Evocutis PLC - Final Results
RNS Number : 6795C
Evocutis PLC
20 January 2015
 



Evocutis plc

 

("Evocutis" or the "Company")

 

Final results for the year ended 31 July 2014

 

Chairman's Report

 

Overview

 

This has been an eventful year for the Company which has seen the transition from a trading company to an investing company.

 

During the first eight months of the financial year, the Company was focussed on disposing of its intellectual property assets and in closing down its trading operations in Wetherby.  These activities were concluded in March 2014 with the sale of LabSkinTM, SYN1113 and other related intellectual property to Venn Life Science Holdings plc.  The sale provided for an element of contingent consideration relating to a stake in any future commercialisation of the intellectual property by Venn in the form or royalties paid on revenues generated from those assets.

 

Following the cessation of trading operations, the Company has been an investing company. The Company's principal assets are a cash balance and available-for-sale investments in the form of shares in Venn Life Science Holdings plc.

 

The Board

Following our shareholder meeting on 12 September 2014, the directors who previously managed the trading operation of the Group stepped down from the board and myself, along with Donald Strang and Hamish Harris were appointed to take responsibility for the future direction of the Company. 

 

Events Subsequent to year end

On 12 September 2014, shareholders approved a capital reorganisation, resulting in each of the Company's existing ordinary shares being subdivided into one new Ordinary Share of 0.01p and one Deferred Share of 0.99p.

 

Additionally, on 15 September 2014, the Company issued 175,000,000 new Ordinary Shares of 0.01p each for cash consideration of £210,000 (before expenses).  The new shares will rank equally in all respects with the existing shares.

 

On the same date, the Company adopted a new investing policy under AIM Rule 15 and there were a number of board changes as disclosed in the Report of the Directors.

 

On 8 December 2014, the Company issued 375,000,000 new Ordinary Shares of 0.01p each for cash consideration of £1,500,000 (before expenses).  The new shares will rank equally in all respects with the existing shares. Each new Ordinary Share carries a warrant which entitles the holder to subscribe for a further one new ordinary share in the Company at 0.4 pence per share up to 31 December 2015.

 

On 18 December 2014, the Company announced that it has signed a Binding Term Sheet ("BTS") to acquire an initial 10% interest in Brazil Tungsten Holdings Limited ("BTHL") which owns a 25 year lease over (with the option to extend) the producing Bodó Tungsten Mine in Rio Grande do Norte, Brazil, by investing US$1 million in new capital in BTHL for the specific purposes of mine expansion. The Company will acquire the 10% interest by subscribing for new shares that represent a 10% shareholding in BTHL. The Company also has an exclusive option to increase its holding in BTHL to 20% within 60 days by investing a further US$1 million towards mine expansion, subject to certain conditions to be advised.

 

Financial review

 

Continuing operations

The continuing operations of the Company relate to its investing activities and to its status as an AIM-listed public company.  The Company incurred administrative expenses associated with operating as a public company and these totalled £127,000 for the year (2013: £190,000).

 

On 19 March 2014, the Company acquired shares in another AIM listed public company, by way of the consideration for the disposal of our LabSkinTM and SYN1113 assets.  These shares are accounted for as "Available-for-sale investments".  At 31 July 2014, the Directors have assessed the valuation of those shares by reference to the quoted bid price and as a result have recorded an impairment loss on that investment of £72,000 (2013: not applicable) within the statement of profit or loss  to reflect the fall in the published share price.  

 

Overall, the Company made a loss of £197,000 (2013: £182,000) from continuing operations.  No income tax has arisen due to the losses sustained (2013: £nil).  

 

Discontinued operations

During the year the Company ceased its scientific trading operations and shut down its trading site in Wetherby.  All operational and administrative staff employed at that site were made redundant.  The Company's LabSkinTM and SYN1113 intangible intellectual property assets, along with certain property, plant and equipment assets were sold to Venn Life Science Holdings plc on 19 March 2014.

 

The financial results from that trade are presented within discontinued operations.  The comparative figures for the year ended 31 July 2013 have been restated to enable comparison between the two years.

 

In the year ended 31 July 2014, the trading operation generated revenues of £48,000 and sustained an overall loss for the year of £507,000 (2013: £825,000).

 

Loss per ordinary share

Basic and diluted loss per share arising from continuing operations has reduced from 0.10 pence for the year ended 31 July 2013, to 0.07 pence for the year ended 31 July 2014.

 

Basic and diluted loss per share arising from discontinued operations has also reduced from 0.47 pence for the year ended 31 July 2013 to 0.29 pence for the year ended 31 July 2014.

 

 

Outlook

 

The Board considers that the current Investing Policy is in the best interests of the Company and its Shareholders as a whole. 

 

The Directors regularly assess investment opportunities for the Company in accordance with the investing policy which was adopted on 12 September 2014. Further capital has been raised by the Company which puts the Company in a good position to pursue new investment opportunities.

 

The Board acknowledges this exciting period for the Company as it continues to evaluate and seek additional investments as opportunities arise. The Board is confident that we will be able to proceed with suitable investments for the Company over the course of the next year.

 

The Board would like to take this opportunity to thank our shareholders for their continued support and I look forward to reporting further progress over the next period and beyond.

 

David Lenigas - Executive Chairman

 

 

20 January 2014

 

For further information, please contact:

 

Evocutis Plc


David Lenigas/Donald Strang, Executive Directors

+44 (0)20 7440 0640


www.evocutis.com

Cairn Financial Advisers LLP


James Caithie/Paul Trendell/Carolyn Sansom

+44(0) 20 7148 7900


www.cairnfin.com

 



Consolidated statement of profit or loss

for the year ended 31 July 2014

 

 



2014

2013

(Restated - note 9)


Notes

£000

£000

Continuing operations








Administrative expenses




Salaries and other staff costs

6

(36)

(52)

Other costs

7

(91)

(138)

Total administrative expenses


(127)

(190)

 

Impairment of available-for-sale asset

 

14

(72)

-

Finance income


2

8

Loss before tax


(197)

(182)

Taxation

8

-

-

Loss for the period from continuing operations


(197)

(182)





Discontinued operations




Loss for the period from discontinued operations

9

(507)

(825)









Loss for the period attributable to equity shareholders of the parent Company


(704)

(1,007)









Loss per ordinary share




Basic and diluted - continuing operations (pence)

10

(0.11p)

(0.10p)

 

 

 



 

Consolidated statement of financial position 

as at 31 July 2014

 

 



2014

2013


Note

£000

£000

ASSETS




Non-current assets




Property, plant and equipment

11

-

49

Other intangible assets

13

-

215

Available-for-sale investments

14

138

-

Total non-current assets


138

264





Current assets




Current tax recoverable

8

-

95

Trade and other receivables

16

15

154

Cash and cash equivalents

17

124

665

Total current assets


139

914





Total assets


277

1,178





LIABILITIES




Current liabilities




Trade and other payables

18

(21)

