue.
A UK resident corporate shareholder will not generally be liable to corporation tax on any
dividend received from the Company and the dividend if received and related tax credit will
constitute franked investment income.
Whether a shareholder who is not resident in the UK for tax purposes is entitled to a tax
credit in respect of dividends paid by the Company and to claim payment of any part of the
tax credit will depend, in general, on the provisions of any double taxation convention
which exists between the shareholder’s country of residence and the UK. A non-UK resident
shareholder may also be subject to foreign taxation on dividend income.
Persons who are not resident in the UK should consult their own tax advisers on the possible
application of such provisions or what relief or credit may be claimed in the jurisdiction in
which they are resident.
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Taxation of chargeable gains
For the purpose of UK tax on chargeable gains, the issue of Ordinary Shares pursuant to the
Placing will be regarded as an acquisition of a new holding in the share capital of the
Company.
The Ordinary Shares so allotted will, for the purpose of tax on chargeable gains, be treated
as acquired on the date of allotment. The amount paid for the Ordinary Shares will usually
constitute the base cost of a shareholder’s holding. If a Shareholder disposes of all or some of
his Ordinary Shares a liability to tax on chargeable gains may, depending on their
circumstances arise subject to, in the case of individuals and trustees, a deduction for so
called taper relief the amount of which depends on various factors, in particular the length of
the period of ownership of the shares.
Companies are not entitled to taper relief but are due indexation allowance which may also
reduce the chargeable gain.
10.3
Stamp duty and stamp duty reserve tax
No stamp duty or stamp duty reserve tax (SDRT) will generally be payable on the issue of the
Placing Shares.
If you are in any doubt as to your tax position, or are subject to tax in a jurisdiction other
than in the UK, you should consult your professional adviser immediately.
11.
Share Option Scheme
On 24 June 2005, the Company adopted the Plant Impact plc Share Option Plan (the “Share
Scheme”).
A summary of the rules of the Share Scheme is as follows:
Grant of Options
Options can be granted at the discretion of the Board to eligible employees (“Eligible
Employees”) in respect of Options which comply with the requirements of Schedule 5 of the
Income Tax (Earnings and Pensions) Act 2003 (“ITEPA”) so as to be Enterprise
Management Incentive Options (“EMI Options”) and to any employee or director in
respect of unapproved Options (“Unapproved Options”).
No Options can be granted after the earlier of the tenth anniversary of the date of adoption
of the Share Scheme and the first occurrence of the release of any Options in exchange for the
issue of replacement Options.
Conditions
The exercise of Options may be made subject to conditions imposed by the Board. The
conditions may be amended if the Board considers that the original conditions are no longer
a fair measure of performance and that the amended terms will be a fairer measure of
performance.
Eligible Employees
EMI Options can be granted to directors or employees of the Company or its qualifying
subsidiaries who devote at least 25 hours per week, or, if less, 75 per cent. of their working
time to the business of the Company or its qualifying subsidiaries and do not have a material
interest in the share capital of the Company, “material interest” being defined in paragraphs
29 and 30 of Schedule 5 to ITEPA and in general terms being possession of more than 30 per
cent. of issued ordinary share capital.
Exercise Price
The subscription price or purchase price payable on the exercise of Options is determined by
the Board. In the case of Unapproved Options, the exercise price can be below the market
value of the Ordinary Shares at the date of grant. In the case of EMI Options, the exercise
price generally has to be equal to the market value of the Ordinary Shares at the date of grant
and can only be less than such market value in exceptional circumstances.
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Limitations
The maximum value of shares subject to EMI Options, based on the market price of an
Ordinary Share at the date of grant, is £3 million.
The maximum value of shares over which EMI Options, based on the market price of an
Ordinary Share at the date of grant, that can be granted to any employee under the EMI
Scheme is £100,000.
Exercise of Options
Options cannot be exercised prior to the second anniversary of the date of grant, save as in
the circumstances described in the paragraph below.
The pro forma option agreement typically used by the Company provides for the early
exercise of Options in the event of a change of control of the Company, a de-merger, a
reconstruction scheme under section 425 of the Companies Act 1985, where a person
becomes bound or entitled under sections 428-430F of that Act to acqurie the remaining
issued share capital of the Company, or where a resolution for the voluntary winding up of
the Company is passed. The pro forma option agreement also contains provision for the roll
over of Options in the event of a change of control with the agreement of the acquiring
company. Options may also be exercisable at the discretion of the Board on the cessation of
the Option Holder’s employment by the Company or any member of the Group.
The option holder must indemnify the Company for any income tax payable under PAYE
and any national insurance contributions payable on the exercise of the Options.
Lapse of Options
Options lapse if the option holder ceases to be an employee but if such cessation occurs after
the Option becomes exercisable, then the option can be exercised within 40 days of such
cessation. If it is not so exercised, the option will lapse. In any event, all Options shall lapse
on the tenth anniversary of the date of grant.
Adjustment of Options
In the event of any variation in the share capital of the Company by way of capitalisation,
rights issue, consolidation, sub-division, reduction or otherwise, the Company can adjust
the number of Ordinary Shares which are subject to Options, and the subscription price for
such Options.
