Annual
Report
2018
ANNUAL
REPORT
2018
OVOCA BIO PLC (FORMERLY OVOCA GOLD PLC)
ANNUAL REPORT
FOR THE FINANCIAL YEAR
ENDED 31 DECEMBER 2018
C O N T E N T S
WELCOME
ANNUAL REPORT
4
1.
2.
5
6
3.
4.
10
CHIEF EXECUTIVE OFFICER
(CEO)’S STATEMENT
5.
12
DIRECTORS’ REPORT
CHAIRMAN’S STATEMENT
23
DIRECTORS’ RESPONSIBILITIES
STATEMENT
COMPANY INFORMATION
AND OVERVIEW
6.
24
INDEPENDENT AUDITORS’
REPORT TO THE MEMBERS
OF OVOCA BIO PLC
DIRECTORS AND CORPORATE
INFORMATION
30
CONSOLIDATED INCOME
STATEMENT
2
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
OVOCA BIO PLC (FORMERLY OVOCA GOLD PLC) FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
31
CONSOLIDATED STATEMENT
OF OTHER COMPREHENSIVE
(LOSS)/INCOME
36
COMPANY STATEMENT
OF FINANCIAL POSITION
32
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
37
CONSOLIDATED STATEMENT
OF CASH FLOWS
34
COMPANY STATEMENT
OF CHANGES IN EQUITY
38
COMPANY STATEMENT
OF CASH FLOWS
35
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
NOTES TO THE FINANCIAL
STATEMENTS
40
7.
3
1.
CHIEF
EXECUTIVE
OFFICER (CEO)’S
STATEMENT
Dear Shareholders and Colleagues!
With the successful conclusion of last year’s acquisition of IVIX LLC
(“IVIX”) and re-admission of the enlarged group on Euronext Dublin
and the London Stock Exchange, the foundation was put in place for
establishing Ovoca Bio Plc (“Ovoca”, “the Company”, “the Group”) as
a recognized developer of novel therapeutics for women’s health,
especially in the area of sexual dysfunction. Our colleagues at IVIX
continue to build out our successful BP101 program, which you will
have seen in March 2019 comfortably exceeded the efficacy and safety
hurdles in its Phase 3 trial in Russia. As a result, we are now preparing
to file for the drug’s marketing approval in its first country, the Russian
Federation, and actively pursuing discussions with potential licensing
partners to commercialize there.
Looking more expansively, to realize the large global potential
of BP101 and to build Ovoca’s future pipeline, the Company will
pursue its transformation further into an international biotechnology
its presence and relationships
development company, growing
outside of the home territory. Over the course of this year and into
the next, we will be seeking to strengthen our international team and
advisers, and increasing our visibility and the familiarity of stakeholders
with our exciting story and plans. Shortly, we plan to publish which
scientific experts will be advising us on our current and future pipeline
opportunities. In parallel with these initiatives, we shall, of course,
be completing the remaining essential activities that BP101 requires
to make it an attractive partnering candidate globally and worthy of
further financing where we choose to retain commercial rights.
We trust you are as enthusiastic as we are about Ovoca’s bright
prospects in its new form. Moreover, we hope that last year’s strong
progress and our current plans help reinforce the view that Ovoca
should be a company that investors want to be part of during its value-
creating future.
Best regards,
Kirill Golovanov, CEO
4
CHAIRMAN’S
STATEMENT
Dear Stakeholders,
I reported last year how our business was at the intersection of
two unfavorable trends and that action was required to insulate
the Company from their effects. Our strategic review to address this
identified the healthcare and biotechnology sectors as having many
of the risk-reward features of our traditional business, but at the same
time being less in the political cross hairs of nations in dispute. While
the geopolitical unrest between Russia and the West shows no signs
of improving, our decisive action in 2018 to acquire IVIX LLC and its
promising clinical program directed to women’s health should bring us
more control over our future and make us less prone to international
politics.
We continue to realize the assets of our former business in an
orderly manner and the steady stream of strong findings in the clinic
for BP101 and our plans to reproduce that internationally are helping
to accelerate Ovoca’s change in strategic direction. The Company
maintains strong reserves of cash and liquid assets and these will
support its repositioning activities. Nevertheless, much work needs
to be done and the board and management recognize the paramount
importance of building Ovoca’s track record of success with its first
drug candidate, growing its product pipeline, and delivering on its
commitments to a new set of stakeholders in a timely way. All of this
we consider to be necessary in order to attract strong commercial
partners, build an enthusiastic investor following and, ultimately, bring
new treatments to the patients that really need them.
Sincerely,
Mikhail Mogutov, Chairman
5
3.
COMPANY
INFORMATION
AND OVERVIEW
OVOCA BIO PLC (FORMERLY OVOCA GOLD PLC)
ANNUAL REPORT
FOR THE FINANCIAL YEAR
ENDED 31 DECEMBER 2018
6
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
INTRODUCTION
Ovoca Bio plc (Ovoca) is a biopharmaceutical company focused on identifying and
developing novel therapeutics targeting the large unmet needs in the treatment of female
sexual dysfunction. In September 2018 Ovoca acquired a majority interest and integrated into
its Group a Russianincorporated company IVIX LLC (IVIX), a company that has sought to develop
and commercialize its investigational drug candidate, BP101, for the treatment of female sexual
dysfunction, since its formation in 2012.
BP101 is a novel synthetic peptide, administered through a nasal spray. Clinical studies
completed to-date have demonstrated statistically significant efficacy in the treatment of a major
form of female sexual dysfunction.
So far, IVIX has reached and completed Phase III clinical studies in Russia for BP101. The Group
now intends to seek approval for the marketing of BP101 in the Russian market, as well seek to
expand its use internationally.
PERFORMANCE HIGHLIGHTS
Since Ovoca announced the acquisition of Russian biotechnology firm, IVIX LLC, on 4th July 2018,
Ovoca has made considerable progress in implementing its strategic refocus away from gold mining
and development. In particular, Ovoca achieved notable success in the following areas in 2018:
• Completion of the acquisition of IVIX on 25th September 2018;
• Recruitment of patients ahead of schedule to the Russian Phase 3 clinical trial of BP101, the
Company’s first drug candidate for the treatment of female sexual dysfunction;
• External expert review of BP101 preclinical and scientific data has been conducted and a
programme identified to address all the regulatory needs for clinical development in the
EU and United States.
OPERATIONAL HIGHLIGHTS
In July 2018, Ovoca announced its proposed acquisition of IVIX and a strategic refocus of its
core business from mining to biotechnology. After obtaining the approval of Ovoca’s shareholders,
meeting the terms and conditions of the agreements attaching to the transaction, and completing
necessary corporate arrangements in Russia, Ovoca completed the acquisition of IVIX LLC on 25th
September 2018. BP101 is now Ovoca’s first investigational drug, consisting of a novel synthetic
peptide that is being developed for the treatment of a major form of female sexual dysfunction
called hypoactive sexual desire disorder (HSDD). There is a high unmet medical need in HSDD with
a lack of safe and effective treatment options currently available. HSDD is a distressing condition
involving a lack or loss of sexual desire in women and affects a large number of adults in the
United States and Europe. IVIX, initiated a Phase 3 therapeutic clinical study in Russia in 2017 and
will allow the Group to apply for marketing authorization of BP101 in its first market, Russia.
After IVIX’s acquisition by Ovoca, the enlarged group continued to make strong progress with the
development of BP101 for HSDD treatment. In late 2018, patient recruitment in the Russian Phase
3 clinical study was completed early based on the findings of an independent Data Monitoring
Committee (DMC) established to monitor the blinded data from the study. As part of the clinical trial
study protocol, a pre-planned interim analysis of the study data was performed by the DMC for the
primary endpoint – change from baseline in the mean number of satisfying sexual events (SSEs). The
interim analysis results showed statistically significant superiority of BP101 compared with placebo,
which allowed the decision to be made to complete patient recruitment for the study.
Also, as a result of consultation with external regulatory affairs experts, further preparation has
been made towards readying BP101 for clinical development in the United States and Europe:
a systematic analysis of BP101 preclinical and scientific data was completed, which allowed
identification of potential gaps to be addressed before regulatory approval would be forthcoming
in Western countries. The Group has used this assessment to modify its ongoing preclinical and
regulatory affairs activities and update its development timelines.
7
3. COMPANY INFORMATION AND OVERVIEW
STRATEGIC DEVELOPMENTS SINCE YEAR END
Following a planned interim analysis conducted by an independent Data Monitoring
Committee (DMC), in Q1 2019 the DMC recommended to stop the trial early as the primary
endpoint has reached its pre-specified criteria for superiority. That allowed IVIX to complete its
Russian Phase 3 clinical study of BP101 ahead of the Strategic Plan (announced previously in
the Admission Document) and to announce positive outcomes for both primary and secondary
endpoints compared to placebo control. For the secondary endpoints that are important from
a regulatory approval perspective – Female Sexual Function Index (FSFI) Desire domain and
Female Sexual Distress Scale-revised (FSDR-R) Item 13, which measures distress related with the
lack of desire - there was shown statistically and clinically significant superiority of BP101 over
placebo. Furthermore, a favorable safety profile of BP101 was demonstrated in the Phase 3 study,
confirming the safety of BP101 since in all previous clinical studies.
On 1st March 2019 IVIX was granted patent No 234753 in Israel covering any use for a large list
of peptide variants based on BP-101. This patent adds to IVIX’s issued patent portfolio consisting
of a Russian patent with the same coverage, and a U.S. patent protecting any pharmaceutical
application of peptides in the same list.
OUR PRODUCT
BP101
Ovoca’s first product, BP101, is an investigational drug comprising a novel synthetic peptide,
that is being developed for the treatment of one of the major forms of female sexual dysfunction
– hypoactive sexual desire disorder (HSDD), for which there is a high unmet medical need with
a lack of safe and effective treatment options. HSDD is a distressing condition of lack or loss of
sexual desire in women, which affects a significant number of adult females in the United States
and Europe. BP101 was in a Phase 3 randomized, double blind, and placebo-controlled clinical
study in Russia during 2018 to confirm the results of a prior efficacy study, which will allow the
Group to apply for marketing authorization of BP101 in Russia.
Female sexual dysfunction (“FSD”) is estimated to affect a significant portion of the female
population in US and EU countries. Examples of FSD may include hypoactive sexual desire disorder
(“HSDD”) and female sexual arousal disorder (“FSAD”). In a research paper published by Shifren
J.L. et al1, nearly 10% of premenopausal women in a large US survey reported distressing low
desire for sexual activity. According to the Women’s International Study of Health and Sexuality2,
the prevalence of HSDD ranged from 6–13 per cent. in Europe, and the proportion of women with
low desire associated with distress was significantly higher in younger women in comparison with
older women.
BP101 has already demonstrated promising results for the treatment of patients with HSDD
in the Phase 2 randomized, double-blind, placebo-controlled study in female patients with lack
or loss of sexual desire, where BP101 significantly increased sexual desire and the number of
SSEs and orgasms in premenopausal women compared with the placebo, while demonstrating a
favorable safety and tolerability profile. In early 2018, IVIX started to enroll patients into its Russian
Phase 3 clinical study to confirm the efficacy and safety seen with BP101, and with the intention
of applying later in 2019 for marketing authorization in Russia and potentially other Eurasian
Economic Union countries for BP101 based on the results of this single Phase 3 study.
1 Shifren JL et al. Sexual Problems and Distress in United States Women: Prevalence and Correlates. ObstetGynecol 2008;112 (5);
968-9 .
2 Nappi RE, Martini E, Terreno E, et al. Management of hypoactive sexual desire disorder in women: current and emerging therapies.
International Journal of Women’s Health. 2010; 2:167-175).
8
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
INTELLECTUAL PROPERTY
Obtained patents:
Russia:
• Patent № 2507212 «Method for Producing a Recombinant Peptide and Resultant Peptide»,
Priority year 2012;
• Patent № 2626002, priority year 2016, “New group of peptides for treatment of Female
Sexual Dysfunction”;
• Patent № 2655763, priority year 2016, “Pharmaceutical composition and method of
treatment of Female Sexual Dysfunctions”.
USA:
• «Method for Producing a Recombinant Peptide and Resultant Peptide», US9409947B2,
priority year 2012.
Israel:
• «Method for Producing a Recombinant Peptide and Resultant Peptide», 234753, priority year
2012.
Applications of PCT «Method for Producing a Recombinant Peptide and Resultant Peptide»,
PCT/RU2013/000433 prosecuted in the following countries:
Country
China
EU
Japan
India
Canada
South Korea
Brazil
Filed
05.28.2013
05.28.2013
05.28.2013
05.28.2013
05.28.2013
05.28.2013
05.28.2013
Serial no.
№201380028491.4
№13772776.4
№2015-503152
№8984/DELNP/2014
№2,868,820
№10-2014-7030301
№BR 11 2014 023888 0
CLINICAL TRIALS UPDATE
Since the acquisition of IVIX in Q3 2018 the Group was continuing to run its Phase 3 clinical study of
BP101 in Russia. In Q1 2019 the pre-specified interim analysis was performed, and statistically significant
superiority of BP101 compared with placebo in terms of the study primary endpoint – change from
baseline in the mean number of satisfying sexual events (SSEs) after the first month of treatment, was
shown. The independent Data Monitoring Committee (DMC) has reviewed the interim analysis results
and has recommended to IVIX to early complete the trial due to early efficacy demonstration.
In line with DMC recommendation, IVIX has decided to early stop the patients’ recruitment to the
BP101-SD02-RUS Phase 3 study and to start preparations for early study completion. Corresponding
interim clinical trial report was sent to Russian Ministry of Health (Regulatory Authority).
FUTURE DEVELOPMENT FOR BP101 ASSET
To pursue Ovoca’s strategy to develop BP101 in Western markets, and in particular the United
States and Europe, the Group has undertaken a number of planning activities in consultation with
external regulatory affairs experts. A systematic analysis of BP101 preclinical and scientific data
was completed, which allowed identification of potential gaps to be addressed before regulatory
approval would be forthcoming in Western countries. The Group has used this assessment to modify
its ongoing pre-clinical and regulatory affairs activities and update its development timelines.
9
4.
DIRECTORS
AND
CORPORATE
INFORMATION
OVOCA BIO PLC (FORMERLY OVOCA GOLD PLC)
ANNUAL REPORT
FOR THE FINANCIAL YEAR
ENDED 31 DECEMBER 2018
10
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
Directors
Mikhail Mogutov
Executive Chairman
Kirill Golovanov
CEO (Executive Director)
Yuri Radchenko
Non-Executive Director
Leonid Skoptsov
Non-Executive Director
Timothy McCutcheon
Non-Executive Director
Nikolay Myasodev (appointed 27 July 2018)
Non-Executive Director
Registered Office
17 Pembroke Street Upper
Dublin 2
D02 AT22
Business Address
17 Pembroke Street Upper
Dublin 2
D02 AT22
Other Business Information
Svetlana Radchenko
Chief Financial Officer
Christopher Wiltshire (appointed 27 July 2018)
Non-Executive Director
Kirill Golovanov
Corporate Secretary
Romulo Colindres (appointed 27 July 2018)
Non-Executive Director
Kenneth Kuchling (resigned 27 July 2018)
Non-Executive Director
Donald Schissel (resigned 27 July 2018)
Non-Executive Director
Registration number:
105274
Incorporated:
15 January 1985
Web site
www.ovocabio.com
Principal banker
Allied Irish Banks plc
Terenure Road
Rathgar
Dublin 6
Ireland
Auditors
Grant Thornton
Chartered Accountants &
Statutory Audit Firm
13 – 18 City Quay
Dublin 2
D02 ED70
Ireland
Solicitors
OBH Partners
17 Pembroke Street Upper
Dublin 2
D02 AT22
Nominated Adviser and
Euronext Growth Advisor
Davy
Davy House
49 Dawson Street
Dublin 2
Ireland
Registrars
Computershare Investor
Services (Ireland) Limited
3100 Lake Drive, Citywest
Business Campus, Dublin 24,
D24 AK82
11
5.
DIRECTORS’
REPORT
OVOCA BIO PLC (FORMERLY OVOCA GOLD PLC)
ANNUAL REPORT
FOR THE FINANCIAL YEAR
ENDED 31 DECEMBER 2018
12
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
The Directors present their annual report and audited financial statements for the financial
year ended 31 December 2018 of Ovoca Bio plc (formerly Ovoca Gold plc) (“the Company”), a
company registered and domiciled in the Republic of Ireland and its subsidiaries (collectively “the
Group”).
PRINCIPAL ACTIVITIES, BUSINESS REVIEW AND FUTURE DEVELOPMENTS
The Group’s activity is that of a bio-technology company following the acquisition of the
interests in IVIX LLC during the year. On 27 July 2108 the Company changed its name to Ovoca Bio
Public Limited Company from Ovoca Gold Public Limited Company. Following the acquisition, the
Company announced its intention for dispose of its remaining property and equipment.
The Directors have reviewed the financial position of the Group and are satisfied that the
Group will continue to operate for the foreseeable future. A detailed business review is included in
the Company information and overview.
KEY PERFORMANCE INDICATORS
At this stage of the Group’s business activities the Directors think it is appropriate to limit the
Key Performance Indicators (KPIs) used to monitor progress in the delivery of the Group’s strategic
objectives, to assess actual performance against targets and to aid management of the business.
The Board monitors relevant KPIs, which it considers appropriate for managing the activities
inherent in exploration and appraisal operations. The KPIs for the Group are as follows:
Financial KPIs
• Shareholder return – the performance of the share price;
• Research and development costs – Pharmaceutical related research and development
costs.