(115)

Total current liabilities


(21)

(115)





Non-current liabilities




Deferred tax liabilities

8

-

(58)

Provisions

19

-

(50)

Total non-current liabilities


-

(108)





Total liabilities


(21)

(223)





Net assets


256

955





EQUITY




Equity attributable to equity holders of the company




Called up share capital

20

1,747

1,747

Share premium reserve

20

7,634

7,634

Share based payments reserve

21

114

138

Merger reserve

21

-

979

Retained earnings

21

(9,239)

(9,543)

Total equity


256

955

 

The financial statements were approved and authorised for issue by the Board of Directors on 20 January 2014 and were signed on its behalf by:

 

 

David Lenigas                                      Donald Strang

Chairman                                               Director

 

Company number: 05656604


Consolidated statement of changes in equity 

for the year ended 31 July 2014

 

 



Share

Share-based





Share

premium

Payments

Merger

Retained



capital

reserve

reserve

reserve

earnings

Total


£000

£000

£000

£000

£000

£000

At 1 August 2012

1,732

7,632

211

979

(8,619)

1,935

Loss for the year

-

-

-

-

(1,007)

(1,007)

Transactions with owners:







Issue of new ordinary shares

15

2

-

-

-

17

Share-based payment charge

-

10

-

-

10

Share options lapsed

-

(83)

-

83

-

At 31 July 2013

1,747

7,634

138

979

(9,543)

955








At 1 August 2013

1,747

7,634

138

979

(9,543)

955

Loss for the year

-

-

-

-

(704)

(704)

Transfers

-

-

-

(979)

979

-

Transactions with owners:







Share-based payment charge

-

-

5

-

-

5

Share options lapsed

-

-

(29)

-

29

-

At 31 July 2014

1,747

7,634

114

-

(9,239)

256

 

Details of the nature of each component of equity are set out in Notes 20 and 21.

 


Consolidated statement of cash flows 

for the year ended 31 July 2014

 

 



2014

2013


Note

£000

£000

Cash flow from operating activities




Loss after tax


(704)

(1,007)

Tax on losses


(58)

(111)

Finance income net of finance costs


(2)

(8)

Profit on sale of property, plant and equipment


(5)

-

Depreciation


16

54

Amortisation of intangible assets


14

27

Impairment losses on property, plant and equipment


-

67

Share-based remuneration


-

17

Impairment of available-for-sale asset


72

-

Share-based payment charges


5

10

Changes in working capital:




    Decrease/(increase)in trade receivables


77

(49)

    Decrease in other receivables


62

24

    (Decrease)/increase in trade payables


(54)

1

    (Decrease) in other payables


(40)

(3)

    (Decrease)/increase in provisions


(50)

50

Cash outflow from operations


(667)

(928)

Taxation received


95

110

Net cash outflow from operating activities


(572)

(818)





Cash flow from investing activities




Purchase of property, plant and equipment

11

(1)

(4)

Proceeds from sale of property, plant and equipment

9

30

-

Finance income


2

8

Net cash inflow from investing activities


31

4





Net decrease in cash and cash equivalents

23

(541)

(814)

Cash and cash equivalents at the beginning of the year


665

1,479

Cash and cash equivalents at the end of the year

17

124

665

 

 

 

 


Company statement of financial position 

as at 31 July 2014

 

 



2014

2013


Note

£000

£000

ASSETS




Non-current assets




Property, plant and equipment

11

-

49

Other intangible assets

13

-

215

Available-for-sale investments

14

138

-

Investments in subsidiary undertakings

15

-

-

Total non-current assets


138

264





Current assets




Current tax recoverable

8

-

95

Trade and other receivables

16

15

142

Cash and cash equivalents

17

124

664

Total current assets


139

901





Total assets


277

1,165





Current liabilities




Trade and other payables

18

(21)

(206)

Total current liabilities


(21)

(206)





Non-current liabilities




Deferred tax liabilities

8

-

(5)

Total non-current liabilities


-

(5)





Total liabilities


(21)

(211)





Net assets


256

954





Equity attributable to equity holders of the company




Called up share capital

20

1,747

1,747

Share premium reserve

20

7,634

7,634

Share based payments reserve

21

114

138

Merger reserve

21

-

641

Retained earnings

21

(9,239)

(9,206)

Total equity


256

954

 

The financial statements were approved and authorised for issue by the Board of Directors on 20 January 2014 and were signed on its behalf by:

 

 

 

David Lenigas                                      Donald Strang

Chairman                                               Director

 

Company number: 05656604



 

Company statement of changes in equity 

for the year ended 31 July 2014

 

 



Share

Share-based





Share

premium

payments

Merger

Retained



capital

reserve

reserve

reserve

earnings

Total


£000

£000

£000

£000

£000

£000

At 1 August 2012

1,732

7,632

211

641

(8,387)

1,829

Loss for the year

-

-

-

-

(902)

(902)

Transactions with owners:







Issue of new ordinary shares

15

2

-

-

-

17

Share-based payment charge

-

-

10

-

-

10

-

-

(83)

-

83

-

At 31 July 2013

1,747

7,634

138

641

(9,206)

954








At 1 August 2013

1,747

7,634

138

641

(9,206)

954

Loss for the year

-

-

-

-

(703)

(703)

Transfers

-

-

-

(641)

641

-

Transactions with owners:







Share-based payment charge

-

-

5

-

-

5

Share options lapsed

-

-

(29)

-

29

-

At 31 July 2014

1,747

7,634

114

-

(9,239)

256

 

Details of the nature of each component of equity are set out in Notes 20 and 21.

 


Company statement of cash flows 

for the year ended 31 July 2014

 

 



2014

2013

 


Note

£000

£000

 

Cash flow from operating activities




 

Loss after tax


(703)

(902)

Tax on losses


(4)

(98)

Finance income net of finance costs


(2)

(8)

Profit on sale of property, plant and equipment


(5)

-

Depreciation


16

13

Amortisation of intangible assets


14

27

Share-based remuneration


-

17

Impairment of available-for-sale asset


72


Share-based payment charges


5

10

Changes in working capital:




    Decrease/(increase) in trade receivables


77

(49)

    Decrease in other receivables


50

62

    (Decrease)/increase in trade payables


(54)

1

    (Decrease)/increase in other payables


(131)

63

Cash outflow from operations


(665)

(864)

 

Taxation received


94

110

 

Net cash outflow from operating activities


(571)

(754)

 





 

Cash flow from investing activities




 

Purchase of property, plant and equipment

11

(1)

(4)

 

Proceeds from sale of property, plant and equipment

9

30

-

 

Finance income


2

8

 

Net cash inflow from investing activities


31

4

 





 

Net decrease in cash and cash equivalents

23

(540)

(750)

 

Cash and cash equivalents at the beginning of the year


664

1,414

 

Cash and cash equivalents at the end of the year

17

124

664

 

 

 

 


Notes to the financial statements

 


1 Presentation of the financial statements

 

Description of business

Evocutis plc is public limited company domiciled in the United Kingdom.  From 1 August 2013 until 18 March 2014, the group was a specialist research group focused on topical antimicrobial innovations for products in the medicinal and consumer healthcare markets.  The group provided independent research and testing facilities specialising in skin microbiology, living skin tissue culture and clinical dermatology. 

