TIDMRM2
RNS Number : 6476J
RM2 International SA
16 June 2014
RM2 International S.A.
Annual Results 2013
RM2 International S.A. ("RM2" or the "Company"), the
vertically-integrated innovator in pallet development, manufacture,
supply and management, announces its financial results for the year
ended 31 December 2013.
Highlights
-- Successful AIM IPO in January 2014, raising GBP137.2m of
development capital to further expand production capacity and to
enable large-scale asset commercialisation and deployment
-- New production facility expected to be fully operation on
schedule in July 2014, more than doubling pultrusion production
capacity and delivering additional operating efficiencies, putting
the business in a much stronger position to meet expected
demand
-- BLOCKPal now in use by further potential customers and
commercial terms agreed with a number of large-scale, blue chip
corporations in retail, food, glass, packaging, beverages and
spirits sectors
-- Bill Sanders appointed to the newly-created position of Group COO in May 2014
Chairman of RM2, Ian Molson, commented:
"2013 was a year of critical development and preparation. The
successful IPO at the beginning of this year marks the start of the
next phase for RM2 as we transition towards large-scale asset
commercialisation and deployment."
Chief Executive Officer, John Walsh, commented:
"Since the IPO at the start of the year we have fine-tuned our
operations and developed a deeper understanding of the requirements
of our prospective customers. We have been very encouraged by the
response from existing and potential customers and remain very
confident that we have the technology and strategy to disrupt a
global market."
For further information:
RM2 International S.A. +44 (0)20 8820 1412
John Walsh, Chief Executive Officer
Ash Mohindra, Chief Financial Officer
Ruari McGirr, Strategic Development and
Investor Relations
Cenkos Securities plc +44 (0)20 7397 8900
Neil McDonald
Alan Stewart
Beth McKiernan
Citigate Dewe Rogerson +44 (0)20 7638 9571
Simon Rigby
Kevin Smith
Lindsay Noton
Notes to Editors
RM2 International S.A. specialises in pallet development,
manufacture, supply and management to establish a leading presence
in global pallet supply and improve the supply chain of
manufacturing and distribution businesses through the effective and
efficient use and management of composite pallets. It is quoted on
the AIM market of the London Stock Exchange under the symbol
RM2.L.
For further information, please visit www.rm2.com
Chairman's and CEO's Statement
We are pleased to announce RM2's results for the year ended 31
December 2013. The whole of the reported period is prior to our
successful AIM IPO in January 2014.
We are happy to report that the transition to our new 265,000
square foot production facility in Ontario is progressing according
to schedule and that it is expected to be fully operational, and
delivering the expected operating efficiencies as of 1 July 2014,
in line with earlier guidance. We are confident that the changes
made to both the production processes and the design of the
BLOCKPal pallet during the first half of this year will put us in a
stronger position as we significantly expand production in the new
facility.
Further to the announcement of 1 May 2014, the BLOCKPal pallet
is now in use by further potential customers. In addition, RM2 has
agreed commercial terms with, and is working to finalise contracts
to deploy significant assets in the supply chain of, a number of
large-scale, blue chip corporations in our target sectors,
specifically retail, food, glass, packaging, beverages and spirits.
Whilst these companies, in common with the majority of our
potential customers, have complex systems and make changes to their
critical processes cautiously and deliberately, the Company remains
confident of converting, over the next three to six months, the
detailed contractual discussions into long-term orders of
significant scale.
We are also ensuring that the terms of the customer contracts
allow RM2 the flexibility to provide additional financing of our
capital requirements with matching invoice discounting or other
debt facilities. The Company's cash position remains strong and
sufficient to meet the requirements of our current production
schedule.
Our recent progress represents just the start of RM2's asset
deployment. We believe that our strategy of targeting contracts of
significant scale with market-leading companies, and the
ratification of our products within their supply chains, will
assist and accelerate deployment of our assets into other companies
within those sectors.
Outlook
Our immediate focus remains on ensuring that the business is
well-positioned to significantly increase production in the
short-term and on securing and further developing our contracted
customer base.
In these early months following our IPO, we have responded to
the feedback from, and the needs of, our existing and target
customers and have developed a deeper understanding of their
systems and operations. We remain convinced that RM2 has a vastly
scalable opportunity in the global pallet market and possesses the
technology and strategy to succeed.
We would like to take this opportunity to thank our staff and
our shareholders and look forward to reporting to you again as the
business progresses.
Ian Molson, Chairman and John Walsh, Chief Executive Officer
Posting of Annual Report and Notice of AGM
The Company confirms that it has posted its Audited Consolidated
Accounts for the year ended 31 December 2013 and (in compliance
with Luxembourg law) its Company-only Accounts for the year ended
31 December 2013 to shareholders together with the Notice of Annual
General Meeting and the associated form of proxy. Both sets of
accounts, the Notice and related documents will be available
shortly on the Company's website and can be downloaded from
www.rm2.com.
The Annual General Meeting will be held at 10 rue Nicolas
Adames, L-1114 Luxembourg on 24 June 2014 at 8:30 a.m.
Consolidated statement of comprehensive income
Notes 2013 2012
USD USD
Continuing operations
Revenue 15 104,204 -
Cost of sales (47,755) -
------------------ -------------
Gross profit 56,449 -
Selling and distribution expenses 16 (837,158) (838,331)
Administrative expenses 16 (32,692,224) (7,772,484)
Other operating expenses 16 (2,295,949) (2,007,795)
Other operating income 16 1,106,294 2,326,259
------------------ -------------
Operating loss (34,662,588) (8,292,351)
Impairment of financial asset 9 - (13,500,000)
Finance costs 16 (48,600,900) (410,218)
Finance income 16 6,063,312 909,013
------------------ -------------
Loss before tax (77,200,176) (21,293,556)
Income tax 17 (72,768) (16,556)
------------------ -------------
Loss for the year i.1. (77,272,944) (21,310,112)
================== =============
Other comprehensive income
Other comprehensive income to
be reclassified in profit or
loss in subsequent periods:
------------------ -------------
Exchange difference on translation
of foreign operations 251,078 (188,516)
------------------ -------------
Other comprehensive income for
the year, net of tax 251,078 (188,516)
Total comprehensive income for
the year (77,021,866) (21,498,628)
================== =============
Loss for the year attributable
to:
Equity holders of the parent (77,270,973) (21,310,522)
Non-controlling interests (1,971) 410
------------------ -------------
(77,272,944) (21,310,112)
================== =============
Total comprehensive income for
the year attributable to:
Equity holders of the parent (77,019,895) (21,499,038)
Non-controlling interests (1,971) 410
------------------ -------------
(77,021,866) (21,498,628)
================== =============
Losses per share 20
Basic losses per share attributable
to ordinary equity holders of
the parent (0.62) (0.19)
Diluted losses per share attributable
to ordinary equity holders of
the parent (0.62) (0.19)
================== =============
Consolidated statement of financial position
Notes 2013 2012
USD USD
Assets
Non-current assets
Property, plant & equipment 6 13,985,494 9,611,640
Investment property 7 1,596,847 1,597,054
Intangible assets 8 3,751,584 39,233
Other non-current financial
assets 9 - 851,587
19,333,925 12,099,514
Current assets
Inventories 10 1,524,792 -
Trade and other receivables 11 1,706,754 2,320,836
Other current financial assets 9 65,979 4,755,051
Prepayments 452,873 222,804
Cash and cash equivalents 12 4,215,344 864,402
-------------- -------------
7,965,742 8,163,093
Total assets 27,299,667 20,262,607
============== =============
Equity and liabilities
Equity 13
Issued capital 1,561,828 55,287,000
Share premium 31,134,458 693,356
Retained earnings (100,836,892) (42,269,357)
Share based payment reserve 15,743,333 -
Foreign currency translation
reserve 27,915 (223,163)
-------------- -------------
Equity attributable to equity
holders of the parent (52,369,358) 13,487,836
Non-controlling interests - 70,164
-------------- -------------
Total equity (52,369,358) 13,558,000
Non-current liabilities
Interest bearing loans and
borrowings 9 2,371,080 2,299,304
Deferred tax liabilities 534,523 -
2,905,603 2,299,304
Current liabilities
Interest bearing loans and
borrowings 9 31,230,713 2,779,495
Trade and other payables 14 44,587,313 1,425,477
Deferred income 4,072 -
Current tax liabilities 941,324 200,331
76,763,422 4,405,303
Total liabilities 79,669,025 6,704,607
Total equity and liabilities 27,299,667 20,262,607
============== =============
Consolidated statement of cash flows
Notes 2013 2012
Cash flows from operating activities USD USD
Loss before tax (77,200,176) (21,293,556)
Adjustment to reconcile profit
before tax to net cash flows
Impairment of financial assets - 13,500,000
Amortisation and depreciation
of non-current assets 6/7/8 578,516 494,468
Provision for inventory obsolescence (1,447,797) 1,447,797
Share based charges 15,743,333 -
Transaction costs on capital
operations, including future
IPO 1,701,995 -
Finance income (6,063,312) (265,964)
Finance expenses 48,600,900 55,851
Unrealised foreign exchange gains (277,824) (130,624)
Net loss/(gain) on disposal of
PPE and intangible assets (737,000) (1,991,399)
Variation in working capital
(Increase)/decrease in inventories (76,995) (1,447,797)
(Increase)/decrease in trade
and other receivables 560,484 102,433
Increase/(decrease) in trade
and other payables 3,593,681 189,190
Income tax paid 54,584 (16,187)
Net cash flows from operating
activities (14,969,611) (9,355,788)
Cash flows from investing activities
Net (purchase of)/proceeds from
intangible assets - (8,243)
Purchase of PPE under construction - (2,885,998)
Net (purchase of)/proceeds from
other PPE (4,268,631) (1,238,125)
Purchase of investment property - (47,002)
Purchase of available-for-sale
investments - (60,587)
Loans granted to third parties 5,482,755 (2,051,929)
Acquisition of a subsidiary,
net of cash acquired 5 (3,253,708) -
Interest received 336,958 14,722
Dividend received from investment 2,302 -
------------- -------------
Net cash flows from investing
activities (1,700,324) (6,277,162)
Cash flows from financing activities
Issuance of capital 13 456,088 -
Acquisition of non-controlling
interests (68,193) -
Transaction costs on capital
operations, including future
IPO 16 (1,701,995) -
Proceeds from other and related
party borrowings 24,700,000 655,219
Repayment of other and related
party borrowings (2,779,302) -
Transaction costs on issue of
new borrowings (500,000) -
Interest paid (71.154) (55,851)
Net cash flows from financing
activities 20,035,444 599,368
Net change in cash and cash equivalents 3,365,509 (15,033,582)
============= =============
Increase/decrease in cash and
cash equivalents 3,365,509 (15,033,582)
Cash and cash equivalents at
1 January 864,209 15,852,084
Exchange adjustment of cash and
cash equivalents (36,582) 45,707
Cash and cash equivalents at
31 December 12 4,193,136 864,209
============= =============
Consolidated statement of changes in equity
Attributable to equity holders of the parent
Notes Foreign Share
currency based
Share Share Retained translation payment Non-controlling
capital premium earnings reserve reserve Total interests Total equity
USD USD USD USD USD USD USD USD
As at 31 December
2011 122,860 55,857,496 (20,958,835) (34,647) - 34,986,874 69,754 35,056,628
==================== ====== ============= ============= ============== ============ =========== ==================== ================ =====================
Loss for the year - - (21,310,522) - - (21,310,522) 410 (21,310,112)
Other comprehensive
income - - - (188,516) - (188,516) - (188,516)
-------------------- ------ ------------- ------------- -------------- ------------ ----------- -------------------- ---------------- ---------------------
Total comprehensive
income - - (21,310,522) (188,516) (21,499,038) 410 (21,498,628)
Conversion of share
premium
to share capital 13 55,164,140 (55,164,140) - - - - - -
Transaction with
owners 55,164,140 (55,164,140) - - - - - -
As at 31 December
2012 55,287,000 693,356 (42,269,357) (223,163) - 13,487,836 70,164 13,558,000
==================== ====== ============= ============= ============== ============ =========== ==================== ================ =====================
Loss for the year - - (77,270,973) - - (77,270,973) (1,971) (77,272,944)
Other comprehensive
income - - - 251,078 - 251,078 - 251,078
-------------------- ------ ------------- ------------- -------------- ------------ ----------- -------------------- ---------------- ---------------------
Total comprehensive
income - - (77,270,973) 251,078 - (77,019,895) (1,971) (77,021,866)
Absorption of
losses 13 (4,919,270) - 4,919,270 - - - - -
Decrease in par
value
of shares issued 13 (44,225,217) 44,225,217 - - - - - -
Losses transferred
to
share premium 13 - (13,784,115) 13,784,115 - - - - -
Acquisition of
non-controlling
interests 5 - - - - - - (68,193) (68,193)
Purchase and
cancellation 13,
of own shares 9 (5,036,773) - - - - (5,036,773) - (5,036,773)
Shares issued in
the
period 13 456,088 - - - - 456,088 - 456,088
Share based
payments 19 - - - - 15,743,333 15,743,333 - 15,743,333
Transaction with
owners (53,725,172) 30,441,102 18,703,385 - 15,743,333 11,162,648 (68,193) 11,094,455
Other
movements - - 53 - - 53 - 53
As at 31 December
2013 1,561,828 31,134,458 (100,836,892) 27,915 15,743,333 (52,369,358) - (52,369,358)
==================== ====== ============= ============= ============== ============ =========== ==================== ================ =====================
Notes
1 Corporate information
RM2 International S.A. (the "Company") is a limited company
(Société Anonyme) incorporated and domiciled in Luxembourg with the
registration number B132.740. The registered office is located Rue
de la Chapelle 5, 1235 Luxembourg. The Company is the ultimate
parent entity of the RM2 Group (the "Group").
The Group is principally engaged in developing and selling
shipping pallets and to provide related logistical services.
2 Basis of preparation
The consolidated financial statements comprises the consolidated
financial information of the Group as at 31 December 2013 and are
prepared under the historic cost convention with the exception of
certain items which are measured at fair value as disclosed in the
accounting policies below.
The accounting policies which follow set out the policies
applied in preparing the consolidated financial statements.
2.1 Statement of compliance
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
("IFRS") as issued by the International Accounting Standards Board
("IASB") and as adopted by the European Union ("EU").
2.2 Basis of consolidation
The consolidated financial statements comprise the financial
information of the Group and its subsidiaries. Subsidiaries are
consolidated from the date of acquisition, being the date on which
the Group obtains control, and continue to be consolidated until
the date when such control ceases. The financial information of the
subsidiaries is prepared for the same reporting period as the
parent company, using consistent accounting policies. All
intra-group balances, transactions, unrealised gains and losses
resulting from intra-group transactions and dividends are
eliminated in full.
Total comprehensive income within a subsidiary is attributed to
the non-controlling interest even if it results in a deficit
balance.
Subsidiaries and business combinations
Subsidiaries are all entities over which the Group has the power
to govern the financial and operating policies generally
accompanying a shareholding of more than one half of the voting
rights. Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are de-consolidated from
the date that control ceases. The Group uses the acquisition method
of accounting to account for the acquisition of subsidiaries.
The consideration transferred on acquisition is measured as the
fair value of the assets given, equity instruments issued and
liabilities incurred or assumed at the date of exchange.
Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date,
irrespective of the extent of any non-controlling interest. The
excess of the consideration transferred over the fair value of the
Group's share of the identifiable net assets acquired is recorded
as goodwill. If the consideration transferred acquisition is less
than the fair value of the net assets of the subsidiary acquired,
the difference is recognised directly in profit or loss.
Acquisition costs are written off to profit or loss.
Inter-company transactions, balances and unrealised gains on
transactions between group companies are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence
of an impairment of the asset transferred. Accounting policies of
subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
The subsidiaries of the Group are listed in note 22.
3 Summary of significant accounting policies
The principal accounting policies are summarised below:
3.1 Foreign currencies
The Group's consolidated financial statements are presented in
United States Dollars ("USD"), which is also the parent company's
functional currency. For each entity the Group determines the
functional currency and items included in the financial statements
of each entity are measured using that functional currency.
Transactions and balances
Transactions in foreign currencies are initially recorded by the
Group's entities at their respective functional currency spot rates
at the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies
are translated at the functional currency spot rates of exchange at
the reporting date.
Differences arising on settlement or translation of monetary
items are recognised in profit or loss. These are recognised in
other comprehensive income until the net investment is disposed of,
at which time, the cumulative amount is reclassified to profit or
loss. Tax charges and credits attributable to exchange differences
on those monetary items are also recorded in other comprehensive
income.
Non-monetary items that are measured in terms of historical cost
in a foreign currency are translated using the exchange rates at
the dates of the initial transactions. Non-monetary items measured
at fair value in a foreign currency are translated using the
exchange rates at the date when the fair value is determined. The
gain or loss arising on translation of non-monetary items measured
at fair value is treated in line with the recognition of gain or
loss on change in fair value of the item (i.e. translation
differences on items whose fair value gain or loss is recognised in
other comprehensive income or profit or loss are also recognised in
other comprehensive income or profit or loss, respectively).
Group companies
On consolidation, the assets and liabilities of foreign
operations are translated into USD at the rate of exchange
prevailing at the reporting date and their income statements are
translated at exchange rates prevailing at the dates of the
transactions. The exchange differences arising on translation for
consolidation are recognised in other comprehensive income. On
disposal of a foreign operation, the component of other
comprehensive income relating to that particular foreign operation
is recognised in profit or loss.
Any goodwill arising on the acquisition of a foreign operation
and any fair value adjustments to the carrying amounts of assets
and liabilities arising on the acquisition are treated as assets
and liabilities of the foreign operation and translated at the spot
rate of exchange at the reporting date.
3.2 Going concern
The consolidated financial statements have been prepared
assuming the Group will continue as a going concern. Under the
going concern assumption, an entity is ordinarily viewed as
continuing in business for the foreseeable future with neither the
intention nor the necessity of liquidation, ceasing trading or
seeking protection from creditors pursuant to laws or regulations.
In assessing whether the going concern assumption is appropriate,
management has considered the company's existing working capital
and management are of the opinion that the Group has adequate
resources to undertake its planned program of activities for the 12
months from the date of approval of the consolidated financial
statements.
On 6 January 2014, the parent company of the Group RM2
International SA completed a successful Initial Public Offering
(IPO) the London Stock Exchange AIM market, raising gross proceeds
of approximately GBP137.2 million (equivalent to approximately USD
225 million) to expand its production capacity and to fund the
production of pallets for rental and sale. Following the IPO, the
Group terminated the DPEI Warrant Agreement by paying USD
40,000,000 and repaid all of the bridging loans as detailed in Note
9 and 25. The Group expects to expand its production and add
pallets to its rental pools in North America and Europe in 2014,
following successful trials with potential customers.
3.3 Property, plant and equipment
Initial recognition and measurement
Property, plant and equipment ("PPE") are tangible assets used
by the Group for its own production or supply of goods or services,
or for administrative purposes and are expected to be used during
more than one period. PPE is recognised when it is probable that
future economic benefits associated with the asset will flow to the
Group and if the cost can be measured reliably.
PPE is initially recognised at cost. Such cost includes the
purchase price and all cost incurred in bringing the assets to the
location and condition for its operation in the manner intended by
management. The cost of the PPE includes also the borrowing costs
for long-term construction projects if the recognition criteria are
met.
The Group has recognised most of the inventory costs within the
cost of the property, plant and equipment for which the inventories
have been used in order to produce samples which are considered as
part of the cost of the property, plant and equipment.
When significant parts of property, plant and equipment will be
required to be replaced, the Group will recognise such parts as
individual assets with specific useful lives and depreciate them
accordingly. Likewise, when a major inspection will be performed,
its cost will be recognised in the carrying amount of the plant and
equipment as a replacement if the recognition criteria are
satisfied. All other repair and maintenance costs will be
recognised in profit or loss as incurred. The present value of the
expected cost for the decommissioning of an asset after its use
will be included in the cost of the respective asset if the
recognition criteria for a provision are met.
Subsequent measurement
PPE is subsequently measured at cost less any accumulated
depreciation and any accumulated impairment losses.
Depreciation is calculated on a straight-line basis over the
estimated useful lives of the assets as follows:
Buildings 30 years
Plant and equipment 3 to 20 years
PPE under construction not depreciated
An item of PPE and any significant part initially recognised is
derecognised upon disposal or when no future economic benefits are
expected from its use or disposal. Any gain or loss arising on
derecognition of the asset (calculated as the difference between
the net disposal proceeds and the carrying amount of the asset) is
included in profit or loss when the asset is derecognised.
The residual values, useful lives and methods of depreciation of
PPE are reviewed at each financial year end and adjusted
prospectively, if appropriate. Further explanation on management
estimates and assumptions is disclosed in note 4.
The Group has not applied revaluation on any of its PPE.
3.4 Leases
The determination of whether an arrangement is, or contains, a
lease is based on the substance of the arrangement at the inception
date. The arrangement is assessed for whether fulfilment of the
arrangement is dependent on the use of a specific asset or assets
or the arrangement conveys a right to use the asset or assets, even
if that right is not explicitly specified in an arrangement.
Group as a lessee
Leases where a significant portion of the risks and rewards of
ownership is retained by the lessor are classified as operating
leases. Payments made under operating leases are charged to profit
or loss on a straight-line basis over the period of the lease.
Leases of property, plant and equipment where the Group has
substantially all the risks and rewards of ownership are classified
as finance leases. Finance leases are capitalised at the lease's
commencement date at the lower of the fair value of the leased
property or the present value of the minimum lease payments. Each
lease payment is allocated between the liability and finance
charges so as to achieve a constant rate on the finance balance
outstanding. The corresponding rental obligations, net of finance
charges, are included in long-term and short-term borrowings. The
interest element of the finance cost is charged to the profit or
loss over the lease period so as to produce a constant periodic
rate of interest on the remaining balance of the liability for each
period. The property, plant and equipment acquired under finance
leases are depreciated over the shorter of the useful life of the
asset or the lease term.
The Group does not have any assets under financial lease.
Group as a lessor
Leases in which the Group does not transfer substantially all
the risks and benefits of ownership of an asset are classified as
operating leases. Initial direct costs incurred in negotiating an
operating lease are added to the carrying amount of the leased
asset and recognized over the lease term on the same basis as
rental income. Contingent rents are recognized as revenue in the
period in which they are earned.
3.5 Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of an asset that necessarily takes a
substantial period of time to get ready for its intended use or
sale are capitalised as part of the cost of the asset. All other
borrowing costs are expensed in the period in which they occur.
Borrowing costs consist of interest and other costs that an entity
incurs in connection with the borrowing of funds.
The Group was in the start-up phase during the year ended 31
December 2013. Cash from borrowings were primarily used to explore
opportunities, pay salaries and other operating expenses. No
specific borrowings were made for the construction or production of
an asset. Therefore, the Group did not capitalise any borrowing
costs during any period up to this date.
3.6 Investment property
Investment properties are measured initially at cost, including
transaction costs. Subsequent to initial recognition, the Group has
decided to measure investment properties using the cost model.
Investment properties are measured similarly to property, plant and
equipment.
The fair value, which reflects market conditions at the
reporting date, is disclosed in the notes to the consolidated
financial statements.
Investment properties are derecognised either when they have
been disposed of or when they are permanently withdrawn from use
and no future economic benefit is expected from their disposal. The
difference between the net disposal proceeds and the carrying
amount of the asset is recognised in the income statement in the
period of de-recognition.
Transfers are made to or from investment property only when
there is a change in use. For a transfer from investment property
to owner-occupied property, the deemed cost for subsequent
accounting is the fair value at the date of change in use. If
owner-occupied property becomes an investment property, the Group
accounts for such property in accordance with the policy stated
under property, plant and equipment up to the date of change in
use.
3.7 Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. The cost of intangible assets acquired in a
business combination is its fair value as at the date of
acquisition. Following initial recognition, intangible assets are
carried at cost less any accumulated amortisation and accumulated
impairment losses, if any.
The useful lives of intangible assets are assessed as finite,
except goodwill.
Intangible assets with finite lives are amortised over the
useful economic life and assessed for impairment whenever there is
an indication that the intangible asset may be impaired. The
amortisation period and the amortisation method for an intangible
asset with a finite useful life are reviewed at least at the end of
each reporting period. Changes in the expected useful life or the
expected pattern of consumption of future economic benefits
embodied in the asset is accounted for by changing the amortisation
period or method, as appropriate, and are treated as changes in
accounting estimates. The amortisation expense on intangible assets
with finite lives is recognised in profit or loss in the expense
category consistent with the function of the intangible assets.
Intangible assets with indefinite useful lives are not
amortised, but are tested for impairment annually, either
individually or at the cash-generating unit level. The assessment
of indefinite life is reviewed annually to determine whether the
indefinite life continues to be supportable. If not, the change in
useful life from indefinite to definite is made on a prospective
basis.
Gains or losses arising from de-recognition of an intangible
asset are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognised in
profit or loss when the asset is derecognised.
Amortisation is calculated on the straight-line method to write
off the cost of each asset to their residual values, over their
estimated useful life. The annual amortisation periods are as
follows:
Software 10 years
Trade names 5 years
Customer Relationship 5 years
Licences 3 to 5 years
Goodwill Not amortized
3.8 Research and development costs
Research costs are expensed as incurred. Development
expenditures on an individual project are considered as an
intangible asset when the Group can demonstrate:
- The technical feasibility of completing the intangible asset
so that the asset will be available for use or sale
- Its intention to complete and its ability to use or sell the asset
- How the asset will generate future economic benefits
- The availability of resources to complete the asset
- The ability to measure reliably the expenditure during development
Following initial recognition of the development expenditure as
an asset, the asset is carried at cost less any accumulated
amortisation and accumulated impairment losses. Amortisation of the
asset begins when development is complete and the asset is
available for use. It is amortised over the period of expected
future benefit. Amortisation is recorded in cost of sales. During
the period of development, the asset is tested for impairment
annually.
To date no amounts have been capitalised in respect of the
development phase of internal projects as management have assessed
that they are unable to demonstrate that they have met all of the
recognition criteria.
3.9 Inventories
Inventories are stated at the lower of cost or net realizable
value. Costs incurred in bringing each product to its present
location and condition are accounted for as follows:
Raw materials Purchase cost on a first in, first out
basis
Finished goods and work Weighted average cost of direct materials
in progress and labour and a proportion of manufacturing
overheads based on the normal operating
capacity, but excluding borrowing costs
Net realisable value is the estimated selling price in the
ordinary course of business, less estimated costs of completion and
the estimated costs necessary to make the sale.
When the net realizable value of stock is lower than its cost,
provisions for impairment are created to reduce the value of the
stock to its net realizable value.
The cost of inventories is recognised as an expense in the
period in which the related revenue is recognised.
3.10 Impairment on non-financial assets
Assets that are subject to amortisation and other non-financial
assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by
which the carrying amount of the asset exceeds its recoverable
amount, which is the higher of an asset's net selling price and
value in use or fair value less cost to sell determined by using
discounted cash flow method. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash flows (cash generating units).
The key assumptions used in the computation of the value in use
or fair value less cost to sell of an asset are detailed in the
note on intangible assets. The future discounted cash flow method
used to determine the value in use or fair value less cost to sell
is usually, but not always, based on cash flow projections over for
the next 5 years.
Impairment losses of continuing operations are recognised in
profit or loss in those expense categories consistent with the
function of the impaired asset.
For assets excluding goodwill, an assessment is made at each
reporting date as to whether there is any indication that
previously recognised impairment losses may no longer exist or may
have decreased. If such indication exists, the Group estimates the
asset's or cash-generating unit's recoverable amount. A previously
recognised impairment loss is reversed only if there has been a
change in the assumptions used to determine the asset's recoverable
amount since the last impairment loss recognised. The reversal is
limited so that the carrying amount of the asset does not exceed
its recoverable amount, nor exceed the carrying amount that would
have been determined, net of depreciation, had no impairment loss
been recognised for the asset in prior years. Such reversal is
recognised in profit or loss unless the asset is carried at a
revalued amount, in which case the reversal is treated as a
revaluation reserve. Goodwill has not been impaired.
3.11 Financial instruments
3.11.1 Financial assets
3.11.1.1 Initial recognition and measurement
The Group classifies its financial assets in the following
categories: at fair value through profit and loss, loans and
receivables, held-to-maturity investments and available-for-sale.
The classification depends on the purpose for which the financial
assets were acquired. Management determines the classification of
its financial assets at initial recognition and re-evaluates this
designation at every reporting date.
All financial assets are recognised initially at fair value
plus, in the case of financial assets not at fair value through
profit or loss, directly attributable transaction costs.
The Group's financial assets include cash and short-term
deposits, trade and other receivables, other current and
non-current assets which are classified in the category of loans
and receivables and available-for-sale financial assets. The Group
does not have held-to-maturity investments.
3.11.2 Subsequent measurement
3.11.2.1 Financial assets at fair value through profit or loss:
This category has two sub-categories: "financial assets held for
trading", and those designated at fair value through profit and
loss at inception. A financial asset is classified in this category
if acquired principally for the purpose of selling in the short
term or is so designated by management. This category includes
derivative financial instruments entered into by the Group that are
not designated as hedging instruments in hedge relationships as
defined by IAS 39. Assets in this category are classified as
current assets if they are either held for trading or are expected
to be realized within 12 months of the balance sheet date.
Financial assets at fair value through profit or loss are
carried in the statement of financial position at fair value with
changes in fair value recognised in finance income or finance costs
in the statement of comprehensive income.
The fair values of quoted investments are based on current bid
prices. If the market for a financial asset is not active (and for
unlisted securities), the Group establishes fair value by using
valuation techniques. These include the use of recent arm's length
transactions, reference to other instruments that are substantially
the same and discounted cash flow analysis, making maximum use of
market inputs and relying as little as possible on entity-specific
inputs.
The Group has no financial assets designated as held for
trading.
3.11.2.2 Loans and receivables:
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They are included in current assets except for maturities
greater than 12 months after the balance sheet date. These are
classified as non-current assets.
After initial measurement, they are subsequently measured at
amortised cost using the effective interest rate method ("EIR"),
less impairment. Amortised cost is calculated by taking into
account any discount or premium on acquisition and fees or costs
that are an integral part of the EIR. The EIR amortisation is
included in finance income in the statement of comprehensive
income. The losses arising from impairment are recognised in the
finance costs in the statement of comprehensive income.
3.11.2.3 Available-for-sale financial assets:
Available-for-sale financial investments include equity and debt
securities. Equity investments classified as available-for-sale are
those, which are neither classified as held for trading nor
designated at fair value through profit or loss. Debt securities in
this category are those which are intended to be held for an
indefinite period of time and which may be sold in response to
needs for liquidity or in response to changes in the market
conditions.