Non-financial KPIs
• Regulatory approval of biopharmaceutical products;
• Development and commercialisation partnerships formed with third parties.
RESULTS AND DIVIDENDS
The results of the Group are disclosed on page 30 of the financial statements. The directors did
not recommend the payment of a dividend.
PRINCIPAL RISKS AND UNCERTAINTIES
The Group’s operating activities are principally carried out in Russia. Accordingly, the principal
risks and uncertainties detailed below have been identified. The Group seeks to minimise the
effects of these risks through careful monitoring of the risks on an ongoing basis.
• Political Risk: As a consequence of activities in different parts of the world, the Group may be
subject to political, economic and other uncertainties, including but not limited to terrorism, war
or unrest, changes in national laws and energy policies and exposure to different legal systems.
• Legal Risk: As a consequence of the Group business portfolio of pharmaceutical interests,
the Group may be numerous legal risks, particularly in the areas of product liability,
competition, and patent disputes.
including
• Competition Risk: The biotechnology and pharmaceutical industries are very competitive.
The Group’s competitors,
include major multinational pharmaceutical
companies, biotechnology companies and research institutions. Many of its competitors
have substantially greater financial, technical and other resources, such as larger research
and development staff. The Group’s competitors may succeed in developing, acquiring or
licensing drug product candidates that are earlier to market, more effective or less costly
than any product candidate which the Group is currently developing or which it may
develop and this may have a material adverse impact on the Group.
13
5. DIRECTORS’ REPORT
• Clinical trials: Clinical trials are expensive, time consuming and difficult to design and
implement and involve uncertain outcomes. Furthermore, results of earlier pre-clinical
studies and clinical trials may not be predictive of results of future pre-clinical studies or
clinical trials. The Group continuously monitors the outcomes and costs of ongoing clinical
trials.
• Regulation: The regulatory approval processes of the regulatory agencies may be lengthy,
time-consuming and the outcome is unpredictable.
• Market Risk: Factors beyond the control of the Group may affect the marketability of its
securities. Prices are subject to fluctuation and are affected by factors beyond the control
of the Group. The effect of these factors on the Group’s operations cannot be accurately
predicted. Fluctuations in stock market prices affect the Group’s Equity securities at fair
value through other comprehensive income (FVOCI). The Group seek to minimise this risk
by closely monitoring stock market movements on an ongoing basis. A detailed sensitivity
analysis of the impact of changes in the market price of securities is available at Note 19.
• Foreign Exchange Risk: Exchange rate fluctuations may affect the cost that the Group
incurs with its operations. Any fluctuations of the Euro and Russian Rouble against
the US Dollar may have a significant impact on the Company’s financial position and
results in future.
The carrying amount of the Group’s foreign currency denominated monetary assets and
monetary liabilities at the end of the reporting date are as follows:
United States Dollar
Russian Rouble
Financial Assets
Financial Liabilities
31/12/2018
31/12/2017
31/12/2018
31/12/2017
€’000
15,752
143
€’000
21,131
1,694
€’000
€’000
986
12
-
8
The following table details the Group’s sensitivity to a 10% increase and decrease in the Euro
against United States Dollar and Russian Rouble. 10% is the sensitivity rate used which represents
management’s assessment of the reasonably possible change in foreign exchange rates. The
sensitivity analysis includes only outstanding foreign currency denominated monetary items and
adjusts their translation at the year-end for a 10% change in foreign currency rates, it assumes that
all other variables, in particular bank interest rates, remain constant and ignores the impact of
forecast sales and purchases
Profit or loss
United States Dollar Impact
Russian Rouble Impact
31/12/2018
31/12/2017
31/12/2018
31/12/2017
€’000
1,342
€’000
2,134
€’000
12
€’000
170
• Credit Risk: this refers to the risk that a counter party will default on its contractual obligations
resulting in financial loss to the Group. The Group has adopted a policy of only dealing with
creditworthy counterparties and obtaining significant collateral, where appropriate, as a
means of mitigating the risk of financial loss from defaulters. The table below analyses the
maximum exposure of the Group’s financial assets which are subject to credit risk:
14
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
Group
Group
Group
Group
31/12/2018
31/12/2017
31/12/2018
31/12/2017
€’000
€’000
US$’000
US$’000
Trade and other receivables
Cash and cash equivalents (Note 22)
Total
138
1,823
1,961
-
5,546
5,546
158
2,008
2,166
-
6,643
6,643
The Group continuously monitors defaults of customers and other counterparty, identified
either individually or by the Group, and incorporates this information into its credit risk controls.
In relation to the credit risk for cash and cash equivalents, the risk is considered to be negligible,
since the counterparties are reputable banks with high quality external credit ratings. The Group’s
management considers that all of the above financial assets are of good credit quality, as the
Group’s policy is to deal only with creditworthy customers.
• Liquidity Risk: is the risk that the Group will not have the sufficient funds to meet its liabilities.
The Group holds its cash in currencies in which it expects to incur expenditure, including
Euros, US Dollar and Russian Roubles. The Group’s reporting currency is the Euro. The most
meaningful information relates to the Group’s current liquidity – since it is not generating
any income from its mineral projects.
The table below analyses the Group’s financial liabilities into relevant maturity groupings
based on the earliest date on which the Group can be required to pay. The amounts disclosed in
the table are the contractual undiscounted cash flows. Balances due within 1 year equal to their
carrying values, as the impact of the discounting is not significant.
Balances due within 1 year
31/12/2018
31/12/2017
31/12/2018
31/12/2017
Group
Group
Group
Group
Trade and other payables (Note 27)
Borrowings (Note 28)
Total
€’000
178
989
1,067
€’000
US$’000
US$’000
41
-
41
202
1,133
1,335
49
-
49
The Group considers expected cash flows from financial assets in assessing and managing
liquidity risk, in particular its cash resources and available for sale financial assets. The Group’s
current cash resources (Note 22), trade and other receivables (Note 21) and equity securities at
FVOCI (Note 19) significantly exceed the current cash outflow requirements.
15
5. DIRECTORS’ REPORT
DIRECTORS, SECRETARY AND THEIR INTERESTS
In accordance with Section 329 of the Companies Act 2014, the interests (all of which are
beneficial) of the Directors and Secretary who held office at the date of approval of the annual
report and at 31 December 2018 and their families in the share capital of the Company were:
Director
18/06/2019
31/12/2018
01/01/2018
23/04/2019
31/12/2018
01/01/2018
Ordinary shares of 12.5 cents each
Options over Ordinary shares
Kirill Golovanov
Mikhail Mogutov
Leonid Skoptsov
Yuri Radchenko
Timothy McCutcheon
Nikolay Myasodev
Christopher Wiltshire
Romulo Colindres
19,506,203
19,506,203
19,506,203
-
-
-
11,656,203
10,002,077
11,656,203
10,002,077
11,656,203
11,656,202
-
-
1,654,125
1,654,125
-
-
-
-
-
-
-
-
2,200,000
2,200,000
200,000
200,000
200,000
200,000
200,000
200,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Further details of the above share options, issued after the year end, to the directors are as
follows:
Director
Kirill Golovanov
Mikhail Mogutov
Leonid Skoptsov
Yuri Radchenko
Timothy McCutcheon
Nikolay Myasodev
Christopher Wiltshire
Romulo Colindres
Date Granted
Number of
options
Exercise Price
Vesting period
27 March 2019
27 March 2019
27 March 2019
27 March 2019
27 March 2019
27 March 2019
27 March 2019
27 March 2019
2,200,000
2,200,000
200,000
200,000
200,000
200,000
200,000
200,000
£0.125
£0.125
£0.125
£0.125
£0.125
£0.125
£0.125
£0.125
3 years
3 years
3 years
3 years
3 years
3 years
3 years
3 years
Mr. Kenneth Kuchling and Mr Donald Schissel retired as Directors on 27 July 2018 and Mr.
Nikolay Myasodev, Christopher Wiltshire and Mr. Romulo Colindres were appointed as Directors
on the same date.
SHARE PRICE
The Company’s shares are primarily traded on the Euronext Growth Market of Euronext Dublin,
and the Alternative Investment Market (AIM) of the London Stock Exchange. The Company’s shares
are also traded on the Frankfurt, Berlin, Munich and Stuttgart exchanges.
The market price of the Company’s shares on the Euronext Growth Market (OVXA.IR) at 31
December 2018 was €0.105 (2017: €0.08). During the financial year ended 31 December 2018 the
market price of the Company’s shares ranged from €0.08 to €0.13 (2017: €0.08 to €0.16).
The market price of the Company’s share on AIM (OVB.LSE) at 31 December 2018 was £0.07
(2017: £0.11). During the financial year ended 31 December 2018 the market price of the Company’s
shares ranged from £0.07 to £0.11 (2017: £0.08 to £0.14).
16
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
SIGNIFICANT SHAREHOLDERS
So far as the Directors are aware, the names of the persons other than the Directors who, directly
or indirectly, are interested in 3 per cent or more of the issued share capital of the Company as at
17 June 2019 are as follows:
Euroclear Nominees Limited
Pickco Trading Co Limited
BBHISL Nominees (HSBC)
Davy Crest Nominees
Citibank Nominees (Ireland)
Chase Nominees Limited
GROUP UNDERTAKINGS
Ordinary shares of €1.25c each
% of issued share capital
18,306,747
7,928,531
7,611,143
5,684,782
3,961,613
3,231,200
20.70
8.96
8.60
6.43
4.48
3.65
Details of the Company’s subsidiary undertakings are set out in Note 18 to the financial
statements.
DIRECTORS’ INTEREST IN CONTRACTS
None of the Directors had a beneficial interest in any contract to which the Company or Group
was a party during the period except as detailed in Note 29.
POLITICAL DONATIONS
The Group made no political donations during the financial year.
RESARCH AND DEVELOPMENT ACTIVITES
Expenditure on the research phase of projects to develop new pharmaceutical products
is recognised as an expense as incurred. During the year, the Group incurred research and
development costs of €’000 484 (US$’000 572).
GOING CONCERN
The Group has significant liquid resources in the form of cash reserves of €1.8 million and
equity investments which can be readily liquidated for €14.1 million at the year end. On 7 February
2019, the Board of Directors approved management plans and forecasts which will allow them
to liquidate the equities securities measured at FVOCI to fund the activities of the Group. The
Directors are satisfied that there are sufficient levels of funding within the Group to enable them
to trade for the foreseeable future, and to explore further investment opportunities if appropriate
projects exist.
The Directors consider that in preparing the financial statements that they have taken into
account all information that could reasonably be expected to be available. On this basis, they
consider that it is appropriate to prepare the financial statements on the going concern basis.
DETAILS OF EXECUTIVE DIRECTORS
Mikhail Alexandrovich Mogutov, Executive Chairman
Mr. Mogutov joined the board of Ovoca in June 2006 and became Chairman in 2008. In 1988,
Mr. Mogutov was a founder of the Bioprocess Group, which was an asset management and
business-development company with interests in various industries. One notable success of the
Bioprocess Group is OAO “United Machinery Plants” (OMZ), which is Russia’s largest machine
building company producing the majority of Russian-made oilrigs and mining/drilling equipment.
In 1996, OMZ was the first Russian company to list on the London Stock Exchange.
17
5. DIRECTORS’ REPORT
Between 1997 and 1999 Mr. Mogutov was the Chairman of Vostsibugol, one of Russia’s largest
coal mining enterprises, with an annual output of over 13 million tons of coal. He became
increasingly active in natural resource development after 1999 and in 2006, he was part of the
Group that vended into Ovoca Bio plc (formerly Ovoca Gold plc) 100% of OAO Ajax - the owner of
the high grade Goltsovoye silver project in the Magadan Region, Russia.
Doctorate, Moscow Physics-Technical Institute, Moscow, Russia. Fluent in Russian and English.
Kirill Golovanov, Chief Executive Officer
Mr. Golovanov joined Ovoca as a corporate advisor in 2007 and moved to be the manager of
the Company’s Russia representative office in 2009. During his time at Ovoca he played a major
role in the development and subsequent sale of the Goltsovoye silver deposit. He has extensive
experience in mining and corporate law, as well as working experience at leading Russian
enterprises, such as Gazprombank and Vneshekonombank. Additionally, he was a department
manager in the Federal Service on Bankruptcy and Finance Restoration – a subdivision of the
Russian Federation Ministry of Finance.
JD, Moscow State Law Academy, Moscow, Russia. MBA, Duke University’s Fuqua School of
Business, NC, USA. Fluent in Russian and English.
DETAILS OF NON-EXECUTIVE DIRECTORS
Yuri Ivanovich Radchenko, Non-Executive Director
Mr. Radchenko became a board member of Ovoca in June 2006. Mr. Radchenko is a Magadan
resident and has a long history of natural resource development in the region. He was deeply
involved in the development of the Julietta gold-silver mine by Bema Gold Corporation and he
is currently the Chairman of Julietta’s operating company. Additionally, he was the discoverer of
the Lunnoye silver deposit, which is now one of OAO Polymetal’s core assets. He was part of the
group that vended into Ovoca Bio plc (formerly Ovoca Gold plc) 100% of OAO Ajax – Goltsovoye.
MS Geology, Kazakhstan Polytechnical Institute, Almaty, Kazakhstan.
Leonid Pavlovich Skoptsov, Non-Executive Director
Mr. Skoptsov joined the board of Ovoca in June 2006 and was the Company’s CEO from 2006
to 2009. Mr. Skoptsov was part of the Bioprocess Group team that owned and ran OAO “United
Machinery Plants” (OMZ). He also played an active part in natural resource development prior to
Ovoca. He was the Chairman of OAO Pervaya Gornorudnaya Companiya from 2001 - 2005, a zinc-
lead asset developer. He was also the Chairman of OAO Volganeft from 2000 to 2004, a mid-tier oil
producer in Russia which was successfully sold to Russneft. He was part of the Group that vended
into Ovoca Bio plc (formerly Ovoca Gold plc) 100% of OAO Ajax – Goltsovoye.
BA, cum laude, Moscow State University, Moscow, Russia. Fluent in Russian and English.
Tim McCutcheon, Non-Executive Director
Mr. McCutcheon joined the Board of Ovoca as a Non-Executive Director in January 2009 and
moved into the CEO position in December 2009. Prior to Ovoca, Mr. McCutcheon was a partner
at DBM Capital Partners, an investment manager and corporate finance boutique specializing in
the mining sector of Russia and the former Soviet Union. He also worked at several investment
banks such as Bear Stearns, Aton Capital and Pioneer Investments as an award-winning metals
and mining sector analyst and as an investment banker. He was one of the first analysts in Russia
to write about its gold mining sector and he has advised numerous international gold mining
companies on M&A, business development, and Russian business practices.
BA, cum laude, Columbia College, New York, NY. MBA, Finance, Columbia Business School.
Fluent in English and Russian.
18
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
Nikolay Myasoyedov, Non-Executive Director
Mr. Myasoyedov is an expert in the field of bioorganic chemistry and biotechnology. He is a full
member of the Russian Academy of Sciences since 2003, serving on the Department of Physical
and Chemical Biology. Mr. Myasoyedov serves as Deputy Director for Research and the head of
the Department of Chemistry of Physiologically Active Substances at the Institute of Molecular
Genetics. He has more than 1,000 citations on work published after 1975. He is a co-author over
360 scientific papers, including 2 monographs, more than 150 copyright certificates and patents,
as well as 4 foreign patents (USA, England, France, Sweden).
Christopher Wiltshire, Non-Executive Director
Mr. Wiltshire is an experienced senior pharmaceutical and biotechnology executive with over
20 years of international experience. He currently serves as the CEO of Hematherix LLC, a company
he founded in 2015 to develop a first-in-class, early stage recombinant blood protein. Between
2008 and 2015, he was the founder/owner of IPT Bioconsulting, which provided strategic advice
to early and mid-stage biotechnology and pharmaceutical companies. Mr. Wiltshire previously
served in number of senior positions with Pfizer between 1998 and 2008, including as head of
business transactions and investments within The Pfizer Incubator LLC. Prior to joining Pfizer, Mr.
Wiltshire worked with Eli Lilly and Company between 1993 and 1998. Mr. Wiltshire holds an MA in
Engineering from the University of Cambridge in the UK and an MBA from the Darden Graduate
School, University of Virginia, US.
Romuolo Colindres, Non-Executive Director
Mr. Colindres is an experienced medical practitioner and pharmaceutical executive, having
worked with GlaxoSmithKline plc (“GSK”) in a number of senior roles since 2007. Mr. Colindres
is currently Vice President, Global Medical Affairs Lead for Zoster with GSK and has previously
held roles with GSK in Panama, Brazil and Belgium during his career with the Company. Prior to
joining GSK, Mr. Colindres was a physician in the United States and Brazil and previously held
roles in public health in the United States and El Salvador. Mr. Colindres holds an MBA from
Duke University’s Fuqua School of Business, NC, USA, an MD from University of North Carolina
School of Medicine, Chapel Hill, NC, USA and a Masters of Public Health from University of North
Carolina School of Public Health, Chapel Hill, NC, USA. Mr. Colindres is fluent in Spanish and
English.
19
5. DIRECTORS’ REPORT
CORPORATE GOVERNANCE STATEMENT
The Board of Directors (“the Board”) are committed to maintaining the highest standards of
corporate governance commensurate with the size, stage of development and financial status of
the Group.
