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Legendary Invest PLC (LEG)

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Tuesday 27 August, 2013

Legendary Invest PLC

Final Results

RNS Number : 5102M
Legendary Investments PLC
27 August 2013
 



27 August 2013

Legendary Investments Plc

 

("Legendary" or the "Company")

RESULTS FOR THE YEAR ENDED 31 MARCH 2013

 

EXECUTIVE CHAIRMAN'S STATEMENT

 

During the year Legendary continued to make good progress against its stated strategy, which is to deliver high returns through proactive investment in growth companies. One investment was exited generating a 4.3x return; several new investments were made; and existing investments continued to make notable progress including three successful listings on public exchanges, all validating Legendary's strategy. While the value of total assets of the Company has not increased, we believe that this belies considerable value that has been generated with many of the investee companies during the year.

 

Listed Investee Company updates

 

Listing and exit of Fastnet Oil and Gas PLC

 

In the first half of the year, in June 2012, Terra Energy Limited, in which Legendary secured a EUR30,000 investment in May 2011, was renamed Fastnet Oil and Gas PLC ("Fastnet") and listed on both AIM and the Enterprise Securities Market of the Irish Stock Exchange.  In the second half of the year, Legendary exited this investment realising £119,000, or a return of 4.3x in 17 months. This was one of Legendary's first investments following its recapitalisation in early 2011, and, while small in size, demonstrates the returns available from Legendary's investment strategy.

Listing of Medgold Resources Limited

 

In the second half of the year, in December 2012, Medgold Resources Limited ("Medgold"), in which Legendary invested £50,000 in July 2011, listed on the TSX-V in Canada by reversing into Emerick Resources Corp. Based on the closing price of the new Medgold, Medgold Resources Corp., following the listing, Legendary's return was 1.9x in 16 months.

 

Medgold is run by an experienced management team and focuses on gold exploration and development in Portugal, Italy and Spain. Since its listing, Medgold has continued to make progress. It is reviewing several projects in Spain, with licences under application in Galicia, targeting the Pinzas area, which hosts similar geology to the Boticas project in Portugal, for which Medgold has been awarded an exploration licence.

 

Along with the entire sector and with the fall in the gold price, Medgold's share price has fallen since its listing. As mentioned above, however, Medgold continues to make progress, and Legendary continues to hold its stake.

 

New investment and listing of Sula Iron and Gold PLC

 

In the first half of the year, in July 2012, Legendary invested £50,000 in a convertible loan note in a pre-IPO funding round for Sula Iron and Gold PLC ("Sula"). Legendary also received warrants in Sula. In the second half of the year, in October 2012, Sula was admitted to trading on AIM, and Legendary invested another £50,000 for further shares and warrants.  Based on the October price, Legendary had generated a return of 1.7x on its initial investment in 3 months and 15% on its further investment.

 

Sula is an iron ore and gold exploration company focused on Sierra Leone. Its main project is the Exploration Licence EL54/2011, in Northern Sierra Leone, which is 153 square kilometres in area and occupies a position south of Lake Sonfon and north of African Mineral Limited's Tonkolili iron ore mine which has a JORC compliant ore resource of 12.8 billion tonnes. Sula has defined an exploration programme to delineate a maiden JORC compliant iron resource in 2013. A drilling programme has been commenced targeting iron mineralisation and five target areas have been identified as hosting potential for hard rock gold mineralisation.

 

In common with the sector as a whole, Sula's share price has declined since its listing. With drilling underway, however, and Sula's plans to delineate a JORC compliant resource this year, Legendary continues to hold its stake.

New investment - Creon Resources PLC

 

In the second half of the year, in January 2013, Legendary purchased 19m shares in Creon Resources PLC ("Creon"), listed on AIM, in exchange for cash and shares in an off-market transaction. Creon was recapitalised last year and its strategy was reset to focus on resources and resource infrastructure investments. We consider that Creon's new shareholders and management are financially strong, well-connected and experienced.