After initial measurement, available-for-sale financial
investments are subsequently measured at fair value with unrealised
gains or losses recognised as other comprehensive income in the
available-for-sale reserve until the investment is derecognised, at
which time the cumulative gain or loss is recognised in other
operating income, or determined to be impaired, at which time the
cumulative loss is reclassified to the statement of comprehensive
income in finance costs and removed from available-for-sale
reserve.
3.11.3 De-recognition
A financial asset is derecognised when:
The rights to receive cash flows from the asset have
expired;
The Group has transferred its rights to receive cash flows from
the asset or has assumed an obligation to pay the received cash
flows in full without material delay to a third party under a
'pass-through' arrangement; and either (a) the Group has
transferred substantially all the risks and rewards of the asset,
or (b) the Group has neither transferred nor retained substantially
all the risks and rewards of the asset, but has transferred control
of the asset; and
When the Group has transferred its rights to receive cash flows
from an asset or has entered into a 'pass-through' arrangement, and
has neither transferred nor retained substantially all of the risks
and rewards of the asset nor transferred control of the asset, the
asset is recognised to the extent of the Group's continuing
involvement in the asset.
In that case, the Group also recognizes an associated liability.
The transferred asset and the associated liability are measured on
a basis that reflects the rights and obligations that the Group has
retained.
Continuing involvement that takes the form of a guarantee over
the transferred asset is measured at the lower of the original
carrying amount of the asset and the maximum amount of
consideration that the Group could be required to repay.
3.11.4 Impairment of financial assets
The Group assesses at each balance sheet date whether there is
objective evidence that a financial asset or a group of financial
assets is impaired. A financial asset or a group of financial
assets is deemed to be impaired if, and only if, there is objective
evidence of impairment as a result of one or more events that have
occurred after the initial recognition of the asset and that event
has an impact on the estimated future cash flows of the financial
asset or the group of financial assets that can be reliably
estimated. Evidence of impairment may include, but is not limited
to, indications that the debtors or a group of debtors are
experiencing significant financial difficulty, default or
delinquency in interest or principal payments.
3.11.4.1 Financial assets carried at amortised cost:
For financial assets carried at amortised cost, the Group first
assesses whether objective evidence of impairment exists
individually for financial assets that are individually
significant, or collectively for financial assets that are not
individually significant. If the Group determines that no objective
evidence of impairment exists for an individually assessed
financial asset, whether significant or not, it includes the asset
in a group of financial assets with similar credit risk
characteristics and collectively assesses them for impairment.
Assets that are individually assessed for impairment and for which
an impairment loss is, or continues to be, recognised are not
included in a collective assessment of impairment.
If there is objective evidence that an impairment loss has been
incurred, the amount of the loss is measured as the difference
between the assets carrying amount and the present value of
estimated future cash flows (excluding future expected credit
losses that have not yet been incurred). The present value of the
estimated future cash flows is discounted at the financial assets'
original effective interest rate. If a loan has a variable interest
rate, the discount rate for measuring any impairment loss is the
current effective interest rate.
The carrying amount of the asset is reduced through the use of
an allowance account and the amount of the loss is recognised in
the statement of comprehensive income. Interest income continues to
be accrued on the reduced carrying amount and is accrued using the
interest used to discount the future cash flows for the purpose of
measuring the impairment loss. The interest income is recorded as
part of finance income in the statement of comprehensive income.
Loans together with the associated allowance are written off when
there is no realistic prospect of future recovery and all
collateral has been realized or has been transferred to the Group.
If, in a subsequent year, the amount of the estimated impairment
loss increases or decreases because of an event occurring after the
impairment was recognised, the previously recognised impairment
loss is increased or reduced by adjusting the allowance account. If
a future write-off is later recovered, the recovery is credited to
finance costs in the statement of comprehensive income.
3.11.4.2 Available-for-sale financial investments:
In the case of equity securities classified as
available-for-sale, a significant or prolonged decline in the fair
value of the security below its cost is considered as indicator
that the securities are impaired. 'Significant' is evaluated
against the original cost of the investment and 'prolonged' against
the period in which the fair value has been below its original
cost. If any such evidence exists for available-for-sale financial
assets, the cumulative loss - measured as the difference between
the acquisition cost and the current fair value, less any
impairment loss on that financial asset previously recognised in
profit and loss - is removed from equity and recognised in the
statement of comprehensive income. Impairment losses recognised on
equity instruments are not reversed through the statement of
comprehensive income. Increases in their value after impairment are
recognised directly in other comprehensive income.
In the case of debt instruments classified as
available-for-sale, impairment is assessed based on the same
criteria as financial assets carried at amortised cost. However,
the amount recorded for impairment is the cumulative loss measured
as the difference between the amortised cost and the current fair
value, less any impairment loss on that investment previously
recognised in the statement of comprehensive income.
Future interest income continues to be accrued based on the
reduced carrying amount of the asset, using the rate of interest
used to discount the future cash flows for the purpose of measuring
the impairment loss. The interest income is recorded as part of
finance income in the statement of comprehensive income. If, in a
subsequent year, the fair value of a debt instrument increases and
the increase can be objectively related to an event occurring after
the impairment loss was recognised in the statement of
comprehensive income, the impairment loss is reversed through the
statement of comprehensive income.
3.12 Financial liabilities
3.12.1 Initial recognition and measurement
Financial liabilities are classified as financial liabilities at
fair value through profit or loss, loans and borrowings, or as
derivatives designated as hedging instruments in an effective
hedge, as appropriate. The Group determines the classification of
its financial liabilities at initial recognition.
All financial liabilities are recognised initially at fair value
and in the case of loans and borrowings, plus directly attributable
transaction costs.
The Group's financial liabilities include trade and other
payables, borrowings and long-term payables.
3.12.2 Subsequent measurement
The measurement of financial liabilities depends on their
classification as follows:
3.12.2.1 Financial liabilities at fair value through profit or loss:
Financial liabilities at fair value through profit or loss
include financial liabilities held for trading and financial
liabilities designated upon initial recognition as at fair value
through profit or loss.
Financial liabilities are classified as held for trading if they
are acquired for the purpose of selling in the near term. This
category includes derivatives financial instruments entered into by
the Group that are not designated as hedging instruments in hedge
relationships as defined by IAS 39. Separated embedded derivatives
are also classified as held for trading unless they are designated
as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised
in the statement of comprehensive income.
The Group has not designated any financial liabilities upon
initial recognition as at fair value through profit or loss.
3.12.2.2 Loans and borrowings:
After initial recognition, interest bearing loans and borrowings
are subsequently measured at amortised cost using the effective
interest rate method. Gains and losses are recognised in the
statement of comprehensive income when the liabilities are
derecognised as well as through the effective interest rate method
amortisation process.
Amortised cost is calculated by taking into account any discount
or premium on acquisition and fees or costs that are an integral
part of the EIR. The EIR amortisation is included in finance costs
in the statement of comprehensive income.
Loans and borrowings are classified as current liabilities
unless the Group has an unconditional right to defer the settlement
of the liability for at least 12 months after the balance sheet
date.
3.12.3 De-recognition
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled or expires. When an
existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an
existing liability are subsequently modified, such an exchange or
modification is treated as a de-recognition of the original
liability and the recognition of a new liability, and the
difference in the respective carrying amounts is recognised in the
statement of comprehensive income.
3.12.3.1 Offsetting of financial instruments
Financial assets and financial liabilities are offset and the
net amount reported in the consolidated statement of financial
position if, and only if, there is a currently enforceable legal
right to offset the recognised amounts and there is an intention to
settle on a net basis, or to realize the assets and settle the
liabilities simultaneously.
3.12.3.2 Fair value of financial instruments
The fair values of quoted investments are based on current bid
prices. If the market for a financial asset is not active (and for
unlisted securities), the Group establishes fair value by using
valuation techniques. These include the use of recent arm's length
transactions, reference to other instruments that are substantially
the same and discounted cash flow analysis, making maximum use of
market inputs and relying as little as possible on entity-specific
inputs.
3.13 Trade receivables
Trade receivables are carried at original invoice amount less
provision made for impairment of these receivables. A provision for
impairment of trade receivables is established when there is
objective evidence that the Group will not be able to collect all
the amounts due according to the original terms of receivables. The
amount of the provision is the difference between the carrying
amount and the recoverable amount, being the present value of
expected cash flows, discounted at the effective interest rate for
similar borrowers. The amount of the provision is recognised in the
statement of comprehensive income.
3.14 Cash and cash equivalents
Cash and cash equivalents are carried in the statement of
financial position at fair value. For the purposes of the cash flow
statement, cash and cash equivalents are comprised of cash on hand
and deposits held on call with banks having an original maturity of
3 months of less. In the statement of financial position, bank
overdrafts are included in borrowings under current liabilities net
of any related restricted cash.
3.15 Taxes
Current income tax
Current income tax assets and liabilities for the current period
are measured at the amount expected to be recovered from or paid to
the taxation authorities. A provision is made for corporation tax
for the reporting period using the tax rates that have been
substantially enacted for each company at the reporting date in the
country where each company operates and generates taxable
income.
Current income tax relating to items recognised directly in
equity is recognised in equity and not in the statement of
comprehensive income.
Management periodically evaluates positions taken in the tax
returns with respect to situations in which applicable tax
regulations are subject to interpretations and establishes
provisions where appropriate.
Deferred income tax
Deferred income tax is provided for using the liability method
on all temporary differences arising from tax bases of assets and
liabilities and the carrying amounts in the financial statements.
The deferred tax is calculated on currently enacted tax rates that
are expected to apply when the temporary differences reverse. Where
an overall deferred taxation asset arises, it is only recognised in
the financial statements where its recoverability is foreseen with
reasonable certainty.
Deferred income tax is provided on temporary difference arising
on investments in subsidiaries except where the timing of the
reversal of the temporary difference is controlled by the Group and
it is probable that the temporary difference will not reverse in
the foreseeable future.
3.16 Pensions and other post-employment benefits
The Group does not operate any defined benefit pension plan or
provide additional post-employment healthcare benefits to
employees.
3.17 Provisions, contingent assets and liabilities
Provisions
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of past events, it is probable
that an outflow of resources will be required to settle the
obligation, and a reliable estimate of the amount of the obligation
can be made. Where the Group expects a provision to be reimbursed,
for example under an insurance contract, the reimbursement is
recognised as a separate asset but only when the reimbursement is
virtually certain. The expense relating to any provision is
presented in the statement of comprehensive income net of any
reimbursement. Provisions are not recognised for future operating
losses.
Provisions are measured at the estimated expenditure required to
settle the present obligation, based on the most reliable evidence
available at the reporting date, including the risks and
uncertainties associated with the present obligation. Where there
are a number of similar obligations, the likelihood that an outflow
will be required in settlement is determined by considering the
class of obligations as a whole. Provisions are discounted to their
present values, where the time value of money is material.
Any reimbursement that the Group can be virtually certain to
collect from a third party with respect to the obligation is
recognised as a separate asset. However, this asset may not exceed
the amount of the related provision.
In those cases where the possible outflow of economic resources
as a result of present obligations is considered improbable or
remote, no liability is recognised.
Contingent assets
Contingent asset is a possible asset that arises from past
events and whose existence will be confirmed only by the occurrence
or non-occurrence of one or more uncertain future events not wholly
within the control of the entity.
Contingent assets are not recognised in the consolidated
financial statements. However, when the realisation of income from
the contingent asset is virtually certain, then the related asset
is not a contingent asset and its recognition is appropriate.
Contingent liabilities
Contingent liability is a possible obligation that arises from
past events and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events
not wholly within the control of the entity, or is a present
obligation that arises from past events but is not recognised
because it is not probable that an outflow of resources embodying
economic benefits will be required to settle the obligation or the
amount of the obligation cannot be measured with sufficient
reliability.
Contingent liabilities are not recognised in the consolidation
financial statements.
3.18 Equity, reserves and dividend payments
Issued share capital represents the nominal value of shares that
have been issued. Share premium includes any premiums received on
issue of share capital. Any transaction costs associated with the
issuing of shares are deducted from share premium, net of any
related income tax benefits.
Other components of equity include the following:
- Foreign currency translation reserve - comprises foreign
currency translation differences arising from the translation of
financial statements of the Group's foreign entities into US
Dollars.
- The share premium account - comprises an amount of USD
30.441.102 corresponding to a share premium available to compensate
existing and future losses or to increase the subscribed share
capital, resulting from the reduction of nominal value of the
shares from USD 0.45 to USD 0.01 dated October 11, 2013.
- Retained earnings - includes all current and prior period retained profits and losses.
All transactions with owners of the parent are recorded
separately within equity.
Dividend distributions payable to equity shareholders are
included in other liabilities when the dividends have been approved
in a general meeting prior to the reporting date.
3.19 Revenue
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Group and the revenue can be
reliably measured, regardless of when the payment is being made.
Revenue is measured at the invoiced value for the sale of goods net
of value added tax rebates and discounts which represents the fair
value of the consideration received or receivable. The Group
assesses its revenue arrangements against specific criteria in
order to determine if it is acting as principal or agent. The Group
has concluded that it is acting as a principal in all of its
revenue arrangements. The following specific recognition criteria
must also be met before revenue is recognised:
Sales of goods
Revenue from the sale of goods is recognised when significant
risks and rewards of ownership of the goods have been transferred
to the buyer and the collectability of the related receivables is
reasonably assured, regardless of when the payment was made.
The Group has completed minimal sales of goods to third parties
as of 31 December 2013.
Rendering of services
Revenue relating to software development that is contracted on a
time and materials basis is recognised as the services are
performed.
Revenue relating to the sale of software licenses is recognised
over the period to which the license relates. Revenue from services
provided is determined by management's assessment of the percentage
completed of each contract. Management determine the percentage of
completion by considering the work performed to date based upon
internal reports and agreed project milestones.
Interest income
For all financial assets at amortised cost and interest bearing
financial assets classified as available for sale, interest income
is recorded using the effective interest rate method, which is the
rate that exactly discounts the estimated future cash payments or
receipts through the expected life of the financial asset or
shorter period, where appropriate, to the net carrying amount of
the financial asset. Interest income is included in finance income
in the statement of comprehensive income.
Rental income
Rental income arising from operating leases on investment
properties is accounted for on a straight-line basis over the lease
terms and included in revenue due to its operating nature.
Rental income is recognised within other operating income as it
is not considered as related to the primary activity of the
Group.
3.20 Changes in accounting policies and disclosures
The Group applied, for the first time, certain standards and
amendments for the preparation of these consolidated financial
statements:
Standard/
Interpretation Content
IAS 1 Presentation of financial statements (amendment)
IAS 19 Employee benefits (revised)
IFRS 13 Fair value measurement (new standard)
IFRIC 20 Stripping costs in the production phase
of a surface mine
IFRS 7 Disclosures - Offsetting Financial Assets
and Financial Liabilities (amendment)
IFRS 1 Government loans (amendment)
None of these new standards, amendments or interpretations had a
material effect on these consolidated financial statements.