BOARD
The Board currently has eight directors, comprising two Executive Directors and six Non-
Executive Directors. The Board met formally on 7 occasions during 2018. An agenda and supporting
documentation was circulated in advance of each meeting. All the Directors bring independent
judgment to bear on issues affecting the Group and all have full and timely access to information
necessary to enable them to discharge their duties. The Directors have a wide and varying array
of experiences in the industry, Non-Executive Directors are not appointed for specific terms. Each
Non-Executive Director comes up for re-election every three years and each new Director is subject
to election at the next Annual General Meeting following the date of appointment.
The following committees deal with the specific aspects of the Group affairs:
Audit Committee: This Committee comprises two Non-Executive Directors. The external
auditors have the opportunity to meet with members of the Audit Committee without executive
management present at least once a year. The duties of the Committee include the review of
the accounting principles, policies and practices adopted in preparing the financial statements,
external compliance matters and the review of the Group’s financial results.
Nominations Committee: Given the current size of the Group, a Nominations Committee is not
considered necessary. The Board reserves to itself the process by which a new Director is appointed.
Remuneration Committee: This Committee comprises one Non-Executive Director and one
Executive Director. This Committee determines the contract terms, remuneration and other
benefits of the Executive Directors, Chairman and Non-Executive Directors. Further details of the
Group’s policies on remuneration, service contracts and compensation payments are given in the
Remuneration Committee Report below.
Communications: The Group maintains regular contact with shareholders through
publications such as the annual and half-year report and via press releases on the Group’s
website, www.ovocabio.com. The Directors are responsive to shareholder enquiries throughout
the year. The Board regards the Annual General Meeting as a particularly important opportunity
for shareholders, Directors and management to meet and exchange views.
The QCA Corporate Governance Code 2018
The QCA Code sets out 10 broad principles and requires the Company to consider how each
should be applied. This Report is a summary of the position with the Company’s Corporate
Governance processes and practices or otherwise “signposts” where other disclosures are made
in this document or on the Company’s website www.ovocabio.com, particularly the Company’s
Corporate Governance Statement: https://ovocabio.com/investors/corporate-governance/.
The Broad address the ten principles underpinning the QCA case as follow:
1. Establish a strategy and business model which promote long-term value for shareholders;
2. Seek to understand and meet shareholder needs and expectations;
3. Take into account wider stakeholder and social responsibilities and their implications for
long-term success;
4. Embed effective risk management, considering both opportunities and threats,
throughout the organization;
20
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
5. Maintain the board as a well- functioning, balanced team led by the chair;
6. Ensure that between them the directors have the necessary up-to-date experience, skills
and capabilities;
7. Evaluate board performance based on clear and relevant objectives, seeking continuous
improvement;
8. Promote a corporate culture that is based on ethical values and behaviors;
9. Maintain governance structures and processes that are fit for purpose and support good
decision- making by the board;
10. Communicate how the Company is governed and is performing by maintaining a dialogue
with shareholders and other relevant stakeholders.
INTERNAL CONTROL
The Directors have overall responsibility for the Group’s system of internal control and have
delegated responsibility for the implementation of this system to executive management. This
system includes financial controls that enable the Board to meet its responsibilities for the integrity
and accuracy of the Group’s accounting records. The Group’s system of internal financial control
provides reasonable, though not absolute assurance that assets are safeguarded, transactions
authorised and recorded properly and that material errors or irregularities are either prevented
or detected within a timely period. Having made appropriate enquiries, the Directors consider
that the system of internal financial, operational and compliance controls and risk management
operated effectively during the period covered by the financial statements and up to the date on
which the financial statements were signed. The internal control system includes the following
key features, which have been designed to provide internal financial control appropriate to the
Group’s businesses:
• budgets are prepared for approval by the Board;
• expenditure and income are compared to previously approved budgets;
• a detailed investment approval process which requires the Board’s approval of all major
capital projects and regular review of the physical performance and expenditure on these
projects.
21
5. DIRECTORS’ REPORT
REMUNERATION COMMITTEE REPORT
The Group’s policy on senior executive remuneration is designed to attract and retain people of
the highest calibre who can bring their experienced and independent views to the policy, strategic
decisions and governance of the Group.
In setting remuneration levels, the Remuneration Committee takes into consideration the
remuneration practices of other companies of similar size and scope. A key philosophy is that staff
must be properly rewarded and motivated to perform in the best interests of the shareholders.
ACCOUNTING RECORDS
The Directors believe that they have complied with the requirement of section 281 to 285 of
the Companies Act, 2014, with regard to the keeping of accounting records by employing persons
with appropriate expertise and by providing adequate resources to the financial function. The
accounting records are held at the Company’s business address at 17 Pembroke Street Upper,
Dublin 2, Ireland
COMPLIANCE STATEMENT
The directors of the Company acknowledge that they are responsible for securing the Company
compliance with its relevant obligations, as defined by Section 225 of the Companies Act 2014.
The directors are satisfied that they have the necessary arrangements and structures in place
as required by Section 225(b) and that these are regularly reviewed in accordance with Section
225(c) but they have not formally put in place the policy required by Section 225(a).
The reasons for this are:
• the ongoing commitments of the Board who have been involved in the legal proceedings
during the year;
• the continued commitment of the Board in making a significant acquisition during the year;
• the relevant arrangements and structures which were in place needed to be constantly
reviewed and re-evaluated;
• this did not facilitate the putting in place a formal compliance policy statement as matters
were in flux;
• the Board are actively rectifying this at present with the Group’s advisors and the policy will
be formally in place shortly.
DISCLOSURE OF INFORMATION TO AUDITORS
Each of the persons who are directors at the time when this Directors’ report is approved has
confirmed that:
• so far as that director is aware, there is no relevant audit information of which the Company’s
auditors are unaware, and
• that director has taken all the steps that ought to have been taken as a director in order to
be aware of any relevant audit information and to establish that the Company’s auditors are
aware of that information.
EVENTS AFTER REPORTING PERIOD
Events subsequent to the period end are dealt with in Note 37 to the financial statements.
AUDITORS
The auditors, Grant Thornton, continue in office in accordance with section 383(2) of the
Companies Act 2014.
This report was approved by the board on 20 June 2019 and signed on its behalf.
Timothy McCutcheon
Director
Kirill Golovanov
Director
22
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
DIRECTORS’ RESPONSIBILITIES STATEMENT
The Directors are responsible for preparing the annual report and financial statements, in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year
giving a true and fair view of the state of affairs of the Group and Company and of the profit or
loss of the Group and Company for that period. The Directors have elected to prepare the Group
financial statements in accordance with International Financial Reporting Standards (IFRSs) as
adopted by the European Union (EU IFRS) and have elected to prepare the Company financial
statements in accordance with EU IFRS, as applied in accordance with Irish law and regulations.
The Group and Company financial statements are required by law to present fairly their
financial position and performance for each financial year.
In preparing each of the Group and Company financial statements, the Directors are required
to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether the financial statements have been prepared in accordance with applicable
accounting standards, identify those standards, and note the effect and the reasons for any
material departure from those standards; and
• prepare the financial statements on the going concern basis unless it is inappropriate to
presume that the Group and Company will continue in business.
The Directors confirm that they have complied with the above requirements in preparing the
financial statements.
The directors are responsible for ensuring that the Group and Company keeps or causes to
be kept adequate accounting records which correctly explain and record the transactions of the
Group and Company, enable at any time the assets, liabilities, financial position and profit or loss
of the Company to be determined with reasonable accuracy, enable them to ensure that the
financial statements and Directors’ report comply with the Companies Act 2014 and enable the
financial statements to be audited. They are also responsible for safeguarding the assets of the
Group and Company and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial
information included on the Group and Company’s website. Legislation in Ireland governing
the preparation and dissemination of financial statements and other information included in
Directors’ reports may differ from legislation in other jurisdictions.
Approved on behalf of the Board on 20 June 1019
Timothy McCutcheon
Director
Kirill Golovanov
Director
23
6.
INDEPENDENT
AUDITORS’
REPORT TO
THE MEMBERS
OVOCA BIO PLC (FORMERLY OVOCA GOLD PLC)
ANNUAL REPORT
FOR THE FINANCIAL YEAR
ENDED 31 DECEMBER 2018
24
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF OVOCA BIO PLC
(FORMERLY OVOCA GOLD PLC)
Opinion
We have audited the financial statements of Ovoca Bio plc (formerly Ovoca Gold plc) for the financial year ended
31 December 2018, which comprise Consolidated income statement, Consolidated statement of other comprehensive
(loss)/income, Consolidated statement of changes in equity, Company statement of changes in equity, Consolidated
statement of financial position, Company statement of financial position, Consolidated statement of cash flows,
Company statement of cash flows and the related notes, including the summary of significant accounting policies.
The financial reporting framework that has been applied in their preparation is Irish law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union.
In our opinion:
• the consolidated financial statements give a true and fair view in accordance with IFRSs as adopted by European
Union, of the state of the assets, liabilities and financial position of the Group at 31 December 2018 and of its profit
and cash flows for the financial year then ended;
• the parent Company statement of financial position gives a true and fair view, in accordance with IFRSs as adopted
by European Union, of the state of the parent Company’s assets, liabilities and financial position of the Company as
at 31 December 2018 and of its cash flows for the financial year then ended; and
• the financial statements have been properly prepared and in accordance with the requirements of the Companies Act 2014.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (Ireland) (‘ISAs’) and applicable law.
Our responsibilities under those standards are further described in the ‘responsibilities of the auditor for the audit of
the financial statements’ section of our report. We are independent of the Group and Company in accordance with the
ethical requirements that are relevant to our audit of the financial statements in Ireland, namely the Irish Auditing and
Accounting Supervisory Authority (IAASA) Ethical Standard concerning the integrity, objectivity and independence of the
auditor. We have fulfilled our other ethical responsibilities 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.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (Ireland) require us to
report to you where:
• the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not
appropriate; or
• the directors have not disclosed in the financial statements any identified material uncertainties that may cast
significant doubt about the Company’s ability to continue to adopt the going concern basis of accounting for a
period of at least twelve months from the date when the financial statements are authorised for issue.
Under the Listing Rules we are required to review the directors’ statement, set out on page 17, in relation to going concern.
We have nothing to report having performed our review.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy,
the allocation of resources in the audit, and the directing of efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and
therefore we do not provide a separate opinion on these matters.
Overall audit strategy
We designed our audit by determining materiality and assessing the risks of material misstatement in the financial
statements. In particular, we looked at where the directors made subjective judgements for example the valuation of goodwill
and equity securities. We also addressed the risk of management override of internal controls, including evaluating whether
there was any evidence of potential bias that could result in a risk of material misstatement due to fraud.
25
6. INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
How we tailored the audit scope
The Group has three business segments, exploration and pharmaceutical, which are operated principally in Russian
Federation and investment activities operated from Bermuda, and with administrative activities in the Republic of
Ireland.
We tailored the scope of our audit taking into account the areas where the risk of misstatement was considered
material to the Group.
In establishing the overall approach to our audit, we assessed the risk of material misstatement at a Group level,
taking into account the nature, likelihood and potential magnitude of any misstatement. As part of our risk assessment,
we considered the control environment in place at Ovoca Bio plc.
Materiality and audit approach
The scope of our audit is influenced by our application of materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the
nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and on
the financial statements as a whole.
Based on our professional judgement, we determined materiality for the Group as follows: 0.5% of total assets for
the financial year ended 31 December 2018. We have applied this benchmark as the Group primarily held assets for the
purposes of acquisition during the financial year.
We agreed with the board of directors that we would report to them misstatements identified during our audit above
5% of materiality as well as misstatements below that amount that, in our view, warranted reporting for qualitative
reasons.
Significant matters identified
The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources
and effort, are set out below as significant matters together with an explanation of how we tailored our audit to address
these specific areas in order to provide an opinion on the financial statements as a whole. This is not a complete list of
all risks identified by our audit.
Calculation and impairment review of goodwill – Note 15
During the year, the Company, through its subsidiary Silver Star Limited, obtained control of IVIX LLC. The resulting
transaction resulted in goodwill of €4.0 million (US$4.6 million) being recognised on consolidation. An impairment
review was carried out in accordance with IAS 38.
Our response
• We reviewed the underlying purchase agreements associated with the transaction;
• We evaluated and challenged management’s assumptions and judgements in assessing the fair value of identified
assets and liabilities acquired in the transaction;
• Obtained and analysed the business plans provided by management for each subject asset to determine whether
the forecast cash flows are reasonable and supportable;
• We performed sensitivity analysis to determine reasonableness of the input variables used in the model;
• Assessed long term growth rates for reasonableness by reference to growth in GDP and projected inflation rates;
and
• We assessed the completeness and accuracy of the disclosures relating to goodwill and the annual impairment
review with the disclosure requirements included in the consolidated financial statements in accordance with
IFRSs as adopted by European Union.
26
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
Valuation of Equity securities at FVOCI (formerly known as available for sale financial assets) – Note 19
The Group has significant Equity securities at FVOCI, comprised of a portfolio of equity investments amounting to
€14.1 million (US$16.2 million). These instruments are measured at fair value with the corresponding fair value change
recognised in other comprehensive income. The valuation is performed by the Company using a Level 1 fair value
hierarchy which are valuations based on quoted prices (unadjusted) in active markets. This is one of the key judgmental
area that our audit has concentrated on and the biggest asset of the Group.
Our response
For this risk, our audit procedures included testing of the following:
• We evaluated whether the management expert has the necessary competence, capabilities and objectivity for the
auditor’s purposes;
• We obtained an understanding of the work of the management expert and evaluate the adequacy of the
management expert’s work including the relevance and reasonableness of the management expert’s conclusions,
the assumptions and methods adopted and the relevance, completeness and accuracy of any source data used;
• We obtained market prices from published quotations at year end and recalculated the market value by multiplying
the market price by the number of shares held; and
• We assessed the completeness and accuracy of the disclosures relating to the Valuation of Equity securities at
FVOCI assets to assess compliance with disclosure requirements included in the consolidated financial statements
in accordance with IFRSs as adopted by European Union.
Other information
Other information comprises information included in the Annual Report, other than the financial statements and our
auditor’s report thereon, including the Chairman’s Report, Chief Executive’s Report and Directors’ Report. The directors are
responsible for the other information. Our opinion on the financial statements does not cover the other information and,
except to the extent otherwise explicitly stated in our report, 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 we identify such material
inconsistencies in the financial statements, we are required to determine whether there is a material misstatement in the
financial statements or a material misstatement of the other information. 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.
Matters on which we are required to report by the Companies Act 2014
• We have obtained all the information and explanations, which we consider necessary for the purposes of our audit.
• In our opinion the accounting records of the Company were sufficient to permit the financial statements to be
readily and properly audited.
• The financial statements are in agreement with the accounting records.
• In our opinion, the information given in the Directors’ Report is consistent with the financial statements.
• Based solely on the work undertaken in the course of our audit, in our opinion, the Directors’ report has been
prepared in accordance with the requirements of the Companies Act 2014.
Matters on which we are required to report by exception
Based on our knowledge and understanding of the Company and its environment obtained in the course of the
audit, we have not identified material misstatements in the Directors Report.
Under the Companies Act 2014 we are required to report to you if, in our opinion, the disclosures of directors’
remuneration and transactions specified by section 305 to 312 of the Acts have not been made. We have no exceptions
to report arising from this responsibility.
Responsibilities of the management and those charged with governance for the financial statements
Management is responsible for the preparation of the financial statements which give a true and fair view in
accordance with IFRS as adopted by the European Union, and for such internal control as directors determine necessary
to enable the preparation of financial statements are free from material misstatement, whether due to fraud or error.
27
6. INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
In preparing the financial statements, management is responsible for assessing the Group and 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 Group and Company or to cease operations, or
has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group and Company’s financial reporting
process.
Responsibilities of the auditor 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 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 their 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
Group and 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 Group and Company’s ability to continue as a going concern. If they conclude that a
material uncertainty exists, they are required to draw attention in the auditor’s report to the related disclosures in
the financial statements or, if such disclosures are inadequate, to modify their opinion. Their conclusions are based
on the audit evidence obtained up to the date of the auditor’s report. However, future events or conditions may
cause the Group and Company to cease to continue as a going concern.
• 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 matter that achieves a true
and fair view.
28
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that may be
identified during the audit.
We report on the audit of a group, and we obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business activities within the Group to express an opinion on the Group financial
statements. We are responsible for the direction, supervision and performance of the audit, and we remain solely
responsible for the auditor’s opinion.
We also provide those charged with governance with a statement that they have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on their independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of
most significance in the audit of the financial statements of the current period and are therefore the key audit matters.
These matters are described in the auditor’s report unless law or regulation precludes public disclosure about the
matter or when, in extremely rare circumstances, we determines that a matter should not be communicated in the
report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company’s members, as a body, in accordance with section 391 of the Companies
Act 2014. Our audit work has been undertaken so that we might state to the Company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.
