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ArcticZymes Technologies — Annual Report 2017
Apr 13, 2018
3538_10-k_2018-04-13_abf95875-5b53-4910-90de-393af0db46a1.pdf
Annual Report
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ANNUAL REPORT 2017
Index
| Board of Directors' report 2017 | 05 |
|---|---|
| Consolidated financial statements | 21 |
| Notes to the financial statements for 2017 | 27 |
| Financial statements — parent company | 53 |
| Notes to the financial statements for 2017 — parent company | 58 |
| Statement by the Board of Directors and CEO | 63 |
| Independent auditor's report | 64 |
1. About Biotec Pharmacon ASA
Biotec Pharmacon ASA is a biotechnology company which is developing, producing and marketing immune modulating beta-glucans and novel recombinant enzymes. The Company is organised in two business areas, each managed as a separate operating unit.
Biotec BetaGlucans AS
All products are based on immune modulating 1,3/1,6 beta-glucans from yeast. The Company has developed active pharmaceutical ingredients produced in-house, in addition to a variety of ingredients and end-user products targeting the following segments:
- ∙ Advanced wound care the Company has launched Woulgan® Gel which contains its proprietary SBG® (soluble beta-glucan) ingredient
- ∙ Adjuvant to vaccines against cancer SBG® beeing used in a clinical trial for Neuroblastoma in children
- ∙ Animal health e.g. in fish farming to strengthen the animal's immune system
- ∙ Consumer health nutritional products used as functional ingredients
Significant growth opportunities Novel
portfolio of products
ArcticZymes AS
The Company develops and markets recombinant enzymes for use in life science research, molecular diagnostics and bio-manufacturing. The enzymes primarily derive from cold-water marine species and offer novel functionality to its customers. Products include:
- ∙ SAP and derived kits clean up prior to Sanger sequencing and Next Generation Sequencing (NGS) processes
- ∙ Cod UNG utilised in viral and other molecular diagnostic assays
- ∙ Double-strand specific DNases and derived kits – removal of DNA from RNA samples. Removal of DNA in PCR master mixes and reagents
- ∙ Polymerases enabling technology development for life science and MDx (Molecular Diagnostics)
- ∙ Proteinase direct lysis and nucleic acid sample prep
- ∙ Salt Active Nuclease (SAN) removal of nucleic acids during manufacturing of vaccines, viruses, recombinant proteins and other reagents
Other polymerases, ligases and reverse transcriptases and non-enzyme products represent additional key products that are more long-term in the development pipeline.
In addition, the Company is developing second generation products within several categories based on input and collaboration with customers.
Biotec Pharmacon ASA
Biotec Pharmacon ASA is the parent holding company providing support functions to the subsidiary operating companies, including distribution, administration, finance, IT and QA.
The headquarter and laboratories are located at the SIVA Innovation Centre close to the University and University Hospital in Tromsø, Norway while the production facilities are in adjacent premises. The majority of employees and associates work in or from Tromsø except for parts of the marketing and sales teams that are located in their core markets in Europe and the US. In addition, the Company has established distribution centres in the United States, in the Netherlands and in Denmark to serve its customers more efficiently.
2. Beta-glucans
Biotec BetaGlucans AS (Biotec) develops applications based on different qualities of beta-glucans including the patent protected soluble beta-1,3/1,6-glucan (SBG®). Biotec produces the active ingredient SBG® at its facilities in Tromsø, which are certified according to GMP as well as ISO 13485. The Company has also GMP+ certification for feed ingredient products.
Woulgan
Woulgan® Gel is CE-certified as a class III, rule 13, medical device with a pharmaceutical ingredient indicated for use in wounds such as diabetic foot ulcers, venous leg ulcers and pressure ulcers, but also burns and other acute wounds. Woulgan® Gel is an active treatment containing SBG® for wounds where healing is stalled or expected to progress slowly.
Woulgan® Gel is a unique and well documented product with a large market potential. The average cost of treating chronic wounds ranges between EUR 6,000 to EUR 10,000. In the UK, more than GBP 5 Billion is spent on treating wounds annually. Woulgan® is proven to have both health and social economic benefits in the markets where it is sold.
The key objectives for 2017 were to achieve reimbursement in UK, increase Woulgan's availability on regional tenders in the Nordics and gain commercial traction in Germany.
Biotec's application to create a new category of "Bioactive Soluble Beta-Glucan Gel" in the UK was rejected in May. However, following an appeal by Biotec, the application was re-opened and in October the NHS confirmed Woulgan's Drug Tariff listing effective from 1st December. Access to the market and reimbursement prompted Biotec's UK partner to step up their marketing and sales activities with a dedicated sales team launching Woulgan® in January 2018.
Biotec commissioned clinical evaluations and efficacy studies in Germany, UK and the Nordics during 2017. In UK, 150 patients with different wound types were treated with Woulgan® and compared with 150 patients treated with standard care. The results presented in March 2018 showed a substantial, powerful healing effect by treating stalled wounds with Woulgan®. The 12-week healing rate with more than 60% healed wounds is compelling and consistent with efficacy data from the randomised, controlled trial by
Zykova et al, 2014. Results from these studies will be submitted for peer review publications once all data are fully analysed.
During the first half of 2017, German clinicians provided commercial proof of concept for Woulgan® Gel with a repeated usage of the product. Over the second half of 2017, uncertainties regarding current reimbursement of products with active claims and gels created challenges to receive reimbursement and thus to prescribe Woulgan® Gel. The reimbursement requirements are expected to be clarified in 2018 and may demand Biotec to apply for "Annex Va" (Positive List of medical devices that are approved for reimbursement) with the G-BA, the authority responsible for the reimbursement of medical devices. Biotec and its Nordic partner continued to target key tenders to open the different regions for promotion of Woulgan®. Several workshops for Key Opinion Leaders (KOLs) and wound care personnel have been carried out in the Nordic region with the aim of creating sales leads and faster local adaptation.
The ongoing Post-Market Clinical Follow-up study (PMCF) increased the patient enrolment in 2017 after the protocol was amended in April 2017 to broaden the inclusion criteria. The primary goal of the study, as required by the Notified Body and MHRA approving Woulgan®, is to
Woulgan reimbursement in the UK
M-Gard supply agreement in the US
demonstrate safety and usefulness of Woulgan®as compared to a treatment regime with a standard hydrogel dressing. Biotec expects to finalize recruitment to the PMCF study during 2018.
Biotec continued focusing on development of new wound care products using the betaglucan technology platform. Product development of the dry layer dressing was moved forward with investment in pilot production equipment as this concept represents the largest value potential, while the spray product development was halted. Several formulations of the dry layer product were tested, and the development is continuing in 2018. New technologies and formulations will be tested with the goal of identifying novel, high-productioncapacity technologies, as well as securing patent protection.
Adjuvant in cancer treatment
The collaboration with Memorial Sloan Kettering Cancer Center
(MSKCC) within immunotherapy of cancer continued during 2017. Biotec's SBG® is used in combination with cancer vaccine against high-risk neuroblastoma in children. The study has been expanded several times, and enrolment has increased significantly over the last two years. More than 160 patients were accrued per end of 2017. Biotec expects the study to further increase in 2018. The study has demonstrated that the combination of neuroblastoma vaccine and SBG® has excellent safety profile and holds promising results with respect to treatment effect. Biotec will use 2018 to renew the current clinical trial agreement and to review commercial possibilities
M-Glucan® (Animal health)
Biotec's animal health product M-Glucan® is well adopted in the market after re-introduction in 2014. A renewed one-year supply agreement was signed with a major customer in the
second half of 2017. Sales in 2017 was lower than 2016 primarily caused by lower demand from Biotec's main customers, who faced lower demand from the marine farmers.
Biotec continued discussions with its raw material supplier to look at other areas where both parties jointly can create value.
M-Gard® (Consumer health)
M-Gard® is Biotec's brand for the consumer health market. M-Gard® is an immunomodulatory betaglucan that has the ability to enhance the body's vital defence mechanisms against pathogens such as bacteria and virus. Studies show that M-Gard® has excellent immune enhancing properties. Biotec signed a supply agreement with a US company in the third quarter.
3. Enzymes ArcticZymes AS develops and markets a growing portfolio of novel recombinant enzymes primarily for use within molecular diagnostics and research, and more recently bio-manufacturing such as gene therapy. The total enzymes market for molecular diagnostics and bio-manufacturing is USD 1.8 Billion with a CAGR of 5-12% depending on enzyme type.
New markets
Novel enzymes such as Salt Active Nucleases (SAN) offer cost effective and technical improvements in the bio-manufacturing of bio-products (viruses) compared to existing products. Such viruses carry modified DNA (i.e. therapeutic DNA payloads) and deliver the DNA at the patient's cells, which need treatment. Future advances in gene therapy will open new ways to cure devastating diseases.
Traditional markets
Traditionally molecular enzymes have been mostly applied to PCR-based methods (Polymerase Chain Reaction), which is still a growing market as the technology is constantly being developed and expanded into new applications. The market is complex as the technology includes multiple stages of specialized solutions, which allows for vast multitude of possible variations. PCR based methods as well as other amplification technologies, are fundamental to DNA sequencing technologies.
Focus for the industry is towards fast pace innovation of Next Generation Sequencing (NGS) technologies with the prospect of wide adoption and accessibility. It is the clinical utility of the technology that makes DNA sequencing the fastest growing molecular technology today. ArcticZymes' existing as well as newly designed enzymes are attractive, integral key components and offer unique properties that are exploited by leading international companies. In most cases, ArcticZymes' enzymes are integrated into and are critical components driving technologies in other companies, or molecular diagnostic tests and platforms.
Portfolio of products
ArcticZymes specializes in enzymes originating from organisms that have evolved in the cold Arctic water environments. Arctic organisms need enzymes that are optimally active at low temperatures. This often leads to a temperature sensitivity making enzymes intolerable to heat. Therefore, enzymes may quickly be inactivated by adding heat after use, contrary to most competitive products that must be physically removed by time-consuming and polluting separation processes.
The heat lability feature of such enzymes is particularly well suited to enhance molecular technologies. Their procedures normally include several sequential steps with each step utilising an enzyme which must be inactivated before moving onto the next step. Heat labile enzymes enable streamlining of molecular processes as inactivation is simply achieved by heating the sample prior to the next step.
Other unique features such as activity at lower temperatures, high-salt and unique specificities offer new and novel ways to utilize ArcticZymes' enzymes in next generation technologies or new molecular assay product developments.
ArcticZymes' has extended innovation beyond enzymes originating in cold aquatic environments. Discovery efforts are underway to prospect other harsh environments for unique enzymes with synergistic and commercially attractive properties.
ArcticZymes has developed a solid knowledge of genetic modification to adapt the enzyme's ability to specific market needs. Most of the enzymes are produced in-house by recombinant technology which ensures complete control over the production process. This makes the Company independent of supplies for biological raw materials and thereby lowers environmental impact. IsoPol
Recombinant production also enables the production of far more consistent, robust and cleaner enzymes compared to natural sources. It also facilitates scalable manufacturing and economies of scale ensuring uninterrupted supply and security of supply.
Customer focused
Since December 2015, ArcticZymes is ISO 9001 certified for the entire business. In elevating its quality standard, it recently achieved ISO 13485 accreditation.
In addition to developing unique enzymes and production methods based on its proprietary technology, ArcticZymes' developments are driven by customers' needs. ArcticZymes works in consultation with its customers in combining its enzymes seamlessly with customer's application-based technologies. This puts ArcticZymes in a unique position to offer its customers a more comprehensive and functionalized solution, while continuously improving its patent protection.
The Company has strong patent protection for its products and is currently marketing several unique genetically modified enzymes derived from diverse organisms, as well as enzymebased kits and non-enzyme based support products.
ArcticZymes has local business development and customer support representatives in Europe, North America and Asia to assist global business coverage. To support sales activities, ArcticZymes has established strategically located warehouses and logistic centres in Europe and in the United States. These logistics centres have made it possible to standardize products, build inventories and safety stocks, improve cost effectiveness of logistics, and most importantly, ensure on demand delivery to customers on a global basis.
Products are sold mainly to larger corporations that use the enzymes in their own production or sell products under a private label. Enzymes are also sold to end users via own online store to promote the Company in the market. Contribution from the online store is limited in volume but is still an important marketing route in establishing new commercial relationships.
Research and development
To develop new product candidates, ArcticZymes participates actively in scientific collaborations, which includes UiT (The Arctic University of Norway). The Norwegian Research Council often supports such cooperation, i.e. the MDxPol program. This contributes to development of new product candidates for future commercialisation and expansion of the academic environment, which is important for development and application of novel products.
The Company receives project funding from the Norwegian Research Council for independent projects. These are mainly projects that are further down the value chain, intended to develop enzymes from promising product candidates into marketable products. Beyond national funding, ArcticZymes has received EU Horizion2020 funding since 2016. This puts ArcticZymes on the international map with more than 15 other partners.
Going forward, ArcticZymes is well positioned to launch an expanded portfolio of new unique enzymes and synergistic products in established as well as in new markets.
SAN HQ Elisa
BST+
IsoPol
SD+
SAN HQ
4. Consolidated financial statements
The financial statements for 2017 are prepared under the assumption of going concern. The basis for this assumption is the Company's plans, capital situation and the long-term forecasts.
The Board is not aware of any matters of significant importance for the Company's status beyond what is disclosed in the financial statements.
Consolidated statement of profit & loss
The financial statements for the Biotec Pharmacon group are prepared in accordance with International Financial Reporting Standards (IFRS). The Biotec Pharmacon group had sales revenues of NOK 66.7 million in 2017, compared to NOK 71.2 million in 2016. Distribution of sales revenues in 2017 was NOK 35.1 million in the beta-glucans' segment and 31.6 million in the enzymes' segment, compared to NOK 42.9 million and NOK 28.2 million in 2016, respectively. Beta-glucans' sales were 19% down compared to previous year, primarily due to lower sales of animal health products. The enzymes' segment had a sales growth of 10% compared to 2016.
Net profit after tax for the Group was NOK -24.8 million compared to NOK -20.4 million in 2016. The operating profit (EBIT) for the Beta-glucan segment was NOK -20.4 million in 2017 compared to NOK -18.2 million in 2016. The enzymes' segment made an operating profit of NOK 4.6 million versus NOK 3.1 million in 2016. Unallocated corporate overhead expenses for 2017 were NOK 9.1 million compared to NOK 5.9 million in 2016.
Total recognized expenses for R&D within the Group in 2017 was NOK 23.5 million, compared to NOK 23.9 million in 2016. R&D expenses within both segments are close to unchanged in 2017 compared to 2016. Most of the R&D costs are expensed in 2017 except for NOK 2.4 million, which fulfilled the criteria for capitalisation. For 2016, NOK 1.1 million was capitalized
.