 

On 19 March 2014, following closure of the group's trading operations, the company became an investing company.  The financial results from the previous trade are presented within discontinued operations.  The comparative figures for the year ended 31 July 2013 have been restated to enable comparison between the two years.

 

The Group's registered office is Evocutis plc, Suite 3B, 38 Jermyn Street, London, SW1Y 6DN.

 

Compliance with applicable law and IFRS

The financial statements have been prepared in accordance with the Companies Act 2006 and International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) and related interpretations, as adopted by the European Union.

 

Composition of the financial statements

The consolidated and Parent Company financial statements are drawn up in Sterling, the functional currency of Evocutis plc and in accordance with IFRS accounting presentation.  The level of rounding for financial information is the nearest thousand pounds.

 

Accounting convention

The financial statements have been prepared using the historical cost convention, as modified by the revaluation of certain items, as stated in the accounting policies.

 

Basis of preparation - Going concern

The financial statements have been prepared on a going concern basis, notwithstanding the loss for the year ended 31 July 2014.  This basis assumes that the company will have sufficient funding to enable it to continue to operate for the foreseeable future and the Directors have taken steps to ensure that they believe that the going concern basis of preparation remains appropriate. 

 

The Group made a loss for the year of £704,000 after taxation.  The Group had net assets of £256,000 and cash balances of £124,000 at 31 July 2014.  The Directors have prepared financial forecasts which cover a period of at least 12 months from date that these financial statements are approved.  These forecasts show that the Company expects to have sufficient financial resources to continue to operate as a going concern.

 

Following the disposal of the Company's intellectual property assets, along with associated property, plant and equipment, in March 2014, the company is now classified as an investing company and holds cash balances and available-for-sale investments.  As part of the disposal of assets agreement, the Company retains a right to receive contingent consideration in the form of royalties arising on any revenues generated by those assets during the 3 year period ending 18 March 2017 or from the sale or licence of the SYN1113 asset at any time. 

 

Subsequent to the year end, the Company has raised further funding of £1,710,000 from the issue of new ordinary shares.  The Directors anticipate that the Company will have a very low level of operating costs for the next 12 months, principally the costs of maintaining the cash shell and of pursuing investment opportunities for the Company.  Therefore they are confident that existing cash balances, along with the new funding, are adequate to ensure that costs can be covered.

 

Consequently, the Directors have a reasonable expectation that the Group has adequate resources to continue to operate for the foreseeable future and that it remains appropriate for the financial statements to be prepared on a going concern basis.

 

Financial period

These financial statements cover the financial year from 1 August 2013 to 31 July 2014, with comparative figures for the financial years from 1 August 2012 to 31 July 2013 and, where appropriate, from 1 August 2011 to 31 July 2012.

 


 

Composition of the Group

A list of the subsidiary undertakings which, in the opinion of the Directors, principally affected the amount of profit or the net assets of the Group is given in Note 15.

 

Accounting principles and policies

The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

 

The financial statements have been prepared in accordance with the Group's accounting policies approved by the Board and described in Note 2, 'Accounting principles and policies'.  Information on the application of these accounting policies, including areas of estimation and judgement is given in Note 3, 'Key accounting judgements and estimates'.  Where appropriate, comparative figures are reclassified to ensure a consistent presentation with current year information.

 

2 Accounting principles and policies

 

Consolidation

The consolidated financial statements for the year ended 31 July 2014 comprise the Company and its subsidiaries (together referred to as the 'Group').

 

Subsidiaries are entities controlled by the Company.  Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities.  In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date control ceases. 

 

Transactions and balances between Group companies are eliminated and no profit before tax is taken on sales between Group companies until the products or services are sold to customers outside the Group.  Goodwill is capitalised as a separate item for subsidiaries acquired.  Where the cost of acquisition is below the fair value of the net assets acquired, the difference is recognised directly in the consolidated statement of profit or loss and other comprehensive income.

 

Discontinued operations

 

The results of the research services operation have been classified as a discontinued operation and the comparative consolidated statement of profit or loss and other comprehensive income has been re-presented in the current and prior year to show the discontinued operation separately from continuing operations.  Further details are set out in note 9. 

 

Revenue

Revenue is recognised when persuasive evidence of an arrangement exists, delivery of products has occurred or services have been rendered, prices are fixed or determinable and there is a probability that economic benefits will flow to the Group.  Certain revenues are generated from licensing and exclusivity agreements under which the Group grants third parties rights to certain products or technologies. 

 

Upfront payments and other similar non-refundable payments received under these agreements are recorded as deferred revenue and are recognised in the consolidated statement of profit or loss and other comprehensive income over the performance period stipulated in the agreement. 

 


 

Non-refundable milestone payments which represent the achievement of a significant technical/regulatory hurdle in the research and development process, pursuant to collaborative agreements, are recognised as revenue upon the achievement of the specified milestone. 

 

Royalty income is recognised on an accruals basis in accordance with the economic substance of the agreement and is reported as part of revenue.  Other revenues are recorded as earned or as the services are performed. 

 

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.  The chief operating decision maker has been identified as the Board of Directors.  Further details are set out in Note 5. 

 

Research and development expenditure

Except as set out below, research and development expenditure is charged to the consolidated statement of profit or loss and other comprehensive income as incurred. 

 

Development expenditure is capitalised if it can be demonstrated that:

 

·       it is technically feasible to develop the product for it to be sold;

·       adequate resources are available to complete the development;

·       there is an intention to complete and sell the product;

·       the group is able to sell the product;

·       sale of the product will generate future economic benefits; and

·       expenditure on the project can be measured reliably.

 

Capitalised development costs are amortised over the periods that the Group expects to benefit from selling the products developed.  The amortisation expense is included within general and administration costs in the consolidated statement of profit or loss and other comprehensive income.

 

Property, plant and equipment

Items of property, plant and equipment are initially recognised at cost.  As well as the purchase price, cost includes directly attributable costs.  Items of property, plant and equipment are carried at depreciated cost.

 

Depreciation is provided on all items of property, plant and equipment so as to write off the carrying value of items over their expected useful economic lives.  It is applied at the following rates:

 

Leasehold improvements                   - Lease term

Plant & machinery                               - 3 to 5 years

Fixtures & fittings                               - 5 years

 

On disposal of property, plant and equipment, the cost and related accumulated depreciation and impairments are removed from the financial statements and the net amount, less any proceeds, is accounted for in the consolidated statement of profit or loss and other comprehensive income.