Cathal Kelly
For and on behalf of
Grant Thornton
Chartered Accountants
& Statutory Audit Firm
13 – 18 City Quay
Dublin 2
Date: 20 June 2019
29
6. INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
CONSOLIDATED INCOME STATEMENT
Administration expenses
Other (losses) / gains
Operating loss
Finance income
Finance costs
Loss for the financial year before tax
Note
5
7
8
8
2018
€’000
(2,306)
(128)
(2,434)
448
(10)
(1,996)
2017
€’000
(1,298)
611
(687)
463
(9)
(233)
2018
2017
US$’000
US$’000
(2,723)
(166)
(2,889)
529
(12)
(2,372)
(1,463)
690
(773)
522
(11)
(262)
Income tax
13
-
-
-
-
Loss for the financial year from continuing operations
Loss for the financial year from discontinued operations
36
(1,996)
(676)
(233)
(148)
(2,372)
(783)
(262)
(168)
Loss for the financial year
(2,672)
(381)
(3,155)
(430)
Loss for the financial year attributable to:
Owners of the parent
Non-controlling interest
Basic loss per share:
From continuing operations (cents)
From continuing and discontinued operations (cents)
Fully diluted loss per share:
From continuing operations (cents)
From continuing and discontinued operations (cents)
(2,356)
(316)
(2,672)
(381)
-
(381)
(2,783)
(372)
(3,155)
(430)
-
(430)
(€2.45)
(€3.28)
(€0.29)
(€0.47)
(US$2.91)
(US$3.87)
(US$0.32)
(US$0.53)
(€2.45)
(€3.28)
(€0.29)
(€0.47)
(US$2.91)
(US$3.87)
(US$0.32)
(US$0.53)
26
14
14
14
14
The accompanying notes on pages 40 to 76 form an integral part of these consolidated financial statements.
The Group has initially applied IFRS 15 and IFRS 9 at 1 January 2018. Under the transition provisions, comparative information
is not restated. Also refer to Note 35.
30
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE (LOSS)/INCOME
Loss for the financial year
Other comprehensive (loss)/income:
Items that will not be reclassified to profit or loss
Fair value movement on equity securities at fair value through other
comprehensive income (FVOCI)
Exchange movement on equity securities designated as at FVOCI
Net other comprehensive loss that will not be reclassified to profit
or loss
Items that will be reclassified subsequently to profit or loss
Foreign exchange gain/(loss) arising from translating foreign
operations
Fair value movement on availableforsale financial assets previously
classified under IAS 39
Exchange movement on availableforsale financial assets on
previously classified under IAS 39
Net other comprehensive (loss)/income that will be reclassified to
profit or loss
Other comprehensive (loss)/income for the financial year
Total comprehensive (loss)/income for the financial year
Total comprehensive (loss)/income attributable to:
Owners of the parent
Non-controlling interest
2018
Note
€’000
2017
€’000
2018
2017
US$’000
US$’000
(2,672)
(381)
(3,155)
(430)
19
19
19
19
26
(1,911)
(437)
(2,348)
-
-
-
(2,256)
(516)
(2,772)
-
-
-
738
(3,202)
(425)
(459)
-
-
738
(1,610)
(4,282)
1,447
1,068
(687)
(687)
(1,068)
(3,937)
(1,068)
(345)
(4,282)
-
(381)
-
-
(425)
(3,197)
(6,352)
(5,979)
(373)
(6,352)
1,634
1,212
2,387
2,387
1,957
1,957
-
(430)
The accompanying notes on pages 40 to 76 form an integral part of these consolidated financial statements.
The Group has initially applied IFRS 15 and IFRS 9 at 1 January 2018. Under the transition provisions, comparative information
is not restated. Also refer to Note 35.
31
6. INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share capital
Treasury share
reserve
Foreign currency
translation
reserve
Share based
payment reserve
Other reserves
Retained
earnings
Total
attributable to
owners of parent
Non-controlling
interest
Note
€’000
€’000
€’000
€’000
€’000
€’000
€’000
€’000
At 1 January 2018
Comprehensive loss:
Loss for the year
Other comprehensive (loss)/income:
Fair value movement on equity securities designated as at FVOCI
Exchange movement on equity securities designated as at FVOCI
Foreign exchange (loss)/gain arising from translation of financial statements of a
foreign operations
Total comprehensive (loss)/income
Transactions with owners of the Company
Share based payments expired during the financial year
Total transactions with owners of the Company
Changes in ownership interest
Acquisition of subsidiary with NCI
Total changes in ownership interests
Balance at 31 December 2018
At 1 January 2017
Comprehensive loss:
Loss for the year
Other comprehensive (loss)/income:
Fair value movement on availableforsale financial assets previously classified
under IAS 39
Exchange movement on availableforsale financial assets previously classified
under IAS 39
Foreign operations – foreign currency translation differences
Total comprehensive loss
Transactions with owners of the Company
Share based payments expired during the year
Total transactions with owners of the Company
Balance at 31 December 2017
25
25
25
25
26 & 33
25
25
25
25
11,057
(547)
3,745
438
5,878
1,832
22,403
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,057
11,057
(547)
(547)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,057
(547)
-
-
-
767
767
-
-
-
-
-
4,512
6,947
-
-
-
(3,202)
(3,202)
-
-
3,745
-
-
-
-
-
(438)
(438)
-
-
-
--
(2,356)
(2,356)
(1,911)
(437)
-
(2,348)
-
438
438
-
-
-
-
-
(2,356)
-
-
-
-
-
(1,911)
(437)
767
(3,937)
-
-
-
-
-
3,968
(524)
18,466
1,294
2,507
-
-
-
-
-
(856)
(856)
438
-
1,447
1,068
-
2,515
856
856
5,878
2,213
(381)
-
-
-
(381)
-
-
23,471
(381)
1,447
1,068
(3,302)
(1,068)
-
-
1,832
22,403
-
(316)
-
-
(29)
(345)
-
-
-
2,505
2,505
2,160
-
-
-
-
-
-
-
-
-
The accompanying notes on pages 40 to 76 form an integral part of these consolidated financial statements.
The Group has initially applied IFRS 15 and IFRS 9 at 1 January 2018. Under the transition provisions,
comparative information is not restated. Also refer to Note 35.
32
33
6. INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
COMPANY STATEMENT OF CHANGES IN EQUITY
At 1 January 2018
Comprehensive loss
Loss for the financial year
Total comprehensive loss
Transactions with owners of the Company
Share based payments expired during the financial
year (refer Note 31)
Total transactions with owners of the Company
At 31 December 2018
11,057
1,305
Ordinary
Share
capital
€’000
11,057
Other
reserves
Share
based
payments
reserve
€’000
867
€’000
438
-
-
-
-
-
-
438
438
-
-
(438)
(438)
-
Retained
earnings
Total
(attributable
to owners of
the parent)
€’000
11,786
(4,696)
(4,696)
-
-
€’000
24,148
(4,696)
(4,696)
-
-
7,090
19,452
At 1 January 2017
Comprehensive income
Profit for the financial year
Total comprehensive income
Transactions with owners of the Company
Share based payments expired during the financial
year (refer Note 31)
Total transactions with owners of the Company
11,057
11
1,294
11,553
23,915
-
-
-
-
-
-
856
856
867
-
-
(856)
(856)
438
233
233
-
-
233
233
-
-
11,786
24,148
At 31 December 2017
11,057
The accompanying notes on pages 40 to 76 form an integral part of these consolidated financial statements.
The Company has initially applied IFRS 15 and IFRS 9 at 1 January 2018. Under the transition provisions, comparative
information is not restated. Also refer to Note 35
34
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Assets
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Equity securities at FVOCI
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Assets included in the disposal group classified as held for sale
Total assets
Equity and liabilities
Equity attributable to owners of the parent
Ordinary shares
Treasury share reserve
Other reserves
Foreign currency translation reserve
Share based payment reserve
(Deficit)/retained earnings
Equity attributable to owners of the parent
Non-controlling interest
Current liabilities
Trade and other payables
Borrowings
Total current liabilities
Liabilities included in the disposal group classified as held for sale
2018
€’000
2017
€’000
2018
2017
US$’000
US$’000
Note
15
16
17
19
20
21
22
36
23
23
25
25
25
24
26
27
28
36
3,994
958
3
14,172
19,127
179
191
1,823
2,193
-
-
3
15,868
15,871
-
35
5,546
5,581
4,575
1,097
4
16,233
21,909
205
219
2,088
2,512
-
-
4
19,008
19,012
-
42
6,643
6,685
481
997
21,801
22,449
551
24,972
1,465
27,162
11,057
11,057
15,586
15,586
(547)
3,968
4,512
-
(524)
(547)
5,878
3,745
438
1,832
18,466
22,403
2,160
-
20,626
22,403
178
989
1,167
8
41
-
41
5
(607)
4,605
1,082
-
474
21,140
2,488
23,628
202
1,133
1,335
9
(607)
6,585
1,494
792
3,257
27,107
-
27,107
49
-
49
6
Total equity and liabilities
21,801
22,449
24,972
27,162
The accompanying notes on pages 40 to 76 form an integral part of these consolidated financial statements.
The Group has initially applied IFRS 15 and IFRS 9 at 1 January 2018. Under the transition provisions, comparative information
is not restated. Also refer to Note 35.
Approved on behalf of the Board of Directors on 20 June 2019
Timothy McCutcheon
Director
Kirill Golovanov
Director
35
6. INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
COMPANY STATEMENT OF FINANCIAL POSITION
Assets
Non-current assets
Property, plant and equipment
Financial assets
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Equity and Liabilities
Equity
Ordinary shares
Retained earnings
Other reserves
Share based payment reserve
Foreign currency translation reserve
Current liabilities
Trade and other payables
Total current liabilities
Note
17
18
21
22
23
24
25
25
25
27
2018
€’000
1
24,116
24,117
580
929
1,509
25,626
11,057
7,090
1,305
-
-
2
27,145
27,147
699
2,837
3,536
30,683
11,057
11,786
867
438
-
19,452
24,148
6,174
6,174
6,535
6,535
2017
€’000
2018
2017
US$’000
US$’000
1
27,625
27,626
665
1,064
1,729
29,355
15,586
12,583
1,780
-
(7,666)
22,283
7,072
7,072
3
28,599
28,602
837
3,398
4,235
32,837
15,586
18,129
1,041
739
(10,486)
25,009
7,828
7,828
Total equity and liabilities
25,626
30,683
29,355
32,837
The accompanying notes on pages 40 to 76 form an integral part of these consolidated financial statements.
The Company has initially applied IFRS 15 and IFRS 9 at 1 January 2018. Under the transition provisions, comparative
information is not restated. Also refer to Note 35.
Approved on behalf of the Board of Directors on 20 June 2019
Timothy McCutcheon
Director
Kirill Golovanov
Director
36
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
CONSOLIDATED STATEMENT OF CASH FLOWS
2017
€’000
2018
2017
US$’000
US$’000
Note
17
17
8
28
Cash flows from operating activities
Continuing operations
Loss for the financial year before tax
Adjustments for:
Impairment of tangible fixed assets
Depreciation
Net finance income
Changes in:
(Increase)/decrease in inventories
Increase in trade and other receivables
Increase/(decrease) in trade and other payables
Net cash used in operating activities
Cash flows from financing activities
Bank borrowing received
Bank interest paid
Bank interest received
Net cash generated from/(used in) financing
activities
Cash flows from investing activities
Dividends received from equity accounted
investees
Acquisition of subsidiary, net of cash acquired
33
Net cash (used in)/generated from investing
activities
2018
€’000
(2,672)
444
30
(438)
(147)
(120)
65
(2,838)
989
(10)
4
983
444
(2,475)
(2,031)
(381)
-
37
(452)
52
(6)
(171)
(921)
-
(11)
-
(11)
463
-
463
Effects of foreign exchange
184
(723)
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of
financial year
Cash and cash equivalents at the end of
financial year
Cash and cash equivalents included in the
disposal group
Cash and cash equivalents for continuing
operation
22
22
36
22
(3,702)
5,549
(1,192)
6,741
1,847
5,549
24
3
1,823
5,546
2,088
6,685
The accompanying notes on pages 40 to 76 form an integral part of these consolidated financial statements.
The Group has initially applied IFRS 15 and IFRS 9 at 1 January 2018. Under the transition provisions, comparative information
is not restated. Also refer to Note 35.
37
(3,155)
509
36
(517)
(168)
(134)
69
(430)
-
(41)
(510)
54
(12)
(174)
(3,307)
(1,113)
1,130
(12)
5
1,123
524
(2,808)
(2,284)
(64)
(4,532)
6,647
2,115
27
-
(12)
-
(12)
522
-
522
148
(455)
7,102
6,647
4
6. INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
COMPANY STATEMENT OF CASH FLOWS
Note
24
18
17
Cash flows from operating activities
(Loss)/profit for the financial year before tax
Adjustments for
Impairment of investments in subsidiaries
Depreciation
Net finance expense
Changes in
Decrease/(increase) in trade and other ‘receivables
(Decrease)/increase in trade and other payables
Net cash (used in)/generated from operating activities
Cash flows from financing activities
Net finance expense
Net cash used in financing activities
Effects of foreign exchange
Net (decrease)/increase in cash and cash ‘equivalents
Cash and cash equivalents at the beginning of year
Cash and cash equivalents at the end of year
22
2018
€’000
2017
€’000
2018
2017
US$’000
US$’000
(4,696)
233
(5,546)
262
3,029
1
3
119
(361)
(1,905)
(3)
(3)
-
(1,908)
2,837
929
-
1
4
93
2,352
2,683
(4)
(4)
-
2,679
158
2,837
974
2
3
172
(756)
(2,548)
(3)
(3)
2,820
(2,334)
3,398
1,064
-
1
5
(3)
3,421
3,686
(5)
(5)
(449)
3,232
166
3,398
The accompanying notes on pages 40 to 76 form an integral part of these consolidated financial statements.
The Company has initially applied IFRS 15 and IFRS 9 at 1 January 2018. Under the transition provisions, comparative
information is not restated. Also refer to Note 35.
38
39
7.
NOTES
TO THE
FINANCIAL
STATEMENTS
OVOCA BIO PLC (FORMERLY OVOCA GOLD PLC)
ANNUAL REPORT
FOR THE FINANCIAL YEAR
ENDED 31 DECEMBER 2018
40
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
1
General Information
Ovoca Bio plc (formerly Ovoca Gold plc) (“the Company”) is a public limited company incorporated in Ireland on 15 January
1985. The address of its registered office and principal place of business is 17 Pembroke Street Upper Dublin 2, Ireland.
These consolidated financial statements for the financial year ended 31 December 2018 consolidate the individual financial
statements of the Company and its subsidiaries (together referred to as ‘the Group’).
The Group’s activity is that of a bio-technology company and the exploration for precious metals and other minerals in Russia.
The Directors have reviewed the financial position of the Group and are satisfied that the Group will continue to operate for
the foreseeable future.
On 21 April 1987, the Company’s shares were admitted to trading on the Irish Stock Exchange Enterprise Securities Market
(ESM) (subsequently renamed the Euronext Growth Market) and on 30 June 2005 to the London Stock Exchange’s Alternative
Investment Market (AIM).
On 25 September 2018, the Group obtained control of IVIX LLC by acquiring 50.02% of their ordinary share capital and therefore
has been consolidated into these financial statements in accordance with IFRS 3 Business Combinations, further information
relating to the acquisition is found in Note 33 of these consolidated financial statements.
2
Statement of Accounting Policies
The following accounting policies have been applied consistently in dealing with items, which are considered material in
relation to the Group’s financial statements.
Statement of compliance
The consolidated and Company financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS) and their interpretations approved by the International Accounting Standards Board (IASB) as adopted by the
European Union (EU) and Irish Statute comprising the Companies Act, 2014.
The Company has availed of the exemption in Section 304(2) of the Companies Act, 2014 not to present its individual Income
Statement and related notes that form part of the approved Company financial statements.
The Company has also availed of the exemption from filing its individual Income statement with the Registrar of Companies as
permitted by Section 304(2)(c) of the Companies Act, 2014.
The IFRSs adopted by the EU as applied by the Company and the Group in the preparation of these financial statements are
those that were effective at 31 December 2018.
Basis of preparation
The Group and Company financial statements are prepared on the historical cost basis as modified by the measurement at fair
value of certain financial assets and liabilities at fair value through profit and loss and fair value through other comprehensive
income. The accounting policies have been applied consistently by Group entities.
Basis of consolidation
The consolidated financial statements comprise the financial statements of Ovoca Bio plc (formerly Ovoca Gold plc) (“the
Company”) and its subsidiaries (“the Group”) for the financial year ended 31 December 2018.
Subsidiaries are entities controlled by the Group. Control is achieved when the Group is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
Specifically, the Group controls an investee if, and only if, the Group has:
• Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee);
• Exposure, or rights, to variable returns from its involvement with the investee; and
• The ability to use its power over the investee to affect its returns.
Generally, when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant
facts and circumstances in assessing whether it has power over an investee, including:
• The contractual arrangement(s) with the other vote holders of the investee;
• Rights arising from other contractual arrangements; and
• The Group’s voting rights and potential voting rights.
41
7. NOTES TO THE FINANCIAL STATEMENTS
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one
or more of the three elements of control. Subsidiaries are fully consolidated from the date that control commences until the
date that control ceases. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with
the policies adopted by the Group. Intra-group balances and any unrealised gains or losses or income or expenses arising from
intra-group transactions are eliminated in preparing the Group financial statements.
Business combinations and goodwill
The acquisition of subsidiaries is accounted for using the acquisition method. The cost of an acquisition is measured as the
aggregate of the fair value, at the date of exchange, of the assets given, equity instruments issued and liabilities incurred or
assumed. The acquiree’s identifiable assets and liabilities that meet the conditions for recognition under IFRS 3 Business
Combinations are recognised at their fair values at the acquisition date. Acquisition-related costs are recognised in the
consolidated statement of profit or loss as incurred.
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the
business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities
recognised. If, after reassessment, the Group’s interest in the acquisition-date net fair value of the acquiree’s identifiable
assets and liabilities exceeds the cost of the business combination, the excess is recognised immediately in the consolidated
statement of profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment
testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-
generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the
acquiree are assigned to those units.