Cash Flow
The Group had a cash flow from operating activities of NOK -22.1 million in 2017, compared to NOK -19.3 million in 2016. Cash flow from investing activities in 2017 was NOK -5.0 million against NOK -1.3 million in 2016. For 2017, investing activities were split between fixed assets of NOK 2.6 million and development of new products being prepared for sale of NOK 2.4 million. Net cash flow from financing activities was zero in both 2017 and 2016.
Net change in cash during 2017 was NOK -27.1 million, compared to NOK -20.7 million in 2016.
23.5 MNOK in R&D expenses
Net profit of -24.8 MNOK
Consolidated statement of financial position
Total equity for the Group amounted to NOK 44.8 million at the end of 2017, compared to NOK 68.1 million at the beginning of the year. Equity ratio was 73%. Cash and cash equivalents amounted to NOK 30.6 million per 31.12.2017, compared to NOK 57.7 million at the end of previous year. The Group has no interest-bearing debt.
The parent company
Sales revenues for the parent company Biotec Pharmacon ASA was NOK 15.1 million in 2017. Net profit was a loss of NOK 8.3 million. Sales revenues are intercompany sales of services to the subsidiaries and rental income from leased offices. For 2016, intercompany sales revenues were NOK 14.5 million.
Deferred tax assets were excluded from the balance sheet at the end of 2009. As of 31.12.2017, the forecast for future taxable profit remains uncertain, and the Company has therefore decided not to recognize this as an asset. A new assessment will be carried out during 2018.
The Board proposes that the 2017 loss in the parent company Biotec Pharmacon of NOK 8.3 million is covered by allocation from retained earnings.
66.7 MNOK in sales revenues
5. Shareholder matters
The Biotec share ended 2017 with a closing price of NOK 6.70, compared to NOK 11.30 at the end of 2016. The lowest closing price during the fiscal year was NOK 5.25, while the highest closing price was NOK 11.85 per share.
The Board encourages employees in the Group to become shareholders in the Company and has regularly supported employees to buy discounted shares within current tax-free rules. In 2017, employees were not given the possibility to buy discounted shares. The Board intends to reintroduce this in 2018. Since 2010, the Company has offered regular share option programs for employees in the Group. A total of 927,000 share options granted in 2015 and 2016 are outstanding per end of 2017. Deadline for exercising options granted in 2015 is 31 May 2018, while options granted in 2016 may be exercised between 1 June 2018 and 31 May 2019. The share option program is also described in note 15 "Executive remuneration policy".
Director Inger Rydin has been a member of the Board since 14 May 2014. Inger Rydin owns and operates Inger Rydin AB. Inger Rydin AB is also an advisor to Biotec BetaGlucans AS and billed services for NOK 0.01 million 2017 and NOK 0.02 million in 2016.
Director Martin Hunt has been a member of the Board since 11 May 2017. Martin Hunt owns and operates Invictus Management Ltd in London. For services and expenses outside his board engagement, Invictus Management Ltd has invoiced NOK 0.1 million in 2017. No other transactions with close associates were carried out in 2017.
As of 31.12.2017, the Company has 43.944.673 shares registered with a nominal value of NOK 1.00 and 2.239 VPS-registered shareholders.
6. Risk
The Group is exposed to various types of financial and operational risks.
Within the business area beta-glucans, the Company has signed agreements with partners for distribution and sales of the
Company's wound care product Woulgan® in UK, Scandinavia and certain channels in Germany. The Company is in a commercialisation phase and there is uncertainty related to sales until commercial viability is proven in these markets.
There are several barriers for small companies being a one-product supplier in a fragmented and highly competitive area despite having a superior product.
There are also risks associated with further rollout of the product to other markets and regions. Regulatory processes and national reimbursement may also be factors that can delay commercial sales of Woulgan®.
Biotec is also a supplier of beta-glucans to the animal and consumer health markets. Both markets are limited in number of customers and the Company is accordingly dependent on these customers to maintain and grow sales.
The Company is dependent upon certain key suppliers, and especially the raw material supplier for production of beta-1,3/1,6-glucan. The Company may, if necessary, change supplier over time, but cannot exclude that such changes will have a temporary negative impact on the Company's operations within the beta-glucan area.
There are risks associated with development and sales in ArcticZymes. The Company has agreements with large multinational customers, but there is no purchase obligation attached to these agreements. The Company is actively entering new agreements to broaden the revenue base. Success relating to introduction of new products in the portfolio is not guaranteed and sales will be dependent on customer implementation.
Future changes in taxes and regulations may represent a risk for the Company having a global scope for both business areas.
The Group seeks to protect its intellectual property through patent protection. There will always be a risk that other companies may dispute such rights or that other players secure rights that could restrict the technological freedom. There is also a risk that the Group must take on costs to defend its rights against patent infringement.
Biotec is a small company, with a few employees that are critical to the success of the Company's operations. Key personnel are involved in the development of products, technologies, production processes, quality control, purchasing, and marketing, as well as other activities of the Company. The Company is also dependent on recruiting new, qualified personnel. There is no guarantee that the company will be able to retain key personnel or to be able to recruit new key personnel in the future.
Currency risk arises since most of the Company's revenues are in USD and EUR, while most expenses are accrued in NOK. A higher exchange rate for the USD and EUR against the NOK will affect the outcome in a positive direction, while lower rates will have the opposite effect. The Group's exposure to currency will in the long run be altered if new product releases provide a change in the currency mix.
The Company has no interest-bearing debt. Financial investments are carried out only in the form of bank deposits, certificates or money market funds with short maturities. The Group is thus not very exposed to interest rate risk. The Company shall not be exposed to any financial risk in the stock market. The Group has limited credit risk and recognized no losses on accounts receivable in 2017 compared to NOK 5 thousand in 2016.
The Board considers the liquidity situation to be acceptable, provided that the estimated cash flow from operations and investment activities follows established plans and budgets for 2018.
7. The working environment and staff
At the end of 2017, there were 44 full- and part time employees in the Group. There were 11 employees in the parent company Biotec Pharmacon ASA, 14 in Biotec BetaGlucans AS, 19 employees in ArcticZymes AS, a decrease of 2 employees during the year.
Lost days due to sick leave in 2017 totalled 268 days, compared to 384 days in the previous year. Accumulated sick leave was 2.6% compared to 3.9% in 2016. No specific initiatives were taken during the year to influence the working environment, but risk
analyses were conducted to avoid work-related accidents. There were no work accidents causing injury to personnel or damage to machinery during 2017.
The Company is committed to recruit and develop employees of both genders. Equality between the genders is practiced in a way that men and women are considered equal regarding career opportunities and salary. At the end of the year, there were 18 women and 26 men employed within the Group. The Board consists of 5 directors, of which 2 of the 4 shareholder-
elected representatives are women. The employeeelected representative and the employee-elected observer are both female.
The Company's activities have limited negative impact on the environment. Excipients and chemicals that cannot be recycled in the production processes are collected and returned to an approved manufacturer for environmentally and sound recycling. Procedures for the collection of various types of waste from laboratories and for separation by source of waste from other operations are established. Use of energy in the production process is modest.
9. Principles of corporate governance
8. Natural
environment
The Board has established principles for corporate governance in line with the Norwegian Accounting Act § 3-3 and the Norwegian Code of Practice for Corporate Governance. A detailed description of application of these principles is published on the Company's website www.biotec.no under Investors / Corporate information.
10. Corporate social responsibility
Biotec Pharmacon ASA is committed to develop socially valuable products, such as health products to improve people's life, and life science products making laboratory processes and diagnosis more efficient and cost effective. The Company avoids using scarce natural resources and emphasizes this by approving suppliers. Ethical guidelines are established, and all employees have confirmed individually in writing that they, through their position will work to prevent
discrimination, promote equality, promote human rights and combat all forms of corruption. Size and business scope of the Company is limited compared with most other listed companies. Thus, thorough reporting in this area is not yet a priority.
A summary of relevant topics with status for Biotec Pharmacon at the end of 2017 is listed in the table below.
| Product groups | Woulgan wound gel | Patient-friendly, without any harmful side effects, beneficial health economics to society |
|---|---|---|
| Feed Ingredient (M-Glucan) | Natural immune-stimulating product without antibiotics for fish and animal feed |
|
| Nutraceuticals (M-Gard) | Natural immune-stimulating ingredients to improve overall physical health |
|
| Recombinant enzymes | Efficient products in micro scale for research and diagnostics |
|
| Customers | In Europe | Feed producers, distributors of drugs and devices, research and diagnostic companies, hospitals and home care providers |
| In USA | Manufacturers of pharmaceuticals, nutraceuticals, and laboratory kits |
|
| Code of Conduct, Ethical guidelines | Policy established and adopted in writing by all employees |
Integrated part of the company's quality system |
| Combating corruption | Described in Code of Conduct | The Company is opposed to all forms of corruption. The Company's relatively small turnover limits possibilities for any corruption. |
| Human rights | This may be an issue for goods produced outside Norway |
The Company uses a sub-supplier from the EU for raw materials for animal feed additives. Generally good follow-up of labour and human rights in this country. |
| Employees' labour rights | Norwegian labour rules apply to all employees |
Employees are included in the management of the Company. Elected representatives are part of Board of Directors and the Working environment committee. Collective agreement with Tekna includes about 50% of all employees. |
| Climate impact | Marginal emissions to air and water, both in terms of production and transportation. |
The Company's main raw material is a residual product from other industrial activities. |
11. Outlook
Since Woulgan® received its CE-mark, Biotec has invested resources to demonstrate the clinical and commercial potential of the product in selected markets. Experiences so far conclude that additional commercial power is needed to fully realise Woulgan's potential, including a sisable sales force to move sales in fragmented markets. The investments needed to build strong market channels and salesforce cannot be justified for a single-product business, hence Biotec is searching for partners who can support across several markets or globally.
Biotec is currently reviewing its go-to-market strategy for Woulgan® to ensure further growth of the franchise with less consumption of the company's financial resources.
During the last few years, ArcticZymes has turned around from a loss-making business to an attractive and profitable growth opportunity. During 2018, the target is to grow the business organically with an active pipeline of new product launches. ArcticZymes will also broaden its approach going forward and develop value from technologies and competences that reside with new partners and complimentary products.
The strategy is to generate further shareholder value by growing ArcticZymes to a leading molecular biology company rather than just a niche supplier of cold adapted enzymes. To reach this goal within the next few years, which is beyond the 2020 ambition, ArcticZymes needs to invest more resources into R&D, commercial activities and potential M&A opportunities.
Erik Thorsen
Inger Rydin
Martin Hunt
Director
Chairman
Biotec is currently evaluating strategies for bringing the novel "neuroblastoma" treatment regime to the next level of early regulatory approval. Biotec is in discussions with Memorial Sloan Kettering Cancer Center to renew the current clinical trial agreement and review commercial possibilities.
The Group will in 2018 focus on cash consumption and expects operating cash flow to be significantly less than in 2017.
Overall, it is the Board's view that the achived milestones and the priorities adopted during 2017 represents a solid foundation for future growth and development of shareholders' values.
The Board would like to thank all employees for their efforts in 2017.