At the date of approval of these consolidated financial
statements, the following IFRS Standards and Interpretations, which
have not been applied in these Financial Statements, were issued
but not yet effective. These new Standards, Amendments and
Interpretations are effective for accounting periods beginning on
or after the dates shown below:
IFRS Standards and Interpretations issued (and EU adopted) but
not yet effective:
Applicable
for periods
beginning on
IAS 32 Offsetting financial assets and financial
liabilities (amendment) 1 January 2014
IAS 27 Separate Financial Statements 1 January 2014
IAS 28 Investments in Associates and Joint
Ventures 1 January 2014
IFRS 10 Consolidated Financial Statements 1 January 2014
IFRS 11 Joint Arrangements 1 January 2014
IFRS 12 Disclosure of Interests in Other Entities 1 January 2014
IFRS 10, IFRS 11 and IFRS 12 Transition Guidance
(amendment) 1 January 2014
IAS 39 Novation of Derivatives and Continuation
of Hedge Accounting (amendment) 1 January 2014
IFRS 10, IFRS 12 and IAS 27 Investment Entities
(amendment) 1 January 2014
IAS 36 Recoverable Amount Disclosures for non-Financial
Assets (amendment) 1 January 2014
IFRS Standards and Interpretations issued by IASB but not yet EU
approved:
Applicable
for periods
beginning on
IFRIC 21 Levies 1 January 2014
IAS 19 Defined Benefit Plans: Employee Contributions
(amendment) 1 July 2014
IFRS 14 Regulatory Deferral Accounts 1 January 2016
IAS 16 and IAS 38 Clarification of acceptable
methods of depreciation and amortisation (amendments) 1 January 2016
IFRS 9 Financial Instruments To be determined
The Group cannot early adopted these amended standards and
interpretations. The Directors do not anticipate that the adoption
of these standards and interpretations will have a material impact
on the reported results.
4 Significant accounting judgements, estimates and assumptions
The preparation of financial statements in conforming with
adopted IFRS requires management to make judgments, estimates and
assumptions that affect the application of policies and reported
amounts of assets, liabilities, income and expenses. The estimates
and assumptions are based on historical experience and other
factors considered reasonable at the time, but actual results may
differ from those estimates. Revisions to these estimates are made
in the period in which they are recognised.
4.1 Judgments
In the process of applying the Group's accounting policies,
management has made the following judgments, which have the most
significant effect on the amounts recognised in the consolidated
financial information:
Non-current assets held for sale
The Group has not discontinued operations during the year
presented in these consolidated financial statements.
In 2012, the Group had decided to dispose of certain non-current
assets as their carrying value would be principally recovered
through sale transactions rather than continuing use. These assets
were machinery and equipment related to the investment in Mafic
S.A. These assets have been disposed of in 2012.
At the year end the Group did not hold any non-current assets
held-for-sale
Investment in Mafic S.A.
The investment in Mafic S.A. was disposed of during the year by
way of a contribution in kind of 842,000 shares of Mafic S.A. to
Basalt Holding S. à r. l.
The Group then cancelled 12,286,000 Class J shares and disposed
of the entire share capital of Basalt Holding S. à r. l. to the
holders of the Class J shares.
Management considers that the fair value of the disposed
investment in Mafic S.A. was represented by the fair value of the
investment held in Basalt Holding S. à r. l. as the disposal was
made by an exchange of financial assets. The final fair value of
Mafic S.A. on disposal was determined in consideration of the
actual value transferred to holders of Class J shares,
corresponding to the nominal value of the Class J shares.
Management has recorded the difference between the carrying
value of Mafic S.A., prior to disposal, and the actual liquidated
value of Class J shares as representative of the gain realised on
the transaction, the amount has been recorded within financial
income. For further detail, refer to notes 9 and 16.
Recognition of deferred tax assets
The assessment of the probability of future taxable income
against which deferred tax assets can be utilised is based on the
Group's latest approved forecast, which is adjusted for significant
non-taxable income and expenses and specific limits to the use of
any unused tax loss or credit. The tax rules in the numerous
jurisdictions in which the Group operates are also carefully taken
into consideration. If a positive forecast of taxable income
indicates the probable use of a deferred tax asset in the
foreseeable future, especially when it can be utilised without a
time limit, that deferred tax asset is usually recognised in full.
The recognition of deferred tax assets that are subject to certain
legal or economic limits or uncertainties are assessed individually
by management based on the specific facts and circumstances.
The Group has not recognised any deferred tax assets in respect
of losses carried forward as there is no certainty of recovery. For
further detail on deferred tax, refer to note 17.
Research and development expenditure
Research and development expenditure has been fully written off
to the statement of comprehensive income. Management have taken
into account the inherent risks in all research and development
expenditure and specifically that expenditure being incurred by the
business in the year ended 31 December 2013 and have concluded that
the requirements of IAS 38 to capitalise development expenditure
have not been met.
Receivable from Plastics Research Corporation
The litigation between the Group and Plastics Research
Corporation ("PRC") was terminated through the signature of a
settlement agreement between the parties dated 17 November 2012. As
per the settlement agreement, PRC must pay USD 13,500,000 to RM2 as
indemnity for the transfer of the equipment (the "Equipment") to
PRC.
The receivable is repayable in several instalments starting 2
years after the settlement agreement date. During this period, PRC
must only reimburse the interest accrued on the receivable and is
secured by the Equipment.
Management has estimated that the effective interest rate to
amortise the receivable was 7%.
Due to delay in payment of the interest receivable by PRC,
Management has estimated that there were significant uncertainties
in relation to the future reimbursement of the capital amount.
Therefore, Management had in 2012 decided to record full impairment
of the outstanding nominal amount of the receivable.
The settlement agreement also provides for royalty payments to
be made by PRC to the Group in relation to future sales made by PRC
with the Equipment. The royalty to be paid is computed based on the
quantity of manufactured items sold and the quantity of composite
ground generated and sold by PRC during the 7 years following the
settlement agreement's date, with a cap of USD 11,000,000.
Management also determined that there was very low probability
that PRC will generate sales from the use of the Equipment and
consequently determined that the fair value of the royalty
receivable was nil.
In November 2013, PRC defaulted on the interest payment due and
subsequently, in 2014, ownership of the Equipment was transferred
to the Group in application of the security agreement. The Group
will decide whether to dispose of the Equipment, or redeploy the
assets within the Group. Full provision has been made for interest
due in respect of the interest receivable and not paid in the
year.
Restricted Shares
The Group has issued restricted share and intends to issue share
options following the approval of the 2013 Share Option Scheme.
Management has considered that the restricted shares issued to
date should be measured similarly to share options. As per
agreement, the shares granted vest immediately and are accompanied
by a restricted share agreement. Management has considered that the
restrictions on shares were representative of market related
vesting conditions, as the holders of the restricted shares can
only dispose of their shares if the quotation price reaches
different thresholds.
Management has considered that achievement of these conditions
would require time corresponding to the advantage provided to the
holders of restricted shares. Management has estimated that Tranche
1 and 2 would be achieved within 5 years and Tranche 3 within 10
years, therefore, Management has applied those durations as vesting
periods for the instruments. For further detail on share-based
payments transactions, refer to note 19.
Employee Stock Option Plan ("ESOP")
Under the Companytion Plan (tion P)evement of these conditions
wo the Company had approved to grant options. The terms of these
awards were modified prior to their issuance following the end of
the fiscal year. Refer to Note 25.
Therefore, management considered that there was no cost to be
measured and accounted for the share options granted as at 31
December 2013. For further detail on share-based payments
transactions, refer to notes 19 and 25.
Accrued liabilities
An amendment to a contract was made in January 2014 which
resulted in the payment in respect of past consultancy services by
the Group. In reviewing the contract and the payment the Group has
recorded a liability for the payment in the 2013 consolidated
financial statements as all the costs related to past services
rendered. For further detail, refer to note 16.
As part of the bridging facility until the successful IPO a
premium was payable to cancel outstanding warrants in the Company.
When considering the premium, the period to which it relates and as
the IPO was completed on 6 January 2014, management considers that
the cost of this cancellation had to be recognised pro ratatemporis
as a finance charge in the 2013 consolidated financial
statements.
Machinery depreciation
The Group has been developing its machinery and products
throughout the year under review. The Group's machinery and
products were not in full operation at the end of the year and
there was no significant income derived from the machinery. The
Group therefore has not depreciated the machinery in the year and
will depreciate against future income when the machinery becomes
fully operational in manufacturing finished product for sale or
internal use. For detail on property, plant and equipment, refer to
note 6.
4.2 Estimates and assumptions
The key assumptions concerning the future and other key sources
of estimation uncertainty at the reporting date, that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year,
are described below. The Group based its assumptions and estimates
on parameters available when the consolidated financial information
were prepared. Existing circumstances and assumptions about future
developments, however, may change due to market changes or
circumstances arising beyond the control of the Group. Such changes
are reflected in the assumptions when they occur.
Share-based payments
The Group measures the cost of equity-settled transactions by
reference to the fair value of the equity instruments at the date
at which they are granted. Estimating fair value for share-based
payment transactions requires determination of the most appropriate
valuation model, which is dependent on the terms and conditions of
the grant. This estimate also requires determination of the most
appropriate inputs to the valuation model including the expected
life of the share (options), volatility and risk-free interest
rate, dividend yield and making assumptions about them.
During the year, the Company entered into several share-based
payment transactions:
- 2012 Equity Incentive Plan - issued shares
- 2013 Equity Incentive Plan - restricted shares
The assumptions and models used for estimating fair value for
share-based payment transactions are disclosed in note 19.
Measurement of property, plant and equipment and investment
property
The Group holds a building property which is used for both Group
administrative purpose and rental to third parties. Therefore, the
management has determined that the building accounting should be
split between the part used by the Group, classified as property,
plant and equipment, and the part rented to third parties,
classified as investment property.
The initial cost of acquisition of the building is for both the
building construction and the land. In determining the part of the
acquisition cost related to the land, by default of split of cost
upon acquisition, the management has made the assumption that 25%
of the initial cost was related to the land.
In determining the measurement of each part of the building (PPE
and investment property), the management has determined the split
based on the surface used for each purpose. Management has also
determined that the depreciation should be made using straight line
method and over a useful life of 30 years.
Due to the inability of the management to determine the residual
value at the end of the useful life, the depreciation is computed
on the entire value of the building cost.
Impairment of inventory
In 2012, during the development of the machine, several samples
were produced. Management has estimated for those samples which
were not deemed to be part of the cost of property, plant and
equipment that full impairment of these inventories should be
recorded due to the inability of the Group to sell these
samples.
The Group has reviewed the estimates used in the valuation of
the inventory in 2012 and has considered that there is value in the
samples produced in 2012. Therefore, management has reversed the
impairment for USD 1,447,797 as at 31 December 2013, refer to note
10.
Fair value of financial instruments
The Group had significant financial instrument in the form of
warrants issued to DPEI.
As a result of an agreement entered into on 8 November 2013, the
warrants were cancelled and the Company recognised a liability for
the termination of the warrants. The liability has been measured in
reference to the amount actually paid by the Company in early
January 2014. For further detail on warrants, refer to note 13.
Business combinations
The directors have identified the separable net assets acquired
and have valued those assets using discounted cash flows for the
expected revenue from those assets. The separable assets identified
are the software, client list and brand name.
Management measured assets acquired and liabilities assumed by
reference to their fair value at acquisition date. Management has
determined the fair value of separable identified assets using
discounted cash flow ("DCF") of the entity over the next 6 years.
In determining the net present value of each asset, the Group has
applied discount rate of 13%.
For further detail on the Group's business combination, refer to
note 5.
5 Business combinations and acquisition of non-controlling interests
5.1 Acquisitions in 2013
Acquisition of Equipment Tracking Limited
During the period covered by theses consolidated financial
statements, the Group acquired the remaining 97% of the voting
shares of Equipment Tracking Limited. The Group had an equity
investment representing 3% of the voting shares of Equipment
Tracking Limited as at 31 December 2012.
On 27 September 2013, RM Total Solutions International BV signed
an agreement to acquire the entire issued share capital of
Equipment Tracking for GBP2 million. Completion of the acquisition
of Equipment Tracking occurred on 10 December 2013. Control of the
business was considered effective at the time of the consideration
was paid.
The assets and liabilities acquired are as follows:
Equipment Tracking Limited
Value of Fair value Fair value
assets in adjustments recognised
company on acquisition
USD USD USD
Intangible assets (note
8) - 2,618,912 2,618,912
Plant and equipment (note
7) 137,007 - 137,007
Trade receivables 168,946 - 168,946
Cash 42,407 - 42,407
Other debtors and prepayments 5,887 - 5,887
----------- ------------- ----------------
354,247 2,618,912 2,973,159
----------- ------------- ----------------
Loans and borrowings 44,460 - 44,460
Trade payables 75,152 - 75,152
Other creditors and accruals 33,219 - 33,219
Other taxes payable 83,718 - 83,718
Income tax payable 7,315 - 7,315
Deferred tax liabilities - 523,782 523,782
----------- ------------- ----------------
243,864 523,782 767,646
----------- ------------- ----------------
Total identifiable net assets
at fair value 2,205,513
Goodwill arising on acquisition
(note 8) 1,150,189
Purchase consideration transferred 3,355,702
================
Equipment Tracking was founded in 1995 (having traded as
Adventures in Business Limited until the incorporation of Equipment
Tracking in 2004). Its pallet tracking and management software TACS
(Track Asset, Control Spend), which the Company previously
licensed, assists customers in managing complex pallet and
equipment flows. It has serviced some of the world's largest
suppliers of consumer goods.
The TACS system offers customers services which provide 'real
time' equipment balances throughout their supply chains.
These services can replace or strengthen existing tracking
systems and are designed to enable l customers to improve their
pallet pool management. The TACS system was designed to provide
customers with greater visibility over costs and, where possible,
the ability to reduce the direct and indirect costs associated with
goods movements between customers and suppliers. This offers major
cost savings to the Group and its customers, increasing the Group's
offer and attraction of the pallet pool business. In addition to
the Group, the TACS system also gives the benefits of a back office
system that can not only track the Group's assets, but also
generate movement statistics, invoicing data and measurement
against performance criteria, which justifies the goodwill in the
acquisition.
The fair value of the separable net assets has been identified
and the goodwill in the business has been calculated at USD
1,150,189 relating to the value attributed to the organisation.
Included in the results for the year is revenue and loss of USD
98,939 and USD 17,740 respectively representing the results since
the date of acquisition. The results for the full year, had
Equipment Tracking been owned for the full year, would have shown
revenue and losses of USD 1,079,163 and USD 14,935,
respectively.
No contingent liabilities were considered in determining the
fair value of assets acquired and liabilities assumed.