Where goodwill has been allocated to a cash-generating unit (CGU) and part of the operation within that unit is disposed of,
the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the
gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed
operation and the portion of the cash-generating unit retained.
The non-controlling interest in the acquiree is initially measured at the Non-Controlling Interests (NCIs) fair value as determined
by an independent valuation.
Functional and presentation currency
These consolidated financial statements are presented in Euro Thousand (€’000), which is also the Company’s functional
currency. The US$ Thousand ($’000) equivalent is shown for information purposes. Each entity in the Group determines its
own functional currency and items included in the financial statements of each entity are measured using that functional
currency.
Interest income
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable,
which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that
asset’s net carrying amount.
Operating expenses
Operating expenses are recognised in profit or loss upon utilisation of the service or as incurred.
Foreign currencies
Monetary assets and liabilities denominated in a foreign currency are translated into Euro at the exchange rate ruling at the
statement of financial position date. Revenues, costs and non-monetary assets are translated at the exchange rates ruling at
the dates of the transactions. Exchange differences are dealt with through the income statement.
Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using the exchange rates
at the transaction date), except for non-monetary items measured at fair value which are translated using the exchange rates
at the date when fair value was determined.
On consolidation, the assets and liabilities of overseas subsidiary companies are translated into Euro at the rates of exchange
prevailing at the statement of financial position date. Exchange differences arising from the restatement of the opening
statements of financial position of these subsidiary companies are dealt with through reserves. The operating results of
overseas subsidiary companies are translated into Euro at the average rates applicable during the year.
On the disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation,
recognised in other comprehensive income and accumulated in the separate component of equity, shall be reclassified from
equity to the income statement when the gain or loss on disposal is recognised.
42
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
Taxation
Taxation on the profit or loss for the period comprises current and deferred tax. Taxation is recognised in the income statement except
to the extent that it relates to items recognised directly in equity, in which case the related tax is recognised directly in equity.
Current tax is the expected tax payable on the taxable income for the period, using tax rates and laws that have been enacted
or substantially enacted at the statement of financial position date, and any adjustment to tax payable in respect of previous
periods.
Deferred tax is provided on the basis of the liability method on temporary differences at the statement of financial position
date. Temporary differences are defined as the difference between the tax bases of assets and liabilities and their carrying
amounts in the financial statements. However, deferred tax is not accounted for, if it arises from initial recognition of an asset
or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting
nor taxable profit or loss, or where, in respect of taxable temporary differences associated with investments in subsidiaries,
joint ventures and associates, the timing and reversal of the temporary differences is subject to control by the Group and it is
probable that reversal will not occur in the foreseeable future. Deferred tax assets and liabilities are not subject to discounting
and are measured at the tax rates that are anticipated to apply in the period in which the asset is realised or the liability is
settled based on tax rates and tax laws that have been enacted or substantively enacted at the statement of financial position
date. The carrying amounts of deferred tax assets are subject to review at each year end date and are reduced to the extent that
future taxable profits are considered to be inadequate to allow all or part of any deferred tax asset to be utilised.
Operating leases
Operating lease rentals are charged to the income statement on a straight line basis over the lease term.
Inventories
Inventories are carried at the lower of cost or net realisable value.
Financial instruments
Recognition and derecognition
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of
the financial instrument.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when
the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is
extinguished, discharged, cancelled or expires.
Financial Assets
Except for those trade receivables that do not contain a significant financing component and are measured at the transaction
price in accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs (where
applicable).
Financial assets, other than those designated and effective as hedging instruments, are classified into the following categories:
• amortised cost
• fair value through profit or loss (FVTPL)
• fair value through other comprehensive income (FVOCI) with recycling of cumulative gains (debt instruments) and losses or
with no recycling of cumulative gains and losses upon derecognition (equity instruments).
The classification is determined by both:
• the entity’s business model for managing the financial asset
• the contractual cash flow characteristics of the financial asset.
All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs,
finance income or other financial items, except for impairment of trade receivables which is presented within other expenses.
Subsequent measurement of financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL):
• they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows
43
7. NOTES TO THE FINANCIAL STATEMENTS
• the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the
principal amount outstanding
After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted
where the effect of discounting is immaterial.
The Company’s cash and cash equivalents, other debtors and amounts owed by group undertakings under trade and other
receivables fall into this category of financial instruments.
Financial assets designated at fair value through OCI (equity instruments)
Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity instruments designated at
fair value through OCI when they meet the definition of equity under IAS 32 Financial Instruments: Presentation and are not
held for trading. The classification is determined on an instrument-by-instrument basis.
Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other income in
the statement of profit or loss when the right of payment has been established, except when the Group benefits from such
proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI.
Equity instruments designated at fair value through OCI are not subject to impairment assessment.
The Group elected to classify irrevocably its equity investments under this category.
Impairment of financial assets
IFRS 9’s impairment requirements use more forward-looking information to recognise expected credit losses – the ‘expected
credit loss (ECL) model’. This replaces IAS 39’s ‘incurred loss model’. Instruments within the scope of the new requirements
included loans and other debt-type financial assets measured at amortised cost and FVOCI, trade receivables, contract assets
recognised and measured under IFRS 15 and loan commitments and some financial guarantee contracts (for the issuer) that
are not measured at fair value through profit or loss.
Recognition of credit losses is no longer dependent on the Company first identifying a credit loss event. Instead the Company
considers a broader range of information when assessing credit risk and measuring expected credit losses, including past
events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows
of the instrument.
In applying this forward-looking approach, a distinction is made between:
• financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low credit
risk (‘Stage 1’) and
• financial instruments that have deteriorated significantly in credit quality since initial recognition and whose credit risk is
not low (‘Stage 2’).
•
‘Stage 3’ would cover financial assets that have objective evidence of impairment at the reporting date.
‘12-month expected credit losses’ are recognised for the first category while ‘lifetime expected credit losses’ are recognised
for the second category.
Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the expected
life of the financial instrument.
Previous financial asset impairment under IAS 39
In the prior year, the impairment of trade receivables was based on the incurred loss model. Individually significant receivables
were considered for impairment when they were past due or when other objective evidence was received that a specific
counterparty will default. Receivables that were not considered to be individually impaired were reviewed for impairment
in groups, which are determined by reference to the industry and region of the counterparty and other shared credit risk
characteristics. The impairment loss estimate was then based on recent historical counterparty default rates for each identified
group.
Trade and other receivables and contract assets
The Company makes use of a simplified approach in accounting for trade and other receivables as well as contract assets
and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows,
considering the potential for default at any point during the life of the financial instrument. In calculating, the Company uses
its historical experience, external indicators and forward-looking information to calculate the expected credit losses using a
provision matrix.
The Parent applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss
allowance for all trade and other receivables with the exception amounts due from subsidiary undertakings which are
measured using the general approach.
44
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
The Company assess impairment of trade receivables on a collective basis as they possess shared credit risk characteristics they
have been grouped based on the days past due. Refer to Note 17 for a detailed analysis of how the impairment requirements
of IFRS 9 are applied.
Classification and measurement of financial liabilities
As the accounting for financial liabilities remains largely the same under IFRS 9 compared to IAS 39, the Company’s financial
liabilities were not impacted by the adoption of IFRS 9. However, for completeness, the accounting policy is disclosed below.
Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the
Company designated a financial liability at fair value through profit or loss.
Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives and
financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in profit or
loss (other than derivative financial instruments that are designated and effective as hedging instruments).
All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss are
included within finance costs or finance income.
The Company’s financial liabilities include trade and other payables and borrowings.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an
existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement
of profit or loss.
Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The fair value measurement is based on the presumption that the transaction
to sell the asset or transfer the liability takes place either:
• In the principal market for the asset or liability; or
• In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the
asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic
benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in
its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to
measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into three
levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement,
as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities
• Level 2: valuation techniques for which the lowest level of inputs which have a significant effect on the recorded fair value
are observable, either directly or indirectly
• Level 3: valuation techniques for which the lowest level of inputs that have a significant effect on the recorded fair value are
not based on observable market data.
For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Company
determines when transfers are deemed to have occurred between levels in the hierarchy at the end of each reporting date.
Equity securities measured FVOCI are measured at Level 1. There were no transfers between Levels in 2018 and 2017.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits, including bank deposits of less than three months
maturity. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are
included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
45
7. NOTES TO THE FINANCIAL STATEMENTS
Investments in subsidiaries
Investments in subsidiaries are measured at cost less accumulated impairment.
Intangibles
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a
business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried
at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles, excluding
capitalised development costs, are not capitalised and the related expenditure is reflected in profit or loss in the period in
which the expenditure is incurred.
The useful lives of intangible assets are assessed as either finite or indefinite.
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there
is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an
intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful
life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the
amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense
on intangible assets with finite lives is recognised in the statement of profit or loss in the expense category that is consistent
with the function of the intangible assets.
Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at
the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life
continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.
An intangible asset is derecognised upon disposal (i.e., at the date the recipient obtains control) or when no future economic
benefits are expected from its use or disposal. Any gain or loss arising upon derecognition of the asset (calculated as the
difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit or
loss.
Research and development costs
Expenditure on the research phase of projects to develop new pharmaceutical products is recognised as an expense as
incurred.
Costs that are directly attributable to a project’s development phase are recognised as intangible assets, provided they meet
the following recognition requirements:
• the development costs can be measured reliably
• the project is technically and commercially feasible
• the Company intends to and has sufficient resources to complete the project
• the Company has the ability to use or sell the software
• the software will generate probable future economic benefits.
Development costs not meeting these criteria for capitalisation are expensed as incurred.
Directly attributable costs include employee costs incurred on product development along with an appropriate portion of
relevant overheads.
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated
amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete and the
asset is available for use. It is amortised over the period of expected future benefit. During the period of development, the asset
is tested for impairment annually.
Patents and licences
The Group have patents acquired through business combination and have been granted for a period of 10 years by the relevant
government agency with the option of renewal at the end of this period. Licences for the use of intellectual property are
granted for periods ranging between five and ten years depending on the specific licences. The licences may be renewed at
little or no cost to the Group. As a result, those licences are assessed as having an indefinite useful life.
46
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
A summary of policies applied to the Group’s intangible assets is, as follows:
Useful lives
Amortisation method
used and rates
Internally generated or
acquired
Goodwill
Indefinite
Licences
Indefinite
Patents
Finite
Development costs
Finite
No amortisation but
subject to impairment
No amortisation but
subject to impairment
Amortised on a straight-
line basis over the period
of
the patent
Amortised on a straight-line
basis over the period of
expected future sales from
the related project
Acquired
Acquired
Acquired
Internally generated
Deferred exploration costs
In accordance with International Financial Reporting Standard 6 - Exploration for and Evaluation of Mineral Resources, the
Group uses the cost method of recognition. Exploration costs include licence costs, survey, geophysical and geological analysis
and evaluation costs, costs of drilling and project-related overheads.
Exploration expenditure in respect of properties and licenses not in production is deferred and is carried forward in the
statement of financial position under intangible assets in respect of each area of interest where:
• the operations are ongoing in the area of interest and exploration or evaluation activities have not reached a stage which
permits a reasonable assessment of the existence or otherwise of economically recoverable reserves; or
• such costs are expected to be recouped through successful development and exploration of the area of interest or
alternatively by its realisation.
When the Directors decide that no further expenditure on an area of interest is worthwhile, the related expenditure is written
off or down to an amount which it considers represents the residual value of the Group’s interest therein.
Property, plant and equipment and depreciation
Property, plant & equipment are stated at cost, less accumulated depreciation. No depreciation is provided on land.
Depreciation is provided at rates calculated to write off the cost less residual value of each asset over its expected useful life,
which are reviewed each financial year, as follows:
Mining equipment
- 20% Straight line
Office furniture and equipment
- 10% Straight line
Fixtures and Fittings
- 20% Straight line
Buildings
- 2% Straight line
The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or
if there is an indication of a significant change since the last reporting date,
Gains and losses on disposals are determined by comparing the carrying amount and are recognised in the Consolidated
Statement of comprehensive income.
Impairment of non-financial assets
The carrying amounts of the Group’s non-financial assets, other than deferred tax assets are reviewed at each reporting date to
determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is
estimated. For intangible assets that have indefinite lives or that are not yet available for use, recoverable amount is estimated
at each reporting date.
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable
amount. A cash-generating unit is the smallest identifiable asset group that is expected to generate cash flows that largely are
independent from other assets and groups. Impairment losses are recognised in the income statement. Impairment losses
recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated
to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis. The
recoverable amount of an asset or cash generating unit is the greater of its value in use and its fair value less costs to sell. In
assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risk specific to the asset. With the exception of
goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer
exist. An impairment loss is reversed if the asset’s or cash-generating unit’s recoverable amount exceeds its carrying amount.
47
7. NOTES TO THE FINANCIAL STATEMENTS
Equity and reserves
Ordinary shares represents the nominal (par) value of shares that have been issued. Share premium includes any premiums
received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium.
Treasury shares are recognised at cost and deducted from equity.
Other reserves comprise of the gains and losses including its foreign exchange movement relating to available for sale financial
assets equity instruments and transfers of expired share based payment reserve to other reserve.
Foreign currency translation reserve comprises translation differences arising from the translation of the financial statements
of the Group’s foreign entities into euro.
Retained earnings include all current and prior period retained profits. All transactions with owners of the parent are recorded
separately within equity.
Share based payments
Employees (including Directors) of the Group may be entitled to remuneration in the form of share- based payment transactions,
whereby employees render service in exchange for shares or rights over shares. Details of the Group’s share option scheme are
set out in Note 28 of the consolidated financial statements.
For any share options granted, the fair value of the option is recognised as an expense in the income statement with a
corresponding increase in equity. The fair value is measured at grant date excluding the impact of non-market conditions and
spread over the period during which the employees become unconditionally entitled to the options. The amount recognised
as an expense is adjusted to reflect the actual number of share options that are expected to vest where vesting conditions are
non-market conditions. When the options are exercised, the proceeds received, net of any directly attributable transaction
costs, are credited to share capital (nominal value) and share premium.
Earnings per share
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing
the income or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares
outstanding during the period. Diluted EPS is determined by adjusting the income or loss attributable to ordinary shareholders
and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which
comprise convertible notes and share options granted to employees.
Provisions, contingent liabilities and contingent assets
Provisions are recognized when present obligations as a result of a past event will probably lead to an outflow of economic
resources from the Group and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain. A
present obligation arises from the presence of legal or constructive commitment that has resulted from past events. Provisions
are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence
available at the reporting date, including the risks and uncertainties associated with the present obligation. Provisions are
discounted to their present values, where the time value of money is material. All provisions are reviewed at each statement of
financial position date and are adjusted to reflect the current best estimate.
Assets Held for Sale
The Group classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered
principally through a sale transaction rather than through continuing use. Non-current assets and disposal groups classified as
held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Costs to sell are the incremental
costs directly attributable to the disposal of an asset (disposal group), excluding finance costs and income tax expense.
The criteria for held for sale classification is regarded as met only when the sale is highly probable and the asset or disposal
group is available for immediate sale in its present condition. Actions required to complete the sale should indicate that it is
unlikely that significant changes to the sale will be made or that the decision to sell will be withdrawn. Management must be
committed to the plan to sell the asset and the sale expected to be completed within one year from the date of the classification.
Property, plant and equipment and intangible assets are not depreciated or amortised once classified as held for sale.
Assets and liabilities classified as held for sale are presented separately as current items in the statement of financial position.
A disposal group qualifies as discontinued operation if it is a component of an entity that either has been disposed of, or is
classified as held for sale, and:
• Represents a separate major line of business or geographical area of operations
• Is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or
• Is a subsidiary acquired exclusively with a view to resale
48
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit
or loss after tax from discontinued operations in the statement of profit or loss.
Additional disclosures are provided in Note 36. All other notes to the financial statements include amounts for continuing
operations, unless indicated otherwise.
Significant management judgment in applying accounting policies and estimation uncertainty
The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect
the amounts reported in the financial statements and accompanying notes. The judgments, estimates and assumptions used
in the financial statements are based upon management’s evaluation of the relevant facts and circumstances as of the date
of the financial statements. Actual results could differ from these estimates, and the effect of any change in estimates will be
adjusted in the financial statements when they become reasonably determinable.
Judgments, estimates and assumptions are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under these circumstances.
Judgments
In the process of applying the Company’s accounting policies, management has made the following judgments, apart from
those involving estimations, which have the most significant effect on the amounts recognised in the financial statements:
Control assessment in a business combination
As disclosed in Note 33, the Group owned 50.02% of IVIX LLC at 31 December 2018 (and subsequently exercised its option in
March 2019 to acquire a further participation interest in IVIX, bringing its interest to 59.84% - see Note 37). Management has
assessed its involvement in the newly acquired company in accordance with IFRS 10’s revised control definition and guidance
and has concluded that it has control over that newly acquired company.
Assets held for sale
On 4 July 2018, the Board of Directors announced its decision to dispose the exploration segment of the Group located in Russia
consisting of CJSC Bulun, Magsel, LLC and Comtrans, LLC, all are wholly-owned subsidiary of the Company, are classified as
assets held for disposal during the financial year. The Board considered the subsidiaries to meet the criteria to be classified as
held for sale at that date for the following reasons:
• CJSC Bulun, Magsel, LLC and Comtrans, LLC are available for immediate sale and can be sold to the buyer in its current
condition.
• The actions to complete the sale were initiated and expected to be completed within one year from the date of initial
classification.
• The shareholders approved the plan to sell on 7 February 2019.
For more details on the discontinued operation, refer to Note 36.