Masha Strømme
Christian Jørgensen
Director
Director, employee representative
Ingrid Skjæveland
Consolidated statement of profit & loss
- January till 31. December
| (Amounts in NOK 1 000) | Note | 2017 | 2016* |
|---|---|---|---|
| Sales revenues | 5 | 66 686 | 71 190 |
| Other revenues | 19, 24 | 6 072 | 7 433 |
| Total revenues | 72 758 | 78 624 | |
| Cost of goods | 11 | -21 927 | -26 736 |
| Personnel expenses | 15,18,21,23,25 | -46 030 | -43 151 |
| Depreciation and amortization | 6,7,23 | -1 978 | -1 912 |
| External services | 23 | -8 660 | -8 596 |
| Other operating expenses | 22, 23 | -19 078 | -19 168 |
| Total operating expenses | -97 673 | -99 562 | |
| Operating profit/loss(-) | -24 915 | -20 939 | |
| Financial income | 20 | 807 | 584 |
| Financial expenses | 20 | -695 | -34 |
| Profit/loss(-) before income tax | -24 803 | -20 389 | |
| Income tax expense | 16, 17 | 0 | 0 |
| Net profit/loss(-) | -24 803 | -20 389 | |
| Net profit/loss(-) tributable to: | |||
| Non-controlling interests | 135 | 91 | |
| Equity holders of Biotec Pharmacon ASA | -24 938 | -20 480 | |
| Earnings per share: | |||
| Basic EPS from net profit/loss | 9 | -0.56 | -0.46 |
| Diluted EPS from net profit/loss | 9 | -0.56 | -0.46 |
* represented due to currency. See note 5 and note 19
Consolidated statement of other comprehensive income
| (Amounts in NOK 1 000) | Note 2017 |
2016 |
|---|---|---|
| Net profit/loss for the year | -24 803 | -20 389 |
| Items that may be reclassified to profit & loss | 0 | 0 |
| Total comprehensive income | -24 803 | -20 389 |
| Comprehensive income attributable to: | ||
| -shareholders of parent company | -24 938 | -20 480 |
| -non-controlling interests | 135 | 91 |
| Total comprehensive income | -24 803 | -20 389 |
Consolidated statement of financial position
As of 31. December
| (Amounts in NOK 1 000) | Note | 2017 | 2016 |
|---|---|---|---|
| ASSETS | |||
| NON-CURRENT ASSETS | |||
| Machinery and equipment | 6 | 4 589 | 3 168 |
| Intangible assets | 7 | 7 119 | 5 465 |
| Other non-current assets | 18 | 9 | 37 |
| Total non-current assets | 11 717 | 8 671 | |
| CURRENT ASSETS | |||
| Inventory | 11 | 5 011 | 2 775 |
| Accounts receivable and other receivables | 8, 10 | 14 363 | 16 716 |
| Cash and cash equivalents | 12 | 30 593 | 57 672 |
| Total current assets | 49 966 | 77 163 | |
| Total assets | 61 683 | 85 834 | |
| EQUITY AND LIABILITIES | |||
| EQUITY | |||
| Share capital | 9,13 | 43 945 | 43 945 |
| Premium paid in capital | 133 378 | 133 378 | |
| Retained earnings | -133 223 | -109 815 | |
| Non-controlling interests | 715 | 580 | |
| Total equity | 44 813 | 68 087 | |
| CURRENT LIABILLITIES | |||
| Accounts payable and other current liabilities | 8,14 | 16 870 | 17 746 |
| Total current liabilities | 16 870 | 17 746 | |
| Total equity and liabilities | 61 683 | 85 834 |
Tromsø, 14 March 2018
Erik Thorsen Chairman
Martin Hunt Director
Ingrid Skjæveland Director
Masha Strømme Director
Christian Jørgensen CEO
Consolidated statement of financial position Consolidated statement of changes in equity
- January till 31. December
| (Amounts in NOK 1 000) | Note | Share capital |
Premium paid in capital |
Retained earnings |
Non controlling interest |
Total equity |
|---|---|---|---|---|---|---|
| Equity as of 01.01.2016 | 43 945 | 133 378 | -91 062 | 489 | 86 749 | |
| Comprehensive income 2016 | -20 480 | 91 | -20 389 | |||
| TRANSACTIONS WITH OWNERS: | ||||||
| Purchase own shares | 13 | -230 | -230 | |||
| Sale own shares | 13 | 184 | 184 | |||
| Employees' share options | 13, 21 | 1 773 | 1 773 | |||
| Total transactions with owners | 0 | 0 | 1 727 | 0 | 1 727 | |
| Equity as of 31.12.2016 | 43 945 | 133 378 | -109 815 | 579 | 68 087 | |
| Comprehensive income 2017 | -24 938 | 135 | -24 803 | |||
| TRANSACTIONS WITH OWNERS: | ||||||
| Employees' share options | 13,21 | 1 529 | 1 529 | |||
| Total transactions with owners | 0 | 0 | 1 529 | 0 | 1 529 | |
| Equity as of 31.12.2017 | 43 945 | 133 378 | -133 224 | 715 | 44 813 |
Consolidated cash flow statement – Group
- January till 31. December
| (Amounts in NOK 1 000) | Note | 2017 | 2016 |
|---|---|---|---|
| CASH FLOW FROM OPERATING ACTIVITIES | |||
| Profit / loss(-) before tax adjusted for: | -24 803 | -20 389 | |
| Depreciation and amortization | 6, 7 | 1 978 | 1 912 |
| Employees' options, share-based payment expense | 13, 21 | 1 529 | 1 773 |
| Changes in working capital: | |||
| Inventory | 11 | -2 236 | 129 |
| Account receivables and other receivables | 10 | 2 354 | -6 127 |
| Trade and other payables | 14 | -877 | 3 424 |
| Net cash flow from operating activities | -22 056 | -19 278 | |
| CASH FLOW FROM INVESTING ACTIVITIES | |||
| Investment in machinery and equipment | 6 | -2 629 | -300 |
| Investment in intangible assets | 7 | -2 422 | -1 054 |
| Changes in long-term receivables | 28 | 7 | |
| Net cash flow from investing activities | -5 024 | -1 347 | |
| CASH FLOW FROM FINANCING ACTIVITIES | |||
| Purchase own shares | 13 | -230 | |
| Sale own shares | 13 | 184 | |
| Net cash flow from financing activities | 0 | -46 | |
| Net change in cash during the year | -27 079 | -20 671 | |
| Cash and cash equivalents as of 1 January | 12 | 57 672 | 78 343 |
| Cash and cash equivalents as of 31 December | 30 593 | 57 672 |
Notes to the financial statements for 2017
Note 1 General information
Biotec Pharmacon ASA (the Company or the Group) is a scientific-based industrial company that develops and supplies immune modulating beta-glucans and cold adapted enzymes, including special formulated products derived from these ingredients. The Company has two business areas operated by two separate operating units:
- ∙ Beta-glucans for use in medical device, as nutrition supplements, as ingredients in cosmetics and animal health products
- ∙ Enzymes for use in molecular research and diagnostics
The beta-glucan segment is organized in the wholly owned subsidiary Biotec BetaGlucans AS, while the subsidiary ArcticZymes AS operates the marine enzymes' segment. The parent company Biotec Pharmacon ASA acts as a holding company with overall management and support functions, while the two subsidiaries carry out the operating activities.
Biotec BetaGlucans AS has developed an advanced gel (Woulgan®) for treatment of stalled wounds, cooperates in an early stage project within immunotherapy of cancer, and has activities for nonpharmaceutical purposes, including manufacturing and sales of proprietary beta-glucans, which strengthens the immune system in humans and animals.
The products in the enzyme segment are sold directly and through distributors to the research market and to larger laboratories for use in molecular biology, specifically related to testing of DNA and RNA samples.
Biotec Pharmacon ASA's headquarter is in Tromsø, Norway, co-located with the subsidiaries ArcticZymes AS and Biotec BetaGlucans AS.
Biotec Pharmacon ASA is listed on Oslo Stock Exchange under the ticker: BIOTEC.
The Board approved the consolidated financial statements on 14 March 2018.
Note 2 Summary of significant accounting policies
The following describes the principal accounting policies applied in the preparation of the consolidated financial statements. These principles have been consistently applied to all periods presented, unless otherwise stated.
Note 2.1 Financial reporting framework
The consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations of IFRS as adopted by the EU. The consolidated financial statements are prepared on a historical cost basis.
The preparation of financial statements in conformity with IFRS requires the use of estimates. Furthermore, the application of the Company's accounting principles requires management to exercise judgment. For further information about this, see note 4.
The consolidated financial statements are prepared under the going concern assumption.
Note 2.2 Principles for consolidation
Subsidiaries
The consolidated financial statements include the parent company Biotec Pharmacon ASA, a wholly owned subsidiary Biotec BetaGlucans AS, and the 96% owned subsidiary ArcticZymes AS. Reference is made to the parent company's note 8 for details on subsidiaries.
Subsidiaries are consolidated from the date of which control is transferred to the Group and deconsolidated when control ceases.
The acquisition method is used to account for acquisitions of subsidiaries. The cost of an acquisition is measured at the fair value of assets provided as consideration for the acquisition, equity instruments issued and liabilities incurred or assumed on transfer of control. Identifiable assets acquired, and liabilities assumed are recorded at fair value at the acquisition date, irrespective of any non-controlling interests. The acquisition cost above the fair value of identifiable net assets acquired is recorded as goodwill. If acquisition cost is below the value of its net assets, the difference is accounted under profit and loss.
Acquisition-related expenses are expensed when incurred.
When step-by-step acquisition of a business occurs, the equity from previous acquisition is re-measured at fair value on the acquisition date by recording the change in value in the income statement.
Intercompany transactions, balances and unrealized gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated, and may be considered as an impairment indicator for the asset transferred. Accounting policies of subsidiaries will be adjusted when deemed necessary to ensure consistency with the Group's accounting policies.
Note 2.3 Operating segment information
The operating segments in these statements are consistent with the internal reporting provided to the chief operating decision maker. The operating decision maker, who is responsible for allocating resources and for assessing performance of the business segments, has been identified as the Board of Directors. An operating segment is engaged in providing products or services that are subject to risks and returns that are different from other operating segments. Biotec Pharmacon presents segment information for the businesses beta-glucans and enzymes. See note 5 for segment information.
Note 2.4 Foreign currency translation
Functional and presentation currency
The accounts of the individual entities within the Group are measured by using the currency of the main economic environment in which the entity operates (its functional currency). The consolidated financial statements are presented in Norwegian kroner (NOK), which is the functional currency for all Group companies.
Transactions and financial position items
Foreign currency transactions are translated into the functional currency using the exchange rate at the transaction date. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary items (assets and liabilities) in foreign currency at year-end, are recorded in the consolidated statement of profit & loss.
Foreign exchange gains and losses relating to loans, expenses, cash and cash equivalents are presented (net) as financial income or expenses. The rest of foreign exchange gains and losses relating sales or cost of goods are presented (net) under sales revenues or cost of goods.
Note 2.5 Machinery and equipment
Machinery and equipment in the Group include primarily production equipment, office equipment and furnishing. These assets have a carrying value of historical cost less depreciation and amortization. Acquisition cost includes expenses directly attributable to the acquisition of the asset.
Subsequent expenses are included in the asset's carrying value or recognized as a separate asset, when it is deemed probable that future economic benefits associated with the item will benefit the Group and that expenses can be measured reliably. Other repair and maintenance expenses are recognized in the consolidated profit & loss statement for the period in which they are incurred.
Assets are depreciated by the linear method, depreciating the acquisition expense to the residual value over the estimated useful life, which are for each group of assets:
| Machinery / Equipment | 5-10 years |
|---|---|
| Vehicles | 3-5 years |
| Furniture and office equipment | 2-5 years |
The actual useful life and residual values of the assets are tested for impairment when there is indication of impairment and adjusted if necessary. If the carrying value of an asset exceeds the estimated fair value, the carrying value is amortized immediately to fair value. Reference is made to note 2.7.
Gains and losses on disposals are recognized as the difference between selling price less transaction costs and the carrying value.
Note 2.6 Intangible assets
Product rights
Through the acquisition of Marimol AS in 2010, intangible assets involved were classified as product rights. Marimol held an exclusive option on the commercial exploitation of the research arising from the project MARZymes, which is the marine bioprospecting initiative by the Arctic University of Norway. The option gives the Company the opportunity to utilize these products commercially against a license fee, which may increase future earnings for the Company. After the acquisition, Marimol AS was merged into ArcticZymes AS. The project MARZymes ended in 2015. Parts of the Polymerase project launched in 2016 originates from MARZymes project. Additional enzyme candidates may also become commercially attractive.
Research and development, patents and licenses Research expenses are expensed when incurred. Development of products are capitalized as intangible assets when:
- ∙ It is technically feasible to complete the intangible asset enabling it for use or sale.
- ∙ Management intends to complete the intangible
asset and use or sell it.
- ∙ The Company has the ability to make use of the intangible asset or sell it.
- ∙ A future economic benefit to the Company for using the intangible asset may be calculated.
- ∙ Available technical, financial and other resources are sufficient to complete the development and use of or sale of the intangible asset.
- ∙ The development expense of the intangible asset can be measured reliably.
Intangible assets are depreciated by the linear method, depreciating the acquisition expense to the residual value over the estimated useful life, which are for each group of assets:
| Product rights | 5-10 years |
|---|---|
| Own product development | 10-12 years |
Other development expenses are expensed when incurred. Previously expensed development costs are not recognized in subsequent periods. Capitalised development costs are depreciated linearly from the date of commercialization over the period in which they are expected to provide economic benefits. Capitalised development costs are tested annually by indication for impairment in accordance with IAS 36.
The Company has capitalized development expenses for Woulgan®, rSAP, HL-dsDNase, SAN Elisa-kit, San HQ and Polymerases when they meet criteria for capitalisation. Other development costs are expensed when incurred.
Note 2.7 Financial assets
Note 2.7.1 Classification
Classification of financial assets depends on the purpose of the asset and is categorised according to IAS 39 in one of the following categories:
- ∙ At fair value through profit & loss are financial assets held for trading. A financial asset is classified in this category if acquired with the purpose to generate profit from short-term price fluctuations
- ∙ Loans and receivables are non-derivative financial assets with fixed or defined payments that are not quoted in an active market
- ∙ Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as Held-to-Maturity
- ∙ Financial instruments available for sale are investments in short term debt and equity securities
- ∙ Other liabilities are most of the Company's liabilities such as accounts payable and other current liabilities
Note 2.7.2 Initial recognition and measuring Loans and receivables are initially recognized at fair value plus directly attributable transaction expenses. Subsequently, these instruments are measured at their amortized cost using the effective interest rate method. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate method.
Other liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. Subsequently these liabilities are measured at their amortized cost using the effective interest rate method. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate method.
Note 2.7.3 Impairment of financial assets The Group assesses at the end of the reporting period whether there is objective evidence that a financial asset or group of financial assets are impaired. An impairment loss of a financial asset or group of financial assets are recognized only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition (a "loss event") and that loss event (or events) affects future estimated cash flows in a way that can be measured reliably.
The criteria used to determine whether there is objective evidence of an impairment loss include:
- ∙ Significant financial distress of the issuer or debtor.
- ∙ Breach of contract, such as breach of contract or non-payment of due interest or principal.
- ∙ The group, of economic or legal reasons relating to the borrower's financial difficulty, gives the borrower a concession that the lender would not otherwise have considered.
- ∙ It is likely the borrower will enter into bankruptcy or financial restructuring.
- ∙ Observable data indicating that there has been a measurable decrease in the estimated future cash flows from a group of financial assets after the initial recognition of those assets, although the decrease can not be identified with the individual financial assets in the group.
Under the category loans and receivables, measured amount of loss is the difference between the carrying amount and the net present value of estimated future cash flows (excluding future credit losses that have not yet been incurred) discounted at the financial asset's original effective interest rate. The carrying value of the asset is reduced and the amount of the loss is recognized in the consolidated profit & loss statement. If a loan or an investment held to maturity has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. When practical,
the Group may measure impairment on the basis of an instrument's fair value using an observable market price.
If an impairment decreases and the decrease can objectively be related to an event occurring after the impairment was recognized (such as an improvement in the debtor's credit rating), the previous loss is reversed through the consolidated profit & loss statement.
Note 2.7.4 De-recognition of financial instruments A financial asset is de-recognized when the rights to receive cash flows from the asset have expired; or the Company has transferred its rights to receive cash flows from the asset and either (i) the Company has transferred substantially all the risks and rewards relating to the instrument, or (ii) the Company has neither transferred nor retained substantially all the risks and rewards relating to the instrument, but has transferred control of the asset.
A financial liability is derecognized when the obligation under the liability is discharged, 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 substantially modified, this is treated as derecognition of the original liability and recognition of a new liability. The difference in the respective carrying amounts is recognized in the consolidated profit & loss statement.
Note 2.8 Inventory
Inventory are stated at the lower of acquisition expense and net realizable value. Acquisition expense is determined using the first-in, first-out (FIFO) method. Value of finished goods and work in progress comprises the expense of design, raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity). Borrowing costs are not included. Net realizable value is the estimated selling price less variable costs of completion and transaction expenses.
Note 2.9 Accounts receivable and other receivables
Accounts receivables arise from the sale of goods or services within the normal operations. Settlements that are due in 12 months or less are classified as current assets. If this is not the case, they are classified as non-current assets.
Accounts receivables are initially measured at fair value. Subsequently accounts receivables are measured at amortised cost using the effective interest method, less provision for impairment. Provisions for losses are recognized when there is objective evidence that the Group will not receive settlement in accordance with the original terms. Significant financial difficulties of the debtor, probability that the debtor will enter into bankruptcy, and default or delinquency in payments are considered to indicate that the trade receivable is impaired. Provision is the difference between the nominal value and the recoverable amount, being the net present value of expected cash flows, discounted at the effective interest rate. Changes in provision are recognized under "Other operating expenses".