 

Shortly after the recapitalisation, Creon invested in a new oil and gas rig construction joint venture with a multi-billion dollar Singaporean listed shipbuilder, Yangzijiang Shipbuilding (Holdings) Ltd. The new oil and gas rig joint venture then secured its first rig order of US$170m for delivery in mid-2015. The development of the new construction yard is progressing with land compacting continuing and skidway construction expected to commence shortly. The rig order itself is also progressing well, now with an enhanced specification. Following Legendary's investment, Creon acquired a 49% stake in a ferrous metal and ferrous ore trader, MGR Resources. This investment is expected to provide Creon with near term recurring income.

 

Creon, with its new shareholders, management and strategy is just beginning what we believe will be an exciting journey. The sectors that it has targeted are buoyant and are expected to remain so. The ticket size in the sectors, at around the US$200m mark for rigs, is an order of magnitude larger than Creon's current market capitalisation of around the £19m mark. While rig builds take two to three years, Creon has secured immediate recurring income through its investment in MGR Resources. Legendary is assisting Creon in various ways to add value rapidly and is pleased to have secured the investment at an early stage in a promising company.

 

While all the above investments are now listed, Legendary identified and made the investments at an early stage for the investee companies prior to listing, and in the case of Creon, shortly after its recapitalisation and new management and strategy were put in place. Legendary assisted and continues to assist the investee companies.

While all the listings were successful, and one exit generated a 4.3x return, Medgold's and Sula's prices have suffered with the mining sector as a whole. Both companies are making progress and should they achieve their stated goals, we believe that their share prices should have meaningful upside potential. The investment in Creon was made near the start of its re-launch and given its shareholders, management, strategy and the sectors in which it invests, we believe that there is both relative and absolute substantial upside potential with the investment being the largest Legendary has made to date at £125,000. 

Unlisted Investee Company updates

Legendary has three unlisted investments, VirtualStock Limited ("VS"), Bosques Energeticos EBE S.A. de C.V. ("Bosques") and Manas Minerals LLC ("Manas").

New investment - VirtualStock Limited

In October 2012, Legendary negotiated a small stake in VirtualStock Limited for a consideration which included just over £50,000 in cash. In addition, Legendary negotiated a warrant to double its stake in VS at an increased valuation. VS is a cloud-based software as a service business ("SaaS") which enables retailers to increase dramatically the range of products they sell online without the associated costs of and risks of holding inventory.

Subsequent to the investment, VS reached a significant milestone in delivering services to its growing list of clients by implementing an "end-to-end turn-key solution" for the online branded product range of Bear Grylls Ventures LLP through its website, www.beargryllsstore.com.

Post the year end in June 2013, VS signed a landmark three-year renewable contract with one of the UK's largest retailers. The contract is to supply a SaaS solution which will enable the retailer to increase significantly its online presence by expanding its non-stocked product range supplied by hundreds of its drop-ship suppliers. The VS solution will form a key component of the retailer's online technology infrastructure, providing its suppliers with a tool which enables them to manage fully the selling of their products through itscorporate website.

 

Increasing online presence and channel integration is currently the greatest single challenge facing the retail sector and VS has a best in class, enterprise solution that is able to interface with any organisation's existing IT infrastructure. This contract win with one of the UK's largest retailers underlines the adaptability, robustness and scalability of the VS solution.

VS current clients include Viking (stationery), Office Depot, Playtex, Wonderbra, Craghoppers, Bear Grylls and, as mentioned above, one of the UK's largest retailers. VS also has a growing sales pipeline. VS is revenue positive and profitable. It is in an exciting space and is entering an exciting growth phase which may potentially lead to value crystallisation in the near to medium term. We believe that Legendary's stake could be worth a multiple of Legendary's current market capitalisation. Legendary continues to assist VS in its rapid development.

 

Existing investment - Bosques Energeticos EBE S.A. de C.V.

 

Bosques has made steady progress over the last few years. It has a research, development and innovation based philosophy and has scored many "firsts" in Mexico and the region: it was the first company to germinate pongamia seeds; it was the first to root successfully pongamia scions; and it was the first to have pongamia flowers (within 2.5 years of planting compared with the normal time of 4-5 years). In addition, it is ahead of the curve in innovating a multi-plant strategy using pongamia, jatropha and castor.