Determining the Group’s functional currency
The determination of a company’s functional currency often requires significant judgement where the primary economic
environment on which it operates may not be clear. Based on the economic substance of the underlying circumstances relevant
to the Company, the functional currency of the Company has been determined to be the Euro. The Euro is the currency of the
primary economic environment in which the Company operates.
Determining classification of financial instruments
The Group classifies a financial instrument, or its component parts, on initial recognition as a financial asset, a financial liability
or an equity instrument in accordance with the substance of the contractual agreement and the definitions of a financial asset,
a financial liability or an equity instrument. The substance of a financial instrument, rather than its legal form, governs its
classification in the financial statements.
Estimation uncertainty
Information about estimates and assumptions that have the most significant effect on recognition and measurement of assets,
liabilities, income and expenses is provided below. Actual results may be substantially different.
Estimating allowance for impairment on inventories
Management estimates the net realisable values of inventories, taking into account the most reliable evidence available at
each reporting date. The future realisation of these inventories may be affected by future technology or other market-driven
changes that may reduce future selling prices.
49
7. NOTES TO THE FINANCIAL STATEMENTS
Estimating measurement of Expected Credit Losses (ECL) allowance for trade receivables
The Group applies the IFRS 9 simplified model of recognising lifetime expected credit losses for all trade receivables as these
items do not have a significant financing component. In measuring the expected credit losses, the trade receivables have been
assessed on a collective basis as they possess shared credit risk characteristics.
Useful lives of depreciable assets
The annual depreciation charge depends primarily on the estimated lives of each type of asset and, in certain circumstances,
estimates of fair values and residual values. The directors annually review these asset lives and adjust them as necessary to
reflect current thinking on remaining lives in light of technological change, prospective economic utilisation and physical
condition of the assets concerned. Changes in asset lives can have significant impact on depreciation charges for the period.
It is not practical to quantify the impact of changes in asset lives on an overall basis, as asset lives are individually determined,
and there are a significant number of asset lives in use. The impact of any change would vary significantly depending on the
individual changes in assets and the classes of assets impacted.
Impairment of non-financial assets
Determining whether non-financial assets are impaired requires an estimation of the value in use of the cash generating units
to which the assets have been allocated. The value in use calculation requires the directors to estimate the future cash flows
to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Where the actual cash
flows are less than expected, a material impairment may arise.
Measurement of the recoverable amounts of deferred exploration costs
In accordance with International Financial Reporting Standard 6 - Exploration for and Evaluation of Mineral Resources, the
Group uses the cost method of recognition. Exploration costs include licence costs, survey, geophysical and geological analysis
and evaluation costs, costs of drilling and project-related overheads. The Directors base the recoverability of the carrying value
of these intangible assets on industry specific data in addition to using their judgment to assess the assets recoverability.
Utilisation of tax losses
The Directors have not deemed it appropriate to recognise deferred tax assets resulting from significant losses being carried
forward from previous years on the basis that it is not certain these losses will be utilized in future periods.
Fair value measurement
Management uses valuation techniques to determine the fair value of financial instruments (where active market quotes are
not available) and non-financial assets. This involves developing estimates and assumptions consistent with how market
participants would price the instrument. Management bases its assumptions on observable data as far as possible but this is
not always available. In that case management uses the best information available. Estimated fair values may vary from the
actual prices that would be achieved in an arm’s length transaction at the reporting date.
New Standards adopted as at 1 January 2018
In 2018 the Group has adopted new guidance for the recognition of revenue (IFRS 15) from contracts with customers. The
Company have assessed that the change in the amount of revenue recognized under IFRS 15, is not materially different to that
recognised under IAS 18 and therefore, there is no impact to either retained earnings or, the profit or loss.
Further, the Group has adopted new guidance for accounting for financial instruments (see Note 35). The Group have assessed
that the change in the recognition and measurement of financial instruments under IFRS 9, is not materially different to that
recognised under IAS 9 and therefore, there is no impact to either retained earnings or, the profit or loss
Standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted by
the Group
At the date of authorisation of these financial statements, certain new standards, and amendments to existing standards
have been published by IASB that are not yet effective. The Company has not early adopted any of these pronouncements.
Information on those expected to be relevant to the Company’s financial statements is provided below.
Management anticipates that all relevant pronouncements will be adopted in the Company’s accounting policies for the first
period beginning after the effective date of the pronouncement. New standards, interpretations and amendments not either
adopted or listed below are not expected to have a material impact on the Company’s financial statements.
IFRS 16 ‘Leases’
IFRS 16 will replace IAS 17 ‘Leases’ and three related Interpretations. It completes the IASB’s long-running project to overhaul
lease accounting. Leases will be recorded in the statement of financial position in the form of a right-of-use asset and a lease
liability. There are two important reliefs provided by IFRS 16 for assets of low value and short-term leases of less than 12
months.
IFRS 16 is effective from periods beginning on or after 1 January 2019. Early adoption is permitted; however, the Company have
decided not to early adopt. The effect of this standard is not expected to materially impact the Company on the grounds that
the Company has no material leases.
50
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
3
Going concern
The Directors have reviewed the current state of the Group’s finances, taking into account resources currently available.
The Directors are satisfied that sufficient funding will be available to the Group to enable it to trade for the foreseeable
future. On this basis the directors consider that it is appropriate to prepare the financial statements on the going concern
basis. The Directors consider that in preparing the financial statements they have taken into account all information that
could reasonably be expected to be available. The financial statements do not include any adjustments that would result
if the Director’s plans were not successful.
4
Segmental reporting
Information regarding the Group’s operating segments is set out below in accordance with IFRS 8 Operating Segments.
IFRS 8 requires operating segments to be identified on the basis of internal reports that are regularly reviewed by the
Group’s chief operating decision maker and used to allocate resources to the segments and to assess their performance
(a) Primary reporting format - business segments
At 31 December 2018, the Group had two business segments, bio-pharmaceutical and investment segments. Bio-
pharmaceutical activities are exclusively carried out by IVIX LLC, Investing activities are carried out by the subsidiary, Silver
Star Limited, a company located in Bermuda. Administrative activities represent group administration costs, primarily
incurred in Ireland and the Russian Federation.
(b) Segment revenues and results
Segment results represent operating profit earned by each segment. This is the measure reported to the Group’s Board of
Directors (“Board of Directors”) for the purposes of resource allocation and assessment of segment performance.
(c) Segment assets and liabilities
For the purposes of monitoring segment performance and allocating resources between segments, the Board of Directors
monitors the total assets and liabilities attributable to each segment. Goodwill is allocated based on separately identifiable
CGUs as further disclosed in Note 15.
Following the acquisition of IVIX LLC (refer Note 33), bio-pharmaceutical (“bio-pharma”) has become a new operating
segment in 2018. As discussed in Note 36, the exploration segment is presented as being discontinued
CONTINUING OPERATIONS - 31 December 2018
Bio-
pharma
Investment
Admin
Total
Bio-
pharma
Investment
Admin
Total
€’000
€’000
€’000
€’000
US$’000
US$’000
US$’000
US$’000
(655)
19
(636)
-
4
(632)
-
(632)
5,544
(125)
5,419
(739)
(912)
(2,306)
(55)
(92)
(128)
(794)
(1,004)
(2,434)
(5)
444
(5)
-
(10)
448
(355)
(1,009)
(1,996)
-
-
-
(357)
(1,009)
(1,996)
15,606
(989)
14,617
170
(53)
117
21,320
(1,167)
20,153
(774)
22
(752)
-
5
(747)
-
(747)
6,351
(144)
6,207
(873)
(1,076)
(2,723)
(65)
(123)
(166)
(938)
(1,199)
(2,889)
(6)
524
(6)
-
(12)
529
(420)
(1,205)
(2,372)
-
-
-
(420)
(1,205)
(2,372)
17,877
(1,131)
16,746
193
(60)
133
24,421
(1,335)
23,086
Administration
expenses
Other gains/
((losses
Operating loss
Finance costs
Finance income
Loss before tax
Income tax
Loss after tax
Segment assets
Segment
liabilities
Net assets
51
7. NOTES TO THE FINANCIAL STATEMENTS
CONTINUING OPERATIONS - 31 December 2017
Investment
Administration expenses
Other gains
Operating loss
Finance income
Finance costs
Gain/(loss) before tax
Income tax
Gain/(loss) after tax
Segment assets
Segment liabilities
Net assets
€’000
(831)
555
(276)
463
(5)
182
-
182
18,589
-
18,589
5
Loss on ordinary activities before taxation
Administration expenses
Employee expense
Directors remuneration (Note 11)
Employment costs (Note 10)
Depreciation (Note 17)
Services provided by the Group’s auditors (Note 6)
Operating lease rentals - property (Note 32)
Research and development (Note 16)
Acquisition related expenses (Note 33)
Other administration expenses
Total administration expenses
Admin
€’000
(467)
56
(411)
-
(4)
(415)
-
(415)
2,863
(41)
2,822
Total
Investment
Admin
Total
€’000
(1,298)
611
(687)
463
(9)
(233)
-
(233)
21,452
(41)
22,411
US$’000
US$’000
US$’000
(631)
320
(311)
522
(6)
205
-
205
22,267
-
22,267
(832)
370
(462)
-
(5)
(467)
-
(469)
3,430
(49)
3,381
(1,463)
690
(773)
522
(11)
(262)
-
(265)
25,697
(49)
25,648
Continuing
Discontinued
31/12/2018
31/12/2018
31/12/2018
31/12/2018
€’000
US$’000
€’000
US$’000
(296)
(552)
(848)
(1)
(62)
(27)
(484)
(357)
(527)
(349)
(654)
(1,003)
(2)
(73)
(32)
(572)
(422)
(619)
(2,306)
(2,723)
(31)
-
(31)
(29)
-
-
-
-
(34)
(94)
(37)
-
(37)
(34)
-
-
-
-
(40)
(111)
52
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
Administration expenses
Employee expense
Directors remuneration (Note 11)
Employment costs (Note 10)
Depreciation (Note 17)
Services provided by the Group’s auditors (Note 6)
Operating lease rentals - property (Note 37)
Other administration expenses
Total administration expenses
6
Services provided by the Group’s auditor
Audit services – group audit
Audit services- statutory entities
Tax advisory services
Total auditors remuneration
All services are from continuing operations.
7
Other gains/(losses)
Impairment of assets held for sale (Note 17 and 36)
Realised foreign exchange losses
Total other (losses)/gains
Trade payables written back
Realised foreign exchange gains
Other expenses
Total other (losses)/gains
Continuing
Discontinued
31/12/2017
31/12/2017
31/12/2017
31/12/2017
€’000
US$’000
€’000
US$’000
(208)
(440)
(648)
(2)
(50)
(11)
(587)
(1,298)
(236)
(497)
(733)
(1)
(55)
(12)
(662)
(1,463)
(19)
-
(19)
(35)
-
-
(87)
(141)
(21)
-
(21)
(40)
-
-
(98)
(159)
31/12/2018
31/12/2017
31/12/2018
31/12/2017
€’000
€’000
US$’000
US$’000
51
3
8
62
39
3
8
50
61
3
9
73
43
3
9
55
Continuing
Discontinued
31/12/2018
31/12/2018
31/12/2018
31/12/2018
€’000
US$’000
-
(128)
(128)
-
(166)
(166)
€’000
(444)
(136)
(580)
US$’000
(509)
(161)
(670)
Continuing
Discontinued
31/12/2017
31/12/2017
31/12/2017
31/12/2017
€’000
US$’000
€’000
US$’000
-
35
(40)
(5)
-
39
(45)
(6)
149
462
-
611
214
476
-
690
53
7. NOTES TO THE FINANCIAL STATEMENTS
8
Finance income and finance costs
Finance income
Dividends received from equity investments
Bank interest received
Total finance income
Finance costs
Bank interest and charges*
Total finance costs
Net finance income
31/12/2018
31/12/2017
31/12/2018
31/12/2017
€’000
€’000
US$’000
US$’000
444
4
448
(10)
(10)
438
463
-
463
(9)
(9)
454
524
5
529
(12)
(12)
517
522
-
522
(11)
(11)
511
*Finance costs of €’000 2 / US$’000 2 have been excluded from the above as they related to the Group’s discontinued operations
(2017: €’000 2 / US$’000 3), refer Note 36.
9
Employee numbers
The average monthly number of employees of the Group during the financial year was (excluding directors):
Administration and operational staff
10 Employment costs
31/12/2018
31/12/2017
Number
Number
6
6
Staff costs (inclusive of directors) during the financial year were as follows:
Wages and salaries
Social insurance costs
Total employment costs
31/12/2018
31/12/2017
31/12/2018
31/12/2017
€’000
€’000
US$’000
US$’000
848
32
879
641
26
667
1,003
37
1,040
724
30
754
54
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
11
Directors’ remuneration
Kirill Golovanov
Mikhail Mogutov
Leonid Skoptsov
Yuri Radchenko
Timothy McCutcheon
Nikolay Myasodev
Christopher Wiltshire
Romulo Colindres
Donald Schissel
Kenneth Kuchling
Directors remuneration
- Share-based benefits -
-------------------- Short-term benefits --------------------
2018
2017
31/12/2018
31/12/2017
31/12/2018
31/12/2017
Number of options
€’000
€’000
US$’000
US$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
200,000
200,000
331
94
58
15
15
7
7
7
9
9
552
164
106
106
16
16
0
0
0
16
16
440
391
112
69
18
18
8
8
8
11
11
654
185
120
120
18
18
-
-
-
18
18
497
The share based benefits relate to the number of exercisable share options held by directors at the year end.
There were no options exercised during the year, while 200,000 share options expired during the financial year (2017: 3,000,000).
Please refer to Note 31 for further details on share options granted and expired in the year and the expense recognised.
12
Retirement benefit costs
The Group does not operate a pension scheme (2017: €NIL / USD$ Nil)
13
Income tax costs
Analysis of income tax charge for the year
€’000
€’000
US$’000
US$’000
31/12/2018
31/12/2017
31/12/2018
31/12/2017
Income tax
Factors affecting tax charge for the financial year
-
-
-
-
The tax for the financial year is higher than (2017 - higher than) the standard rate of corporation tax in Ireland of 12.5% (2017:
12.5%). The differences are explained below:
31/12/2018
31/12/2017
31/12/2018
31/12/2017
€’000
€’000
US$’000
US$’000
Loss on ordinary activities before tax
Loss on ordinary activities before tax multiplied by standard rate of
corporation tax at in Ireland of 12.5% (2017: 12.5%)
Effects of
Ineligible costs and losses carried forward to future periods
Total income tax
(2,672)
(334)
334
-
(381)
(48)
48
-
(3,155)
(394)
394
-
(430)
(54)
54
-
A deferred tax asset has not been recognised at the reporting date in respect of trading tax losses. Due to the history of past
losses, the Group has not recognised any deferred tax asset in respect of tax losses to be carried forward which are approximately
€11.9 million at 31 December 2018 (2017: €9.2 million).
55
7. NOTES TO THE FINANCIAL STATEMENTS
14
Loss per share and dividends
Loss per share
Basic loss per share is calculated by dividing the loss after taxation for the financial year attributable to the equity holders of
the parent by the weighted average number of ordinary shares outstanding during the financial year.
Diluted loss per share is calculated by dividing the loss after taxation for the financial year attributable to the equity holders of
the parent by adjusting the weighted average number of share in issue to assume conversion of all potential ordinary shares.
For the purpose of calculating diluted loss per share for both 2018 and 2017, the potentially exercisable instruments in issue
would have the effect of being antidilutive and, as such, the diluted loss per share is the same as the basic loss per share for
both years.
Basic and diluted loss per share
€’000
€’000
US$’000
US$’000
31/12/2018
31/12/2017
31/12/2018
31/12/2017
Loss for the financial year attributable to the equity holders of the
parent:
Continuing operations
Discontinued operations
Loss for the financial year attributable to the equity holders of the
parent
Weighted average number of ordinary shares (thousands)
Basic and diluted loss per share from continuing operations (cents)
Basic and diluted loss per share from discontinued operations (cents)
Basic and diluted loss per share from continuing and discontinued
operations (cents)
(1,996)
(676)
(2,672)
81,564
(€2.45)
(€0.83)
(233)
(148)
(381)
81,564
(€0.29)
(€0.18)
(2,372)
(783)
(3,155)
81,564
($2.91)
($0.96)
(262)
(168)
(430)
81,564
($0.32)
($0.21)
(€3.28)
(€0.47)
($3.87)
($0.53)
On the 27 March 2019, the Company approved a number of share options incentive schemes for Directors, the total number of
share granted was 5,600,000 shares.
Dividends
The directors did not recommend the payment of a dividend (2017: € Nil / US$ Nil).
15
Goodwill
The movements in the net carrying amount of goodwill are as follows:
Gross carrying amount
Balance 1 January
Acquired through business combination (Note 33)
Net exchange difference
Balance at 31 December
Accumulated impairment
Balance at 1 January 31 December 2018
Carrying amount at 31 December
Impairment testing
2018
€’000
-
3,994
-
3,994
-
-
3,994
2017
€’000
2018
2017
US$’000
US$’000
-
-
-
-
-
-
-
-
4,523
52
4,575
-
-
4,575
-
-
-
-
-
-
-
For the purpose of annual impairment testing, goodwill is allocated to the operating segments expected to benefit from the
synergies of the business combinations in which the goodwill arises as set out below, and is compared to its recoverable value:
56
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
Goodwill allocated to biopharmaceutical segment
2018
€’000
3,994
2017
€’000
2018
2017
US$’000
US$’000
-
4,523
-
The recoverable amount of each segment was determined based on value-in-use calculations, covering a detailed five-year
forecast, followed by an extrapolation of expected cash flows for the remaining useful lives using a declining growth rate
determined by management. The present value of the expected cash flows of each segment is determined by applying a
suitable discount rate reflecting current market assessments of the time value of money and risks specific to the segment.