Acquisition of additional interest in RM2 Europe Sp. Zoo
On 8 October 2013, the Group acquired an additional 20% interest
in the voting shares of RM2 Europe Sp. Zoo increasing its ownership
interest to 100%. The consideration of USD 68,193 was part of the
settlement agreement with STM Technologies, Inc., the
non-controlling shareholders made on 27 September 2013. The
carrying value of the additional interest in RM2 Europe Sp. Zoo was
USD 68,193. Following is a schedule of additional interest acquired
in RM2 Europe Sp. Zoo:
USD
-------
Consideration paid to non-controlling shareholders 68,193
Carrying value of the additional interest in RM2 Europe
Sp. Zoo 68,193
-------
Difference recognised in retained earnings within equity -
6 Property, plant and equipment
Land & Building Plant & Construction Total
Equipment in progress
USD USD USD USD
Cost
As at 1 January 2012 1,804,314 236,919 23,226,097 25,267,330
Additions 4,725 358,021 2,515,145 2,877,891
Disposals - (2,115,000) (12,413,815) (14,528,815)
Transfer - 8,088,579 (8,088,579) -
Exchange differences 51,382 6,431 97,635 155,448
---------------- ------------ ------------- -------------
As at 31 December 2012 1,860,421 6,574,950 5,336,483 13,771,854
Additions 40,952 5,856,419 - 5,897,371
Disposals - (891,740) - (891,740)
Other / transfers - 1,679,560 (1,679,560) -
Acquired through business
combinations (note 5) - 233,650 - 233,650
Exchange differences 41,296 (208,970) (119,460) (287,134)
---------------- ------------ ------------- -------------
As at 31 December 2013 1,942,669 13,243,869 3,537,463 18,742,002
================ ============ ============= =============
Depreciation and impairment
As at 1 January 2012 42,822 120,278 3,537,463 3,700,563
Depreciation charge for
the year 46,828 404,305 - 451,133
Exchange differences 2,389 6,129 - 8,518
---------------- ------------ ------------- -------------
As at 31 December 2012 92,039 530,712 3,537,463 4,160,214
Depreciation charge for
the year 83,501 418,574 - 502,075
Acquired through business
combinations (note 5) - 96,643 - 96,643
Exchange differences 2,734 (23,158) - (20,424)
---------------- ------------ ------------- -------------
As at 31 December 2013 178,274 1,022,771 3,537,463 4,738,508
================ ============ ============= =============
Net book value
As at 31 December 2013 1,764,395 12,221,099 - 13,985,494
================ ============ ============= =============
As at 31 December 2012 1,768,382 6,044,238 1,799,020 9,611,640
================ ============ ============= =============
The Group has no restrictions on the realisability of its
property, plant and equipment. The Group has capital commitments on
the development and acquisition of property, plant and equipment in
Canada for USD 2,386,380 (CAD 2,535,529)
As at 31 December 2013 the Group had several items of property,
plant and equipment which were temporarily idle. The carrying
amount of these items is USD 2,452,532 (2012: USD 1,745,341). This
amount corresponds to machines for the production of pallets which
have been completed and for which the production has not started.
There was no amount of depreciation charge as per prior periods as
these machines were still in the construction phase.
There were no borrowing costs capitalised during any period.
6.1 Security on property, plant & equipment for liabilities
The Group has granted a security interest over the property held
in Switzerland in return for the CHF 2,100,000 bank loan (USD
2,361,135) (2012: CHF 2,100,000 - USD 2,704,000).
7 Investment property
Investment
properties
USD
Cost
As at 1 January 2012 1,634,108
Exchange differences 47,002
------------
As at 31 December 2012 1,681,110
Exchange differences 45,213
------------
As at 31 December 2013 1,726,323
============
Depreciation and impairment
As at 1 January 2012 40,853
Depreciation charge for the year 40,935
Exchange differences 2,268
------------
As at 31 December 2012 84,056
Depreciation charge for the year 41,408
Exchange differences 4,012
------------
As at 31 December 2013 129,476
============
Net book value
As at 31 December 2013 1,596,847
============
As at 31 December 2012 1,597,054
============
The investment property is a building used by the Group for both
administrative purpose and for rental. The cost of the property
related to the administrative purpose is classified within
property, plant and equipment. The cost for the rental part is
classified as investment property.
7.1 Results from investment property
As at 31/12/2013 As at 31/12/2012
USD USD
Rental income from investment
property: 326,125 333,088
direct operating expenses
(including repairs and maintenance)
arising from investment property
that did not generate rental
income during the period: (124,706) (113,507)
----------------- -----------------
201,419 219,581
================= =================
7.2 Fair value of investment property
The investment property is measured at cost. The fair value of
the property as at 31 December 2013 has been determined by Regie
Chatel S.A., an independent external appraiser, on 20 January 2014.
This valuation is the only external valuation made by the Group for
the investment property. Regie Chatel S.A. is a specialist in
valuing such investment properties. The fair value of the property
has been determined using the rental income and the construction
value. The valuation has been determined with the following primary
inputs:
2013 2012
Yield (%) 7% 7%
Average price for new construction (m(2) 390 CHF/ m(2) 311.9 CHF/
) m(2)
Land price (m(2)) 280 CHF/m(2) 250 CHF/m(2)
Fair value determined for the part classified 2,092,370 2,085,695
as investment property USD
(1,860,960 (1,904,907
CHF) CHF)
This valuation is the first valuation performed on the property
and for the purpose of these consolidated financial
information.
8 Intangible assets
Software Trade Customer Acquired Goodwill Total
names relationships licences
and similar
intangible
assets
USD USD USD USD USD USD
Cost
As at 1 January 2012 - - - 38,790 - 38,790
Additions - - - 8,243 - 8,243
---------- -------- --------------- ------------- ---------- ----------
As at 31 December
2012 - - - 47,033 - 47,033
Additions - - - - - -
Acquired on business
combination (Note
5) 1,964,184 163,682 491,046 - 1,150,189 3,769,101
Exchange differences - - - - (19,317) (19,317)
========== ======== =============== ============= ========== ==========
As at 31 December
2013 1,964,184 163,682 491,046 47,033 1,130,872 3,796,817
========== ======== =============== ============= ========== ==========
Depreciation and impairment
As at 1 January 2012 - - - 5,400 - 5,400
Depreciation charge
for the year - - - 2,400 - 2,400
---------- -------- --------------- ------------- ---------- ----------
As at 31 December
2012 - - - 7,800 - 7,800
Impairment in the
year - - - 35,033 - 35,033
Depreciation charge
for the year - - - 2,400 - 2,400
---------- -------- --------------- ------------- ---------- ----------
As at 31 December
2013 - - - 45,233 - 45,233
========== ======== =============== ============= ========== ==========
Net book value
As at 31 December
2013 1,964,184 163,682 491,046 1,800 1,130,872 3,751,584
========== ======== =============== ============= ========== ==========
As at 31 December
2012 - - - 39,233 - 39,233
========== ======== =============== ============= ========== ==========
The Group has no intangible assets pledged as security for
liabilities.
The Group has no contractual commitment for the acquisition of
intangible asset.
As these assets were recognized late in the year 2013, the
software, trade names, customer relationships resulting from the
Equipment Tracking Limited business combination were not
depreciated during the year 2013.
9 Financial assets and liabilities
As at 31/12/2013 As at 31/12/2012
Financial assets USD USD
Available for sale investments
Unquoted equity shares - 60,587
Total available for sale
investments - 60,587
----------------- -----------------
Total financial assets at
fair value - 60,587
================= =================
Loans and receivables
Trade and other receivables
(Note 11) 1,706,754 2,320,836
Loan note to Mafic - 4,451,000
PRC accrued interest - 247,704
Deposits 65,979 56,347
----------------- -----------------
Other current financial assets 65,979 4,755,051
Cash and cash equivalents 4,215,344 864,402
Total current financial assets 4,281,323 5,619,453
Non-current
Other receivables - 791,000
Total loans and receivables 5,988,077 8,731,289
----------------- -----------------
Total financial assets 5,988,077 8,791,876
================= =================
Total current 5,988,077 7,940,289
Total non-current - 851,587
Financial liabilities
Financial liabilities at
amortised cost
Interest-bearing loans and
borrowings 33,601,793 5,078,799
Trade and other payables 45,532,709 1,625,808
Total financial liabilities
at amortised cost 79,134,502 6,704,607
Total financial liabilities 79,134,502 6,704,607
================= =================
Total current 76,763,422 4,405,303
Total non-current 2,371,080 2,299,304
================= =================
9.1 Available-for-sale investment - unquoted equity shares
In 2012, the available-for-sale financial assets consist in the
investments in shares of a non-listed company, which was valued
based on non-market observable information. In 2013, the Group
acquired the remaining shares of this company which is now
consolidated.
9.2 Loan notes
In 2012, the Group had loan note receivables with two entities:
PRC and Mafic. In 2013, the Group has no more loan note receivables
with Mafic S.A. as this amount has been reimbursed. The net book
value of the loan note receivables with PRC is nil.
9.2.1 Loan notes PRC
The Group entered into an agreement with Plastics Research
Corporation ("PRC") for the development and production of specific
shipping pallets. The machine has been developed on land rented by
PRC from a third party (the "Redlands Facility"). The development
of the production facility has required the acquisition of
equipment (the "Equipment") which is located at the Redlands
Facility. In the course of the development of the Equipment,
several disputes arose between the Group and PRC. The disputes were
settled by an agreement of the parties entered into on 15 November
2012.
As per the Settlement Agreement, it has been agreed that:
- PRC has ownership and possession of all Equipment in the Redlands Facility;
- PRC shall pay to RM2 S.A. the principal sum of USD 13,500,000
(the "Indebtedness") as a non-royalty payment; and
- PRC shall pay to RM2 S.A. royalties for the sales of pallets
and composite compound up to USD 11,000,000 (the "Royalty
Payments").
The outstanding balance of the indebtedness as at 31 December
2013 amounts to USD 14,109,415 (in 2012: USD 13,747,704) and
includes interest of USD 609,415 (in 2012: USD 247,704).
The loan bears interest at the effective interest rate of 7% per
annum and has a maturity date as at 15 November 2019.
Management has determined that there was significant risk on the
recoverability of the capital amount of the Indebtedness for USD
13,500,000 and decided to record a full impairment on the
investment (for further detail, refer to note 4). The impairment on
the loans and receivables was incurred as the Group has estimated
that the recoverability of the receivable resulting from the
resolution of the litigation with PRC was uncertain as a result of
the delinquent payment made by PRC.
As at 31 December 2012, the carrying amount of the loan notes
PRC is USD 247,704, which corresponds to the balance of accrued
interest. As at 31 December 2013, the carrying amount of the loan
notes PRC is USD nil, as PRC is in default.
As a result from the transfer of the Equipment by the Group to
PRC in exchange of the payment of the receivables of USD
13,500,000, the Group has generated a gain on the de-recognition of
the Equipment of USD 906,399.
In November 2013, PRC defaulted on the interest payment due.
Subsequently in 2014, ownership of the Equipment was transferred to
the Group, pursuant to the security agreement. The Group will
decide whether to dispose of the Equipment, or redeploy the assets
within the Group. The Equipment is fully impaired in the
consolidated financial statements. Full provision has been made for
interest due in respect of the interest receivable and not paid in
the year of USD 609,414.
9.2.2 Loan notes Mafic
The Group has incurred costs related to the development of new
technology for the production of pallets using Basalt fibre. During
the development process, the Group determined that they did not
want to use this fibre for the production of their pallets.
The Group entered into negotiation with Mafic for the sale of
the development costs incurred in relation with this project. An
agreement was concluded with Mafic S.A. in September 2013.
The Group recognised a loan note receivable with Mafic S.A. for
USD 4,451,000 as at year end 2012. The receivable has been fully
paid in September 2013.
9.3 Interest-bearing loans and borrowings
As at 31/12/2013 As at
31/12/2012
Effective Maturity USD USD
interest date
rate
Non-current interest-bearing
loans and borrowings
30 November
CHF 2,100,000 Bank loan 2.4% 2015 2,361,142 2,299,304
Hire purchase liabilities 9,938 -
in excess of one year
Total non-current interest-bearing
loans and borrowings 2,371,080 2,299,304
================= ============
Current interest-bearing
loans and borrowings
Bank overdraft (note 12) Variable On-demand 22,208 193
Shareholder current account 0% On-demand 8,550 2,779,302
Shareholder loans 10% plus
25% on 5,926,532 -
repayment
JKD Capital* 10% plus
25% on 13,385,105
repayment -
CVI CVF 11 Lux Securities 10% plus
Trading S. à r. l. 25% on 11,853,539 -
repayment
Hire purchase liabilities 34,779 -
in excess of one year
Total current interest-bearing
loans and borrowings 31,230,713 2,779,495
================= ============
Total interest-bearing loans
and borrowings 33,601,793 5,078,799
================= ============
*Note: An affiliate of JKD Capital also received a USD 500,000
arrangement fee
CHF 2,100,000 bank loan
The loan is secured by a mortgage on the building held by the
Group in Switzerland for a total value of CHF 2,470,000 (USD
2,777,144) and by transfer of rental income to the lender.
9.3.1 Domestic Private Equity Investors LLC ("DPEI") Bridge Facility
The Group had entered into a bridge facility with DPEI for the
financing of its operations on 30 June 2010. As a result of the
Group restructuring operations in 2011, the bridge facility had
been fully reimbursed during the year 2011.
The Group also issued warrants on the same date to DPEI granting
to DPEI the right to purchase up to 10% of the fully diluted share
capital of the Company. The right exists as long as the outstanding
warrant shares represent more than 5% of the share capital of the
Company. The fair value of the warrants is immaterial.
On 8 November 2013 the agreement was amended such that the right
to warrants would be terminated following a successful IPO before
31 March 2014 on the condition that the company pay DPEI USD 40m.
This occurred in January 2014 and has been considered as a cost of
the facility in the year ended 31 December 2013.
The number of warrant shares granted to DPEI at each year end is
as follows (taking into account the termination described in the
preceding paragraph):
As at 31/12/2013 As at 31/12/2012
Number of Warrant Shares - 12,514,656
================== =================
9.4 Hedging activities and derivatives
The Group has not entered into any hedging activity during each
period covered by the consolidated financial information.
9.5 Fair values
The Group estimates that the fair value of the financial assets
and liabilities approximates their carrying amount as these are
mainly composed of short-term receivables and payables.
9.5.1.1 Fair value hierarchy
The Group uses the following hierarchy for determining and
disclosing the fair value of financial instruments by valuation
technique:
- Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities
- Level 2: other techniques for which all inputs that have a
significant effect on the recorded fair value are observable,
either directly or indirectly
- Level 3: techniques that use inputs that have a significant
effect on the recorded fair value that are not based on observable
market data
As at 31 December 2012, the Group held the following financial
instruments carried at fair value in the statement of financial
position:
As at 31/12/2012 Level 1 Level 2 Level 3
Assets measured at fair value USD USD USD USD
Available-for-sale financial
asset:
Equity shares 60,587 - - 60,587
================= ======== ======== ========
The Group has no financial instruments at fair value as at 31
December 2013.
9.5.1.2 Reconciliation of fair value measurements of Level 3 financial instruments
The Group carries unquoted equity shares as available-for-sale
financial instruments classified as Level 3 within the fair value
hierarchy.
The Group has equity interests in two unlisted entities with
which it entered into a research and collaboration agreement.
A reconciliation of the beginning and closing balances including
movements is summarised below:
Mafic S.A. Equipment Total
Tracking
Ltd.
USD USD USD
1 January 2013 - - -
Purchases 10,500 50,087 60,587
Sold (10,500) - (10,500)
Transferred to investment
in subsidiary on purchase - (50,087) (50,087)
----------- ---------- ---------
31 December 2013 - - -
=========== ========== =========
On 27 September 2013, the Company participated in a contribution
in kind of 842,000 shares of Mafic S.A. in order to incorporate and
hold 100% of the issued share capital of Basalt Holding S. à r. l.,
a newly incorporated Luxembourg company. This resulted in the
recognition of a financial gain of USD 16,464,380. Subsequently, a
value correction amounting to USD 3,304,857 has been deducted from
the value acquisition of Basalt Holding S. à r. l.
participation.