 

Goodwill

Goodwill represents the excess of the cost of a business combination over the total acquisition date fair values of the identifiable assets, liabilities and contingent liabilities acquired.  Goodwill is deemed to have an indefinite useful life and is tested for impairment annually.  Where the fair value of the interest acquired in an entity's assets, liabilities and contingent liabilities exceeds the purchase consideration paid, this excess is recognised immediately as a gain in the consolidated statement of profit or loss and other comprehensive income.

 


 

Other intangible assets

Intangible assets are stated at cost or deemed cost less provisions for amortisation and impairments.

 

Customer-related intangibles separately acquired or acquired as part of a business combination are amortised over their estimated useful lives, generally not exceeding 20 years, using the straight line basis.  The estimated useful lives for determining the amortisation charge take into account the nature of the relationships and are reviewed and, where appropriate, adjusted annually.

 

Technology-based intangibles comprise unpatented technology, in-process research and development, know-how and trade secrets.  Where these are separately acquired or acquired as part of a business combination, they are amortised over their estimated useful lives, generally not exceeding 20 years, using the straight-line basis.  The estimated useful lives for determining the amortisation charge take into account the nature of the relationships and are reviewed and, where appropriate, adjusted annually.  Research costs which do not meet the criteria for recognition of an internally generated intangible asset are written off to the consolidated statement of profit or loss and other comprehensive income when incurred.

 

Leases

Lease agreements which transfer substantially all the benefits and risks of ownership of an asset to the Group are accounted for as finance leases, as if the asset had been purchased outright.  The assets are included within property, plant and equipment.  The capital element of the lease commitment is included within obligations under finance leases.  Assets held under finance leases are depreciated on a basis consistent with similar owned assets.  The interest element of the lease is included in the consolidated statement of profit or loss and other comprehensive income.

 

All other leases are operating leases and the rental costs are charged to the consolidated statement of profit or loss and other comprehensive income on a straight line basis over the term of the lease.

 

Share capital

Financial instruments issued by the Group are treated as equity only to the extent that they do not meet the definition of a financial liability.  The Group's ordinary shares are classified as equity instruments.

 

Retirement benefits: Defined Contribution Schemes

Contributions to defined contribution pension schemes are charged to the consolidated statement of profit or loss and other comprehensive income in the year to which they relate.

 

Share-based payments

Where equity settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the consolidated statement of profit or loss and other comprehensive income over the vesting period.  Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. 

 

Market vesting conditions are factored into the fair value of the options granted.  As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied.  The cumulative expense is not adjusted for failure to achieve a market vesting condition.

 

Financial instruments

 

Available-for-sale investments

Non-derivative financial assets comprising the Company's strategic investments in entities not qualifying as subsidiaries, associates or jointly controlled entities.  They are carried at fair value with changes in fair value recognised directly in a separate component of equity (available-for-sale reserve).  Where there is a significant or prolonged decline in the fair value of an available-for-sale financial asset (which constitutes objective evidence of impairment), the full amount of the impairment, including any amount previously charged to equity, is recognised in the consolidated statement of comprehensive income.  On sale, the amount held in the available-for-sale reserve associated with that asset is removed from equity and recognised in the consolidated statement of comprehensive income.

 

Trade and other receivables

Trade and other receivables are accounted for at original invoice amount less any provisions for doubtful debts.  Provisions are made where there is evidence of a risk of non-payment, taking into account the age of the debt, historical experience and general economic conditions.  If a trade debt is determined to be uncollectable, it is written off, firstly against any provisions already held and then to the consolidated statement of profit or loss and other comprehensive income.  Subsequent recoveries of amounts previously provided for are credited to the consolidated statement of profit or loss and other comprehensive income.

 

Trade and other payables

Trade and other payables are held at amortised cost which equates to nominal value. 

 

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, current balances with banks and similar institutions and liquid investments generally with maturities of 3 months or less.  They are readily convertible into known amounts of cash and have an insignificant risk of changes in values.

 

Financial investments

Listed investments are valued at closing bid price on 31 July.  For measurement purposes, financial investments are designated at fair value through profit and loss.  Gains and losses on the realisation of financial investments are recognised in the profit and loss for the period and taken to retained earnings.  The difference between the market value of financial instruments and book value to the Group is shown as a gain or loss in the profit for the period and taken to the revenue reserve.

 

Investments in subsidiaries are reflected in the Company's accounts at cost less any provisions for diminution in value.

 

Taxation

 

Current tax is provided at the amounts expected to be paid applying tax rates that have been enacted or substantively enacted by the reporting date.

 

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the balance sheet differs from its tax base, except for differences arising from:

 

·    the initial recognition of goodwill;

·    the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profits; and

·    investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

 

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised.  The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).

 


 

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:

 

·    the same taxable group company; or

·    different group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

 

Impairment of non-current assets

The carrying values of all non-currents assets are reviewed for impairment when there is an indication that the assets might be impaired.  Additionally, goodwill, intangible assets with indefinite useful lives and intangible assets which are not yet available for use are tested for impairment annually.  Any provision for impairment is charged to the consolidated statement of profit or loss and other comprehensive income in the year concerned.

 

Impairments of goodwill are not reversed.  Impairment losses on other non-current assets are only reversed if there has been a change in estimates used to determine recoverable amounts and only to the extent that the revised recoverable amounts do not exceed the carrying values that would have existed, net of depreciation or amortisation, had no impairments been recognised.

 

3 Key accounting judgements and estimates

 

The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.  The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. 

 

Actual results may differ from these estimates.  The estimates and underlying assumptions are reviewed on an ongoing basis.  Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision only affects that period, or in the period of the revision and future periods if the revision affects both current and future periods.

 

Significant estimates and assumptions that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities at 31 July 2014 are set out below:

 

Fair value of contingent consideration

The consideration for the sale of intellectual property assets to Venn Life Science Holdings plc in March 2014 included an element of contingent consideration that is based on a future royalty stream from commercialisation of those assets by Venn.  An estimate of the fair value of the contingent consideration has been made in these financial statements.  However the actual amounts of royalties receivable in future years is dependent upon a number of factors, all of which are outside the Company's control.  These include Venn's ability to be able to generate commercial revenues from the intellectual property assets, the demand for those products and other economic factors.

 

4 New accounting requirements

 

At the date of authorisation of these financial statements, the following IFRSs, IASs and Interpretations were in issue but not yet effective.  Their adoption is not expected to have a material effect on the financial statements unless otherwise indicated:

 

·      IFRS 9 Financial Instruments (effective date not yet confirmed and standard not yet endorsed by the EU);

·      IFRS 15 Revenue from Contracts with Customers (effective date 1 January 2017, not yet endorsed by the EU);

·      Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38) (effective date 1 January 2016);

·      Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11) (effective date  1 January 2016); and

·      IFRS 14 Regulatory Deferral Accounts (effective date 1 January 2016).