Bosques currently has 11ha under cultivation with 16,000 pongamia trees, 20,000 jatropha plants and 3,000 castor plants. Having proven its techniques on the 11ha test plantation, it is currently seeking partners with which to cultivate pilot plantations of several thousand ha.

Legendary has a substantial minority stake of 40% in Bosques. Companies similar to Bosques in size of test plantation and number of plants are valued at several million pounds. We believe that Legendary's stake could be worth a multiple of Legendary's current market capitalisation. Value crystallisation might be expected in the medium term. Legendary continues to assist Bosques in its development.

 

New investment - Manas Minerals LLC

 

In July 2012, Legendary invested £100,000 into Kyrgyzstan based Manas. Manas owns the Padsha Ata Licence to mine for coal in the Asksy region of Jalal-Abad. Soviet surveys suggest that the region contains 182 million tonnes of coal reserves of which 116 million is of coking coal quality. Jalal-Abad is strategically located within 200 km of the Chinese border. Legendary's investment is by way of a convertible loan note and a warrant. Together the convertible loan and warrant should give Legendary at a return of at least 1.75x on the initial investment.

 

In 2012, Manas engaged Wardell Armstrong to conduct a Competent Persons Report and a technical work program was commenced. The initial results suggest that the coal formation is more intense than suggested by the Soviet era studies and the thickness of the seams is greater than suggested by those studies. The value of the coal is estimated in at over US$15bn (US$85 per tonne). Value crystallisation is expected in the near to medium term. Legendary continues to assist Manas.

 

Other Investments

 

Also, in July 2012, Legendary invested £50,000 in Regency Mines PLC ("Regency"), listed on AIM. Regency is a mineral exploration and development company focusing on nickel and cobalt in Papua New Guinea (alongside JV partner Direct Nickel) and gold, flake graphite and base metals in Australia. Regency has not performed as expected. It is not a core holding.

 

As reported in the interim statement, progress at Undrawn Reality Limited ("UR") slowed considerably. It became evident that the timeframe to develop UR's game had extended significantly. Legendary concluded that it would not receive a return on UR and wrote its investment down to zero. The loss was minimal at £2,000, and the write-down freed time for Legendary to focus on more promising investments.

 

Financial Review

 

Legendary values its investments conservatively at the price of recent investments, unless a transaction has taken place or they are listed, in which case the transaction or market values are used. Consequently, the unlisted investments are held at the price of recent investments while the listed investments are marked to market.

 

Legendary ended the year with £509,000 (2012: £143,000) of investments, £126,000 of cash, including £25,000 held in the client account of Legendary's accountants and shown on the balance sheet as debtors due within one year (2012: £534,000) and £649,000 of total assets (2012: £688,000).

 

During the year, Legendary made a net gain on investments of £38,000 (2012: nil). This comprised of realised gains net of impairments of £90,000 (Fastnet and UR), and net unrealised losses of £52,000 (all the other investments).

 

Administrative costs were £196,000 (2012: £189,000). Of these, share based payments accounted for £15,000 (2012: £19,000), leaving cash administrative costs as £181,000 (2012: £170,000). In line with paying cash remuneration to directors only when investment realisations are made at a profit, the directors received £23,200 (2012: £300) of cash remuneration. Removing the share based payments and the directors' cash remuneration, administrative costs were somewhat lower at £158,000 (2012: £170,000). The fall is accounted for due to one-off costs in 2012. Within the £158,000, general administration, accountancy and certain professional services costs rose as did travel costs due to increased activity.

 

The overall operating loss was £158,000 (2012: £189,000). There were nil finance charges (2012: £nil).

 

Board Changes

 

At the start of November 2012, I was appointed the Executive Chairman.

 

In October 2012, Rajesh Rai resigned as an Executive Director of Legendary. We take this opportunity to thank Rajesh for his work on behalf of the Company.

 

OUTLOOK

 

Legendary's proactive investment strategy is making progress and gaining momentum. The listings of Fastnet, Sula and Medgold demonstrate Legendary's ability to source investments that offer substantial returns. The exit from Fastnet demonstrates Legendary's ability to realise those returns. The investment in Creon was made at an early stage, and given the strength of Creon's shareholders and management, and the sector in which it operates, we believe significant potential exists for multiple returns.