On 11 October 2013, the Group cancelled 12,286,000 Class J
shares with a nominal value of USD 0.45 each and disposed of the
entire share capital of Basalt Holding S. à r. l. as a payment in
kind to the holders of the Class J shares. The financial loss on
the disposal is USD 8,171,070. The difference between the gain, the
value correction and the loss recognised on this transaction is the
value of the cancellation of the share capital.
On 10 December 2013, the Group purchased the remaining 97% of
Equipment Tracking Limited, see note 5.
10 Inventories
As at As at 31/12/2012
31/12/2013
USD USD
Raw materials 878,357 -
Work in progress 488,639 -
Finished goods 157,795 -
1,524,791 -
The Group produced some sample items in 2012. The Group has
determined that the recoverable value of those samples which were
not deemed to be part of the cost of property, plant and equipment
samples was nil and decided to make full impairment of the
inventory cost. During the year ended 2012, the Group recorded a
value adjustment on the inventory for USD 1,447,797.
As at 31 December 2013, the Group has assessed the carrying
value of the inventory and consider that there is value in the
samples produced and therefore has reversed the impairment.
The cost of inventory recognised as an expense during the year
was USD 47,755. In 2012, there was no cost of inventory recognised
as an expense as the Group has not made any sale transaction during
this period.
The Group does not have any pledge on its inventory.
11 Trade and other receivables
As at As at 31/12/2012
31/12/2013
USD USD
Trade receivables 190,548 -
Income tax receivables 38 2,118
Other tax receivables 967,678 1,362,630
Other receivables 548,490 956,088
------------ -----------------
Total trade and other receivables 1,706,754 2,320,836
============ =================
The ageing of the trade receivables as at 31 December 2013 is
detailed below:
2013 2012
Neither past due nor impaired: 50,022 -
Past due but not impaired:
0 to 30 days 124,682 -
30 to 60 days 15,844 -
60 to 90 days - -
Over 90 days - -
-------- -----
190,548 -
======== =====
The Group has no provision for impairment of receivables.
The balance of other receivables included an advance payment
made to STM related to the acquisition of a licence for the Mafic
project (see note 9) for USD 1,000,000 as at 31 December 2012
(2013: USD Nil).
The other tax receivables primarily relate to Harmonised Sales
Tax (VAT) balances due in Canada.
12 Cash and short-term deposits
As at 31/12/2013 As at 31/12/2012
USD USD
Cash at bank and in hand 3,917,084 555,580
Short-term deposits 298,260 308,822
----------------- -----------------
Total cash and short-term
deposits 4,215,344 864,402
================= =================
Cash at banks earns interest at floating rates based on daily
bank deposit rates. Short-term deposits are made for varying
periods of between one day and three months, depending on the
immediate cash requirements of the Group, and earn interest at the
respective short-term deposit rates.
At the period ended, the Group does not have any undrawn
committed borrowing facilities.
The Group has not pledged any part of its short-term deposits to
fulfil collateral requirements.
The Group has no restricted cash at any period ended. For the
purpose of the statement of cash flows, cash and cash equivalents
comprise the following at 31 December:
As at 31/12/2013 As at 31/12/2012
USD USD
Cash at bank and in hand 3,917,084 555,580
Short-term deposits 298,260 308,822
4,215,344 864,402
Bank overdraft (note 9) (22,208) (193)
----------------- -----------------
Total cash and cash equivalents 4,193,136 864,209
================= =================
13 Share capital and reserves
2012
On 20 January 2012, the Extraordinary General Meeting of the
Company decided to increase the share capital of the Company by an
amount of USD 55,164,140 through partial incorporation of share
premium into capital to raise its former amount of USD 122,860 to
USD 55,287,000.
The Extraordinary General Meeting also decided to reduce the par
value of the shares of the Company from USD 1 per share to USD 0.45
per share by the issuance of 67,573,000 new shares equivalently
distributed in each class of shares.
The Extraordinary General Meeting decided to increase the
authorized share capital of the Company by an amount of USD
67,340,143.50 to raise its current amount of USD 232,860 to USD
67,573,003.50 equivalently distributed in each class of shares with
the same rights.
As at 31 December 2012, each ordinary share issued has a nominal
value of USD 0.45 and has been fully paid-up.
2013
On 11 October 2013, the Company's issued share capital was
reorganised. The Company's share capital was decreased by USD
9,956,043 (to reflect absorption of historic losses and
reimbursement in kind to shareholders consisting of all the shares
held by the Company in Basalt Holding S. à r. l.).
Linked to such decrease in issued share capital, the ordinary
shares designated as Class J ordinary shares were cancelled. This
took the Company's total issued share capital to USD 45,330,956,
consisting of 110,574,000 ordinary shares of USD 0.45 each.
Immediately following this, the nominal value of the ordinary
shares was reduced from USD 0.45 to USD 0.01.
Following such reorganisation, the Company's issued share
capital was USD 1,105,740, consisting of 110,574,000 ordinary
shares of USD 0.01 each.
On 6 November 2013, the Company issued an additional 22,275,000
ordinary shares taking the Company's total issued share capital to
132,849,000 ordinary shares of USD 0.01 each.
On 14 November 2013, the Company's shareholders resolved to
reorganise the Company's share capital such that, with effect from
Admission, each of the classes of ordinary share designated as
Class A-I be converted into a single class of ordinary share, being
the Ordinary Shares.
On 26 November 2013, 11,025,000 Ordinary Shares were issued to
certain founders of the Company, taking the Company's total issued
share capital to 143,874,000 Ordinary Shares.
On 3 December 2013, 12,308,775 Restricted Shares were granted to
certain Directors, taking the Company's total issued share capital
to 156,182,775 Ordinary Shares.
The restricted shares are issued with performance criteria. The
Performance Conditions are linked to the volume weighted average
quoted price of the Ordinary Shares (the "Average Price") for a
consecutive 30 day period (the "Relevant Period"). If the Average
Price is 50 per cent higher than the Placing Price for the Relevant
Period, the Performance Condition in respect of one-third of the
Restricted Shares shall be fulfilled. If the Average Price is 75
per cent higher than the Placing Price for the Relevant Period, the
Performance Condition in respect of a further one-third of the
Restricted Shares shall be fulfilled. If the Average Price is 100
per cent higher than the Placing Price for the Relevant Period, the
Performance Condition in respect of the final third of the
Restricted Shares shall be fulfilled. If any Performance Conditions
are not fully satisfied by 19 November 2023, the Director shall
transfer any of his remaining Restricted Shares to the Company at a
purchase price equal to the nominal value of the Restricted Shares,
being USD 0.01 each.
The holders of the Restricted Shares cannot sell, transfer,
mortgage, charge, encumber or otherwise dispose of any of the
Restricted Shares as long as the performance conditions are not
fully satisfied. These Restricted Shares are considered by
Management as share-based payments and performance conditions as
market vesting conditions. For further detail on the share-based
payments transactions refer to note 19.
13.1 Authorised shares
Shares USD Par value
per share
At 1 January 2012 232,860 232,860 USD 1
Increase of authorised share
capital and reduction of par
value per share dated 20 January
2012 149,929,370 67,340,143.5
At 31 December 2012 150,162,230 67,573,003.5 USD 0.45
Capital restructuring of 11
October 2013
* Authorised capital reduction (15,016,223) (6,757,300.4) USD 0.45
- (59,464,243.1) N/A
* Decrease of par value of shares
* Increase of authorised share capital 39,786,093 397,861 USD 0.01
------------- --------------- -----------
174,932,100 1,749,321 USD 0.01
Decrease of authorised share
capital dated 6 November 2013 (22,275,000) (222,750) USD 0.01
Increase of authorised share
capital dated 14 November
2013 522,274,995 5,222,750 USD 0.01
Increase of authorised share
capital dated 19 November
2013 9,341,361 93,414 USD 0.01
Decrease of authorised share
capital dated 26 November
2013 (11,025,000) (110,250) USD 0.01
Decrease of authorised share
capital dated 26 November
2013 (12,308,775) (123,088) USD 0.01
------------- --------------- -----------
At 31 December 2013 660,939,681 6,609,397 USD 0.01
============= =============== ===========
As at 31 December 2013, the authorised share capital is split
equally into 9 classes of shares (Classes A to I) with the same
rights (2012: 10 Classes A to J).
13.2 Ordinary shares issued and fully paid
Shares USD Par value
per share
At 1 January 2012 122,860 122,860 USD 1
Conversion of share premium
to share capital dated 20
January 2012 55,164,140 55,164,140 USD 1
Reduction of par value per
share dated 20 January 2012 67,573,000 -
At 31 December 2012 122,860,000 55,287,000 USD 0.45
Capital restructuring of
11 October 2013
* Decrease in share capital by absorption of losses - (4,919,270)
* Acquisition and cancellation of own shares (Class J
shares) (note 9) (12,286,000) (5,036,773)
* Capital reduction by decrease of par value of shares - (44,225,217)
------------- ------------- -----------
110,574,000 1,105,740 USD 0.01
Subscription for new shares
on 6 November 2013 22,275,000 222,750 USD 0.01
Subscription for new shares
26 November 2013 11,025,000 110,250 USD 0.01
Subscription for restricted
shares on 3 December 2013
(note 19) 12,308,775 123,088 USD 0.01
------------- ------------- -----------
At 31 December 2013 156,182,775 1,561,828 USD 0.01
============= ============= ===========
As at 31 December 2013, the share capital issued is split
equally into 9 classes of shares (Classes A to I) with the same
rights (2012: 10 Classes A to J).
2014
Following 31 December 2013, the Company made several changes to
share capital of the Company, refer to note 25 on subsequent events
for further detail.
13.3 Share premium
USD
At 1 January 2012 55,857,496
Conversion of share premium to share capital dated
20 January 2012 (55,164,140)
At 31 December 2012 693,356
Reduction of nominal value per share 11 October
2013 44,225,217
Absorption of the 31 December 2013 loss on 14
November 2013 (13,784,115)
-------------
At 31 December 2013 31,134,458
=============
The share premium account comprise an amount of USD 30,441,102
corresponding to share premium available to compensate existing and
future losses or to increase the subscribed share capital,
resulting from the reduction of nominal value of the shares from
USD 0.45 to USD 0.01 on October 11, 2013.
13.4 Warrants
On 30 June 2010, the Group has issued warrant scheme to Domestic
Private Equity Investors LLC ("DPEI") granting to DPEI the right to
purchase up to 10% of the fully diluted share capital of the
Company (the "Warrant Shares"). The right exists as long as the
outstanding warrant shares represent more than 5% of the share
capital of the Company.
The number of Warrant Shares granted to DPEI at each year end is
as follows:
As at 31/12/2013 As at 31/12/2012
Number of Warrant Shares - 12,514,656
On 8 November 2013 an agreement was entered into with DPEI to
agree that the right to warrants would be terminated following a
successful IPO before 31 March 2014 on the condition that the
Company pay DPEI USD 40,000,000. The Company made payment of the
liability 6 January 2014. This amount has been considered as a
finance expense in the year ended 31 December 2013.
The liability for the termination of the warrants amounts to USD
40,000,000 and is recorded within other payables as at year end
2013.
13.5 Nature and purpose of reserve
Currency translation reserve:
The currency translation reserve is used to record exchange
differences arising from the translation of the subsidiaries'
financial statements in foreign currencies to the Group reporting
currency.
This reserve cannot be distributed to shareholders.
13.6 Dividend distribution
As a result of the accumulated losses generated by the Group, no
dividend has been declared or paid.
14 Trade and other payables
As at As at
31/12/2013 31/12/2012
USD USD
Trade payables 2,725,769 991,874
Employee compensation
payables 9,046 25,084
Other tax payables 188,582 222,866
Other payables 41,663,916 185,653
Total trade and
other payables 44,587,313 1,425,477
============ ============
Other payables includes an amount of USD 12,782 due to related
parties and an amount of USD 40,041,574 due in relation with the
cancellation of DPEI warrants (see note 9).
Terms and conditions of the above financial liabilities:
- Trade payables are non-interest bearing and are normally settled on 30-days terms
- Other payables are non-interest bearing and have an average term of 30 days terms
- For explanation on the Group's liquidity risk management processes, refer to Note 23.
15 Revenue
The Group has revenue for USD 5,000 in 2013 in relation to its
core activity. The amount is not significant as the Group has not
yet started the production and commercialisation of their products.
The remaining revenue shown in 2013 is related to the activity
(rendering of IT services) of the newly acquired subsidiary
Equipment Tracking Limited from the date of its acquisition (see
note 5) to the end of the year 2013.
16 Other income and expenses
16.1 Other operating income
As at 31/12/2013 As at 31/12/2012
USD USD
Net gain on disposal of PPE 737,000 1,991,399
Rental income 326,125 333,088
Other 43,169 1,772
Total other operating income 1,106,294 2,326,259
================= =================
In 2013, the gain on disposal of PPE results from additional
gain on derecognition of assets made in 2012as a result of disposal
value revision.
In 2012, the gain on disposal of PPE has been generated from the
derecognition of the assets related to the PRC project as a result
of the settlement agreement (USD 906,399) (see note 9) and a gain
(USD 1,085,000) in relation to the transfer to Mafic of development
costs on other projects for which the Group has considered that
they could not be used for their own purpose.
16.2 Other operating expenses
As at 31/12/2013 As at 31/12/2012
USD USD
Direct operating
expenses on rental-earning
investment properties 124,706 113,508
Research and development
costs 100,830 281,425
Impairment on inventory - 1,447,797
Cost of agreement 2,000,000 -
settlement
Net wealth tax 70,413 165,065
Total other operating
expenses 2,295,949 2,007,795
================= =================
The impairment on the inventory in 2012 was incurred due to the
inability of the Company to sell the sample items produced by the
Group. The Group estimated that these items had a nil net residual
value.
Although, as at 31 December 2013, the Group reviewed its
estimation and determined that the inventory, representing sample
items, had a marketable value and reversed the impairment recorded
in 2012. This reversal is booked against the variation of inventory
under the caption Administrative expenses.
On 27 September 2013 the Company reached an agreement with STM
Technologies, Inc. whereby the parties agreed to terminate certain
agreements in exchange for the Company agreeing to pay STM USD 2
million.
The net wealth tax relates primarily to the tax due by each
Luxembourgish subsidiary on the net assets of the entity.