 

 

5 Segmental analysis

 

Segmental analysis is not applicable as there is only one operating segment of the continuing business - investment activities.  The performance measure of investment activities is considered by the Board to be profitability and is disclosed on the face of the consolidated statement of profit or loss and other comprehensive Income.  An analysis of the Group's previous trading activities, which were discontinued during the year, is set out in note 9.

 

6 Information regarding Directors and employees

 


2014

2013


£000

£000

Included within continuing operations



Wages and salaries

33

48

Social security costs

3

4


36

52




Included within discontinued operations



Wages and salaries

244

492

Social security costs

22

47

Pension contributions

11

22

Share based payment expense

4

10


281

571

 

 

During the year, the Group provided benefits to employees including healthcare insurance and personal life assurance.

 


2014

2013


Number

Number

Average number of persons employed by the Group (including Directors) during the year



Continuing operations - Directors

4

4

Discontinued operations - Research and administrative staff

10

12

Total

14

16

 

The compensation of the Directors, in aggregate, was as follows:

 


2014

2013


£000

£000

Wages and salaries

53

203

Social security costs

6

25

Pension costs

-

5

Benefits in kind

-

2

Fees payable to third parties

4

15

Share-based remuneration

-

13

Share-based scheme costs

-

10


63

273

 

Full details of the remuneration of individual directors, including the highest paid director, are set out in the Directors' Report.  There were no directors (2013: 1 director) in the Group's stakeholder money purchase pension schemes in the year.



 

 

7 Loss for the year - continuing operations

 

The following items have been included in operating loss:

 


2014

2013


£000

£000

Fees payable to the company's auditors in relation to the Group:



Audit and assurance services :

- Audit of parent Company and consolidated financial statements

13

23

- Audit of subsidiary companies

2

3

Total auditor's fees

15

26




Analysis of other costs:



Legal and professional fees

82

130

Other general overheads

9

8


91

138

 

At 31 July 2014, the amount due to BDO LLP for fees yet to be invoiced was £15,000, comprising statutory audit of £15,000.

 

8 Taxation

 


2014

2013

Taxation credit based on losses for the year

£000

£000

UK Corporation tax

-

-

Deferred taxation

-

-

Tax expense from continuing operations

-

-

Tax credit from discontinued operations

(58)

(111)

Total tax expense

(58)

(111)

 

 


2014

2013

Reconciliation of the taxation rate on Group profits

£000

%

£000

%

Loss for the year

(632)


(1,007)


Total income tax credit

58


111


Loss excluding income tax

(690)

(100.0)

(1,118)

(100.0)

UK Corporation tax at the statutory UK rate

(154)

(22.3)

(265)

(23.7)

Expenses not deductible for tax purposes

4

0.6

3

0.3

Research and development enhancement

-

-

(113)

(10.1)

Losses utilised against R & D tax credits received

-

-

109

9.7

Losses for which no deferred asset was recognised

150

21.7

155

13.9

Other permanent differences

(58)

(8.4)

-

-

Prior year adjustments

-

-

-

-

Total

(58)

(8.4)

(111)

(9.9)

 

 

 

 



 

 

 


Group

Company


2014

2013

2014

2013


£000

£000

£000

£000

Corporation tax recoverable

-

95

-

95

 

Movement in deferred tax liabilities

 

Group


Accelerated





capital



Deferred tax liabilities


allowances

Intangibles

Total



£000

£000

£000

At 1 August 2013


5

53

58

Credit to consolidated statement of profit or loss and other comprehensive income - arising from the origination and reversals of temporary differences


(5)

(53)

(58)

At 31 July 2014


-

-

-

 

 

Company




Accelerated






capital


Deferred tax liabilities




allowances

Total





£000

£000

At 1 August 2013




5

5

Credit to statement of profit or loss and other comprehensive income - arising from the origination and reversals of temporary differences




(5)

(5)

At 31 July 2014




-

-

 

 



Recognised

Unrecognised

Tax losses - Group


2014

2013

2014

2013



£000

£000

£000

£000

Trading losses available indefinitely


-

-

-

6,800

Deferred tax asset


-

-

-

1,360

 

 



Recognised

Unrecognised

Share-based payments - Group


2014

2013

2014

2013



£000

£000

£000

£000

Accumulated share-based payments


-

-

114

138

Deferred tax asset


-

-

24

28

 

As set out in Note 2, the Group has not recognised a deferred tax asset in the financial statements as there is no certainty that taxable profits will be available against which these assets could be utilised.

 

Factors affecting the tax charge in future years

Changes to tax legislation could impact on the Group's effective tax rate.  The UK Government has proposed some significant changes to the UK taxation system.  The UK Government announced a phased reduction in the main rate of corporation tax to 20% and the deferred tax balances reflect that reduction in the UK tax rate. 

 

 



 

 

9 Discontinued operations

 

In December 2013, the Group ceased its research services operation and all intellectual property assets and residual property, plant and equipment were disposed to Venn Life Science Holding plc on 19 March 2014.  The results of the research services operation have been classified as a discontinued operation and the comparative consolidated statement of profit or loss and other comprehensive income has been re-presented in the current and prior year to show the discontinued operation separately from continuing operations.  The results of operations discontinued during the year ended 31 July 2014 is as follows:

 



2014

2013



£000

£000

Revenues


48

395

Expenses


(613)

(1,331)

Results from operating activities


(565)

(936)

Income tax


58

111

Results from operating activities, net of tax


(507)

(825)

Gain on sale of discontinued operation - see below


-

-

Tax on gain on sale of discontinued operation


-

-

Loss from discontinued operations for the year


(507)

(825)





Basic and diluted loss per shares (pence)


(0.29p)

(0.47p)

 

The loss from discontinued operation of £507,000 (2013: loss of £825,000) is attributable entirely to the owners of the Company.

 

Cash flows used in discontinued operations



2014

2013



£000

£000

Net cash used in operating activities


(447)

(712)

Net cash from investing activities


(1)

(4)

Net cash flows for the year


(448)

(716)

 

Effect of the disposal on the financial position of the Group



2014



£000

Property, plant and equipment


(8)

Other intangible assets


(202)

Net assets and liabilities disposed of


(210)




Consideration:



- Shares in Venn Life Science Holdings plc


210

- Fair value of contingent consideration


-

Total consideration received


210

Gain on sale of discontinued operation


-

 

 

 



 

 

10 Loss per share

 

Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year.  Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares in issue to assume the conversion of all potentially dilutive ordinary shares. 