 

VirtualStock is another extremely exciting prospect, positioned at the centre of the fast growing and exciting cloud based SaaS sector. Since Legendary's investment, VirtualStock has made dramatic progress including signing a potentially transformational contract with one the UK's largest retailers. VS is already revenue generating and profitable. We believe value crystallisation may be expected in the near to medium term.

 

Notable progress has been made at Bosques with it being ahead of the curve in innovation and achieving several firsts in its field. Work continues at Manas.

 

While activity has increased, costs have been kept low with directors' remuneration linked directly to the performance of the Company.

 

The Board looks confidently to the future.

 

Extracts of the audited results appear below and a full version will be available on the Company's website www.legendaryinvestments.co.uk

For further information, please contact:

Contact:



Legendary Investments Plc

Zafar Karim / Thomas Reuner

 

020 8201 3536

Grant Thornton UK LLP

 

Colin Aaronson/ Melanie Frean / Jen Clarke

 

020 7383 5100

SI Capital                

 

Nick Emerson/ Andrew Thacker

01483 413500

Newgate Threadneedle

Caroline Evans-Jones

020 7653 9850

 

 



 

About Legendary Investments Plc

 

Legendary is a proactive investment company that focuses on making investments in and assisting companies which exhibit the potential to generate returns of many multiples through capital appreciation.  Typically, Legendary invests in small companies where there are clear catalysts for value appreciation and the companies are operating in sectors exhibiting long term growth. Examples of such sectors include technology, energy, natural resources and mining. Legendary is incorporated in the UK, which is its principal country of operation.



 

PROFIT AND LOSS ACCOUNT

For the year ended 31 March 2013

 

 

 

 

Note

2013

£'000

2012

£'000

Net gain on investments


38

-



                           

                           

 

Administrative expenses


(196)

(189)



                           

                           



         

         

Operating loss


158)

(189



         

         









Loss on ordinary activities before taxation

2

(158)

(189)

Tax on loss on ordinary activities

4

-

-



         

         

Loss for the financial year


(158)

(189)



         

         

Loss per share




-       basic and fully diluted (pence)

5

(0.01)p

(0.01)p

 

A separate statement of recognised gains and losses has not been prepared as the Company has no recognised gains or losses in the current or prior period other than the loss noted above.

 

All activities derive from continuing operations.

 

 



 

BALANCE SHEET

As at 31 March 2013

 



2013

2012


Notes

£'000

£'000













 

FIXED aSSETS




Tangible Assets

6

4

5

Investments

7

236

66



         

         



240

71

 

cURRENT aSSETS




Debtors due within one year

9

35

6

Investments

8

273

77

Cash at bank and in hand


101

534



         

         



409

617

 

CREDITORS: amounts falling due within one year

10

(65)

(36)



         

         

NET CURRENT ASSETS


344

581



         

         





CREDITORS: Amounts falling due after more than one year

11

(30)

(30)



         






NET ASSETS


554

622



         

         

 

 

Capital and reserves




Called up share capital

12

1,643

1,575

Share premium account

13

8,316

8,309

Share warrant and option reserve

14

171

156

Profit and loss account - deficit

15

(9,576)

(9,418)



         

         

Equity Shareholders' FUNDS

16

554

622



         

         

 



 

CASH FLOW STATEMENT

For the year ended 31 March 2013

 


Notes

2013

£'000

2012

£'000

Net cash (OUTFLOW)/inflow from operating activities  

17

(140)

98









CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT




Purchase of office equipment


-

(5)

Fixed Asset investments during the year


(172)

(66)





Net cash outflow from capital expenditure and financial investment


(172)

(71)





MANAGEMENT OF LIQUID RESOURCES




Current Asset investments made during the year


(196)

(77)





 

Financing




Issue of new ordinary shares


75

615

Expenses paid in connection with share issues


-

(31)





(DECREASE)/increase iN CASH IN THE YEAR


(433)

534





 

RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS


2013

£'000

2012

£'000

(Decrease)/Increase in cash in the year


(433)

534

Cash outflow from  increase in liquid resources


196

77



        


               


(237)

611



        

        





Net funds/(debt) at start of year                                                                        19


581

(30)



        

        

Net funds at end of year


344

581



        

        

 

 


 

1              SEGMENTAL ANALYSIS



 

The Company only has one class of business and only operates within the United Kingdom.