Note 2.10 Cash and cash equivalents
Cash and cash equivalents consist of cash, bank deposits and other short-term liquid investments.
Note 2.11 Share capital and premium paid in capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options less taxes are recorded as a reduction in proceeds to equity. When purchasing own shares, the consideration paid including any transaction costs less tax, is deducted from equity (attributable to equity shareholders) until the shares are cancelled, reissued or sold. When such shares are subsequently sold or reissued, any consideration received less direct transaction costs and related income tax effects, is included in shareholders' equity.
Note 2.12 Account payables and other current liabilities
Account payables are obligations to pay for goods or services from suppliers. Account payables are classified as current liabilities if payment is due within 12 months. If this is not the case, it is classified as long-term debt. Account payables are measured at fair value upon initial recognition. Subsequently amortized cost is measured using the effective interest method.
Note 2.13 Loans
Loans and borrowings are initially at fair value when they are disbursed, less any transaction costs. In subsequent periods, loans are recorded at amortized cost using the effective interest rate. The Group has no interest bearing debt per 31.12.2017.
Note 2.14 Current and deferred income tax
The tax expense is comprised of current and deferred tax. Tax is recognized, except when it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income.
The tax expense is measured in accordance with the tax laws and regulations that are enacted at the balance sheet date.
Deferred tax is measured as temporary differences between tax values and consolidated accounting values of assets and liabilities, using the liability method. If deferred tax arises from initial recognition of an asset or assets in a transaction different from integration of enterprises, and that at the time of the transaction affects neither accounting nor taxable profit, it is not capitalized. Deferred tax is determined using tax rates and laws that have been enacted or
substantially enacted at the balance sheet date and are expected to apply when the deferred tax asset is realized or the deferred tax liability is settled.
Deferred tax assets are recognized to the extent that it is probable on the balance sheet date that future taxable profit will be available, and that the temporary differences can be offset against this income.
Deferred tax is measured from temporary differences on investments in subsidiaries, except where the Group controls the timing of the reversal of the temporary differences and it is not likely they will be reversed in the near future.
Note 2.15 Pension obligations, bonus schemes and other compensation schemes for employees
The Group has a defined contribution plan for all employees in Norway under which the Group pays a fixed percentage contribution of members' salaries. The Group has no further payment obligations once the contributions have been paid. Prepaid contributions are recognized as an asset to the extent that a cash refund or reduction of future payments is possible.
The Group recognizes liabilities and expenses for bonuses based on a review of key personnel achievement. The Group recognizes a provision for bonuses based on contractually and probable liabilities.
Note 2.16 Share based options
The Group has a share-based option scheme. Per 31.12.2017, there were 927 000 outstanding options divided on 38 employees in the Group. The fair value of the services received from the employees in return for the options granted is recognized as an expense in the consolidated profit & loss statement. Total expense for the options are accrued over the vesting period based on the fair value of the options granted, excluding impact of any vesting conditions that are not reflected in the market. Criteria not reflected in the market, affect the assumptions about the number of options expected to be exercised. At the end of each reporting period, the Company revises its estimates of the number of options expected to be exercised. It recognizes the importance of the revision of original estimates in the consolidated profit and loss statement with a corresponding adjustment in equity.
The net value of proceeds received less directly attributable transaction expenses are credited to the share capital (nominal value) and the share premium when the options are exercised.
Note 2.17 Provisions
The Group recognizes a provision when:
∙ There is a legal or constructive obligation as a result of past events,
- ∙ It is probable that the obligation will be settled by a transfer of financial assets,
- ∙ The obligation can be estimated with sufficient reliability.
Provisions for future operating losses are not recognized.
Provisions are measured as the present value of expected payments to settle the obligation, using a discount rate before tax reflecting current market assessments and the risks specific to the liability. Increase in the obligation due to time is recognized as an interest expense.
Provisions are measured at the present value of expected payments to settle the obligation.
Note 2.18 Revenue recognition
Revenues are measured at the fair value of the consideration received or receivable, and represents amounts for receivable for goods supplied, stated net of discounts, returns and VAT. The Group recognizes revenue when the amount of revenue can be reliably measured, when it is probable that future economic benefit will flow to the entity, and when the specific criteria have been met, as described below.
Sale of goods
Sale of goods are recognized when significant risk and rewards of ownership of the goods is passed on to the buyer, usually on delivery of goods and when there is no unfulfilled obligation that could affect the customers' acceptance of the products. Delivery is governed by sales contracts, but usually occurs when the product is delivered to the customer.
Note 2.19 Government grants
Government grants are recognized at fair value when it is reasonable sure that the grant will be received and that the Company will fulfil the conditions attached to the grant. The grants are recognized as other revenue in the period in order to match the expenses they are intended to compensate. Government grants relating to the purchase of fixed assets are recorded as a reduction in the carrying cost, and are expressed in the profit and loss statement through lower annual depreciation over the expected life of the relevant fixed assets.
Note 2.20 Leases
Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are expensed over the lease period.
Note 2.21 Dividends
Dividends are classified as liabilities from the date approved by the General Assembly. No dividends for 2017 is proposed.
Note 2.22 Changes in accounting policies and disclosures
Standards and interpretations that are issued up to the date of issuance of the consolidated financial statements, but not yet effective are disclosed below. The Group's will adopt the relevant new and amended standards and interpretations when they become effective.
- ∙ IFRS 9 Financial Instruments addresses the classification, measurement and recognition of financial assets and financial liabilities. The standard is effective as of 01.01.2018. IFRS 9 will replace IAS 39 Financial Instrument: recognition and Measurement. The Group does not expect any significant impact on its balance sheet or equity applying the classification and measurement requirements in IFRS 9. The Group will continue the measuring its financial assets held at fair value. IFRS 9 requires the Group to record expected credit losses on all its trade receivables, either on a 12-month or lifetime basis. The Group will apply the simplified approach and record a 12-month expected losses on all trade receivables. The standard shall be implemented retrospectively, but it is not a requirement to prepare comparative figures. Based on the financial assets and liabilities held by the Group, the standard will not have any significant impact on the financial statements. The Group has evaluated potential losses on receivables based on historic losses: (table below)
- ∙ IFRS 15 Revenue from contracts with customers. The standard is effective as of 01.01.2018. The standard replaces all existing standards and interpretations relating to revenue recognition. The core principle of IFRS 15 is for companies to recognise revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the company expects to be entitled in exchange for those goods or services. With some few exceptions, the standard is applicable for all remunerative contracts and includes a model for recognition and measurement of sale of individual non-financial
assets. The objective of the standard is to provide a five-step approach to revenue recognition that includes identifying contracts with customers, identifying performance obligations, determining transaction prices, allocating transaction prices to performance obligations, and recognizing revenue when or as performance obligations are satisfied. The Group has evaluated the potential implications of the standard and have not identified any remunerative contracts which will change the practice for recognition and measurement of sale. The standard will have no influence on the financial statements for valid/identified contracts the Group has at the end of 2017. In the future the Group will work continuous to analyse new contracts or contracts with changes in current incoterms, time of delivery etc..
∙ IFRS 16 Leases regulates matters relating to leased assets. It requires all leases to be recognized in the statement of financial position as a right to use asset with subsequent depreciation. This standard was endorsed 31.10.2017 by the EU and will be effective as of 01.01.2019. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single onbalance sheet model similar to the accounting for financial leases under IAS 17. At the commencement date the lessee will recognise a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. Lessees are required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset. Lessor accounting under IFRS 16 is substantially unchanged from today's accounting under IAS 17. Lessors will continue to classify all leases using the same classification principle as in IAS 17 and distinguish between two types of leases: operating and finance leases. IFRS 16 is effective for annual periods beginning on or after 1 January 2019. The Group has evaluated potential implications of the standard and have estimated the following effects for the 2017 financial statements (Table next page)
| (Amounts in NOK 1 000) | Not overdue | 0-30 | 31-60 | 61-90 | Over 90- |
|---|---|---|---|---|---|
| Days of maturity | |||||
| Outstanding 31.12.2017 | 6 343 | 374 | 227 | 14 | 259 |
| Historical loss - % | 0% | 0% | 0% | 0% | 0% |
| Future estimation of losses - % | 0% | 0% | 0% | 0% | 0% |
| Expected loss - % | 0% | 0% | 0% | 0% | 0% |
| Provision for losses | 0 | 0 | 0 | 0 | 0 |
Potential losses on receivables
Potential effects on financial position
| (Amounts in NOK 1 000) | 31.12.2017 | 31.12.2017 IFRS 16 adjusted |
Changes | |
|---|---|---|---|---|
| Lease assets | 1 | 16 368 | 16 368 | |
| Fixed assets | 11 717 | 11 717 | ||
| Sum fixed assets | 11 717 | 28 085 | 16 368 | |
| Lease liabilities | 2 | 13 123 | 13 123 | |
| Current liabilities | 3 | 16 870 | 20 115 | 3 245 |
| Sum current liabilities | 16 870 | 33 238 | 16 368 |
-
Right of use is calculated from inception of contract
-
Net present value of liability maturing more than 12 months
-
Next years instalment is part of current liabilities
Potential effects on profit & loss
| (Amounts in NOK 1 000) | 31.12.2017 | 31.12.2017 IFRS 16 adjusted |
Changes |
|---|---|---|---|
| Sum revenues | 72 758 | 72 758 | |
| Property, plant & equipment | -6 760 | -3 515 | 3 245 |
| Other expenses | -92 891 | -92 891 | |
| Sum expenses | -99 651 | -96 406 | 3 245 |
| EBITDA | -26 893 | -23 648 | 3 245 |
| Depreciation | -1 978 | -4 604 | -2 626 |
| EBIT | -28 871 | -28 252 | 619 |
| Net financials | 112 | -507 | -619 |
| EBT | -28 759 | -28 759 |
Note 3 Financial risk management
Note 3.1 Financial risk factors
Certain activities expose the Group to financial risks like market risk, credit risk, interest rate risk and liquidity risk. The Group's overall risk management wants to minimize potential adverse effects of any unpredictability of financial markets. For the reporting period, the Group had no interest-bearing loans. Financial instruments are normally not used for trading purposes. Interest-bearing investments beyond bank deposits can be made in certificates or bond funds with short maturities.
Note 3.1.1 Market risk
Foreign currency risk
Revenues for 2017 to the Group are mainly denominated in USD and EUR; distributed 25% at USD and 60% at EUR. Most of the Group's cost base is denominated in NOK (66%), while expenses in EUR amounts to 28%.
The Group had for 2017 a positive trade currency balance for both USD and EUR. A weaker NOK against the USD or EUR will influence the operating profit in a positive direction, while a stronger NOK against the USD or EUR will have the opposite effect.
If NOK relative to USD was 5% stronger / weaker at 31.12.2017 and all other variables held constant, this would lead to a lower / higher operating profit of NOK 46 000 (2016: NOK 102 000). For EUR would such currency changes have affected the result by NOK 27 000 (2016: NOK 124 000). The impact on equity would be correspondingly. The calculated effect is based on 5% change in receivables and payables denominated in USD and EUR as of 31.12.2017.
Price risk
The Group is very little exposed to risks related to commodity prices.
Interest rate risk
The Group has little exposure to interest rate risk as the investment of liquid assets are in bank deposits, certificates and / or money market funds with short maturities. The Group has no interest-bearing debt.
Note 3.1.2 Credit risk
The Group is mainly exposed to credit risk related to accounts receivables. No single customer represents major outstanding credit records and the associated credit risk is considered to be low. The maximum exposure is expressed at the carrying value of accounts receivable.
Note 3.1.3 Liquidity risk
Rolling liquidity forecasts are performed at group level to secure sufficient cash for operational needs.
Based on planned activities and current cash position, the Group considers the liquidity risk to be medium.
The Group has its cash in bank deposits or interestbearing securities with low risk. The majority of cash is invested in Norwegian bank deposits and money market fund. At the reporting date, the Group had bank deposits and money market fund of NOK 30.6 million.
The Group's debt has maturity shorter than one year and will be settled at maturity:
| (Amounts in NOK 1 000) | 2017 | 2016 |
|---|---|---|
| MATURITY | ||
| < 3 months | 5 806 | 6 885 |
| 3 months – 12 months | 1 111 | 296 |
| Total accounts payable | 6 917 | 7 181 |
| Accrued public fees and withdrawals | 9 953 | 10 566 |
| Total accounts payable and other current liabilities |
16 870 | 17 746 |
Note 3.2 Capital management
The Group's objectives when managing capital are to safeguard the continued operations of the Group to provide returns for shareholders and other stakeholders and to maintain an optimal capital structure to reduce capital costs.
To improve the capital structure, the Group may issue new shares or sell assets. The Group has no long-term debt and pays no dividends to shareholders as long as the Group is in a development phase.
The table below shows the Group's net cash position as of 31 December:
| (Amounts in NOK 1 000) | 2017 | 2016 |
|---|---|---|
| Cash and cash equivalents | 30 593 | 57 672 |
| Less: Restricted cash equivalents | -2 008 | -1 460 |
| Net cash position | 28 585 | 56 212 |
Note 4 Accounting estimates and judgments
Estimates and judgments undergo continuous evaluation based on historical experience and other factors, including expectations of future events believed to be reasonable under the present circumstances.
The Group makes estimates and assumptions concerning the future. Estimates and assumptions are based on parameters available when the financial statements were prepared, but these assumptions may change due to market changes or circumstances arising beyond the control of the Group. These changes are reflected in assumptions when they occur.
Estimates and assumptions that might have a significant risk for adjustment in the carrying value in the following years are addressed below:
Assessment of capitalization of development: Capitalisation of development expenses of a defined product assumes that future cash flows from sales of this product exceed the expenses of development. The expected future cash flows are still subject to uncertainties, and may, if reduced, result in impairment of capitalized development expenses.
Assessment of useful life of intangible assets: Useful life of intangible assets are based on an assessment of each individual asset. Maximum expected useful lifetime of for capitalized development expense is the remaining lifetime of any related patents.
Assessing start up for amortization of intangible assets:
Amortization of intangible assets related to capitalized development costs begins when the product is ready for distribution / sales, including the presence of necessary government approvals. Amortization of other intangible assets starts with acquisitions.
Note 5 Segment information
The Group has divided its business into two operating segments; enzymes and beta-glucans. The segment enzymes consists of sales revenues and operating expenses associated with the subsidiary ArcticZymes AS, while the segment beta-glucans is related to revenues and operating expenses of the subsidiary
Biotec BetaGlucans AS. The parent company provides a range of administrative services to the subsidiaries. Invoicing is based on service agreements. Corporate overhead cost within the parent company remains unallocated.