 

The Group has one class of potentially dilutive ordinary shares: those share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the year.  However, due to losses incurred in the year there is no dilutive effect from the potential exercise of these share options.

 

Loss attributable to ordinary shareholders


2014

2013


Continuing

Discontinued


Continuing

Discontinued



operations

operations

Total

operations

operations

Total


£000

£000

£000

£000

£000

£000

Loss for the year

(197)

(507)

(704)

(182)

(825)

(1,007)

 

 

Weighted average number of ordinary shares


2014

2013

Issued ordinary shares at 1 August

174,675,828

173,774,928

Effect of shares issued on 1 November 2012

-

673,824

Weighted average number of ordinary shares at 31 July

174,675,828

174,448,752

 

 

11 Property, plant and equipment

 

 



Plant

Fixtures



Leasehold

and

and



improvements

equipment

fittings

Total

Group

£000

£000

£000

£000

Cost at 1 August 2012

126

278

13

417

Additions

-

1

3

4

Cost at 31 July 2013

126

279

16

421

Additions

-

1

-

1

Disposals

(126)

(280)

(16)

(422)

Cost at 31 July 2014

-

-

-

-






Depreciation at 1 August 2012

31

211

9

251

Charge for the year

28

24

2

54

Impairment charge

67

-

-

67

Depreciation at 31 July 2013

126

235

11

372

Charge for the year

-

15

1

16

Disposals

(126)

(250)

(12)

(388)

Depreciation at 31 July 2014

-

-

-

-






Net book value at 1 August 2012

95

67

4

166

Net book value at 31 July 2013

-

44

5

49

Net book value at 31 July 2014

-

-

-

-

 

Following cessation of the Group's research services operation during the year, all property, plant and equipment assets were disposed of during this period.



 

 



Plant

Fixtures




and

and




equipment

fittings

Total

Company


£000

£000

£000

Cost at 1 August 2012


207

12

219

Additions


1

3

4

Transfers from group undertakings


26

-

26


234

15

249

Additions


1

-

1

Disposals


(235)

(15)

(250)

Cost at 31 July 2014


-

-

-






Depreciation at 1 August 2012


178

9

187

Charge for the year


11

2

13

Depreciation at 31 July 2013


189

11

200

Charge for the year


15

1

16

Disposals


(204)

(12)

(216)

Depreciation at 31 July 2014


-

-

-






Net book value at 1 August 2012


29

3

32

Net book value at 31 July 2013


45

4

49

Net book value at 31 July 2014


-

-

-

 

Following cessation of the Company's research services operation during the year, all property, plant and equipment were disposed of during this period.

 

 

12 Goodwill

 



Goodwill

Group


£000

Cost at 1 August 2012 and 31 July 2013


489

Eliminated during the year


(489)

Cost at 31 July 2014


-




Impairment provision at 1 August 2012 and 31 July 2013


489

Eliminated during the year


(489)

Impairment provision at 31 July 2014


-




Net book value at 1 August 2012, 31 July 2013 and 31 July 2014


-

 

The goodwill arose on the acquisition of Leeds Skin Centre for Applied Research Limited in May 2011.  Following the sale of the Group's intellectual property assets in March 2014, the goodwill balances have been eliminated during the year ended 31 July 2014.

 

 

 



 

13 Other intangible assets

 




Unpatented




Customer

technology &




relationships

In-process R & D

Total

Group


£000

£000

£000

Cost at 1 August 2012 and 31 July 2013


179

275

454

Disposals/eliminated in the year


(179)

(275)

(454)

Cost at 31 July 2014


-

-

-






Amortisation at 1 August 2012


179

33

212

Charge for the year


-

27

27

Amortisation at 31 July 2013


179

60

239

Charge for the year


-

14

14

Disposals/eliminated in the year


(179)

(74)

(253)

Amortisation at 31 July 2014


-

-

-






Net book value at 1 August 2012


-

242

242

Net book value at 31 July 2013


-

215

215

Net book value at 31 July 2014


-

-

-

 

 

 




Unpatented




Customer

technology &




relationships

In-process R & D

Total

Company


£000

£000

£000

Cost at 1 August 2012 and 31 July 2013


174

270

444

Disposals/eliminated in the year


(174)

(270)

(444)

Cost at 31 July 2014


-

-

-






Amortisation at 1 August 2012


174

28

202

Charge for the year


-

27

27

Amortisation at 31 July 2013


174

55

229

Charge for the year


-

14

14

Disposals/eliminated in the year


(174)

(69)

(243)

Amortisation at 31 July 2014


-

-

-






Net book value at 1 August 2012


-

242

242

Net book value at 31 July 2013


-

215

215

Net book value at 31 July 2014


-

-

-

 

Following the cessation of the group's research services operation and the sale of its intellectual property assets in March 2014, all remaining balances on intangible assets have been eliminated in the year.



 

14 Available-for-sale investments

 



% of

Value at



Value at



equity held

31 July



31 July


Country of

at 31 July

2013

Additions

Impairment loss in the year

2014

Investee company name

incorporation

2014

£000

£000

£000

£000

Venn Life Science Holdings plc

Ireland

3.06%

-

210

(72)

138

 

The investment in Venn Life Science Holdings plc has been valued at bid price, as quoted on the , at 31 July 2014.

 

 

 

15 Investments in subsidiary undertakings

 



Investments



in subsidiary



undertakings

Company


£000

Cost at 1 August 2012 and 31 July 2013


339

Eliminated in the year


(339)

Cost at 31 July 2014


-




Impairment at 1 August 2012 and 31 July 2013


339

Eliminated in the year


(339)

Impairment at 31 July 2014


-




Net book value at 1 August 2012, 31 July 2013 and 31 July 2014


-

 

Principal Group companies

 

The following are the subsidiary undertakings of Evocutis plc at 31 July 2014.

 


Country of


Percentage

Name of subsidiary

incorporation

Principal activity

Owned

Leeds Skin Centre for Applied Research Limited

England and Wales

Dormant

100%

 

During the year, two dormant subsidiary companies, Syntopix Limited and Syntopix Research Services Limited were voluntarily struck off the Register of Companies.  Consequently the investments in these companies, which were fully provided against, have been eliminated during the year ended 31 July 2014.  Subsequent to the period end, the Directors have applied for Leeds Skin Centre for Applied Research Limited to also be voluntarily struck off.

 

 

16 Trade and other receivables

 


Group

Company


2014

2013

2014

2013


£000

£000

£000

£000

Trade receivables

-

77

-

77

Other receivables

6

20

6

20

Prepayments

9

57

9

45


15

154

15

142

 



 

At 1 August 2013, the Company's financial statements contained inter-group receivables with a gross amount of £3,522,000 against which full provision of £3,522,000 had been made.  These balances were due from the Company's dormant subsidiaries, Syntopix Limited and Syntopix Research Services Limited.  As explained in note 15, these companies were struck off during the year ended 31 July 2014.  Consequently, the Company no longer has outstanding balances due from these entities.