 

 

2              LOSS ON ORDINARY ACTIVITIES BEFORE TAX

2013

£'000

2012

£'000

Loss on ordinary activities before tax  for  the year  is stated after charging:



Depreciation of tangible fixed assets

1

-

Auditor's remuneration - statutory audit

18

30

- Services relating to taxation

5

5

- Other services

7

1


        

        

 

 

3              DIRECTORS

 

2013

Number

2012

Number

Number of employees

The average monthly number of employees including directors, during the year was:

3

3





£'000

£'000

Directors' emoluments

                Directors' fees

23

-




 

Other than the gross director's fees of £23,230 (2012: £300) accrued in the year there were no staff costs paid during the year (2012: £nil). The Company did not incur any social security costs in relation to the fees. With respect to directors' share based payments, see Note 14.

 

 

4              TAX ON LOSS ON ORDINARY ACTIVITIES

 

2013

£'000

2012

£'000

Analysis of charge in the year:



Current tax

-

-

Deferred tax

-

-


         

         


-

                          -




 



 


2013

£'000

2012

£'000




                Loss on ordinary activities before tax

(158)

(189)




                Loss on ordinary activities multiplied by standard rate of corporation tax in the UK 24% (2012: 26%)

(38)

(49)

Expenses not deductible for tax purposes

3

19

                Tax losses unutilised

35

30




Current tax charge for year

-

-




 

As at 31 March 2013 the Company had losses of approximately £6.2m (2012: £6m) available to carry forward against future income. A deferred tax asset of £1.4m (2012: £1.5m) is not recognised in respect of these losses due to the uncertainty as to the utilisation of the losses in the foreseeable future.

 

Future tax charges will be dependent on the split of profits for tax purposes as between revenue and capital items, and the utilisation of losses incurred to date.

 

 



 

5              LOSS PER ORDINARY SHARE

 

2013

£'000

2012

£'000

Loss for the financial year

(158)

(189)


        

        

Average number of ordinary shares in issue (basic) ('000)

1,586,758

1,113,917




                Basic and diluted loss per share (pence)

(0.01)p

(0.01)p


        

        

 

The loss attributable to ordinary shareholders and weighted average number of ordinary shares for the purposes of calculating the diluted loss per share are identical to those used for basic loss per ordinary share. This is because the exercise of share options and other benefits would have the effect of reducing loss per share and is therefore not dilutive under the terms of FRS 22 Earnings Per Share.

 



 

6              TANGIBLE FIXED ASSET

 


Office Equipment

£'000




                COST



                1 April 2012


5




               At 31 March 2013


5







                DEPRECIATION



                At 1 April 2012


-

               Charge for the year


1




               At 31 March 2013


1




                NET BOOK VALUE



                At 31 March 2013


4




               At 31 March 2012


5



       

 

 

7              FIXED ASSET INVESTMENTS

 


Other

Investments

Shares




                VALUATION



                At 1 April 2012


66

                Additions


172

                Unrealised loss

 


(2)




               At 31 March 2013


236



       




 

The unrealised loss relates to the investment in Undrawn Reality limited ("UR"). The Board of Legendary has concluded that it will no longer receive a return on UR in the foreseeable future and has written its investment down to zero.

 



 

 

The Company holds more than 20% of the equity (and no other share or loan capital) of the following undertakings:-

 

Other Participating Interest:

Class of

holding

Proportion directly held

Nature of

Business





Bosques Energeticos EBE S.A. de C.V.

Ordinary

40%

Development and cultivation of renewable energy crops

 

Bosques Energeticos EBE S.A. de C.V. in which the Company has more than 20% interest, is not treated as an associated undertaking. All investments are measured at fair value through profit and loss as detailed in the accounting policy.