Management submits segment results regularly to the Board.
Net profit/loss(-) from the operating segments:
| (Amounts in NOK 1 000) | 2017 | 2016 | ||||||
|---|---|---|---|---|---|---|---|---|
| Enzymes | Beta glucans |
Corporate | Total | Enzymes | Beta glucans |
Corporate | Total | |
| Sales revenues | 31 628 | 35 051 | 7 | 66 686 | 28 232 | 42 959 | -1 | 71 190 |
| Cost of goods | -44 | -21 883 | -21 927 | -794 | -25 942 | -26 736 | ||
| Gross profit | 31 584 | 13 168 | 7 | 44 759 | 27 438 | 17 018 | 44 456 | |
| Other revenues | 3 481 | 2 591 | 6 072 | 4 473 | 2 961 | 7 433 | ||
| Operating expenses | -29 856 | -34 812 | -9 101 | -73 769 | -28 297 | -36 821 | -5 797 | -70 915 |
| Depreciation and amortization | -639 | -1 329 | -10 | -1 978 | -540 | -1 316 | -56 | -1 912 |
| Operating profit/loss(-) | 4 570 | -20 382 | -9 104 | -24 915 | 3 073 | -18 158 | -5 853 | -20 939 |
| Net financial income | -138 | -601 | 851 | 112 | 23 | -889 | 1416 | 550 |
| Profit/loss(-) before tax | 4 432 | -20 982 | -8 253 | -24 803 | 3 096 | -19 047 | -4 437 | -20 389 |
| Tax | 0 | 0 | ||||||
| Net profit/loss(-) | 4 432 | -20 982 | -8 253 | -24 803 | 3 096 | -19 047 | -4 437 | -20 389 |
Currency gains / losses for 2016 have been reclassified from other revenues to sales revenues for comparison purposes.
Assets, liabilities and investments distributed to the segments:
| (Amounts in NOK 1 000) | 2017 | 2016 | ||||||
|---|---|---|---|---|---|---|---|---|
| Enzymes | Beta glucans |
Corporate | Total | Enzymes | Beta glucans |
Corporate | Total | |
| Assets | 21 204 | 19 923 | 20 556 | 61 683 | 20 680 | 34 702 | 30 451 | 85 834 |
| Liabilities | 5 576 | 7 109 | 4 185 | 16 870 | 5 728 | 9 956 | 2 063 | 17 746 |
Geographical distribution of sales revenues:
| (Amounts in NOK 1 000) | 2017 | 2016 |
|---|---|---|
| Norway | 28 046 | 40 355 |
| Europe | 18 250 | 9 104 |
| Asia/Australia/Africa | 1 344 | 1 850 |
| Americas | 19 046 | 19 881 |
| Total sales revenues | 66 686 | 71 190 |
Sales revenues from the largest customer within each segment in 2017: Beta-glucan segment NOK 18.8 million, enzyme segment NOK 14.4 million.
Geographical distribution of investments in machinery and equipment:
| (Amounts in NOK 1 000) | 2017 | 2016 |
|---|---|---|
| Norway | 2 629 | 300 |
| Total | 2 629 | 300 |
Note 6 Machinery and equipment
| (Amounts in NOK 1 000) | Machinery | Equipment | Total |
|---|---|---|---|
| AS OF 01.01.2016 | |||
| Historic cost | 31 674 | 6 130 | 37 804 |
| Accumulated depreciation | -28 892 | -4 794 | -33 686 |
| Book value at 01.01.2016 | 2 782 | 1 336 | 4 118 |
| FINANCIAL YEAR 2016 | |||
| Addition | 237 | 62 | 299 |
| Disposals | 0 | ||
| Accumulated depreciation on disposals | 0 | ||
| Depreciation | -667 | -582 | -1 249 |
| Book value at 31.12.2016 | 2 353 | 815 | 3 168 |
| AS OF 31.12.2016 | |||
| Historic cost | 31 911 | 6 191 | 38 103 |
| Accumulated depreciation | -29 559 | -5 376 | -34 935 |
| Book value at 31.12.2016 | 2 353 | 815 | 3 168 |
| FINANCIAL YEAR 2017 | |||
| Addition | 1 995 | 634 | 2 629 |
| Disposals | -64 | -64 | |
| Accumulated depreciation on disposals | 64 | 64 | |
| Depreciation | -810 | -399 | -1 209 |
| Book value at 31.12.2017 | 3 537 | 1 051 | 4 589 |
| AS OF 31.12.2017 | |||
| Historic cost | 33 842 | 6 826 | 40 668 |
| Accumulated depreciation | -30 304 | -5 775 | -36 080 |
| Book value at 31.12.2017 | 3 538 | 1 051 | 4 589 |
| Linear depreciation over useful life | 5 - 10 years | 2 - 5 years |
The Company has rental agreements for all premises in use. The Company has at own expense adapted the production premises for internal purpose.
The rental agreement for the production premises runs till 31 December 2020 with an optional extension period. Expenses from rental agreements for premises amouted NOK 4.2 million in 2017 versus NOK 4.0 million in 2016.
Management considers that there are no impairment indicators at the group level, and that no write-downs of these assets are necessary.
Note 7 Intangible assets
| (Amounts in NOK 1 000) | Product rights | Own product development | Total |
|---|---|---|---|
| AS OF 01.01.2016 | |||
| Historic cost | 1 663 | 6 874 | 8 537 |
| Accumulated depreciation | -1 663 | -1 799 | -3 462 |
| Book value at 01.01.2016 | 0 | 5 075 | 5 075 |
| FINANCIAL YEAR 2016 | |||
| Addition | 1 054 | 1 054 | |
| Disposals | 0 | ||
| Depreciation | -664 | -664 | |
| Book value at 31.12.2016 | 0 | 5 465 | 5 465 |
| AS OF 31.12.2016 | |||
| Historic cost | 1 663 | 7 928 | 9 591 |
| Accumulated depreciation | -1 663 | -2 463 | -4 126 |
| Book value at 31.12.2016 | 0 | 5 465 | 5 465 |
| FINANCIAL YEAR 2017 | |||
| Addition | 2 422 | 2 422 | |
| Disposals | 0 | ||
| Depreciation | -769 | -769 | |
| Book value at 31.12.2017 | 0 | 7 119 | 7 119 |
| AS OF 31.12.2017 | |||
| Historic cost | 1 663 | 10 351 | 12 013 |
| Accumulated depreciation | -1 663 | -3 232 | -4 895 |
| Book value at 31.12.2017 | 0 | 7 119 | 7 119 |
| Linear depreciation over useful life | 5 - 10 years | 10 - 12 years |
ArcticZymes AS has acquired commercial rights to the outcome from MARZymes, the marine bioprospecting project of UiT - the Arctic University.
UiT shall be compensated by a license fee for any commercial sale of products from this project.
So far, a polymerase product has been developed for commercial sale, and other enzyme candidates are under consideration.
Aquisition cost for the product rights has been fully amortized.
Own product development is basically external services (including patent expenses) for development of rSAP, HL-dsDNase, SAN ELISA-kit, SAN HQ, Polymerases and external costs related to development of Woulgan. (see Note 2.6)
Management considers that there are no impairment indicators, and that no write-downs of these assets are necessary.
Note 8 Financial assets and liabilities
The financial assets consits primarily of cash and cash equvalents obtained through equity issues.
Assets per 31.12
| (Amounts in NOK 1 000) | 2017 | 2016 |
|---|---|---|
| LOANS AND RECEIVABLES: | ||
| Accounts receivables | 7 431 | 11 957 |
| Other receivables | 6 932 | 4 759 |
| Total loans and receivables | 14 363 | 16 716 |
The Group has no financial assets available for sale, assets held for trading or non-derivative financial assets. See note 10 for breakdown and assessment of accounts receivable.
Liabilities per 31.12
| (Amounts in NOK 1 000) | 2017 | 2016 |
|---|---|---|
| OTHER LIABILITIES | ||
| Accounts payable | 5 808 | 7 181 |
| Public taxes and withholdings | 2 713 | 2 087 |
| Other current payables | 8 349 | 8 479 |
| Total accounts payable and other current liabilities | 16 870 | 17 746 |
NOK 1.1 million included in other current liabilities is an upfront payment recieve from Horizon 2020 more than 12 moths ago. The Group has no interest-bearing loans or debt
Note 9 Earnings per share
Earnings per share are calculated by dividing net income by the weighted average number of shares during the year, net of treasury shares (note 13)
| (Amounts in NOK 1 000) | 2017 | 2016 |
|---|---|---|
| Profit attributable to ordinary shareholders of the parent | -24 938 | -20 480 |
| Profit attributable to non-controlling interests | 135 | 91 |
| Profit from continued operations | -24 803 | -20 389 |
| Weighted average number of shares issued (1 000 shares) | 43 945 | 43 945 |
| Weighted average number of shares and options (1 000 shares) | 44 905 | 44 903 |
| Earnings per share (NOK per share) | -0.56 | -0.46 |
Since the company's net profit is negative, the earnings per share and diluted earnings per share coincide.
Note 10 Receivables
| (Amounts in NOK 1 000) | 2017 | 2016 |
|---|---|---|
| Accounts receivables | 7 431 | 11 957 |
| Provisions for estimated losses on accounts receivables | 0 | 0 |
| Accounts receivables, net | 7 431 | 11 957 |
| Research grants | 685 | 1 344 |
| Tax grants | 2 647 | 2 589 |
| Prepayments | 3 027 | 126 |
| VAT | 512 | 657 |
| Other receivables | 60 | 42 |
| Total receivables | 14 363 | 16 716 |
Fair value for accounts receivable equals book value. There are no significant concentrations of credit risk.
| Age breakdown of accounts receivable per 31.12.2017: | |||||
|---|---|---|---|---|---|
| Not yet due | 1 – 30 days | 31 – 60 days | 61 – 90 days | Over 90 days | Total |
| 6 557 | 374 | 227 | 14 | 259 | 7 431 |
A majority of accounts receivables overdue on 31 December have been settled subsequently.
| Age breakdown of accounts receivable per 31.12.2016: | |||||
|---|---|---|---|---|---|
| Not yet due | 1 – 30 days | 31 – 60 days | 61 – 90 days | Over 90 days | Total |
| 11 254 | 565 | 34 | 4 | 100 | 11 957 |
| Fair value of receivables by currency: | 2017 | 2016 |
|---|---|---|
| USD | 1 443 | 2 280 |
| EUR | 9 111 | 9 646 |
| GBP | 142 | |
| NOK | 3 667 | 4 791 |
| Total receivables | 14 363 | 16 716 |
Note 11 Inventory and cost of goods
| (Amounts in NOK 1 000) | 2017 | 2016 |
|---|---|---|
| Raw materials | 868 | 449 |
| Semi-finished goods | 1 436 | 641 |
| Finished goods | 2 707 | 1 684 |
| Total inventories | 5 011 | 2 775 |
| (Amounts in NOK 1 000) | 2017 | 2016 |
|---|---|---|
| Change in inventories of goods in progress and in finished goods | -681 | 201 |
| Cost of goods | 22 608 | 26 535 |
| Total cost of goods | 21 927 | 26 736 |
Note 12 Cash and cash equivalents
| (Amounts in NOK 1 000) | 2017 | 2016 |
|---|---|---|
| Cash | 15 583 | 56 209 |
| Money marked fund | 13 000 | |
| Deposits, restricted | 3 | 3 |
| Tax withdrawal accounts | 2 008 | 1 460 |
| Total cash and cash equivalents | 30 593 | 57 672 |
Note 13 Share capital, share premium, share options, and other equity
| (Number of shares) | Shares | Whereof treasury shares |
|---|---|---|
| FINANCIAL YEAR 2016: | ||
| Per 01.01.2016 | 43 944 673 | |
| Purchase own shares | 17 895 | 17 895 |
| Sale own shares | -17 895 | -17 895 |
| Per 31.12.2016 | 43 944 673 | 0 |
| FINANCIAL YEAR 2017: | ||
| Purchase own shares | 0 | 0 |
| Sale own shares | 0 | 0 |
| Per 31.12.2017 | 43 944 673 | 0 |
All shares are fully paid up. Par value is NOK 1.00 per share.
2016
The Annual General Meeting on 11 May 2016 granted three authorizations to the Board:
-
- Authorization to issue 4 390 000 shares. The authority does not include non-cash share issues or capital increases in connection with mergers. The shareholders' rights in accordance with the Public Limited Companies Act §10-4 may be waived. Other terms of the issue of new shares are determined by the Board. The authorization had not been exercised as at 31 December 2016. This authorization replaced the authorization granted by the General Meeting on 12 May 2015 and valid until the Annual General Meeting in 2017.
-
- Authorisation to issue up to 1 200 000 shares in connection with share schemes for employees. The authorization was valid until the Annual General Meeting in 2017. This authorization was not exercised as of 31 December 2016.
-
- Authorization to purchase up to 300 000 treasury shares. Lowest price per share is NOK 1 and maximum NOK 100. The Board may decide when and how the shares may be disposed of. The company held no treasury shares as at 31 December 2016. The authorization was valid until
the Annual General Meeting in 2017. In November 2016 the company acquired 17 895 treasury shares and resold these to interested employees at a 20% discount on the market price of NOK 12.86.
2017
The Annual General Meeting held on 11 May 2017 authorized the Board to increase the share capital by NOK 1 200 000 by one or more capital increases directed towards associates, as a part of the Company's share option program.
The General Meeting approved the allocation of up to 1 200 000 share options to the Company's associates for the period until the next Annual General Meeting to cover outstanding options until the next Annual General Meeting in 2018, but not later than 30 June 2018. The Board shall decide on the principles for and the allocation of the options.