 

At 31 July 2014, the Company's financial statements contained an inter-group receivable with a gross amount of £1,167 against which full provision of £1,167 has been made.  This balance is due from the Company's dormant subsidiary, Leeds Skin Centre for Applied Research Limited.  The Directors are in the process of applying for this subsidiary to be struck off the Register of Companies; therefore this balance is considered irrecoverable.

 

 

17 Cash and cash equivalent

 


Group

Company


2014

2013

2014

2013


£000

£000

£000

£000

Cash at bank

124

665

124

664

 

 

18 Trade and other payables

 


Group

Company


2014

2013

2014

2013

Amounts due within one year

£000

£000

£000

£000

Trade payables

-

54

-

54

Social security

-

13

-

13

Other payables

-

3

-

3

Amounts due to subsidiary undertakings

-

-

-

91

Accruals and deferred income

21

45

21

45


21

115

21

206

 

19 Provisions

 


Group

Company


2014

2013

2014

2013

Property dilapidations provision

£000

£000

£000

£000

Balance at 1 August

50

-

-

-

Provisions made during the year

25

50

-

-

Utilised during the year

(75)

-

-

-

Balance at 31 July

-

50

-

-

 

The Group had a lease on a property which contained clauses relating to the condition of the property throughout the lease term and at the date when the lease ended.  In the prior year, the Group made a provision of £50,000 in respect of the accrued estimated costs, as at 31 July 2013, of property repairs which were expected to be undertaken in order to fulfil the terms of the lease.

 

During the year ended 31 July 2014, the Group terminated the lease and incurred final dilapidation costs of £75,000.  Consequently the provision has been fully utilised in the year.

 

 



 

20 Share capital and share premium account

 





Share



Ordinary shares of 1p each

premium



Number

£000

£000

Share capital issued and fully paid





At 1 August 2012


173,179,690

1,732

7,632

Issue of new ordinary shares


1,496,138

15

2

At 31 July 2013


174,675,828

1,747

7,634

Issue of new ordinary share


-

-

-

At 31 July 2014


174,675,828

1,747

7,634

 

Share capital represents the nominal value of the amount subscribed for shares.  Share premium represents the amount subscribed for shares in excess of their nominal value.  Ordinary shares carry the rights to one vote per share at general meetings of the Company and the rights to share in any distributions of profits or returns of capital and to share in any residual assets available for distribution in the event of a winding up.

 

21 Movements in equity

 

The merger reserve is a reserve created on the combination of companies within the Group prior to 1 August 2006 and as a consequence of applying merger relief criteria to the premium arising from the issue of ordinary shares as part of the cost of acquisition of Leeds Skin Centre for Applied Research Limited in the year ended 31 July 2011. 

 

The share-based payment reserve represents amounts arising from the requirement to expense the fair value of share-based remuneration in accordance with IFRS 2 'Share-based Payments'. 

 

Retained earnings are the cumulative net losses recognised in the consolidated statement of profit or loss and other comprehensive income. 

 

Movements on these reserves are set out in the consolidated statement of changes in equity.

 

 

22 Related party transactions

 

The Group and Company had the following transactions with related parties:

 






Amounts owed to related party




Purchases from related party

At 31 July

At 31 July




2014

2013

2014

2013

Name of related party

Relationship

Nature of transaction

£000

£000

£000

£000

Atraxa Consulting Limited

Common directorship of

Mr J D Bamforth

Provision of accountancy services to the company

57

58

-

12

 

Terms and conditions of transactions with related parties

Outstanding balances that relate to trading balances are unsecured, interest free and settlement occurs in cash.  There have been no guarantees provided or received for any related party receivables or payables.  The Company has an outstanding amount of £1,167 due from a subsidiary undertaking, against which it has made full provision.  This assessment is undertaken each financial year through examining the financial position of the subsidiary company.  Further details of the inter-group debt are set out in note 16.

 

Compensation of key management personnel of the Group

The Group considers the directors to be its key management personnel.  Full details of the remuneration of the directors are shown in the Directors' Report and Note 6.

 

 



 

23 Reconciliation of net cash flow to movement in net funds

 


Group

Company


2014

2013

2014

2013


£000

£000

£000

£000

Net funds at beginning of the year

665

1,479

664

1,414

Decrease in cash

(541)

(814)

(540)

(750)

Net funds at end of the year

124

665

124

664

 

Analysis of changes in net funds

 


At 31


At 31


July

Cash

July


2013

Flow

2014


£000

£000

£000

Cash and cash equivalents

665

(541)

124





Net funds

665

(541)

124

 

 

24 Commitments

 

The total future minimum lease payments under non-cancellable operating leases are:

 


Group

Company


2014

2013

2014

2013


£000

£000

£000

£000

Rental payments due within one year

-

80

-

-

Rental payments due between one and five years

-

106

-

-

Total commitments under non-cancellable operating leases

-

186

-

-

 

In the prior year, the Group had an operating lease in respect of its five year lease on its property in Wetherby which expired on 30 November 2015.  During the year ended 31 July 2014, the Group negotiated a termination of this lease with the landlord and has vacated the property.  Consequently at 31 July 2014, the Group has no operating leases outstanding.

25 Financial instruments and related disclosures

 

General objectives, policies and processes

 

The Board has overall responsibility for the determination of the Group's risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group's finance function.  The Board receives monthly reports from the Chief Financial Officer through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets.

 

The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility.

 

The Group reports in Sterling.  Internal and external funding requirements and financial risks are managed based on policies and procedures adopted by the Board of Directors.  The Group does not use derivative financial instruments such as forward currency contracts, interest rate and currency swaps or similar instruments.  The Group does not issue or use financial instruments of a speculative nature.

 

Capital management

The Group's objectives when maintaining capital are:

 

·      to safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders; and

·      to provide an adequate return to shareholders.

The capital structure of the Group consists of total shareholders' equity as set out in the 'Consolidated statement of changes in equity'.  All working capital requirements are financed from existing cash resources.

 

Capital is managed on a day to day basis to ensure that all entities in the Group are able to operate as going concerns.  Operating cash flow is primarily used to cover the overhead costs associated with operating as an AIM-listed company. 

 

 

Liquidity risk

Liquidity risk arises from the Group's management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.

 

The directors consider that there is no significant liquidity risk faced by the Group.  The Group maintains sufficient balances in cash to pay accounts payable and accrued expenses.

 

The Board receives forward looking cash flow projections at periodic intervals during the year as well as information regarding cash balances.  At the balance sheet date the Group had cash balances of £124,000 and the financial forecasts indicated that the Group expected to have sufficient liquid resources to meet its obligations under all reasonably expected circumstances and will not need to establish overdraft or other borrowing facilities.