Recoverable amount of each operating segment
Biopharmaceutical segment
Growth rates
2018
€’000
10,827
2017
€’000
2018
2017
US$’000
US$’000
-
12,384
-
The growth rates used are 160% for year 1, 39% for year 2 and 4% thereafter, these reflect the long-term average growth rates
for the product lines and industries of the segments (all publicly available). The growth rate exceeds the overall long-term
average growth rates for because the product produced by the biopharmaceutical segment are new and are expected to
continue to grow at above-average rates for the foreseeable future.
Discount rates
The discount rate of 15% reflect appropriate adjustments relating to market risk and specific risk factors of each segment.
Cash flow assumptions
Management’s key assumptions include fast initial growth (refer growth rates above), followed by stable profit margins, based
on market analysis. The Group’s management believes that this is the best available input for forecasting this mature market.
No expected efficiency improvements have been taken into account and prices and wages reflect publicly available forecasts
of inflation for the industry.
16
Other intangible assets
Cost
At 1 January 2017
At 31 December 2017
At 1 January 2018
Acquisition through business combination (refer Note 33)
Exchange difference
At 31 December 2018
Net book value
At 31 December 2018
At 31 December 2017
--- Patents, trademarks and others ---
€’000
USD $’000
-
-
-
992
(34)
958
958
-
-
-
-
1,153
(56)
1,097
1,097
-
No amortisation of patents, trademarks and development costs were included in and recognised administration expenses
during the year Nil (2017: €Nil / US$ Nil).
Research and development costs of €’000 484 / US$’000 572 (2017: €Nil / US$ Nil) were recognised as other expenses (refer
Note 5).
Staff costs of €Nil / US$ Nil (2017: €Nil / US$ Nil) were capitalised during the year.
57
7. NOTES TO THE FINANCIAL STATEMENTS
17
Property, plant and equipment – Group
Continuing
Discontinued
Continuing
Discontinued
Office furniture &
equip.
Mining
equip.
Land and
buildings
Office
furniture &
equip.
Mining
equip.
Land and
buildings
€’000
€’000
€’000
$’000
$’000
$’000
1,131
111
Cost
At 1 January 2017
Disposals
Effect of movements in exchange
rates
At 31 December 2017
At 1 January 2018
Acquisition through business
combination (refer Note 33)
Effect of movements in exchange
rates
70
-
1
71
71
1
5
810
(501)
-
309
309
-
-
-
-
1,131
1,131
-
-
At 31 December 2018
77
309
1,131
Depreciation
At 1 January 2017
Charge for year
Depreciation on disposal
At 31 December 2017
At 1 January 2018
Charge for year
Impairment
Effect of movements in exchange
rates
At 31 December 2018
Net book values
At 31 December 2018
At 31 December 2017
67
1
-
68
68
2
-
4
74
3
3
203
2
(9)
196
196
8
-
65
269
40
113
224
34
-
258
258
20
444
-
722
409
873
1,010
(543)
-
467
467
-
(113)
354
230
2
(10)
222
222
10
-
79
311
43
245
1,526
-
-
1,526
1,526
-
(230)
1,296
284
36
-
320
320
24
509
(26)
827
469
1,206
-
1
112
112
1
(15)
98
105
3
-
108
108
2
-
(16)
94
4
4
All mining equipment is included in the assets classified as held for sale and discontinued operations as disclosed in Note 36.
The residual values and useful lives of property, plant and equipment are reviewed at each financial year end. The useful lives
have been reviewed and deemed to be appropriate.
At 31 December 2018, the disposal group was stated at fair value less costs to sell and comprised the following assets:
58
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
Loss on remeasurement
Cost transferred from fixed assets
Accumulated depreciation transferred from fixed assets
Impairment (refer Note 7)
Fair value at 31 December 2018
-------------Disposal group -------------
€’000
1,131
(278)
(444)
409
$’000
1,296
(318)
(509)
469
The land and building were independently value by Center of Law Ltd (Magadan), a licensed property valuation company in
Russia. The valuation amount to RUR’000 32,478 (€’000 409 / US$’000 469). This valuation resulted in impairment losses of
€’000 444 / $’000 509 for write-downs of the disposal group to the lower of its carrying amount and its fair value less costs to sell
have been included in ‘other expenses’ (refer Note 7). The impairment losses have been applied to reduce the carrying amount
of land and buildings within the assets held for sale and discontinued operations.
Company
Cost
At 1 January 2017 and 31 December 2017
Effect of movements in exchange rates
At 1 January 2018
Depreciation
At 1 January 2017
Charge for year
At 31 December 2018
Accumulated depreciation
At 1 January 2018
Depreciation
Effect of movements in exchange rates
At 31 December 2018
Net book value
At 31 December 2018
At 31 December 2017
Office furniture and
equipment
Office furniture and
equipment
€’000
US$’000
68
(11)
57
64
1
65
65
1
(10)
56
1
3
50
-
50
47
1
48
48
1
-
49
1
2
59
7. NOTES TO THE FINANCIAL STATEMENTS
18
Investments in subsidiaries – Company
01/01/2018
€’000
27,145
27,145
Movement
during the
year
€’000
(3,029)
(3,029)
31/12/2018
01/01/2018
Movement
during the
year
31/12/2018
€’000
24,116
24,116
US$’000
US$’000
US$’000
28,599
28,599
(974)
(974)
27,625
27,625
Silver Star Limited
Investment in
subsidiaries at cost
At 31 December 2018 the Company had the following direct and indirect subsidiary undertakings:
Name
CJSC Bulun
Magsel Limited
Comtrans
Ovoca Mining Limited
Silver Star Limited
Ovoca Gold (Russia)
Limited
IVIX LLC
Registered office & country of
incorporation
Principal Activity
Proportion holding
13 A Koltcevaya street, Magadan 685000,
Russian Federation
13 A Koltcevaya street, Magadan 685000,
Russian Federation
13 A Koltcevaya street, Magadan 685000,
Russian Federation
36 Vyronos Avenue, Nicosia Tower Center, 8th
Floor, Flat 801 1506 Nicosia, Cyprus
27 Reid Street, 1st Floor, Hamilton HM11,
Bermuda
Mineral Exploration
Mineral Exploration
Support Company
Dormant
Investment
17 Pembroke Street Upper, Dublin 2, Ireland
Support company
2018
100%
100%
100%
100%
100%
100%
Stoloviy Pereulok, 6
Moscow, 121069 Russian Federation
Biopharmaceutical
50.02%
2017
100%
100%
100%
100%
100%
100%
-
All shares are directly held in subsidiaries, with the exception of CJSC Bulun, Magsel Limited and IVIX LLC, which are held
through Silver Star Limited, and comprise of ordinary shares held in the Company.
Movement during the year
During the year, the Company impaired its shareholding in Silver Star Limited due to a reduction in the market value of the
equity securities designated as at FVOCI which are held by Silver Star Limited.
Change in shareholdings
During the year the Group acquired control of IVIX LLC, further information relating to the acquisition is disclosed in Note 33.
Disclosures relating to subsidiaries
Information relating to subsidiaries that have non-controlling interests that are material to the Group are provided in Note 26.
19 Equity securities designated as at FVOCI
At 1 January 2018, the Group designated the investments shown below as equity securities at FVOCI because these equity
securities represent investments that the Group intends to hold for the long term for strategic purposes. In 2017, these
investments were classified under IAS 39 as available-for-sale.
60
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
At 1 January
Fair value movement
Foreign exchange movement
Net translation adjustments
At 31 December
Consisting of:
Quoted securities
Polymetal International plc
Asset managed fund
Other
Closing balance
31/12/2018
31/12/2017
31/12/2018
31/12/2017
€’000
€’000
US$’000
US$’000
15,868
(1,911)
(437)
652
14,172
12,865
1,297
10
14,172
15,340
1,447
1,068
(1,987)
15,868
14,577
1,276
15
15,868
19,008
(2,256)
(516)
(3)
16,233
14,737
1,486
10
16,233
16,162
1,634
1,212
-
19,008
17,461
1,529
18
19,008
The Investment in Polymetal International plc represents the holding of 1,405,000 shares. Polymetal International plc is listed
on the London stock exchange. The asset managed fund represents investments in quoted investments in US listed entities.
The above quoted securities are denominated in the following currencies:
Sterling
US Dollar
AUS Dollar
Closing balance
2018
€’000
12,865
1,297
10
14,172
2017
€’000
14,577
1,276
15
15,868
2018
US$’000
14,737
1,486
10
16,233
2017
US$’000
17,461
1,529
18
19,008
A reasonably possible change of 5% in market value at the reporting date would have increased (decreased) equity by the
amounts shown below, as movement in the fair value are measured through OCI, there is no increase or decrease within profit
or loss. This analysis assumes that all other variables, in particular foreign currency exchange rates, remain constant.
31 December 2018
Polymetal International plc
Asset managed fund
Other
Total
31 December 2017
Polymetal International plc
Asset managed fund
Other
Total
-------------- Equity -------------
-------------- Equity -------------
€’000
€’000
US$’000
US$’000
5% increase
5% decrease
5% increase
5% decrease
643
65
1
709
729
64
1
794
737
74
1
812
739
68
1
808
(643)
(65)
(1)
(709)
(729)
(64)
(1)
(794)
61
(737)
(74)
(1)
(812)
(739)
(68)
(1)
(808)
7. NOTES TO THE FINANCIAL STATEMENTS
20
Inventories
Finished goods
Finished goods as held for resale (refer Note 36)
2018
€’000
179
3
182
2017
2018
2017
€’000
US$’000
US$’000
-
4
4
205
5
209
-
5
5
The Group has not recognised an inventory write down during the year (2017: € Nil / US$ Nil).
In the opinion of the directors the replacement cost of the stock did not differ significantly from the figure shown (2017: € Nil /
US$ Nil). No inventory was recognised as an expense during the year.
21
Trade and other receivables
------------------------ Group ------------------
-------------------- Company -----------------
2018
2017
2018
2017
2018
2017
2018
2017
€’000
€’000
US$’000
US$’000
€’000
€’000
US$’000
US$’000
Tax refundable
Other debtors
Amounts owed by group undertakings
(refer Note 29)
Trade and other receivables as held for
resale (refer Note 36)
53
138
-
191
5
196
35
-
-
35
4
39
61
158
-
219
7
226
42
-
-
42
5
47
53
61
466
580
-
6
-
693
699
-
580
699
61
70
534
665
-
665
7
-
830
837
-
837
All amounts are short term. Amounts owed by group undertakings are unsecured, interest free and repayable on demand.
22
Cash and cash equivalents
-------------------- Group ---------------------
-------------------- Company ---------------------
2018
2017
2018
2017
€’000
€’000
US$’000
US$’000
2018
€’000
2017
2018
2017
€’000
US$’000
US$’000
Cash at bank
Short term deposits
Cash classified as
held for resale (refer
Note 36)
1,378
445
1,823
4,918
628
5,546
1,578
510
2,088
5,891
752
6,643
24
3
27
4
929
-
929
-
2,837
1,064
3,398
-
-
-
2,837
1,064
3,398
-
-
-
1,847
5,549
2,115
6,647
929
2,837
1,064
3,398
Cash and cash equivalents are held by the Group on a short-term basis with all having an original maturity of three months or
less. The carrying amount approximates their fair value. Short-term deposits are obtained at prevailing market rate conditions.
62
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
23
Share capital
Group and company
Authorised equity
120,000,000 Ordinary shares of 12.5 cent each
2018
€
2017
€
2018
US$
2017
US$
15,000,000
15,000,000
15,000,000
15,000,000
21,000,000
21,000,000
21,000,000
21,000,000
Group and company
Issued, called up and fully paid
Number of
ordinary shares
At 1 January 2017 and 31 December 2017
88,458,806
Share capital
Share capital
€’000
11,057
US$’000
15,586
At 1 January 2018 and 31 December 2018
88,458,806
11,057
15,586
Ordinary shares
Holders of these shares are entitled to dividends as declared from time to time and are entitled to one vote per share at general
meetings of the Company. All rights attached to the Company’s shares held by the Group are suspended until those shares are
reissued.
Treasury shares
The reserve for the Company’s treasury shares comprises the cost of the Company’s shares held by the Group
On 28 April 2015, Ovoca Bio plc purchased 5,800,000 ordinary shares of nominal value €0.125 each of the issued share capital
of the Company at a price of GBP 6.8p. Ovoca Bio plc intends to hold these shares as treasury stock.
As of year-end 2018, the Company has a total of 81,563,806 (2017: 81,563,806) Ordinary Shares in issue excluding treasury
shares of 6,895,000 which have a cumulative cost of €’000 547 / US$’000 607. The purchase was made pursuant to the authority
granted by shareholders at an Extraordinary General Meeting of the Company held on 17 October 2014. To date, Ovoca has
acquired 7.8% (2017: 7.8%) of its own share capital under this approved share buyback programme.
24
Retained earnings
------------------ Group -------------------
---------------- Company -----------------
2018
2017
2018
2017
2018
2017
2018
2017
€’000
€’000
US$’000
US$’000
€’000
€’000
US$’000
US$’000
Surplus at 1 January
Share of (Loss)/profit for the year
Surplus at 31 December
1,832
(2,356)
(524)
2,213
(381)
1,832
3,257
(2,783)
3,687
11,786
11,553
(430)
(4,696)
233
474
3,257
7,090
11,786
18,129
(5,546)
12,583
17,867
262
18,129
Retained earnings is made up of accumulated profits and losses.
In accordance with the provisions of the Companies Act 2014, Section 304(2), the Company has not presented an
income statement. A loss for the year of €’000 4,696 / US$’000 5,546 (2017: income of €’000 233 / US$’000 262) has
been recognised in the income statement of the Company.
63
7. NOTES TO THE FINANCIAL STATEMENTS
25
Other reserves – Group
Other
reserves
Foreign
currency
translation
reserve
Share
based
payment
reserve
Total
Other
reserves
Foreign
currency
translation
reserve
Share
based
payment
reserve
Total
€’000
€’000
€’000
€’000
US$000
US$000
US$000
US$000
At 1 January 2018
5,878
3,745
438
10,061
6,585
1,494
792
8,871
Other comprehensive
income/(loss):
Fair value movement
on equity securities
designated as at FVOCI
Exchange movement
on equity securities
designated as at FVOCI
Foreign exchange
(loss)/gain arising from
translation of financial
statements of a foreign
operations
Transactions with
owners of the Company
Share based payments
expired
Balance at 31 December
2018
(1,911)
(437)
-
-
-
767
-
-
-
(1,911)
(2,256)
(437)
(516)
-
-
767
-
(412)
-
-
-
(2,256)
(516)
(412)
438
-
(438)
-
792
-
(792)
-
3,968
4,512
-
8,480
4,605
1,082
-
5,687
At 1 January 2017
2,507
6,947
1,294
10,748
2,780
1,953
1,759
6,492
Other comprehensive
income/(loss):
Foreign exchange loss
arising from translation of
financial statements of a
foreign operation
Fair value movement on
availableforsale financial
assets
Exchange movement on
availableforsale financial
assets
Transactions with
owners of the Company
Share based payments
expired
Balance at 31 December
2017
(3,202)
-
(459)
(8)
(467)
-
(3,202)
1,447
1,068
856
-
-
-
-
-
-
1,447
1,634
1,068
1,212
(856)
-
959
-
-
-
-
-
1,634
1,212
(959)
-
5,878
3,745
438
10,061
6,585
1,494
792
8,871
64
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
25
Other reserves – Company
Share
based
payment
reserve
Other
reserves
€’000
€’000
Foreign
currency
translation
reserve
Share based
payment
reserve
Other
reserves
Total
US$000
US$000
US$000
US$000
Total
€’000
At 1 January 2018
867
438
1,305
1,041
(10,486)
739
(8,706)
Other comprehensive
income:
Exchange movement
on translation from
functional currency
Transactions with
owners of the
Company
Share based
payments expired
during the financial
year
Balance at 31
December 2018
-
-
438
(438)
-
-
-
2,820
-
2,820
739
-
(739)
-
1,305
-
1,305
1,780
(7,666)
-
(5,886)
At 1 January 2017
11
1,294
1,294
16
(10,037)
1,764
(8,257)
Other comprehensive
(loss):
Exchange movement
on translation from
functional currency
Transactions with
owners of the
Company
Share based
payments expired
during the financial
year
Balance at 31
December 2017
-
-
856
(856)
-
-
-
(449)
-
(449)
1,025
-
(959)
-
867
438
1,294
1,041
(10,486)
739
(8,706)
65
7. NOTES TO THE FINANCIAL STATEMENTS
26 Non-controlling interest
The following table summarises the information relating to each of the Group’s subsidiaries that has material Non-
Controlling Interest (NCI), before any intragroup eliminations
NCI percentage
Noncurrent assets
Current assets
Current liabilities
Net assets
Net assets attributable to NCI
NCI Share of goodwill (refer Note 33)
Total NCI
NCI percentage
Administration expenses
Other gains and losses
Operating loss
Finance costs
Finance income
Loss for the financial year before tax
Income tax
Loss for the financial year
Foreign exchange loss arising from translation of
financial statements of a foreign operation
Other comprehensive loss for the financial year
Total comprehensive loss for the financial year
Profit allocated to NCI
OCI allocated to NCI
Total comprehensive loss allocated to NCI
2018
€’000
IVIX LLC
49.98%
959
591
(125)
1,425
712
1,448
2,160
2017
€’000
IVIX LLC
0.00%
-
-
-
-
-
-
-
2018
US$’000
IVIX LLC
49.98%
1,099
677
(143)
1,633
815
1,633
2,448
2017
US$’000
IVIX LLC
49.98%
-
-
-
-
-
-
-
For the 3 month
period ended
31/12/2018
For the 3 month
period ended
31/12/2017
For the 3 month
period ended
31/12/2018
For the 3 month
period ended
31/12/2017
€’000
IVIX LLC
49.98%
€’000
IVIX LLC
-%
US$’000
IVIX LLC
49.98%
US$’000
IVIX LLC
-%
(655)
19
(636)
-
4
(632)
-
(632)
(58)
(58)
(690)
(316)
(29)
(345)
-
-
-
-
-
-
-
-
-
-
-
-
-
(774)
22
(752)
-
5
(747)
-
(747)
(68)
(68)
(815)
(373)
(34)
(407)
-
-
-
-
-
-
-
-
-
-
-
-
IVIX LLC contributed €’000 632 / US$’000 746 to the consolidated loss for the three months from 1 October 2018 to 31 December 2018. If
IVIX had been acquired on 1 January 2018, the loss contributed to the Group for 2018 would have been €’000 1,262 / US$’000 1,490.