Scheme Amendment
The Board has the power to amend the rules of the Share Scheme. However, alteration to the
rules can materially alter the subsisting rights of any option holder in relation to any option.
12.
12.1
Intellectual Property
The Group is dependent on patents and other intellectual property which are of
fundamental importance to the Group’s business.
12.2
Plant Impact has filed eight base patent applications covering six technologies. All the
applications corresponding to the base applications are set out below:
Patent Applications Application Number
Filing date
Status
Country
Priority Dates
BugOil쑓
BugOil쑓
BugOil쑓
BugOil쑓
PI 0417150-0
200480041121.5
04801259.5
0512866.5
2
2
2
2
December 2004
December 2004
December 2004
December 2004
Brazil
China
Europe
UK
2 December 2003
2 December 2003
2 December 2003
2 December 2003
BugOil쑓
BugOil쑓
BugOil쑓
BugOil쑓
BugOil쑓
1499/KOL NP/06
Not yet known
10-2006-7012492
PA/a/2006/006119
2006123422
2
2
2
2
2
December 2004
December 2004
December 2004
December 2004
December 2004
Pending
Pending
Pending
Granted
(23 November
2005)
Pending
Pending
Pending
Pending
Pending
India
Japan
Korea
Mexico
Russia
2 December 2003
2 December 2003
2 December 2003
2 December 2003
2 December 2003
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Patent Applications Application Number
Filing date
Status
Country
Priority Dates
BugOil쑓
BugOil쑓
10/541,740
PCT/GB2004/005063
2 December 2004
2 December 2004
Pending
Superseded
2 December 2003
2 December 2003
BugOil쑓
Alethea쑓
CaT Technology
2006/04489
PCT/GB2005/001562
PCT/GB2006/002185
2 December 2004
22 April 2005
15 June 2006
Pending
Pending
Pending
Impaction
Plant Growth
Enhancement
Speedo
Votec Technology
Nematicidal
Composition
0520726.1
PCT/GB2006/000882
12 October 2005
13 March 2006
Pending
Pending
0521993.6
0603468.0
0609436.1
28 October 2005
22 February 2006
12 May 2006
Pending
Pending
Pending
USA
PCT
(International)
South Africa
PCT
PCT
(International)
UK
PCT
(International)
UK
UK
UK
2 December 2003
23 April 2004
17 June 2005
12 March 2005
Plant Impact continues as part of its research and development programme to generate
intellectual property relating to its business, which may or may not lead to new applications
for patents, and possibly other registrations, being made.
13.
Working Capital
The Directors are of the opinion, having made due and careful enquiry, that, taking into account the
Net Proceeds of the Placing and the existing facilities of the Group, the working capital available to
the Group will be sufficient for its present requirements, that is at least 12 months from the date of
Admission.
14.
Environmental Issues
The Group is not aware of any environmental issues or risks affecting the utilisation of the property,
plant or machinery of the Group.
15.
Litigation
There are no governmental, legal or arbitration proceedings (including any such procedings which
are pending or threatened of which the Group is aware) in which any Group company is involved by
or against any Group company which may have or have had in the twelve months preceding the
date of this document a significant effect on the Group’s financial position or profitability.
16.
Significant Changes
There has been no significant change in the financial or trading position of the Group since
31 March 2006, being the date on which the Group’s latest accounts were prepared.
17.
Arrangements relating to the Placing
Pursuant to the Placing Agreement, Fiske has agreed, as agent for the Company, to use its
reasonable endeavours to procure subscribers for the Placing Shares at the Placing Price. Under the
Placing Agreement:
17.1
the Company has agreed to pay to Fiske a commission equal to 4 per cent. of the proceeds of
the Placing (plus any applicable VAT) together with a corporate advisory fee of £58,380;
17.2
the Company has agreed to pay all other costs and expenses of the Placing and related
arrangements together with VAT on all such costs and expenses;
17.3
the Company and the Directors have given certain warranties and the Company has agreed
to give warranties and indemnities as to the accuracy of the information in this document
and as to other matters in relation to the Group and its business.
18.
Related Party Transactions
Save in relation to the Company’s arrangements with Braemar Securities Limited and Enterprise
Ventures Limited, detailed at paragraph 8.1 above, the conversion of the Loan Notes by the Loan
Note Holders into Ordinary Shares detailed in paragraph 9.5 above, the capitalisation of the Loan
detailed at paragraph 9.9 above and the Fund Loan made by RisingStars Growth Fund detailed at
paragraph 9.12 above, there are no transactions to which the Group is a party which are considered
material either in the context of the Placing or Admission or in the context of the turnover of the
Group in the relevant periods.
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19.
19.1
General
It is estimated that the total expenses payable by the Company in connection with the
Placing and Admission will amount to approximately £555,000 (excluding VAT).
19.2
Grant Thornton Corporate Finance, Greaves Brewster LLP and Fiske have each given and
not withdrawn their written consent to the inclusion in this document of their names and the
references to them in the form and context in which they appear.