Share options
Share options have been awarded all employees of the company since 2010. The scheme is intended as an incentive to stay with the company, and the assignment is graded according to the ability the
employee is believed to have to contribute to a positive value development for the company's shares. In the second quarter of 2015, a total of 452 500 options were allocated to the employees, of which 80 000 to the CEO. The options have a 2-year vesting period, and the strike is NOK 18.42. In 2016, a total of 519 500
options were allocated to the employees, of which 80 000 to the CEO. These options have a 2-year vesting period, and average strike is NOK 11.93. Criterias for allocation of options have not been changed over the last 3 years. In 2017 no options were granted. See note 21 regarding expensed amount for share options.
| (Amounts in NOK 1 000) | 2017 | 2016 | ||
|---|---|---|---|---|
| Average exercise price | Number of share options | Average exercise price | Number of share options | |
| As of 01.01. | 15.41 | 1 175 250 | 18.17 | 655 750 |
| Granted during the year | 11.93 | 519 500 | ||
| Elapsed | -45 000 | |||
| Expired | -203 250 | |||
| Outstanding at 31 December | 927 000 | 1 175 250 |
Expiry date, exercise price, and outstanding options at year end
| Expiry date | Average exercise price | Number of share options 2017 |
Number of share options 2016 |
|---|---|---|---|
| 2017, 31 May | 17.61 | 203 250 | |
| 2018, 31 May | 18.42 | 440 000 | 452 500 |
| 2019, 31 May | 11.93 | 487 000 | 519 500 |
| Outstanding at 31 December | 927 000 | 1 175 250 | |
| Exercisable options at 31 December | 440 000 | 203 250 |
The fair value of employee share options are calculated according to the Black-Scholes method. The most important parameters are share price at grant date, exercise prices shown above, volatility (66.3%), expected dividend yield (0%), expected term of 3 years, annual risk free interest rate (1.53%). The volatility is based on market data from the last year. The fair value is expensed over the vesting period. Adjustements have been made for employees leaving their position during the year. Per 31.12.2017 a total of NOK 16.9 million had been expensed, of which NOK 1.5 million applies to 2017. The Company has no obligations, legal nor implied, to settle the options in cash unless the general assembly declines to renew its authorization to issue new shares.
| Ownership information: | Shares | Ownership | |
|---|---|---|---|
| Tellef Ormestad | 3 127 969 | 7.12 % | |
| AKA AS | 1 450 000 | 3.30 % | |
| Danske Bank AS | 1 214 794 | 2.76 % | |
| Clearstream Banking S.A. | 1 168 114 | 2.66 % | |
| Odd Knut Birkeland | 1 030 000 | 2.34 % | |
| Nordnet Bank AB | 876 303 | 1.99 % | |
| MP Pensjon | 873 239 | 1.99 % | |
| Pro AS | 874 169 | 1.99 % | |
| Progusan AS | 750 026 | 1.71 % | |
| Nordea Bank Denmark AS | 750 785 | 1.71 % | |
| Belvedere AS | 700 095 | 1.59 % | |
| Isar AS | 699 853 | 1.59 % | |
| Hartvig Wennberg II | 696 033 | 1.58 % | |
| Arne Ketil Kyrkjebø | 694 119 | 1.58 % | |
| Nordnet Livsforsikring AS | 661 648 | 1.51 % | |
| Middelboe AS | 481 660 | 1.10 % | |
| Spiralen Industrier AS | 474 639 | 1.08 % | |
| Catilina Invest AS | 470 000 | 1.07 % | |
| Rolf Engstad | 370 774 | 0.84 % | |
| Tarago AS | 344 787 | 0.78 % | |
| 20 largest shareholders aggregated |
17 709 007 | 40.30 % | aggregated |
The 20 largest shareholders as of 31 Dec 2017 The 20 largest shareholders as of 31 Dec 2016
| Ownership information: | Shares | Ownership |
|---|---|---|
| Tellef Ormestad | 3 220 756 | 7.33 % |
| AKA AS | 1 450 000 | 3.30 % |
| Danske Bank AS | 1 218 496 | 2.77 % |
| Nordnet Bank AB | 1 031 746 | 2.35 % |
| Clearstream Banking S.A. | 869 654 | 1.98 % |
| MP Pensjon | 822 931 | 1.87 % |
| Progusan AS | 750 026 | 1.71 % |
| Nordea Bank Denmark AS | 736 250 | 1.68 % |
| Belvedere AS | 700 095 | 1.59 % |
| Hartvig Wennberg AS | 696 033 | 1.58 % |
| Nordnet Livsforsikring AS | 681 746 | 1.55 % |
| Arne Ketil Kyrkjebø | 621 020 | 1.41 % |
| Nordea Bank Danmark A/S | 528 036 | 1.20 % |
| Trapesa AS | 521 048 | 1.19 % |
| Ivar Hjørungnes | 490 000 | 1.12 % |
| Odd Knut Birkeland | 431 400 | 0.98 % |
| Spiralen Industrier AS | 429 639 | 0.98 % |
| KLP Aksje Norge Indeks | 404 704 | 0.92 % |
| Pro AS | 364 821 | 0.83 % |
| Euro Hage og Anlegg AS | 350 000 | 0.80 % |
| 20 largest shareholders aggregated |
16 318 401 | 37.13 % |
Note 14 Accounts payable and other current liabilities
| (Amounts in NOK 1 000) | 2017 | 2016 |
|---|---|---|
| Accounts payable | 5 808 | 7 181 |
| Accrued public fees and withdrawals | 2 714 | 2 086 |
| Accrued holiday pay, bonus, and salaries | 5 346 | 5 846 |
| Miscellaneous other accrued costs | 3 002 | 2 633 |
| Total accounts payable and other current liabillities | 16 870 | 17 746 |
Book value of accounts payable and other current liablities is close to fair value.
| Age breakdown of accounts payable per 31.12.2017: | |||||
|---|---|---|---|---|---|
| Not yet due | 1 – 30 days | 31 – 60 days | 61 – 90 days | Over 90 days | Total |
| 5 077 | 729 | 0 | 0 | 2 | 5 808 |
A majority of accounts payable overdue on 31 December have been settled subsequently.
| Age breakdown of accounts payable per 31.12.2016: | |||||
|---|---|---|---|---|---|
| Not yet due | 1 – 30 days | 31 – 60 days | 61 – 90 days | Over 90 days | Total |
| 6 881 | 300 | 0 | 0 | 0 | 7 181 |
| Book value of accounts payable and other current liablities measured by currency (Amounts in NOK 1 000): |
2017 | 2016 |
|---|---|---|
| NOK | 9 880 | 9 961 |
| EUR | 5 169 | 7 160 |
| USD | 1 366 | 235 |
| GBP | 415 | 232 |
| DKK | 50 | |
| SEK | 39 | 108 |
| Total accounts payable and other current liabillities | 16 870 | 17 746 |
Note 15 Executive remuneration policy
Note 15.1. General
According to the Public Limited Companies Act § 6-16a, the Board shall prepare a statement on determination of salaries and other remuneration to the CEO and other senior executives and account for the executive remuneration policy that has been applied in the previous fiscal year.
The statement contains guidelines for determining salaries and other remuneration, including the main principles for the executive remuneration policy. The guidelines are only recommendations for the Board. If the Board deviates from the guidelines on determination of salaries, the reason for this will be recorded in the board minutes. Allocated share options referred to in paragraph 2.5 is binding for the Board and the Company until expiry of the options. The annual general meeting is supposed to renew authorisation to issue shares every year.
Biotec Pharmacon ASA defines the following positions as senior executives: CEO, CFO, CSO and VP Marketing Woulgan, and Managing director ArcticZymes.
Note 15.2. Guidelines for salaries and other benefits for 2017
Note 15.2.1 The main principles for executive remuneration policy
The main principles behind the Company's executive remuneration policy is to promote value creation in the Company and to create common interests between owners and senior executives. Executive pay should not be of such nature or extent that it may damage the Company's reputation. The Company will seek arrangements that encourage long-term value creation, while compensation schemes are competitive with schemes in comparable companies.
The Board has appointed a compensation committee that acts as a preparatory body in connection
with the Board's responsibility for determining the remuneration to the CEO and for establishing guidelines for salaries to other senior executives.
As long as the Company is in a development phase, with limited opportunities for profit, the Board will assign a reasonable number of share options to stimulate ownership and value creation.
Note 15.2.2 Determination of salaries It is the Company's policy that executive salaries are defined as a combination of fixed and a variable performance related pay on an annual basis, reflecting level of the position and experience. The basic salary for senior executives is individually determined. A fixed salary is determined by the following considerations:
- ∙ Experience and competence
- ∙ Responsibilities
- ∙ Competitive situation and local market practice
Other criteria may be used, reflecting each subsidiary's tasks and goals.
The Board determines the CEO's remuneration. The CEO determines salary adjustments for other senior executives in consultation with the Board's compensation committee.
The remuneration of senior executives follows the same principles that apply to all employees with respect to annual limits for salary adjustments, assessment of individual performance and timing of regulation.
Note 15.2.3 Benefits in kind
Senior executives receive benefits such as mobile phone expenses, internet access, and journals based on need.
Note 15.2.4 Performance related pay Performance related pay for senior executives:
Maximum bonus
| Maximum bonus | |
|---|---|
| CEO | 50 % of fixed annual salary |
| CFO | 20 % of fixed annual salary |
| CSO, Biotec BetaGlucans AS | 25 % of fixed annual salary |
| VP Marketing Woulgan, Biotec BetaGlucans AS |
20 % of fixed annual salary |
| Managing Director, ArcticZymes AS |
25 % of fixed annual salary |
Performance related pay depends on the Company and the individual achieving predefined measurable objectives (Key Performance Indicators) and will be determined by the Board. Performance related payments in 2017 were based on the objectives achieved during 2016. Total average performance related payment in 2017 amounted to 61% of the maximum.
Note15.2.5 Allocated options to senior executives and other employees
A share option scheme for all employees was established in the second quarter of 2015, with a two- year vesting period and one year for declaration period. The option scheme provide an incentive to stay with the company and the size of the award depends on each employee's opportunity to contribute to shareholder value. The main principle for the option scheme is that the strike price should be equal or higher than the market price at grant. In total 452 500 share options were issued in the second quarter 2015 at a strike price of NOK 18.42 per share. The first exercise date was on 1 June 2017.
A second share option scheme for all employees was established in the second quarter of 2016. The option scheme follows the same outline as the program in 2015 with two-year vesting period and one-year declaration period. In total 519 500 options were issued in the second quarter of 2016 at a strike price of NOK 11.93 per share. The first exercise date is 1 June 2018.
Senior executives, i.e. CEO (resigned 30.09.2017) S. Lien holds 160 000 options, CFO B. Sørvoll holds 70 000 options, CSO R. Engstad holds 80 000 options, Managing Director ArcticZymes J. Holter holds 80 000 options and VP Marketing S. Devine holds 30 000 options related to these programs. Svein Lien's options in the 2016 program need to be called by end of the first quarter 2018. Christian Jørgensen who replaced Svein Lien as CEO on 02.10.2017 has an agreement giving him the right to receive 500 000 options, or equivalent cash compensation, with the following plan:
| Options | Option strike price |
Options earned at share price |
|---|---|---|
| 100 000 | NOK 8.00 per share | NOK 11.00 per share |
| 100 000 | NOK 8.00 per share | NOK 14.00 per share |
| 100 000 | NOK 8.00 per share | NOK 17.00 per share |
| 100 000 | NOK 8.00 per share | NOK 20.00 per share |
| 100 000 | NOK 8.00 per share | NOK 23.00 per share |
Christian Jørgensen's options have a three-year vesting period and a two-year declaration period after award.
At 31 December 2017 the total number of options outstanding is 972 000. See note 13 in the financial statements for details. The Board will from year to year propose to the annual general meeting to obtain an authorization to issue a sufficient number of new shares or to purchase own shares in the market to match the options that can be exercised during the same period.
Note 15.2.6 New options
The Board wants to continue awarding options based on principles previously defined, see section 2.5. The Board proposes to the annual general meeting a new program with award of up to 1 300 000 share options to senior executives for the period up to annual general meeting in 2019. This includes 500 000 options to the CEO (according to CEO employment contract) and 800 000 options divided equally between CFO Børge Sørvoll, MD ArcticZymes Jethro Holter, CSO Rolf Engstad and VD Marketing Stuart Devine. For each senior executive, the principles of option plan will be:
| Proposed options |
Option strike price |
Options earned at share price |
|---|---|---|
| 20% of options | NOK 8.00 per share | NOK 11.00 per share |
| 20% of options | NOK 8.00 per share | NOK 14.00 per share |
| 20% of options | NOK 8.00 per share | NOK 17.00 per share |
| 20% of options | NOK 8.00 per share | NOK 20.00 per share |
| 20% of options | NOK 8.00 per share | NOK 23.00 per share |
Christian Jørgensen's options have a three-year vesting period and a two-year declaration period after award.
The vesting period will be three-years (2018-2020), with an additional two-year declaration period (until 2022). The options will be awarded after the annual general meeting in 2018. It is assumed that the Annual General Meeting will renew this program every year during the length of the program.
The Board further proposes that a maximum of 100 000 options are allocated to other employees, based on Board of Director's discretion. Exercise price for these allocated options will be five-days average
closing price prior to the date they are awarded. The options have a vesting period of three-years and an additional one-year declaration period. It is assumed that the Annual General Meeting will renew this program every year during the length of the program.
Note 15.2.7 Pensions
Pension schemes for senior executives will basically be the same as for employees in general. The Company has a defined contribution pension scheme. There are no contributions made for salaries exceeding 12G. All employees contribute with additional 2% of own salary to the pension scheme.
Note 15.2.8 Severance schemes
Resigned CEO Svein Lien is employed by the Company until 1 April 2018. He will not receive any severance pay after notice period expires.
CEO Christian Jørgensen employment contract entitles him to 6 months' severance payment beyond the 6 months' notice period if the Company terminates the employment. CFO Børge Sørvoll and Managing
Director ArcticZymes AS Jethro Holter are entitled to 6 months' severance pay from the Company. Severance schemes for other senior executives are not established.
Note 15.2.9 Other remuneration
There are no other elements in remuneration to senior executives.
Note 15.3. Executive salary policy for the fiscal year 2017
During 2017 Biotec Pharmacon ASA's objective was to offer competitive terms to senior executives. The principles described in previous sections were used in salary adjustments and for allocating other benefits in 2016. The CEO's (Svein Lien) salary was unchanged in 2017. The position as Managing Director of Biotec BetaGlucans AS has been held by the CEO of the Group in 2017.
Note 16 Deferred tax asset
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities assuming that the deferred taxes relate to the same taxation authority.
| (Amounts in NOK 1 000): | 2017 | 2016 | Change |
|---|---|---|---|
| Non current assets | -26 616 | -36 843 | -10 227 |
| Gains and loss account | 20 721 | 25 902 | 5 180 |
| Total temporary differences | -5 894 | -10 942 | -5 048 |
| Deferred tax asset: | |||
| Tax assessment loss carried forward | -425 913 | -393 554 | 32 359 |
| Calculation base deferred tax asset | -431 807 | -404 496 | 27 311 |
| Deferred tax asset, 23%/24% | -99 316 | -97 079 | 2 237 |
The Group has excluded from the financial position deferred tax asset of NOK 99.3 million related to temporary differences and tax loss carryforwards, as the company did not meet the criteria for capitalization under IAS 12. On approval date of this report, there was insufficient data available to predict reliable future earnings in order incorporate deferred tax asset in the finacial position.