 

Interest rate risk

As the Group has no borrowings, to only has limited interest rate risk.  The impact is on income and operating cash flow and arises from changes in market interest rates.  Cash resources are held in current, floating rate accounts.

 

Market risk

Market price risk arises from uncertainty about the future valuations of financial instruments held in accordance with the Group's investment objectives.  These future valuations are determined by many factors but include the operational and financial performance of the underlying investee companies, as well as market perceptions of the future of the economy and its impact upon the economic environment in which these companies operate.  This risk represents the potential loss that the Group might suffer through holding its available-for-sale investment portfolio in the face of market movements, which was a maximum of £138,000 (2013: £nil).

 

The investment in equity in an AIM-quoted company that the Group holds is less frequently traded than shares in more widely traded securities.  Consequently, the valuations of these investments can be more volatile. 

 

Market price risk sensitivity

The table below shows the impact on the return and net assets of the Group if there were to be a 20% movement in overall share prices of the available-for-sale investments held at 31 July 2014.  No comparative data is shown as the Group did not hold any investments of this type in the prior year.

 

 


31 July


2014


Other comprehensive income and


Net assets


£000

Decrease if overall share price falls by 20%, with all other variables held constant

(28,000)

Decrease in other comprehensive earnings and net asset value per Ordinary share (in pence)

(0.02p)



Increase if overall share price rises by 20%, with all other variables held constant

28,000

Increase in other comprehensive earnings and net asset value per Ordinary share (in pence)

0.02p

 

The impact of a change of 20% has been selected as this is considered reasonable given the current level of volatility observed.

 

 

 

Currency risk

The directors consider that there is no significant currency risk faced by the Group.  The Group no longer enters into foreign currency transactions and no balances at 31 July 2014 are denominated in foreign currencies.

 

Credit risk

Credit risk is the risk that a counterparty will fail to discharge an obligation or commitment that it has entered into with the Group.  The Group's maximum exposure to credit risk is:

 







2014

2013




£000

£000

Cash at bank



124

665

Other receivables



15

154




139

819

 

The Group's cash balances are held in accounts with HSBC Bank plc. 

 

The Company has credit risk exposure on inter-group receivables.  Provisions have been made at each period end against inter-group receivables to the extent that it is envisaged that the amounts will not be recoverable.

 

Fair value of financial assets and liabilities

Financial assets and liabilities are carried in the Consolidated Statement of Financial Position at either their fair value (available-for-sale investments) or at a reasonable approximation of the fair value (trade and other receivables, trade and other payables and cash at bank).

 

The fair values are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. 

 

Trade and other receivables in scope of IAS 39

The following table sets out financial assets within Trade and other receivables which fall within the scope of IAS39.  These assets are non-interest earning.

 


Group

Company


2014

2013

2014

2013

Financial assets in scope of IAS39

£000

£000

£000

£000

Trade and other receivables (Note 16)

15

154

15

142

 

There are no financial assets which are past due and for which no provision for bad or doubtful debts has been made.

 

Trade and other payables in scope of IAS39

The following table sets out financial liabilities within Trade and other payables which fall within the scope of IAS39.  These financial liabilities are predominantly non-interest bearing.  Other liabilities include tax and social security payables and provisions which do not constitute contractual obligations to deliver cash or other financial assets, which are outside the scope of IAS39.

 


Group

Company


2014

2013

2014

2013


£000

£000

£000

£000

Financial liabilities in scope of IAS39

21

102

21

193

Other liabilities

-

13

-

13

Total trade and other payables (Note 18)

21

115

21

206

 



 

 

26 Share schemes

 

During the year, the Group had a share option scheme for all employees (including Directors).  Options are exercisable at a price agreed at the date of grant.  The vesting period is usually between one and five years.  The exercise of options is dependent upon eligible employees meeting performance criteria.  The options may not be exercised before the occurrence of a takeover, sale or admission.  The options are settled in equity once exercised. 

 

If the options remain unexercised after a period of 10 years from the date of grant, the options expire.  Options lapse if the employee leaves the Group before the options vest. 

 

Options outstanding





Weighted





average





exercise




Number 

price

At 1 August 2012



5,257,110

9.16p

Options granted



6,295,200

1.12p

Options lapsed



(3,761,370)

(7.23p)

At 31 July 2013



7,790,940

3.60p

Options lapsed



(5,140,100)

(2.06p)

At 31 July 2014



2,650,840

6.57p

Range of exercise prices



5.25p - 8.65p

Weighted average remaining contractual life



5.20 years

 

Options outstanding at 31 July 2014







Weighted

Latest



exercise

exercise

Year of grant (year ended 31 July)

Number

price (p)

date

2009

1,031,990

8.65p

6/8/2018

2011

1,618,850

5.25p

30/11/2020

Total

2,650,840

6.57p


 

Options exercisable






Weighted



exercise


Number

price (p)

At 31 July 2013

4,860,807

5.07p

At 31 July 2014

2,650,840

6.57p

 

 

Charge to the consolidated statement of profit or loss and other comprehensive income

 


2014

2013


£000

£000

Share based payment charges

5

10

 



 

 

27 Post balance sheet events

 

On 12 September 2014, shareholders approved a capital reorganisation, resulting in each of the Company's existing ordinary shares being subdivided into one new Ordinary Share of 0.01p and one Deferred Share of 0.99p. 

Additionally, on 15 September 2014, the Company issued 175,000,000 new Ordinary Shares of 0.01p each for cash consideration of £210,000 (before expenses).  The new shares will rank equally in all respects with the existing shares.

On the same date, the Company adopted a new investing policy under AIM Rule 15 and there were a number of board changes as disclosed in the Report of the Directors.

On 8 December 2014, the Company issued 375,000,000 new Ordinary Shares of 0.01p each for cash consideration of £1,500,000 (before expenses).  The new shares will rank equally in all respects with the existing shares. Each new Ordinary Share carries a warrant which entitles the holder to subscribe for a further one new ordinary share in the Company at 0.4 pence per share up to 31 December 2015.

On 18 December 2014, the Company announced that it has signed a Binding Term Sheet ("BTS") to acquire an initial 10% interest in Brazil Tungsten Holdings Limited ("BTHL") which owns a 25 year lease over (with the option to extend) the producing Bodó Tungsten Mine in Rio Grande do Norte, Brazil, by investing US$1 million in new capital in BTHL for the specific purposes of mine expansion. The Company will acquire the 10% interest by subscribing for new shares that represent a 10% shareholding in BTHL. The Company also has an exclusive option to increase its holding in BTHL to 20% within 60 days by investing a further US$1 million towards mine expansion, subject to certain conditions to be advised.

 

28 Loss for the financial year

 

The company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own profit and loss account in these financial statements.  The group loss for the year includes a loss after tax of £703,000 (2013: £902,000) which is dealt with in the financial statements of the parent company.

 

 


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