 

 

8              CURRENT ASSET INVESTMENTS

2013

£'000

2012

£'000




AIM listed investments

 

         

220

-

Other listed investments

53

             -

Unlisted investments

-

             77





273

77


       

       




 

 

9              Debtors: amounts due within one year

2013

£'000

2012

£'000




                Prepayments

10

6

                Other Debtors

25

-





35

6


       

       

 

£25,000 (2012: £nil) of the other debtors represents the cash balance held in the client account of the Company's accountants, PSB Accountants Limited, as at the year end date. The balance is payable on demand. Due to their short term nature, the carrying value as above approximates to fair value.

 



 

 

10           CREDITORS: amounts falling due within one year

 

2013

£'000

2012

£'000

 

Trade creditors

21

17

Accruals

44

18

Other creditors

-

1


        

        


65

36


        

        

 

Trade creditors and accruals represent the Company's financial liabilities measured at amortised cost.  Due to their short term nature, carrying value approximates to fair value.

 

 

11           CREDITORS: amount falling due after more than a year

 

2013

£'000

2012

£'000

 

Loan

30

30




 

The loan represents the funding of £30,000 that was raised in August 2010 by way of a loan facility. The facility bears no interest and has no fixed date for repayment. The loan is not expected to be paid in the foreseeable future and therefore has been classified as due in more than one year as the Directors believe this most appropriately reflects the period over which the loan will be repaid. As part of the terms of the loan, Legendary granted 260,000,000 warrants over new ordinary shares at an exercise price of 0.1p per share. At the date the warrants were granted, the Company's share price was 0.075p. The warrants expire in August 2015. 

 

 

12           CALLED UP SHARE CAPITAL

 

2013

£'000

2012

£'000

                AUTHORISED

3,000,000,000 ordinary shares of £0.001 each

3,000

3,000


       

       

ALLOTTED, ISSUED AND FULLY PAID



1,643,349,016 (2012: 1,575,167,198) ordinary shares of £0.001 each

1,643

1,575


       

        

 

 

13           SHARE PREMIUM

 

2013

£'000

 

2012

£'000

 

                At start of the year

8,309

8,309

                Premium on  Ordinary Shares Issued of 0.001 each

7

-


        

        

                At end of the year

8,316

8,309


        

        

 

Transaction costs amounting to £nil (2012: £nil) in regard to issue of shares were deducted from equity and charged against the share premium account.

 

On 22 January 2013, the Company issued 68,181,818 ordinary shares of £0.001 each at a price of £ 0.0011 per share. These shares were issued for as part consideration for the purchases of 19,230,769 shares of Creon Resources PLC. Share issue costs were £nil.

 



 

14           SHARE BASED PAYMENT

 

Share Options

 

The Company has unapproved and approved share option schemes in which the directors participate.

 

Under the Company's approved share option plan, the Company grants options and shares to certain directors and employees of the Company. If the options remain unexercised for a period of 10 years from the date of grant, the options lapse. The options are exercisable immediately on grant.

 

Details of Directors' outstanding share options as at the year ended are shown below.

 


31 March 2013

31 March 2012


Exercise


Exercise



price


price



per share

Number

per share

Number






Zafar Karim

0.20p

106,000,000

0.20p

72,000,000

Thomas Reuner

0.35p

5,000,000

0.35p

5,000,000

Thomas Reuner

0.20p

27,000,000

0.20p

11,000,000








138,000,000


88,000,000











 

Rajesh Rai resigned on 18 October 2012. Rajesh Rai's 32,000,000 share options, with an exercise price of 0.20p, have not lapsed following his resignation.

 

Movements in ordinary share options outstanding



31 March 2013


31 March 2012



Weighted average exercise price


Weighted average

 exercise price


Number

pence

Number

pence

At start of the year

120,000,000

0.20p

80,000,000

0.20p

Granted during the year

50,000,000

0.20p

35,000,000

0.20p

Granted during the year

-


5,000,000

0.35p


                       




At end of the year

170,000,000

0.20p

120,000,000

0.20p











 

All options were exercisable at the end of the year.

 

Last date when exercisable

Exercise price

Granted No.