Note 17 Tax expense
| (Amounts in NOK 1 000) | 2017 | 2016 |
|---|---|---|
| Profit before income tax | -24 740 | -20 389 |
| Group profit consolidation | -18 645 | |
| Non deductable expenses | 18 | 55 |
| Non taxable income | -2 653 | -2 551 |
| Utilisation of tax loss carried forward | -3 673 | |
| Changes in temporary differences | -5 047 | 14 302 |
| Tax base | -32 422 | -30 901 |
| Tax expense | 0 | 0 |
Tax payable is not calculated. Deferred tax asset is not recognized and tax expense thus constitutes NOK 0.
Note 18 Pension costs
The Group has established a defined contribution pension plan compliant to requirements for compulsory occupational pension in Norway. The employer's contribution to the plan is 5% for salaries between 0 G and 7.1 G, and 8% for salaries between 7.1 G and 12 G. In addition employees pay 2% of their salary to the pension plan. As of 31.12.2017 the Group paid for 41 members of the scheme. As of 31.12.2016 the Group paid for 42 members of the scheme.
| (Amounts in NOK 1 000) | 2017 | 2016 |
|---|---|---|
| Total pension costs | 1 452 | 1 366 |
Note 19 Other operating revenues
| (Amounts in NOK 1 000) | 2017 | 2016 |
|---|---|---|
| Government grants (note 24) | 1 675 | 4 102 |
| Tax grants "Skattefunn" (note 24) | 2 600 | 3 124 |
| Other grants | 1 796 | 208 |
| Total other operating revenues | 6 072 | 7 433 |
Currency gains/losses for 2016 have been reclassified to sales revenues for comparison purposes.
Note 20 Financial income and expense
| (Amounts in NOK 1 000) | 2017 | 2016 |
|---|---|---|
| Interest income | 807 | 584 |
| Other financial income / expense(-) | -695 | -34 |
| Total financial income and expense, net | 112 | 550 |
Note 21 Personnel expenses
| (Amounts in NOK 1 000) | 2017 | 2016 |
|---|---|---|
| Salaries | 40 193 | 37 406 |
| Employer's social security contribution | 2 856 | 2 606 |
| Estimated value of share options granted to employees (note 13) | 1 529 | 1 773 |
| Pension costs (note 18) | 1 452 | 1 366 |
| Total personnel expenses | 46 030 | 43 151 |
| Number of employees on 31 December: | 44 | 46 |
| Number of FTEs | 44.0 | 41.2 |
The pension scheme (note 18) complies with the requirements for compulsary occupational pensions in Norway.
Note 22 Other operating expenses
| (Amounts in NOK 1 000) | 2017 | 2016 |
|---|---|---|
| Marketing expenses | 1 735 | 1 141 |
| Patent and licensing expenses | 2 997 | 3 411 |
| Rental and operation of premises | 8 269 | 8 453 |
| Other operating expenses | 6 077 | 6 163 |
| Total other operating expenses | 19 078 | 19 168 |
Note 23 Research and development expenses
According to the Group's accounting policies (note 2.6), the development of Woulgan, rSAP, HL-dsDNase, Elisa-kit, San HQ and Polymerases are considered to be development projects that meets the IFRS criteria for capitalization in 2017. The Group capitalized NOK 2.4 millon in 2017. Other expenses related to research and developement are expensed when incurred.
| (Amounts in NOK 1 000) | 2017 | 2016 |
|---|---|---|
| RESEARCH AND DEVELOPMENT EXPENSES: | ||
| Personnell expenses | 16 505 | 16 395 |
| Purchase of external services | 2 065 | 3 277 |
| Other operating expenses | 2 960 | 2 379 |
| Depriciation and amortization | 1 968 | 1 853 |
| Total R&D expenses, not capitalized | 23 500 | 23 904 |
Note 24 Government grants
A significant part of the Group's activities is research-based and complies with regulations for grants from the Research Council of Norway. A grant is settled based on annual financial reporting. From time to time the company applies for grants from other available sources. The following grants for research and development activities are included in other operating income (note 19):
| (Amounts in NOK 1 000) | Grants expiry | 2017 | 2016 |
|---|---|---|---|
| FROM RESEARCH COUNSIL OF NORWAY (FORSKNINGSRÅDET): | |||
| Functionalization of enzymes from marine bioprospecting | 2016 | 580 | |
| Enabling new concepts for marine enzymes | 2017 | 263 | 2 159 |
| Phd funding program | 2018 | 378 | 702 |
| X-press | 2019 | 1 034 | 500 |
| FROM INNOVATION NORWAY (INNOVASJON NORGE): | |||
| Investment grant for production equipment, distributed over amortization periods | 2016 | 66 | |
| FROM MABIT: | |||
| Increased protection against sea lice infestation with an activated immune system | 2017 | 344 | 28 |
| FROM TROMS FYLKESKOMMUNE (VRI): | |||
| Better protection against viruses by activating the immune system | 2017 | 103 | 97 |
| FROM REGIONAL RESEARCH FUND (REGIONALT FORSKNINGSFOND): | |||
| Reduced sea lice infestation by adding beta-glucan | 2017 | 167 | 83 |
| FROM NORINNOVA TECHNOLOGY TRANSFER: | |||
| MdxPol | 2018 | 654 | |
| FROM HORIZON 2020 (EU): | |||
| Virus X | 2020 | 529 | 94 |
| Tax grants "Skattefunn" | Annually | 2 600 | 3 124 |
| Total grants | 6 072 | 7 433 |
Note 25 Related party disclosures
Director Martin Hunt has been a member of the Board since 11 May 2017. Martin Hunt owns and operates Invictus Management Ltd in London. For services and expenses beyond his board remuneration, Invictus Management Ltd has invoiced NOK 0.1 million in 2017. Director Inger Rydin owns and operates Inger Rydin AB. Inger Rydin AB is an advisor to Biotec BetaGlucans AS and invoiced during 2017 services for NOK 0.01 million. Beyond this, the Group had no transactions with related parties.
Remuneration of Board of Directors and Management
| (Amounts in NOK 1 000) | 2017 | 2016 | ||||||
|---|---|---|---|---|---|---|---|---|
| Salaries paid |
Bonus paid |
Pension costs |
Other benefits |
Salaries paid |
Bonus paid |
Pension costs |
Other benefits |
|
| Erik Thorsen, Chairman | 415 | 400 | ||||||
| Inger Rydin, Director | 200 | 190 | ||||||
| Masha LG Strømme, Director | 171 | 165 | ||||||
| Martin Hunt, Director | 105 | |||||||
| Ingrid Skjæveland, Director / Employee | 45 | |||||||
| Jan Raa, former Director | 39 | |||||||
| Richard Godfrey, former Director | 66 | 99 | ||||||
| Gerd Nilsen, former Director | 30 | 75 | ||||||
| Olav Flaten, former Director | 70 | 171 | ||||||
| Gunnar Rørstad, former Director | 80 | |||||||
| Christian Jørgensen, CEO (01.10.17) | 1 111 | 23 | 3 | |||||
| Svein Lien, former CEO | 2 825 | 873 | 82 | 25 | 2 799 | 911 | 83 | 26 |
| Børge Sørvoll, CFO | 1 180 | 157 | 75 | 11 | 1 157 | 174 | 85 | 9 |
| Rolf Engstad, CSO Biotec BetaGlucans AS | 1 420 | 167 | 90 | 18 | 1 313 | 190 | 84 | 17 |
| Jethro Holter, Managing Director ArcticZymes AS |
1 304 | 259 | 77 | 11 | 1 265 | 223 | 83 | 9 |
| Stuart Devine, VP Global Marketing Woulgan, Biotec Betaglucans AS |
1 828 | 178 | 1 942 | 246 |
See note 13 in reference to share options to executives and note 15 regarding executive remuneration policy. The Group has a bonus scheme for key employees. Bonus will depend on achieving defined objectives (Key Performance Indicators) for the current year. The maximum bonuses for 2017 are 50% of salary for Svein Lien, 20% of salary for Børge Sørvoll, 25% of salary for Rolf Engstad, 25% for Jethro Holter and 20% for Stuart Devine. The criteria for bonus payments for 2017 are partly fulfilled. Provisions made in the financial accounts according to best estimate. CEO Christian Jørgensen received a sign-on fee when joining the Company.
Shares owned or controlled by directors and senior management per 31.12.2017:
| Options | Shares * | |
|---|---|---|
| Erik Thorsen, Chairman | 23 500 | |
| Ingrid Skjæveland, Director, employees' representative | 17 500 | 16 087 |
| Christian Jørgensen, CEO | 62 000 | |
| Rolf Engstad, CSO | 80 000 | 370 774 |
| Børge Sørvoll, CFO | 70 000 | 17 428 |
| Jethro Holter, Managing Director ArcticZymes AS | 80 000 | 564 |
| Suart Devine, VP Marketing, BBG | 30 000 | 25 187 |
* Including shareholdings of close assosiates
External auditor: Auditing fees and expenses ex VAT:
| (Amounts in NOK 1 000) | 2017 | 2016 |
|---|---|---|
| Statutory audit | 274 | 269 |
| Other attestation services | 10 | 4 |
| Other services beside auditing | 31 | 100 |
| Total auditing fees and expenses | 315 | 372 |
Note 26 Events after balance sheet date, 31 December 2017
There are no events of significance to the financial statements for the period from the financial position date to the date of approval; 14 March 2018.
Financial statement of profit & loss — parent company
- January till 31. December
| (Amounts in NOK 1 000) | Note | 2017 | 2016 |
|---|---|---|---|
| Sales revenues | 5 | 15 075 | 14 523 |
| Total revenues | 15 075 | 14 523 | |
| Personnel expenses | 6, 13 | 15 840 | 13 708 |
| Depreciation and amortization | 1 | 10 | 56 |
| Other operating expenses | 8 328 | 6 613 | |
| Total operating expenses | 24 178 | 20 377 | |
| Operating profit / loss (-) | -9 104 | -5 854 | |
| Financial income | 11 | 877 | 1 446 |
| Financial expenses | 11 | -26 | -30 |
| Profit/loss(-) before income tax | -8 253 | -4 437 | |
| Income tax expense | 2 | 0 | 0 |
| Net profit/loss(-) | -8 253 | -4 437 | |
| Transferrals | |||
| Transferred to other equty | -8 253 | -4 437 |
Financial statement of comprehensive income — parent company
| (Amounts in NOK 1 000) | Note | 2017 | 2016 |
|---|---|---|---|
| Net profit/loss for the year | -8 253 | -4 437 | |
| Other income & costs after tax | 0 | 0 | |
| Comprehensive income | -8 253 | -4 437 |
Statement of financial position — parent company
As of 31. December
| (Amounts in NOK 1 000) | Note | 2017 | 2016 |
|---|---|---|---|
| ASSETS | |||
| NON-CURRENT ASSETS | |||
| Office equipment | 1 | 5 | 15 |
| Investments in subsidiaries | 8, 9 | 244 537 | 244 537 |
| Total non-current assets | 244 542 | 244 552 | |
| CURRENT ASSETS | |||
| Accounts receivables | 4, 9, 12 | 1 476 | 1 312 |
| Other receivables | 4, 12 | 375 | 190 |
| Cash and cash equivalents | 3, 12 | 54 869 | 61 135 |
| Total current assets | 56 720 | 62 637 | |
| Total assets | 301 262 | 307 188 | |
| EQUITY AND LIABILITIES | |||
| EQUITY | |||
| Share capital | 7 | 43 945 | 43 945 |
| Premium paid in capital | 133 378 | 133 378 | |
| Other paid-in capital | 46 282 | 44 753 | |
| Retained earnings | 73 472 | 81 725 | |
| Total equity | 297 076 | 303 801 | |
| CURRENT LIABILLITIES | |||
| Accounts payable | 12 | 29 | 296 |
| Public fees and tax withholdings | 12 | 1 399 | 701 |
| Other current liabilities | 10, 12 | 2 758 | 2 391 |
| Total current liabilities | 4 185 | 3 388 | |
| Total equity and liabilities | 301 262 | 307 188 |
Tromsø, 14 March 2018
Erik Thorsen Chairman
Inger Rydin Director
Martin Hunt Director
Ingrid Skjæveland Director
Masha Strømme Director
Christian Jørgensen CEO
Statement of changes in equity — parent company
- January till 31. December
| (Amounts in NOK 1 000) | Share capital | Premium paid in capital |
Other paied in capital |
Retained earnings |
Total |
|---|---|---|---|---|---|
| Equity as of 01.01.2016 | 43 945 | 133 378 | 43 027 | 86 161 | 306 511 |
| Purchase own shares | -230 | -230 | |||
| Sale own shares | 184 | 184 | |||
| Employees' share options | 1 773 | 1 773 | |||
| Net profit for the year 2016 | -4 437 | -4 437 | |||
| Equity as of 31.12.2016 | 43 945 | 133 378 | 44 753 | 81 724 | 303 801 |
| Purchase own shares | |||||
| Sale own shares | |||||
| Employees' share options | 1 529 | 1 529 | |||
| Net profit for the year 2017 | -8 253 | -8 253 | |||
| Equity as of 31.12.2017 | 43 945 | 133 378 | 46 282 | 73 471 | 297 076 |
The Company's share capital consists of 43 944 673 shares as of 31.12.2017.
Statement of cash flow — parent company
- January till 31. December
| (Amounts in NOK 1 000) | Note | 2017 | 2016 |
|---|---|---|---|
| CASH FLOW FROM OPERATING ACTIVITIES | |||
| Profit / loss(-) after tax adjusted for: | -8 253 | -4 437 | |
| Depreciation and amortization | 1 | 10 | 56 |
| Employees' options, share-based payment expense | 6 | 1 529 | 1 773 |
| Changes in working capital | |||
| Account receivables and other receivables | 4 | -390 | -416 |
| Trade and other payables | 797 | -359 | |
| Net cash flow from operating activities | -6 307 | -3 383 | |
| CASH FLOW FROM INVESTING ACTIVITIES | |||
| Investment in subsidiary | -70 000 | ||
| Changes in long-term receivables | 41 | 76 | |
| Net cash flow from investing activities | 41 | -69 924 | |
| CASH FLOW FROM FINANCING ACTIVITIES | |||
| Share issue | |||
| Purchase own shares | 7 | -230 | |
| Sale own shares | 7 | 184 | |
| Net cash flow from financing activities | 0 | -46 | |
| Net change in cash during the year | 3, 12 | -6 266 | -73 353 |
| Cash and cash equivalents as of 1 January | 3, 12 | 61 135 | 134 489 |
| Cash and cash equivalents as of 31.12 | 54 869 | 61 135 |
Notes to the financial statements for 2017 — parent company
ACCOUNTING PRINCIPLES
Biotec Pharmacon ASA has decided to adopt simplified IFRS in the company accounts according to the Norwegian Accounting Act § 3-9.Simplified adoption of IFRS in the company accounts means that value estimates and accounting principles applied in the consolidated financial statements for the Group also apply to the parent company Biotec Pharmacon ASA. Reference is made to the accounting principle note for the Group. Regarding lay-out and note information, a simplified adoption of IFRS allows this to be in accordance with the Norwegian Accounting Act. The lay-out of the statement and the notes for the parent company are thus prepared in accordance with the above mentioned, with the exception of comprehensive income which is in accordance with IFRS.