19.3
Grant Thornton UK LLP has given and not withdrawn its written consent to the inclusion in
this document of its report and the references to it in respect of Part 4 of this document in the
form and context in which it appears.
19.4
CEM Analytical Services (“CEMAS”) and contributors, Dr Alan Jutsum and Mr Michael
Eustace, are the authors of the expert report set out in this document. CEMAS and Messrs.
Jutsum and Eustace have provided and not withdrawn their consent to the issue of this
document with the inclusion of references to their name and the Expert’s Report in the form
and context in which they appear.
19.5
Save as set out in this document, there are no patents or intellectual property rights, licences
or particular contracts which are of fundamental importance to the Group’s business.
19.6
There have been no interruptions in the business of the Group, nor are there any significant
recent trends, which may have or have had in the 12 months preceding the publication of this
document a significant effect on the financial position of the Group or which are likely to
have a material effect on the prospects of the Group for the next 12 months.
19.7
The Placing Price represents a premium of 37 pence over the nominal value of 1 pence per
Ordinary Share. The premium arising on the Placing amounts to approximately
£3.75 million in aggregate.
19.8
The Ordinary Shares are in registered form. No temporary documents of title will be issued.
19.9
Save as disclosed in this document no person (excluding professional advisers otherwise
disclosed in this document and trade suppliers) has:
19.9.1 received, directly or indirectly from the Group within the 12 months preceding the
date of this document; or
19.9.2 entered into contractual arrangements (not otherwise disclosed in this document) to
receive, directly or indirectly, from the Group, on or after Admission, any of the
following:
앫
fees totalling £10,000 or more;
앫
securities of the Company where these have a value of £10,000 or more
calculated by reference to the Placing Price; or
앫
any other benefit with the value of £10,000 or more at the date of this
document.
19.10 Save as disclosed in this document, the Directors are unaware of any exceptional factors
which have influenced the Group’s activities.
19.11 Save as disclosed in this document, there are no investments in progress which are significant
to the Group.
19.12 The financial information contained in Part 4 of this document does not constitute statutory
accounts within the meaning of section 240 of the Act. A copy of the audited accounts of the
Company for the period ended 31 March 2006 will be delivered to the Registrar of
Companies in England and Wales before 31 October 2006. The auditors report on those
accounts was unqualified and did not contain any statement under section 237 of the Act.
The Company’s current auditors Grant Thornton UK LLP, Chartered Accountants and
Registered Auditors, audited the Company’s consolidated financial statements for 15
months ended 31 March 2006 upon which an unqualified audit opinion has been given.
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19.13 This document does not constitute an offer to sell, or the solicitation of an offer to acquire,
Ordinary Shares in any jurisdiction where such an offer or solicitation is unlawful and is not
for distribution in any jurisdiction in which such distribution is unlawful. The Ordinary
Shares have not been, and will not be, registered under the US Securities Act or under the
applicable securities laws of any state of the United States, any province or territory of
Canada, Japan, South Africa, Australia or the Republic of Ireland and may not be sold,
directly or indirectly, within the United States or the Excluded Territories or to any citizen,
national or resident of the United States or the Excluded Territories.
19.14 Where information has been sourced from a third party, it has been accurately reproduced
and, so far as the Company is aware and has been able to ascertain from information
published by such third party, no facts have been omitted which might render the
reproduced information inaccurate or misleading.
19.15 This document includes statements that are, or may be deemed to be, “forward-looking
statements”. These forward-looking statements can be identified by the use of
forward-looking terminology, including such terms as “believes”, “estimates”, “plans”,
“anticipates”, “targets”, “aims”, “continues”, “expects”, “intends”, “may”, “will”,
“would” or “should” or, in each case, their negative or other variations or comparable
terminology. These forward-looking statements include all matters that are not matters of
fact. They appear in a number of places throughout this document and include statements
regarding the Group’s intentions, beliefs or current expectations concerning, among other
things, the Group’s results of operations, financial condition, liquidity, prospects, growth,
strategies and the industries in which the Group operates. By their nature, forward-looking
statements involve risk and uncertainty because they relate to future events and
circumstances. A number of factors could cause actual results and developments to differ
materially from those expressed or implied by the forward-looking statements including,
without limitation: conditions in the markets, the market position of the Group, earnings,
financial position, cash flows, return on capital and operating margins, anticipated
investments and capital expenditures, changing business or other market conditions and
general economic conditions. These and other factors could adversely affect the outcome
and financial effects of the plans and events described in this document. Forward-looking
statements contained in this document based on past trends or activities should not be taken
as a representation that such trends or activities will continue in the future. Subject to any
requirement under the AIM Rules or other legal or regulatory requirements, the Company
undertakes no obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. You should not place undue reliance
on forward-looking statements, which speak only as of the date of this document.
Dated 10 October 2006
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PLANT
p a r t n e r
IMPACT
f o r
g r o w t h
Admission Document
10th October 2006
Nominated Adviser
Grant Thornton Corporate Finance
Broker
Fiske plc