Lapsed No.

Exercised

Outstanding at 31 March 2013







1 January 2021

0.20p

80,000,000

-

-

80,000,000

15 May 2021

0.35p

5,000,000

-

-

5,000,000

5 January 2022

0.20p

35,000,000

-

-

35,000,000

2 January 2023

0.20p

50,000,000

-

-

50,000,000









170,000,000



170,000,000







 

Post the balance sheet date, in June 2013, Zafar Karim and Thomas Reuner received an additional 60,000,000 and 20,000,000 options, respectively, with an exercise price of 0.20p each.



 

 

Fair value

 

The fair value of the options is estimated at the date of grant using a Black-Scholes option pricing model that uses assumptions noted in the table below. No performance conditions were included in the fair value calculations.



Expected life of options (years)

5

Exercise price

0.20p

Share price at grant date

0.08p-0.10p

Risk free rate

 0.88% -1.04%

Expected share price volatility

        50%

Expected dividend yield

0.00%

Estimate of % of options vesting

100%

Assumed staff attrition

0%

Fair value of options

           0.0248p

 

The Company uses historical data to estimate option exercise and employee termination within the valuation model. Expected volatilities are based on implied volatilities as determined by simple average of a sample of listed companies base in similar sectors. The risk free rate for the period within the contractual life of the option is based on the UK gilt yield curve at the time of the grant.

 

The share based payment charged for the year was £12,000 (2012: £19,000).

 

Warrants

 

Other than the employee share options set out above, warrants have been granted with exercise prices and dates shown in the table below.

 

Last date when exercisable

Exercise price

Granted No.

Lapsed No.

Exercised

Outstanding at 31 March 2013







5 August 2015

0.10p

260,000,000

-

-

260,000,000

6 August 2015

0.20p

10,000,000

-

-

10,000,000

24 November 2015

0.15p

25,000,000

-

-

25,000,000

25 November 2013

0.15p

30,000,000

-

-

30,000,000

29 November 2015

0.20p

20,000,000

-

-

20,000,000

7 March 2014

0.16p

225,000,000

-

-

225,000,000

17 January 2015

0.15p

37,500,000

-

-

37,500,000









607,500,000



607,500,000







 

Movements in warrants outstanding



31 March 2013


31 March 2012



Weighted average exercise price


Weighted average

 exercise price


Number

pence

Number

pence

At start of the year

570,000,000

0.13p

570,000,000

0.13p

Granted during the year

37,500,000

0.15p

-

-






At end of the year

607,500,000

0.13p

570,000,000

0.13p






 

The fair value of warrants granted in the year was £3,000 (2012: £nil).



 

 

Fair value

 

The fair value of the warrants is estimated at the date of grant using a Black-Scholes option pricing model that uses assumptions noted in the table below. No performance conditions were included in the fair value calculations.



Expected life of warrants (years)

2-3

Exercise price

0.10p - 0.20p

Share price at grant date

0.08p - 0.11p

Risk free rate

0.35%

Expected share price volatility

40%

Expected dividend yield

0.00%

Estimate of % of options vesting

100%

Assumed staff attrition

0%

Fair value of options

0.065p

 

Other Information

 

The market price of the Company's ordinary shares ranged from a high of 0.1750p to a low of 0.0750p during the year.

 

 

14           PROFIT AND LOSS ACCOUNT

 

2013

£'000

2012

£'000

                At the start of the year

(9,418)

(9,229)

                Loss for the financial year

(158)

(189)




                At the end of the year

(9,576)

(9,418)




 

 

15           RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

2013

£'000

2012

£'000

                Opening shareholders' funds

622

177

                Loss for the financial year

(158)

(189)

Share issue

75

615

Share warrant and option charge

15

19




                Closing shareholders' funds

554

622




 

 



 

16           RECONCILIATION OF OPERATING LOSS TO NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES

2013

£'000

2012

£'000

                Operating loss

(158)

(189)

Share option/warrant charge

15

19

Share issue costs

-

31

Depreciation

1

-

                Increase in creditors

29

1

                (Increase)/decrease in debtors

(29)

236

                Loss on investment

2

-




                Net cash (outflow) /inflow from operating activities 

(140)

98




 

17           ANALYSIS OF NET FUNDS

 

At 31 March 2012

£'000

Non-cash Movements

£'000

Cash flows

£'000

At 31 March 2013

£'000

                Cash at bank and in hand

534

-

(433)

101

                Current asset investments

77

-

196

273

                Other loan

(30)

-

-

(30)







581

-

(237)

344











In the prior period net funds included fixed asset investments of £66K. Fixed asset investments have been excluded in both periods to reflect more properly that these are not liquid resources.