Shares held in subsidiary companies are valued according to historical cost in the annual accounts.
Note 1 Depreciation fixed assets
| (Amounts in NOK 1 000) | Office equipment 2017 | Total 2017 | Office equipment 2016 | Total 2016 |
|---|---|---|---|---|
| Accumulated costs as of 01.01. | 471 | 471 | 471 | 471 |
| Accumulated depreciation | 466 | 466 | 456 | 456 |
| Book value as of 31.12. | 5 | 5 | 15 | 15 |
| This year's depreciation | 10 | 10 | 56 | 56 |
| Depreciation rate | 3-5 years |
Note 2 Tax expense
| (Amounts in NOK 1 000) | 2017 | 2016 | Change |
|---|---|---|---|
| TEMPORARY DIFFERENCES | |||
| Non current assests | 4 973 | 6 211 | -1 238 |
| Gains and loss account | 20 721 | 25 901 | -5 180 |
| Total temporary differences | 25 694 | 32 112 | -6 418 |
| Tax assessment loss carried forward | -189 846 | -188 016 | -1 830 |
| Calculation base deferred tax asset | -164 152 | -155 904 | -8 248 |
| Deferred tax asset, 23%/24% | -37 755 | -37 417 | -338 |
| Profit before income tax | -8 253 | -4 437 | |
| Permanent differences | 5 | 7 | |
| Change temporary differeces | 6 418 | 8 103 | |
| Profit before tax loss carried forward | -1 830 | 3 673 | |
| Utilisation of tax loss carried forward | 1 830 | -3 673 | |
| Tax base | 0 | 0 | |
| Change in deferred tax asset | 0 | 0 | |
| Tax expense | 0 | 0 |
Deferred tax asset has not been incorporated in the financial position for 2016 nor 2017.
Note 3 Cash and cash equivalents
| (Amounts in NOK 1 000) | 2017 | 2016 |
|---|---|---|
| Cash and bank accounts | 53 764 | 60 622 |
| Tax withdrawal accounts | 1 106 | 513 |
| Cash and cash equivalents, gross | 54 869 | 61 135 |
| Joint liability for debt of the subsidiary Biotec BetaGlucans to DNB in accordance with bank account terms for the Group. |
-34 526 | -12 340 |
| Total cash and cash equivalents, net | 20 343 | 48 795 |
The Company's bank deposits are included in the group account agreement with DNB. See note 12 for the Group showing the Group's net cash equivalents.See note 12 for the parent company.
Note 4 Receivables
| (Amounts in NOK 1 000) | 2017 | 2016 |
|---|---|---|
| Accounts receivable | 1 476 | 1 312 |
| Other receivables | 375 | 190 |
| Total receivables | 1 851 | 1 502 |
The fair value of accounts receivable and other receivables equals book value. The Company has no long term dept. There are no significant concentrations of credit risk.
Note 5 Sales revenue
| (Amounts in NOK 1 000) | 2017 | 2016 | ||
|---|---|---|---|---|
| GEOGRAPHICAL DISTRIBUTION: | ||||
| Norway | 100 % | 15 075 | 100 % | 14 523 |
| Total sales revenues | 100 % | 15 075 | 100 % | 14 523 |
Note 6 Personnel expenses
| (Amounts in NOK 1 000) | 2017 | 2016 |
|---|---|---|
| Salaries | 12 600 | 10 468 |
| Employer's social security contribution | 1 098 | 903 |
| Pension costs | 457 | 348 |
| Estimated value of share options granted to employees (note 13) | 1 529 | 1 773 |
| Other benefits | 158 | 216 |
| Total personnel expenses | 15 840 | 13 708 |
2017: 9.2 FTE split between 4.45 men and 4.75 women. 2016: 7.6 FTE split between 2.85 men and 4.75 women. The company's pension scheme complies with the requirements in regard to compulsary occupational pensions in Norway.
Auditor expenses, ex VAT:
| (Amounts in NOK 1 000) | 2017 | 2016 |
|---|---|---|
| Statutory auditing | 160 | 90 |
| Other auditing services | 19 | |
| Other services beside auditing | 28 | 19 |
| Total auditing expenses | 188 | 128 |
Remuneration of the Board of Directors and management:
| (Amounts in NOK 1 000) | 2017 | 2016 | ||||||
|---|---|---|---|---|---|---|---|---|
| Salaries paid |
Bonus paid |
Pension costs |
Other benefits |
Salaries paid |
Bonus paid |
Pension costs |
Other benefits |
|
| Erik Thorsen, Chairman | 415 | 400 | ||||||
| Inger Rydin, Director | 200 | 190 | ||||||
| Masha LG Strømme, Director | 171 | 165 | ||||||
| Martin Hunt, Director | 105 | |||||||
| Ingrid Skjæveland, Director / Employee representative |
45 | |||||||
| Jan Raa, former Director | 39 | |||||||
| Richard Godfrey, former Director | 66 | 99 | ||||||
| Gerd Nilsen, former Director | 30 | 75 | ||||||
| Olav Flaten, former Director | 70 | 171 | ||||||
| Christian Jørgensen, CEO (01.10.17) |
1 111 | 23 | 3 | |||||
| Svein Lien, former CEO | 2 825 | 873 | 82 | 25 | 2 799 | 911 | 83 | 26 |
| Børge Sørvoll, CFO | 1 180 | 157 | 75 | 11 | 1 157 | 174 | 85 | 9 |
The Company has a bonus scheme for key employees. Bonus will depend on achieving defined objectives (Key Performance Indicators) for the current year. The maximum bonuses for 2017 are 50% of salary for Svein Lien, and 20% of salary for Børge Sørvoll. The criterias for bonus payments for 2017 are partly fulfilled. CEO Christian Jørgensen received a sign-on fee when joining the Company.
See note 13 in the accounts for the Group regarding share options to employees, and note 15 for matters concerning the CEO. There are no loans, prepayments or guarantees in favour of senior executives in the Company.
Note 7 Share capital
| (Number of shares) | Number of shares | Whereof treasury shares |
|---|---|---|
| 01.01.2016 | 43 944 673 | |
| Purschase own shares | 17 895 | 17 895 |
| Sale own shares | -17 895 | -17 895 |
| Per 31.12.2016 | 43 944 673 | 0 |
| Per 31.12.2017 | 43 944 673 | 0 |
The Annual General Meeting on 11 May 2017 granted one authorization to the Board: Authorization to issue up to 1 200 000 shares in connection with share schemes for employees. The authorization is valid until the AGM in 2018 or at the latest 30.06.2018. This authorization was not exercised as of 31 December 2017.
See Group note 13 for an overview over largest shareholdings.
Note 8 Investments in subsidiaries
| (Amounts in NOK 1 000) | Main office location | Share capital & premium | Shareholding | Book value | Net profit | Equity |
|---|---|---|---|---|---|---|
| ArcticZymes AS | Tromsø | 24 296 | 96 % | 42 500 | 3 377 | 18 329 |
| Biotec BetaGlucans AS | Tromsø | 122 037 | 100 % | 202 037 | -20 492 | 494 |
Note 9 Group internal accounts
| (Amounts in NOK 1 000) | 2017 | 2016 |
|---|---|---|
| Receivables from subsidiaries as of 31.12 | 1 476 | 1 312 |
| Liablitities to subsidiaries as of 31.12 | 0 | 0 |
The Company has entered into service agreements with the subsidiaries ArcticZymes AS and Biotec BetaGlucans AS where the subsidiaries purchase services within management, finance, administration, quality assurance, business development and IPR.
Note 10 Other current liabilities
| (Amounts in NOK 1 000) | 2017 | 2016 |
|---|---|---|
| Accrued salaries and holiday payment | 1 639 | 1 034 |
| Other accrued costs | 1 119 | 1 358 |
| Total other current liabilities | 2 758 | 2 391 |
Book value of current liabilities equals fair value.
Note 11 Financial income and expense
| (Amounts in NOK 1 000) | 2017 | 2016 |
|---|---|---|
| Interest income | 867 | 1 446 |
| Total financial income | 867 | 1 446 |
| Impairment loss on unlisted shares | -29 | |
| Net loss on currencies, not realised | -15 | -1 |
| Interest expense | -1 | |
| Total financial expense | -16 | -30 |
| Total financial income and expense, net | 851 | 1 417 |
Note 12 Financial instruments by category
The financial instruments in the financial position have been grouped as follows for subsequent measurement:
Assets per 31.12
| (Amounts in NOK 1 000) | 2017 | 2016 |
|---|---|---|
| DEPOSITS AND RECEIVABLES | ||
| Accounts receivable | 1 851 | 1 502 |
| Money market fund | 13 000 | |
| Cash and cash equivalents | 41 869 | 61 135 |
| Total financial instruments | 56 720 | 62 637 |
Liabilities per 31.12
| (Amounts in NOK 1 000) | 2016 | 2015 |
|---|---|---|
| FINANCIAL LIABILITIES AT AMORTISED COST | ||
| Accounts payable | 29 | 296 |
| Public fees and tax witholdings | 1 399 | 701 |
| Other current liabillities | 2 758 | 2 391 |
| Total current liabilities | 4 185 | 3 388 |
Note 13 Pensions
The Company has established a defined contribution pension plan compliant to requirements for compulsory occupational pension in Norway. The employer's contribution to the plan is 5% for salaries between 0 G and 7.1 G, and 8% for salaries between 7.1 G and 12 G. In addition employees pay 2% of their salary to the pension plan. As of 31.12.2017 the Company paid for 12 members of the scheme.
| (Amounts in NOK 1 000) | 2017 | 2016 |
|---|---|---|
| Total pension costs | 457 | 348 |
Note 14 Events after balance sheet date, 31 December 2017
There are no events of significance to the financial statements for the period from the financial position date to the date of approval; 14 March 2018.
Statement by the Board of Directors and CEO
We confirm, to the best of our knowledge, that the financial statement for the period 1. January to the 31. December 2017 have been prepared in accordance with current accounting standards and that the information in the accounts gives a true and fair view of the Company and the Group's assets, liabilities, financial position and results of operation.
We also confirm, to the best of our knowledge, that the annual report includes a true and fair overview of the Company's and the Group's development, results and position, together with a description of the most important risks and uncertainty factors the Company and the Group are facing.
Tromsø, 14. March 2018 Board of Directors Biotec Pharmacon ASA
Erik Thorsen Chairman
Inger Rydin Director
Martin Hunt Director
Ingrid Skjæveland Director, employee representative
Masha Strømme Director
Christian Jørgensen CEO
Statsautoriserte revisorer Ernst & Young AS
Roald Amundsens Plass 1, NO-9008 Tromsø Postboks 1212, NO-9262 Tromsø
Foretaksregisteret: NO 976 389 387 MVA Tlf: +47 24 00 32 00 Fax: +47 77 64 14 63 www.ey.no Medlemmer av Den norske revisorforening
INDEPENDENT AUDITOR'S REPORT
To the Annual Shareholders' Meeting of Biotec Pharmacon ASA
Report on the audit of the financial statements
Opinion
We have audited the financial statements of Biotec Pharmacon ASA, which comprise the financial statements for the parent company and the Group. The financial statements of the parent company comprise the balance sheet as at 31 December 2017, the statements of other comprehensive income, income statement, cash flows and changes in equity for the year then ended and notes to the financial statements, including a summary of significant accounting policies. The consolidated financial statements comprise the balance sheet as at 31 December 2017, the statements of other comprehensive income, income statement, cash flows and changes in equity for the year then ended and notes to the financial statements, including a summary of significant accounting policies.
In our opinion,
- ► the financial statements are prepared in accordance with the law and regulations;
- ► the financial statements present fairly, in all material respects, the financial position of the parent company as at 31 December 2017, and of its financial performance and its cash flows for the year then ended in accordance with the Norwegian Accounting Act section 3-9;
- ► the consolidated financial statements present fairly, in all material respects the financial position of the Group as at 31 December 2017 and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU.
Basis for opinion
We conducted our audit in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Company and the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in Norway, and we have fulfilled our ethical responsibilities as required by law and regulations. We have also complied with our other ethical obligations in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for 2017. We have determined that there are no key audit matters to communicate in our report.
We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the financial statements section of our report. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures provide the basis for our audit opinion on the financial statements.
Other information
Other information consists of the information included in the Company's annual report other than the financial statements and our auditor's report thereon. The Board and Chief Executive Officer (management) are responsible for the other information. Our opinion on the financial statements does not cover the other information, and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information, and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of management for the financial statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards as adopted by the EU, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting, unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with law, regulations and generally accepted auditing principles in Norway, including ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
- ► identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- ► obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control
- ► evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
- ► conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Independent auditor's report – Biotec Pharmacon ASA
- ► evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
- ► obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
Report on other legal and regulatory requirements
Opinion on the Board of Directors' report and on the statements on corporate governance and corporate social responsibility
Based on our audit of the financial statements as described above, it is our opinion that the information presented in the Board of Directors' report and in the statements on corporate governance and corporate social responsibility concerning the financial statements, the going concern assumption, and proposal for the allocation of the result is consistent with the financial statements and complies with the law and regulations.
Opinion on registration and documentation
Based on our audit of the financial statements as described above, and control procedures we have considered necessary in accordance with the International Standard on Assurance Engagements (ISAE) 3000, Assurance Engagements Other than Audits or Reviews of Historical Financial Information, it is our opinion that management has fulfilled its duty to ensure that the Company's accounting information is properly recorded and documented as required by law and bookkeeping standards and practices accepted in Norway.
Tromsø, 15 March 2018 ERNST & YOUNG AS
Kai Astor Frøseth State Authorised Public Accountant (Norway)
Independent auditor's report – Biotec Pharmacon ASA
Biotec Pharmacon ASA
Sykehusveien 23 Postboks 6463 9294 Tromsø
Telefon: (+47) 77 64 89 00 Telefaks: (+47) 77 64 89 01 E-post: [email protected]