16.3 Finance income
As at 31/12/2013 As at 31/12/2012
USD USD
Interest income on loans and
receivables 936,061 240,275
Total interest income 936,061 240,275
Net foreign exchange gain 84,536 643,049
Dividend income 2,302 -
Disposal of investment in 5,036,773 -
Mafic
Other 3,640 25,689
Total finance income 6,063,312 909,013
================= =================
16.4 Finance costs
As at 31/12/2013 As at 31/12/2012
USD USD
Interest at amortised costs
on loans and borrowings 7,056,956 55,347
Total interest expenses 7,056,956 55,347
Net foreign exchange loss 891,180 354,367
Transaction costs -
DPEI warrant 40,000,000
Other 652,764 504
Total finance costs 48,600,900 410,218
================= =================
16.5 Amortisation and depreciation expenses
As at As at 31/12/2012
31/12/2013
USD USD
Depreciation and amortisation
expenses, included in:
Administrative expenses 580,916 494,468
------------ -----------------
580,916 494,468
============ =================
16.6 Employee benefits expenses
As at 31/12/2013 As at 31/12/2012
USD USD
Included in selling and distribution
expenses:
Wages and salaries 699,284 696,050
Social security costs 101,091 101,339
Pension costs 36,783 40,942
Included in administrative
expenses:
Wages and salaries 4,852,273 2,134,873
Social security costs 290,346 155,647
Pension costs 11,965 7,813
Total employee benefits expenses 5,991,742 3,136,664
================= =================
Average number of full time
employees 109 82
================= =================
16.7 Research and development costs
As at 31/12/2013 As at 31/12/2012
USD USD
Included in other operating
expenses: 100,830 281,425
================= =================
17 Income taxes
17.1 Income tax expenses
The major components of income tax expense for each period
are:
As at 31/12/2013 As at 31/12/2012
USD USD
Current income tax:
Current income tax charge 62,152 16,556
10,616 -
----------------- -----------------
Total current income tax: 72,768 16,556
Income tax expenses 72,768 16,556
================= =================
A reconciliation between tax expense and the accounting loss
multiplied by the domestic tax rate of each entity in its
jurisdiction for each period is as follows:
As at 31/12/2013 As at 31/12/2012
USD USD
Loss before tax (77,200,176) (18,053,555)
----------------- -----------------
Theoretical income tax charge/(income)
using applicable income tax
rate (21,981,699) (4,534,594)
Reconciliation to actual
income tax charge
Adjustment in respect of
current income tax of previous
year - (681)
Unrecognised deferred tax
assets on losses carried
forward 21,982,512 8,003,846
Non-deductible expenses from:
Director's fees, ESOP 4,828,352 -
Accelerated capital allowances 12,011 -
Other non-deductible expenses 3,780 (3,749,467)
Non-taxable income from:
Gain on disposal of mafic (4,821,943) -
Other non-taxable income - 297,452
Minimum income tax charge 48,881 -
Other 874 -
Income tax expenses 72,768 16,556
================= =================
17.2 Deferred taxes
The Group has not recognised deferred tax asset on the tax
losses carried forward as the Group has estimated that no
sufficient future benefits would be generated in the near future to
cover the losses.
The tax losses for which no deferred tax asset has been
recognised amount to USD 113,788,484 as at 31 December 2013 (2012:
USD 29,096,299). If the Group was able to recognise all
unrecognised deferred tax assets, the loss would decrease by USD
31,474,756 as at 31 December 2013 (2012: USD 7,120,548).
On the acquisition of Equipment Tracking Limited on 10 December
2013 and the valuation of the separable net assets the company
created deferred tax liability of USD 523,782, refer to note 5.
During the year, the Group recognised a deferred tax liability
on the accelerated capital depreciation of some assets held by
Equipment Tracking Limited for USD 10,741, the variation with the
amount recognised in profit and loss is due to currency
translation.
As at year end, the Group has recognised deferred tax
liabilities for USD 534,523 (2012: nil).
18 Pensions and other post-employment benefit plans
The Group has not entered into any defined contribution plan and
defined benefit plan for its employees.
19 Share-based payments
The Group has a number of share schemes as shown in the table
below.
The Company grants restricted shares, shares grants at par value
and share options at its discretion to employees, officers,
directors, consultants and advisors. . Restricted shares and share
options are granted with vesting periods of between the date of
grant and ten years from the issuance or the date of grant. Should
the restricted shares or options remain unexercised after a period
of ten years from the date of grant, the options will expire and
the restricted shares will be repurchased from the holder. Options
are exercisable at a price equal to the Company's quoted market
price on the date of grant.
Each programme approved by the Company during the year is
detailed as follows:
19.1 2012 Equity Incentive Plan
The Remuneration Committee had approved the issuance of
11,025,000 shares to certain founders of the Group on 16 July 2013.
These shares were immediately issued without any restriction for
the holders.
Management has determined the fair value of this share-based
payment transaction by reference to the placing price of the
shares.
19.2 2013 Equity Incentive Plan
The Remuneration Committee had approved the issuance of
12,308,775 shares to Directors on 14 November 2013. These shares
were immediately issued and accompanied by a restricted share
agreement for each beneficiary of the awards.
Each restricted share agreement specified that holders can only
dispose of their shares upon achievement of certain performance
conditions. The performance conditions are linked to the volume
weighted average quoted price of the Ordinary Shares (the "Average
Price") for a consecutive 30 day period (the "Relevant Period"). If
the Average Price is 50% higher than the Placing Price for the
Relevant Period, the Performance Condition in respect of one-third
of the Restricted Shares shall be fulfilled. If the Average Price
is 75% higher than the Placing Price for the Relevant Period, the
Performance Condition in respect of a further one-third of the
Restricted Shares shall be fulfilled. If the Average Price is 100%
higher than the Placing Price for the Relevant Period, the
Performance Condition in respect of the final third of the
Restricted Shares shall be fulfilled. If any Performance Conditions
are not fully satisfied by 19 November 2023, the Director shall
transfer any of his remaining Restricted Shares to the Company at a
purchase price equal to the nominal value of the Restricted Shares,
being USD 0.01 each.
Management has considered that, even if shares were immediately
issued to holders and then there was no effective period, the
performance conditions would be similar to vesting conditions. As a
result, Management has determined the duration of tranche 1 and 2
as at 5 years and of tranche 3 as at 10 years from grant date.
In determining the amount of shares that will be exercised
(available for disposal by holders) at 100%, the Management
considers that all beneficiaries would remain in the Group at the
date of the exercise.
19.3 Employee Stock Option Plan ("ESOP")
The Remuneration Committee approved the issuance of 1,917,000
shares options to certain of the Group's key employees on 19
November 2013. These options will vest in 3 equal tranches on the
anniversary of the grant date, subject to the individuals remaining
employees in good standing of the Group. The terms of these awards
were modified prior to their issuance in the subsequent period.
Refer to Note 25
Also in the subsequent period, the Remuneration Committee
approved the issuance of 4,216,405 restricted shares to Directors
and key employees. Part of these awards (3,316,405 - see Note 25
under A and D.a) are issued under the same conditions as the
restricted shares described above and part (300,000 - see Note 25
under D.b) vest on the third anniversary of the grant date. In
addition, the Remuneration Committee approved the issuance of
600,000 share options (see Note 25 under C) to key employees and
management, vesting over three years in equal tranches on the
anniversary of the grant date and with a strike price equal to fair
market value on the date of grant. The vesting of such options also
automatically accelerates should the volume-weighted average price
of the Company's shares exceed the Placing Price of GBP 0.88 by
100% for a period of 30 consecutive calendar days.
As the grant date for these awards is subsequent to year end,
the management has not measured the options granted as at year end
2013.
Financial effect of share-based payment transactions:
The expense recognised for employee services received during the
year is shown in the following table:
2013
USD
----------
Expense arising from equity-settled share-based
payment transactions 15,743,333
Expense arising from cash-settled share-based -
payment transactions
----------
Total expense arising from share-based payment
transactions 15,743,333
==========
The Company does not have any liability arising from share-based
payment transactions as at 31 December 2013.
Movements during the year:
The following table illustrates the number and weighted average
exercise price (WAEP) of, and movements in, share granted and share
options during the year:
Share issued Restricted Number of
at par value shares issued share options
Outstanding at beginning of - - -
year
Granted during the period 11,025,000 12,308,775 -
------------------------------- ------------- ---------------- --------------
Exercised during the period (11,025,000) - -
------------------------------- ------------- ---------------- --------------
Outstanding at end of the year - 12,308,775 -
------------------------------- ------------- ---------------- --------------
Tradable/Exercisable at end - - -
of the year
------------------------------- ------------- ---------------- --------------
The weighted average remaining contractual life for the
restricted shares issued outstanding as at 31 December 2013 was
6.67 years.
The weighted average fair value of shares granted during the
year was USD 0.67.
Management considers that range of exercise price will be from
GBP 1.32 to GBP 1.54 for tranche 1, from GBP 1.54 to GBP 1.76 for
tranche 2 and from GBP 1.76 for tranche 3.
The weighted average share price at the date of exercise was GBP
0.88.
19.4 Fair value of share based payments transactions
2012 Equity Incentive Plan - Shares issued to founders
The fair value of shares granted was estimated based on the
placing price of shares (GBP 0.88), as at 6 January 2014, as it is
considered to be the most representative value of the shares
granted to founders at the grant date, less the exercise price paid
by the holders of the shares (GBP 0.01).
2013 Equity Incentive Plan - Restricted shares issued
A modified Black-Scholes model has been used to determine the
fair value of the share based payment on the date of grant or
issue. The fair value is expensed to the income statement on a
straight line basis over the vesting period, which is determined
annually. The model assesses a number of factors in calculating the
fair value. These include the market price on the date of grant,
the exercise price of the share options, the expected share price
volatility of the market sector in which the Group operates, the
expected life of the options, the risk free rate of interest and
the expected level of dividends in future periods
The calculation of the fair value of options issued requires the
use of estimates. Expected volatility has been estimated based on
similar sized companies listed on the AIM market of the London
Stock Exchange. It is assumed that all options will be
exercised.
2013
Restricted
Shares
Weighted average exercise price GBP 0.01
Expected volatility 17%
Expected life of restricted shares 5 and 10
years
Risk-free interest rate 1.9%-2.6%
Expected dividend yields Nil
----------------------------------- -------------
Model used Black-Scholes
In determining the cost to be recognised during the period,
management considered that all shares would be exercised by holders
upon achievement of performance conditions.
20 Earnings per share
Basic earnings per share amounts are calculated by dividing the
net profit for the year attributable to ordinary equity holders of
the parent by the weighted average number of ordinary shares
outstanding during the year.
Diluted earnings per share amounts are calculated by dividing
the net profit attributable to ordinary equity holders of the
parent by the weighted average number of ordinary shares
outstanding during the year plus the weighted average number of
ordinary shares that would be issued on conversion of all the
dilutive potential ordinary shares into ordinary shares.
The following reflects the income and share data used in the
basic and diluted earnings per share computations:
As at 31/12/2013 As at 31/12/2012
USD USD
Net loss attributable to ordinary
equity holders of the parent
for basic earnings (77,270,973) (21,310,522)
================= =================
As at 31/12/2013 As at 31/12/2012
Weighted average number of
ordinary shares for basic
earnings per share 125,498,680 112,631,905
Effect of dilution:
Warrant shares to DPEI - 12,514,656
----------------- -----------------
Weighted average number of
ordinary shares adjusted for
the effect of dilution 125,498,680 125,146,561
================= =================
Loss per share
Basic (0.62) (0.19)
Diluted - (0.17)
================= =================
Management considers that there is no dilutive effect from the
existing warrants during the year as these were fully cancelled on
8 November 2013.
21 Segment reporting
The Group has only two operating segments for the disclosure of
revenue: the production of pallets for transport and related
logistical services, and the sale of software licences and
services.
Turnover
As at 31/12/2013 As at 31/12/2012
USD USD
Pallets and logistical services 5,265 -
Software licences and services 98,939 -
104,204 -
----------------- -----------------
The net assets attributable to the revenue generating segments
are as follows (comparative information is omitted as there was
only one segment in 2012):
As at 31/12/2013
USD
Pallets and logistical services
Total Assets 23,234,674
Total Liabilities 79,428,301
Software licences and services
Total Assets 4,087,200
Total Liabilities 240,699
Geographical information
The parent company is based in Luxembourg. The information for
the geographical area of non-current assets are presented for the
most significant areas where the group has operations, being
Luxembourg (country of domicile), rest of Europe and North
America.
As at 31/12/2013 As at 31/12/2012
USD USD
Luxembourg 2,381,272 2,333,842
Rest of Europe 7,507,598 3,655,153
North America 9,445,055 6,463,932
19,333,925 12,452,927
----------------- -----------------
Non-current assets of this purpose consist of property, plant
and equipment, investment properties and intangible assets.
22 Commitments and contingencies
22.1 Operating lease commitments - Group as lessor
The Group has entered into commercial property lease on its
investment property, consisting in the Group's surplus space in the
Swiss office building. The non-cancellable lease has remaining
terms of as at 31 December 2021.
Future minimum rentals receivable under non-cancellable
operating leases as at 31 December are as follows:
As at 31/12/2013 As at 31/12/2012
USD USD
Within one year 326,125 260,525
After one year but not more
than five years 1,304,502 1,042,100
More than five years 978,375 1,042,100
2,609,002 2,344,725
================= =================
22.2 Operating lease commitments - Group as lessee
The Group has entered into commercial leases for office spaces
in United Kingdom and New Jersey and for a manufacturing facility
in Canada. These leases have an average life of between 6 months
and 3 years with renewal options included in the contracts. There
are no restrictions placed upon the Group by entering into these
leases.
Future minimum rentals payable under non-cancellable operating
leases as at 31 December are as follows:
As at 31/12/2013 As at 31/12/2012
USD USD
Within one year 399,078 405,476
After one year but not more
than five years 256,140 1,855,903
More than five years - 222,000
655,218 2,483,379
================= =================
22.3 Contingent liabilities
At 31 December 2013 the Company had a contingent liability to
pay GBP 363,866 (USD 602,666), on the successful completion of an
IPO. This occurred on 6 January 2014.
22.3.1 Warrants DPEI
In relation with the Warrants issued by the Group to DPEI, the
holder of the warrant has the option to terminate the Warrants, at
its discretion. Upon termination of the Warrants, the Group will
have to pay the holder an amount equal to the fair market value of
the warrants. The holder may only terminate 25% of the warrant
shares and only during the period from 31 December 2012 until 31
December 2017.
On 8 November 2013 the agreement was amended such that the right
to warrants would be terminated following a successful IPO before
31 March 2014 on the condition that the company pay DPEI USD 40
million. This occurred in January 2014 and has been considered as a
cost of the facility in the year ended 31 December 2013.
22.3.2 Royalties PRC
The Group has a right to royalty receivable from PRC resulting
from the sale of pallets manufactured and composite compound
generated by using the equipment transferred to PRC as a result of
the settlement of the litigation between the Group and PRC.
Due to inability of the Group to estimate the future royalty
income from the Settlement Agreement, the value of the instrument
in the consolidated financial information is deemed to be nil.
22.4 Forward purchase of property, plant and equipment
The Group has commitment in relation with forward purchase for
the acquisition of property, plant and equipment, as follows:
As at As at 31/12/2012
31/12/2013
USD USD
Forward purchase for acquisition 2,386,380 -
of PPE
============ =================
22.5 Related party disclosures
22.5.1 Group subsidiaries
The consolidated financial information include the financial
statements of the Company and its subsidiaries. The Group has the
following subsidiaries included in these consolidated financial
information:
% of equity interest
Subsidiary name Country
of incorporation 2013 2012
RM2 S.A., including Swiss
branch Luxembourg 100% 100%
RM2 I.P. S.A. Luxembourg 100% 100%
RM2 Holland B.V. Netherlands 100% 100%
RM2 Total Solutions International
B.V. Netherlands 100% 100%
RM2 Europe Spó ka z.o.o. Poland 100% 80%
United States
RM2 USA Inc. of America 100% 100%
RM2 Limited (previously Victoria
Rises Ltd.) United Kingdom 100% 100%
RM2 Canada Inc. Canada 100% 100%
RM2 France S.à r.l. France 100% 100%
Equipment Tracking Limited United Kingdom 100% -
All subsidiaries held by the Company are consolidated.
During the year the company purchased the 97% of Equipment
Tracking Limited that it did not previous own, see note 5. In
addition the company acquired the Minority Interest of 20% in RM2
Europe Spó ka z.o.o.
During the year 2012, the Group incorporated the subsidiary RM2
France S. à r.l.