 

 

18           RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS

2013

£'000

2012

£'000

                (Decrease)/Increase in cash in the year

(433)

534

                Cash outflow from  increase in liquid resources

196

77




               

(237)

611







                Net funds/(debt) at start of year

581

(30)




                Net funds at end of year

344

581




 

Current asset investments of £196,000 (2012: £77,000) are disclosed on the face of the cash flow statement within management of liquid resources in 2013. The reallocation of the 2012 cash flows from capital expenditure and financial investment results in more accurate disclosure of the nature of these items.

 

19           FINANCIAL INSTRUMENTS

 

Loans and receivables

Loans and receivables include cash at bank and in hand and other debtors. Financial liabilities at amortised cost include trade creditors, accruals and loans.

 

Borrowing facilities

At the year end the Company had no overdraft facility (2012: £nil).



 

20.          FINANCIAL INSTRUMENTS (continued)

 

Capital Management

The Company is financed primarily with equity capital, which is then utilised to meet operating expenses and make investments. Investments are financed primarily from equity capital, though debt may be utilised where it is felt that it is prudent to do so.

 

Interest rate risk

The Company had no fixed or floating rate financial liabilities at 31 March 2013 (2012: £nil).

 

Currency risk

The Company makes investments in both UK and foreign companies. In addition, the companies in which the Company invests may or may not have exposure to foreign currency exposure. In this regard the Company has foreign currency exposure. Currency exposure is one the factors considered when making investments, and as such it is implicitly managed at the point of investment.

 

Liquidity risk

The Company makes investments in unlisted and listed entities. Consequently the Company is exposed to the liquidity risk to the extent that it may not be able to find buyers for its unlisted investments and liquidity in its listed investments may be low. Therefore there can be no certainty that the Company would be able to exit its investments.

 

Market risk

The Company monitors the value of its investments on a regular basis, and takes action to decrease or dispose of investments when it deems appropriate.

 

Credit risk

The bank account of the Company and of the client account held by PSB Accountants Limited is held with well established financial institutions of high quality credit standing.

 

Fair value hierarchy

Fair values have been measured at the end of the reporting period as follows -


Level 1

'Quoted
prices'
£'000

Level 2

'Observable prices'
£'000

Level 3

'Unobservable prices'
£'000

 

Total
£'000

Year ended 31 March 2013





Financial assets
At fair value through profit and loss


273


-


236


509

All fixed asset investments are classified as level 3. The movement on level 3 assets are disclosed in Note 7.

Financial assets and liabilities measured at fair value are disclosed using a fair value hierarchy that reflects the significance of the inputs used making the fair value measurements, as follows -

•  Level 1 - Unadjusted quoted prices in active markets for identical asset or liabilities ('quoted prices'),

•  Level 2 - Inputs (other than quoted prices in active markets for identical assets or liabilities) that are directly or indirectly observable for the asset or liability ('observable inputs'), or

•  Level 3 - Inputs that are not based on observable market data ('unobservable inputs')

The Level 3 investments have been valued at the price of recent investment, net asset value or discounted cash flow based on post period end redemptions in line with the Company's accounting policies and IPEVC guidelines.

 

21.  POST BALANCE SHEET EVENTS

Post the balance sheet date, in June 2013, Zafar Karim and Thomas Reuner received an additional 60,000,000 and 20,000,000 options, respectively, with an exercise price of 0.20p each.

 

22.  CONTROLLING PARTY

In the opinion of the Directors there is no immediate or ultimate controlling party.

 

 


This information is provided by RNS
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