22.5.2 Transaction with related parties
All transactions between the Company and the Group's
subsidiaries, and between Group's subsidiaries, have been
eliminated for the preparation of these consolidated financial
information.
Income Expenses Amounts Amounts
Year with related from related owed by owed to
parties parties related related
parties parties
USD USD USD USD
Parent: 2012 - - - 2,779,302
Parent: Interest bearing
loans 2013 - 1,226,532 - 5,926,532
Parent: Non-interest bearing
loans 2013 - - - 8,550
Key Management personnel: 2012 - 402,447 - -
Remuneration
Key Management personnel: 2013 - 428,402 - -
Remuneration
Key Management personnel: 2013 - 15,743,333 - -
Stock-options
In addition, the parent company realized in 2013 a capital
decrease by the distribution in kind of shares in Basalt Holding S.
à r. l. (see note 9 for details of the transaction).
Stock grants and restricted shares with related parties are
disclosed in note 19.
22.5.3 Transactions with parent companies
In 2013, the Company borrowed USD 4,700,000 from its
shareholders. These short term loans bear an interest of 10% per
annum and are repayable at their nominal value increased with a
premium of 25%. (see note 9). The repayment occurred on 7 January
2014. The premium is recognized in the financial charges on a
prorata-temporis basis.
22.5.4 Transactions with key management personnel
There were no specific transactions between the Group and the
key management personnel.
The Group granted compensation to the key management personnel
as follows:
As at 31/12/2013 As at 31/12/2012
USD USD
Short-term employee benefits 428,402 402,447
23 Financial risk management objectives and policies
The Group's financial liabilities comprise only loans and
borrowings and trade and other payables. The main purpose of these
financial liabilities is to finance the Group's operations. The
Group has loan and other receivables, trade and other receivables,
and cash and short-term deposits that arrive directly from its
operations.
The Group is exposed to market risk, credit risk and liquidity
risk. The Group's senior management oversees the management of
these risks. The Board of Directors reviews and agrees policies for
managing each of these risks which are summarised below.
23.1 Market risks
Market risk is the risk that the fair value of future cash flows
of a financial instrument will fluctuate because of changes in
market prices. Market prices comprise three types of market risk:
interest rate risk, currency risk and other price risk, such as
commodity price risk or equity price risk. Financial instruments
affected by market risk include loans and borrowings, deposits and
available-for-sale investments.
The Group's management has determined that the Group was not
subject to the interest rate risk as all significant loans and
receivables have been issued with fixed interest rate, to the
commodity price risk as the production of pallets does not require
raw material subject to market volatility.
The Group has only exposure to the foreign currency risk as a
result of its operations in various countries and using different
functional currencies.
The sensitivity analyses in the following sections relate to the
position as at 31 December 2013 and 2012. The sensitivity analyses
have been prepared on the basis that the amount of net debt, the
ratio of fixed to floating interest rates of the debt and
derivatives and the proportion of financial instruments in foreign
currencies are all constant and on the basis of the hedge
designations in place (at 31 December 2013: none).
The analyses exclude the impact of movements in market variables
on: the carrying values of pension and other post-retirement
obligations; provisions: and the non-financial assets and
liabilities of foreign operations.
23.1.1 Foreign currency risk
Foreign currency risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of
changes in foreign exchange rates. The Group's exposure to the risk
of changes in foreign exchange rates relates primarily to the
Group's operating activities (when revenue or expense is
denominated in a different currency from the Group's presentation
currency) and the Group's net investments in foreign
subsidiaries.
The Group has no policy to manage its foreign currency risk as
the Group's management estimates the foreign currency risk as
negligible.
The Group has significant operations in the following
currencies: United States Dollar (USD), Swiss Franc (CHF) and
Canadian Dollar (CAD). The Group has other operations in the
following currencies which are not significant for the Group: Euro
(EUR), Polish Zloty (PLN) and Great Britain Pound (GBP).
23.1.1.1 Sensitivity analysis
The following tables demonstrate the sensitivity to a reasonably
possible change in the CHF and CAD exchange rates, with all other
variables held constant. The impact on the Group's profit before
tax is due to changes in the fair value of monetary assets and
liabilities including non-designated foreign currency derivatives.
The Group's exposure to foreign currency changes for all other
currencies is not material.
The sensitivity analysis assumes a +/- 3% change of the USD/CHF
exchange rate for each period covered by these consolidated
financial information. This percentage has been determined based on
the average market volatility in exchange rates in the previous 24
months.
The variation of the USD/CAD exchange rate of the previous 24
months is less than 1% and therefore, it is not considered as a
significant risk for the Group.
Year Change Effect on Effect on
in CHF profit before other comprehensive
rate tax income
USD USD
2013 +3% 16,494 16,494
-3% (16,988) (16,988)
2012 +3% 60,640 60,640
-3% (64,256) (64,256)
Year Change Effect on Effect on
in CAD profit before other comprehensive
rate tax income
USD USD
2013 +1% (214,057) (214,057)
-1% 217,057 214,507
2012 +1% (6,666) (6,666)
-1% 6,801 6,801
23.2 Credit risk
Credit risk is the risk that a counterparty will not meet its
obligations under a financial instrument or customer contract,
leading to a financial loss. The Group is exposed to credit risk
from its operating activities and from its financing activities,
including deposits with banks and financial institutions, foreign
exchange transactions and other financial instruments.
Trade and other receivables
The Group is not subject to any credit risk related to trade
receivable as the Group has no material trade receivables as at
each period ended.
The other receivables are mainly composed of tax receivables
owed by the national institutions for which the Group consider that
there is no risk of recoverability.
The Group also had other receivables with Mafic (in 2012), net
of impairment, for which they consider that there is no risk of
recoverability as all these receivables has been recovered
subsequently.
23.2.1 Financial instruments and cash deposits
The Group loans financial instruments are mainly represented by
loan receivables owed by PRC.
The management has estimated that the recoverability of the PRC
receivable was uncertain (see note 4) and has recorded impairment
on the full nominal amount of the receivables.
Credit risk from balances with banks and financial institutions
is not considered significant as the Group has made placements with
lower-risk counterparties.
23.2.2 Ageing analysis of receivables
The Group does not have overdue receivables except the interest
on the PRC loans which are due as at 31 December 2013 and remains
unpaid as at the period end for USD 609,415 (2012: 120,000). The
interest has currently not been collected, as a consequence, it has
been fully impaired.
23.3 Liquidity risk
The Group's objective is to maintain a balance between
continuity of funding and flexibility through the use of raising of
capital via equity issues or bridging facilities. Longer term the
Group will look to finance activities through bank and debt
facilities.
Maturity Profile
The table below summarises the maturity profile of the Group's
financial liabilities based on contractual undiscounted
payments.
31 December Due on Due within Due between Due between Due after Total
2013 demand 3 months 3 and 12 1 and 5 years
months 5 years
USD USD USD USD USD USD
Non-current
liabilities
Interest-bearing
loans and borrowings - - - 2,371,080 - 2,371,080
Bank borrowings - - - 2,371,080 - 2,371,080
Current liabilities - - - -
Interest-bearing
loans and borrowings 22,208 31,208,505 - - - 31,230,713
Bank overdrafts 22,208 - - - - 22,208
Other loans
and borrowings - 25,273,423 - - - 25,273,423
Loans from other
related parties - 5,935,082 - - - 5,935,082
Trade and other
payables - 45,528,637 - - - 45,528,637
Trade payables - 2,725,769 - - - 2,725,769
Payables to
other related
parties - 12,782 - - - 12,782
Employee compensation
payables - 9,046 - - - 9,046
Other tax payables - 1,129,906 - - - 1,129,906
Other payables - 41,651,134 - - - 41,651,134
Total financial
liabilities: 22,208 76,737,142 - 2,371,080 - 79,130,430
======== =========== ============ ============ ========== ===========
31 December Due on Due within Due between Due between Due after Total
2012 demand 3 months 3 and 12 1 and 5 years
months 5 years
USD USD USD USD USD USD
Non-current
liabilities
Interest-bearing
loans and borrowings - - - 2,299,304 - 2,299,304
Bank borrowings - - - 2,299,304 - 2,299,304
Current liabilities
Interest-bearing
loans and borrowings 2,779,495 - - - - 2,779,495
Bank overdrafts 193 - - - - 193
Loans from other
related parties 2,779,302 - - - - 2,779,302
Trade and other
payables - 1,636,477 - - - 1,636,477
Trade payables - 1,202,874 - - - 1,202,874
Employee compensation
payables - 25,084 - - - 25,084
Other tax payables - 222,866 - - - 222,866
Other payables - 185,653 - - - 185,653
Total financial
liabilities: 2,779,495 1,636,477 - 2,299,304 - 6,715,276
========== =========== ============ ============ ========== ==========
23.4 Concentration of risk
Concentrations arise when a number of counterparties are engaged
in similar business activities, or activities in the same
geographical region, or have economic features that would cause
their ability to meet contractual obligations to be similarly
affected by changes in economic, political or other conditions.
Concentrations indicate the relative sensitivity of the Group's
performance to developments affecting a particular industry. The
Group do not consider that others are engaged in similar business
activities, but do monitor the situation.
24 Capital management
The Group's policy is to maintain a strong capital base to
maintain investor, creditor and market confidence and to sustain
the future development of the business. The impact of the level of
capital on shareholders' return is also recognised and the Group
recognises the need to maintain a balance between the higher
returns that might be possible with greater gearing through future
borrowings and the advantage and security afforded by a sound
capital position.
The Group manages the capital structure and makes adjustments to
it in the light of changes in economic conditions and the risk
characteristics of the underlying assets. In order to maintain or
adjust the capital structure, the Group may adjust the amount of
dividends paid to shareholders in the future, return capital to
shareholders, issue new shares, or sell assets to reduce debt.
25 Subsequent events
Operations on capital
On 6 January 2014, the Company was admitted to trading on the
AIM Market of the London Stock Exchange Plc and raised GBP
137,195,122.
On 6 January 2014, the Extraordinary General Meeting decided to
increase the share capital of the company by an amount of USD
1,600,609 in order to raise it from its former amount of USD
1,561,828 to USD 3,162,437, with a total share premium of USD
223,097,977.
General operations
On 6 January 2014, the contingent liability in relation with the
payment of a success fee amounting to GBP 363,866 (USD 595,831)
became due and payable as the IPO was successfully completed.
On 7 January 2014, the Company reimbursed the loans owed to JKD
Capital, CVI CVF 11 Lux Securities Trading S. à r. l. and the
shareholder loans detailed in Note 9 under Current interest-bearing
loans and borrowings.
On 7 January 2014, the Company reimbursed an amount of USD
40,000,000 to DPEI, corresponding to the liability recorded for the
termination of the warrants within other payables as at year end
2013 (see Note 13).
On 4 March 2014, RM2 S.A. and RM2 USA Inc. signed a Transfer
Agreement with PRC, where RM2 S.A. exercised its post-default
remedies with respect to the Purchased Assets and RM2 USA Inc.
acquired the right of PRC in the Purchased Assets (refer to note
9).
On 16 April 2014, the board of directors of RM2 International
S.A decided the transfer, without dissolution, of all of its
assets, liabilities (net assets contributed are valued at USD
200,787,792) and contingent liabilities to a new limited liability
company (société à responsabilité limitée) to be incorporated under
the name of RM2 HOLDING S. à r.l. ("the Receiving Company"), in
exchange for the issue of shares in the receiving company. This
operation shall be treated with retroactive effect as from 1 April
2014. This plan will be submitted for approval by a future
extraordinary general meeting of shareholders. The share capital of
the receiving company will be of USD 200,000,000.00 represented by
324,366,137 shares fully paid up, without nominal value and with a
total issue premium of an amount equal to the balance of the
Contribution Plan and the share capital.
On 1 May 2014, RM2 Canada entered into a lease for a new
production facility in Ontario, Canada for a 265,000 square foot
production facility. The machinery owned by RM2 Canada will be
moved from its existing site before 30 June 2014.
Grants of Options and Restricted Shares
Pursuant to the authorisations granted by Extraordinary General
Meetings of Shareholders certain grants of options and Restricted
Shares have been made subsequent to 31 December 2013 as described
below:
A. The share capital of the Company was increased by an amount
of USD 23,164 on 24 January 2014 raising it from its former amount
of USD 3,162,438 to USD 3,185,602, through the issuance of
2,316,405 Restricted Shares to certain directors. Such Restricted
Shares have the same vesting conditions as the December 3, 2013
grant of Restricted Shares (see Note 19.3). The information
necessary to valuate these Share-based payments are as follows:
2014
Restricted
Shares
Weighted average exercise price GBP 0.01
Expected volatility 17%
Expected life of restricted shares 5 and 10
years
Risk-free interest rate 1.9%-2.6%
Expected dividend yields Nil
----------------------------------- -----------
B. The share capital of the Company was increased on 3 April
2014 by an amount of USD 9,000 raising it from its former amount of
USD 3,185,602 to USD 3,194,602, through the issuance of 900,000
Restricted Shares. Such Restricted Shares vest on the third
anniversary of the grant date, so long as the beneficiaries remain
employees in good standing on the vesting date. This restricted
shares issued pursuant to this award were originally part of the
November 19 option award described in Note 19.3. The information
necessary to valuate these Share-based payments are as follows:
2014
Restricted
Shares
Weighted average exercise price USD 0.01
Expected volatility 17%
Expected life of restricted shares 3 years
Risk-free interest rate 1.1%
Expected dividend yields Nil
----------------------------------- -----------
C. On 5 May 2014, 600,000 Options were granted to certain
employees, vesting over three years in equal tranches on the
anniversary of the grant date and with a strike price equal to fair
market value on the date of grant. The vesting of such options also
automatically accelerates should the volume-weighted average price
of the Company's shares exceed the Placing Price of GBP 0.88 by
100% for a period of 30 consecutive calendar days. See Note 19.3.
The information necessary to valuate these Share-based payments are
as follows:
2014
Restricted
Shares
Weighted average exercise price USD 0.01
Expected volatility 17%
Expected life of restricted shares 3 years
Risk-free interest rate 1.1%
Expected dividend yields Nil
----------------------------------- -----------
D. The share capital of the Company was increased on 30 May
2014, by an amount of USD 23,170 raising it from its former amount
of USD 3,194,602 to USD 3,217,772, through the issuance of:
a. 1,000,000 Restricted Shares to certain employees having the
same vesting conditions as the December 3, 2013 grant of Restricted
Shares. Such Share-based payments remain in effect so long as the
beneficiaries remain employees in good standing on the vesting
date). See also Note 19.3. The information necessary to valuate
these Share-based payments are as follows:
2014
Restricted
Shares
Weighted average exercise price GBP 0.01
Expected volatility 17%
Expected life of restricted shares 5 and 10
years
Risk-free interest rate 1.9%-2.6%
Expected dividend yields Nil
----------------------------------- -----------
b. 1,317,000 Restricted Shares to certain employees which vest
on the third anniversary of the grant date. Such Share-based
payments remain in effect so long as the beneficiaries remain
employees in good standing on the vesting date. 1,017,000 of the
restricted shares issued pursuant to this award were originally
part of the November 19 option award described in Note 19.3 The
information necessary to valuate these Share-based payments are as
follows:
2014
Restricted
Shares
Weighted average exercise price USD 0.01
Expected volatility 17%
Expected life of restricted shares 3 years
Risk-free interest rate 1.1%
Expected dividend yields Nil
----------------------------------- -----------
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAAKSFSLLEFF
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