66
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
For the 3 month
period ended
31/12/2018
For the 3 month
period ended
31/12/2017
For the 3 month
period ended
31/12/2018
For the 3 month
period ended
31/12/2017
€’000
€’000
US$’000
US$’000
(690)
-
-
(690)
-
-
-
-
(828)
-
-
(828)
-
-
-
-
Cash flows attributable to IVIX LLC
Net cash from operating activities
Net cash used in investing activities
Net cash from (used in) financing activities
Net cash inflow
27
Trade and other payables
------------------- Group ---------------------
---------------- Company -----------------
2018
2017
2018
2017
2018
2017
2018
2017
€’000
€’000
US$’000
US$’000
€’000
€’000
US$’000
US$’000
Trade payables
Amounts owed to group
undertakings (refer note
29)
Accruals
Liabilities classified as
held for resale (refer note
36)
115
-
63
178
8
186
5
-
36
41
5
46
131
-
71
202
9
214
6
-
43
49
6
2
1
2
1
6,128
6,498
7,020
7,443
44
36
6,174
6,535
50
7,072
384
7,828
-
-
-
-
55
6,174
6,535
7,072
7,828
All amounts are short term and non-interest bearing. The net carrying value of trade payables is considered a reasonable
approximation of fair value. Trade payables written back during the year amounted to €Nil / $ Nil (2017:€ ’000 149 / USD ’000 214), refer
Note 7.
28
Borrowings
-------------------Group -------------------
---------------- Company -----------------
2018
2017
2018
2017
2018
2017
2018
2017
€’000
€’000
US$’000
US$’000
€’000
€’000
US$’000
US$’000
Loan from third party
989
-
1,133
-
-
-
-
-
The loan from a third party is denominated in US Dollars and bears an interest rate of 7.25%. The loan has been repaid in full
on 8 February 2019.
Reconciliation of movement of liabilities to cash flows arising from financing activities:
67
7. NOTES TO THE FINANCIAL STATEMENTS
-------------------Group -------------------
---------------- Company -----------------
2018
2017
2018
2017
2018
2017
2018
2017
€’000
€’000
US$’000
US$’000
€’000
€’000
US$’000
US$’000
Balance at 1 January 2017
and 31 December 2017
Changes from financing cash
flows
Proceeds from borrowings
Other changes
Interest expense
Interest paid
Balance at 31 December
2018
-
989
5
(5)
989
29
Related party transactions
-
-
-
-
-
-
1,133
6
(6)
1,133
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Details of subsidiary undertakings are shown in Note 18. In accordance with International Accounting Standard 24 - Related
Party Disclosures, transactions between group entities that have been eliminated on consolidation are not disclosed. Key
management personnel are the Board of Directors. Details of the remuneration of Directors are disclosed in Note 11 of the
consolidated financial statements. None of the related party transactions disclosed above were undertaken with the parent
company, Ovoca Bio plc.
Included in amounts owed by/(to) group undertaking are amounts shown below:
Comtrans
Amounts owed by group undertakings (refer Note 21)
Silver Star Limited
Amounts owed to group undertakings (refer Note 27)
---------------------------- Company ------------------------------
2018
€’000
466
466
2017
€’000
693
693
(6,128)
(6,128)
(6,498)
(6,498 )
2018
US$’000
534
534
(7,020)
(7,020)
2017
US$’000
830
830
(7,443)
(7,443 )
At 31 December 2018, the Parent company had balances receivable of €’000 466 / US$’000 534 (2017: €’000 693/US$’000
830) from its subsidiaries. These receivables mainly relate to management services and loans to subsidiaries. Total provision
in respect of amounts due from subsidiary undertakings at 31 December 2018 is €’000 631 /US$’000 745 (2017: €’000 272 /
US$’000 307). The impairment loss recognised in the Parent company in respect of amounts due from subsidiary undertakings
has been calculated using expected credit loss model as required by IFRS 9.
In determining the impairment loss, amounts due from subsidiaries were classified as either amounts repayable on demand,
low credit risk receivables or amounts for which there has been a substantial increase in credit risk since initial recognition.
In determining the expected credit loss (including probability of default and loss given default), regard was given to the
historic performance of the relevant loan as well as forward looking information for the relevant subsidiary including
detailed discounted cash flow forecasts. For repayable on demand loans where the loan could not be repaid at the reporting
date, expected credit losses were calculated by considering the likely recovery strategies of the Parent company, including
consideration of ‘repay over time’ strategies. For loans with a substantial increase in credit risk, consideration was given to
the future activities and cash flows of the subsidiary and life time expected credit losses were recognised accordingly where
appropriate.
30
Financial instruments
The Group monitors relevant aspects of financial instrument risk on an ongoing basis. Financial instrument risks primarily
relates to foreign exchange risk, credit risk, liquidity risk and market risk.
The following table shows the carrying amount of financial assets and financial liabilities. in each category are as follows
68
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
------------------- Group ---------------------
---------------- Company -----------------
2018
2017
2018
2017
2018
2017
2018
2017
€’000
€’000
US$’000
US$’000
€’000
€’000
US$’000
US$’000
Financial assets not measured
at fair value
Investments (refer Note 18)
-
-
-
-
24,116
27,145
27,625
28,599
Cash and cash equivalents (refer
Note 22)
Other debtors (refer Note 21)
Amounts owed by group
undertakings (refer Note 21)
Financial assets measured at
fair value
Equity securities designated as
at FVOCI (refer Note 19)
Financial liabilities not
measured at fair value
Trade and other payables (refer
Note 27)
Foreign Exchange Risk
1,823
5,546
2,008
6,643
929
2,837
1,064
3,398
138
-
-
-
158
-
-
-
61
466
-
693
70
534
-
830
1,961
5,546
2,166
6,643
25,572
30,675
29,293
32,827
14,172
15,868
16,233
19,008
14,172
15,868
16,233
19,008
-
-
-
-
-
-
-
-
178
178
41
41
202
202
49
49
6,174
6,535
6,174
6,535
7,072
7,072
7,828
7,828
Exchange rate fluctuations may affect the cost that the Group incurs with its operations. Any fluctuations of the Euro and
Russian Rouble against the US Dollar may have a significant impact on the Company’s financial position and results in future.
The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities at the end of the
reporting date are as follows:
United States Dollar
Russian Rouble
Financial Assets
Financial Liabilities
31/12/2018
31/12/2017
31/12/2018
31/12/2017
€’000
15,752
143
€’000
21,131
1,694
€’000
€’000
986
12
-
8
The following table details the Group’s sensitivity to a 10% increase and decrease in the Euro against United States Dollar
and Russian Rouble. 10% is the sensitivity rate used which represents management’s assessment of the reasonably possible
change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary
items and adjusts their translation at the year-end for a 10% change in foreign currency rates, it assumes that all other variables,
in particular bank interest rates, remain constant and ignores the impact of forecast sales and purchases
69
7. NOTES TO THE FINANCIAL STATEMENTS
United States Dollar Impact
Russian Rouble Impact
31/12/2018
31/12/2017
31/12/2018
31/12/2017
€’000
1,342
€’000
2,134
€’000
12
€’000
170
Profit or loss
Credit Risk
This refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the Group.
The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining significant collateral, where
appropriate, as a means of mitigating the risk of financial loss from defaulters. The table below analyses the maximum
exposure of the Group’s financial assets which are subject to credit risk:
Group
Group
Group
Group
31/12/2018
31/12/2017
31/12/2018
31/12/2017
€’000
€’000
US$’000
US$’000
Trade and other receivables
Cash and cash equivalents (Note 22)
Total
138
1,823
1,961
-
5,546
5,546
158
2,008
2,166
-
6,643
6,643
The Group continuously monitors defaults of customers and other counterparty, identified either individually or by the Group,
and incorporates this information into its credit risk controls. In relation to the credit risk for cash and cash equivalents, the
risk is considered to be negligible, since the counterparties are reputable banks with high quality external credit ratings. The
Group’s management considers that all of the above financial assets are of good credit quality, as the Group’s policy is to deal
only with creditworthy customers.
Liquidity Risk
This refers to the risk that the Group will not have the sufficient funds to meet its liabilities. The Group holds its cash in
currencies in which it expects to incur expenditure, including Euros, US Dollar and Russian Roubles. The Group’s reporting
currency is the Euro. The most meaningful information relates to the Group’s current liquidity – since it is not generating any
income from its mineral projects.
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the earliest date on which
the Group can be required to pay. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances
due within 1 year equal to their carrying values, as the impact of the discounting is not significant.
Balances due within 1 year
31/12/2018
31/12/2017
31/12/2018
31/12/2017
Group
Group
Group
Group
Trade and other payables (Note 27)
Borrowings (Note 28)
Total
€’000
178
989
1,167
€’000
US$’000
US$’000
41
-
41
202
1,133
1,335
49
-
49
The Group considers expected cash flows from financial assets in assessing and managing liquidity risk, in particular its cash
resources and available for sale financial assets. The Group’s current cash resources (Note 22), trade and other receivables
(Note 21) and equity investments measured through other comprehensive income (Note 19) significantly exceed the current
cash outflow requirements.
Market Risk
Factors beyond the control of the Group may affect the marketability of its securities. Prices are subject to fluctuation and are
affected by factors beyond the control of the Group. The effect of these factors on the Group’s operations cannot be accurately
predicted. Fluctuations in stock market prices affect the Group’s Equity securities at FVOCI. The Group seek to minimise this risk
by closely monitoring stock market movements on an ongoing basis. A detailed sensitivity analysis of the impact of changes in
the market price of securities is available at Note 19.
70
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
Fair Value measurement
Equity securities FVOCI are measured at Level 1. These are the only financial asset of the Group measured at fair value on a
recurring basis. There were no transfers between Levels in 2018 and 2017.
Capital management
The Group considers total equity as capital. Its primary objective in capital management is to maintain a strong credit
rating in order to support its business and maximize shareholder value. The Group manages its capital structure and makes
adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may
issue new shares or other financial instruments in relation to ensure the liquidity and the necessary level of the working capital.
The amounts managed as capital by the Group for the reporting periods are as summarized as follows:
Group
Group
Group
Group
31/12/2018
31/12/2017
31/12/2018
31/12/2017
€’000
20,626
€’000
22,403
US$’000
23,628
US$’000
27,107
Total Equity
31
Share based payments - Group and Company
Under the share option scheme employees of the Group can receive conditional awards of share options depending on
their performance, seniority and length of service. All options issued to date vest once granted. IFRS 2 requires that a
recognised valuation methodology be employed to determine the fair value of share options granted. The valuation model
used by the Company in years where options are granted or vesting is the Bi-nominal model. Fair value is determined under
the equity settled share based remuneration schemes operated by the group.
The volatility assumption, measured at the standard deviation of expected share price returns, is based on a statistical
analysis of daily share prices over the last three years. The market vesting condition was factored into the valuation of the
phantom options by applying an appropriate discount to the fair value of equivalent share appreciation rights without the
specified vesting conditions. The Group did not enter into any share-based payment transactions with parties other than
employees during the current or previous period.
Expired share options were transferred to other reserves during the year.
Outstanding at 1 January
Expired during the year
Outstanding at 31 December
Of which:
Exercisable at 31 December
------------------ 2018 ------------------
------------------ 2017 ------------------
Number of
options
Weighted average
exercise price (€cent
per share)
Number of options
Weighted average
exercise price
(€cent per share)
200,000
(200,000)
-
-
41
-
-
-
3,200,000
(3,000,000)
200,000
200,000
33
-
41
41
71
7. NOTES TO THE FINANCIAL STATEMENTS
32 Commitments under operating leases
------------------------Group----------------
------------------------Company-------------------
2018
2017
€’000
€’000
2018
$’000
2017
$’000
No later than one year
27
11
32
12
2018
€’000
32
2017
€’000
12
2018
$’000
-
2017
$’000
-
The Group leases offices under non-cancellable operating lease agreements. The lease expenditure charged to the income
statement during the year is disclosed in Note 5 of the consolidated financial statements.
33
Acquisition of subsidiary
On 25 September 2018, the Group acquired 50.02% of the equity instruments of IVIX LLC (“IVIX”), a Russian based business,
thereby obtaining control. The acquisition was made to diversify the Group’s position.
The details of the business combination as follows:
Fair value of consideration transferred
€’000
US$’000
Amount settled in cash
3,604
4,120
72
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
Recognised amounts of identifiable net assets
€’000
US$’000
Non-current assets
Property, Plant and Equipment
Intangible assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Non-current liabilities
Other non-current payables
Total non-current liabilities
Current liabilities
Trade and Other Payables
Provisions
Total current liabilities
Identifiable net assets
1
992
993
31
37
1,129
1,197
(15)
(15)
(52)
(5)
(57)
1
1,153
1,154
37
45
1,312
1,394
(17)
(17)
(64)
(6)
(70)
2,118
2,459
Cash outflow on acquisition
€’000
US$’000
Consideration transferred settled in cash
Cash and cash equivalents acquired
Net cash outflow on acquisition
Acquisition costs charged to expenses
(3,604)
1,129
(2,475)
(357)
(4,120 )
1,312
(2,808)
(422)
Acquisition-related costs amounting to €’000 357 / US$’000 422 are not included as part of consideration transferred and
have been recognised as an expense in the consolidated statement of profit or loss, as part of administrative expenses in
Note 5.
Goodwill arising from the acquisition has
been recognised as follows:
Parent
NCI
Total
Parent
NCI
Total
€’000
€’000
€’000
US$’000
US$’000
US$’000
Amount settled in cash (refer above)
3,604
-
3,604
4,120
-
4,120
Fair value of NCI at acquisition date (refer
below)
-
2,505
2,505
-
2,861
2,861
Identifiable net assets (refer above)
(1,058)
(1,057)
(2,115)
(1,230)
(1,228)
(2,458)
Goodwill recognised on acquisition (refer
Note 15)
2,546
1,448
3,994
2,890
1,633
4,523
The goodwill is attributable mainly to the skills and technical talent of IVIX’s work force. None of the goodwill recognised is
expected to be deductible for tax purposes.
73
7. NOTES TO THE FINANCIAL STATEMENTS
The Fair Value of the NCI at the acquisition date was independently valued at Russian Rouble 191 million (€ 2.5 million /
US$ 2.7 million) by International Business Center, an independent firm specialising in consulting, investments and company
valuations.
At the date of acquisition, the Company also had the right to acquire a further participation interest (shareholding) to be issued
by IVIX for US$2.04 million which would increase its overall participation interest in the charter capital of IVIX by 9.9 per cent.
The fair value to this right was valued at €Nil / $Nil, this option was exercised in full post year end, refer Note 37.
34
Prior year presentation
Certain accounts in the prior year have been reclassified to conform to current year presentation.
35
Adoption of new accounting standards
IFRS 9 Financial Instruments
IFRS 9 replaces IAS 39 “Financial Instruments: Recognition and measurement”, it makes major changes to the previous
guidance on the classification and measurement of financial assets and introduces an “expected credit loss” model for the
impairment of financial assets. The Company has adopted consequential amendments to IFRS 7 Financial Instruments:
Disclosures that are applied to disclosures about 2018 but have not been generally applied to comparative information.
On the date of initial application, 1 January 2018, the financial instruments of the Group and Company were reclassified
as follows:
Group
Financial assets
Cash and cash equivalents (refer
Note 22)
Equity securities designated as at
FVOCI (refer Note 19)
Total financial assets
Financial liabilities
Trade and other payables
(refer Note 27)
Total financial liabilities
Original
classification under
IAS 39
New
classification
under IFRS
Original
carrying
amount
under IAS
39
New
carrying
amount
under
IFRS 9
Original
carrying
amount
under IAS
39
New
carrying
amount
under
IFRS 9
€’000
€’000
US$’000
US$’000
Amortised cost
Amortised cost
5,546
5,546
6,643
6,643
Available-for-sale
FVOCI – equity
instrument
15,868
15,868
19,008
19,008
21,414
21,414
25,651
25,651
Amortised cost
Amortised cost
41
41
41
41
49
49
49
49
74
OVOCA BIO PLC ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
Company
Financial assets not measured
at fair value
Investments (refer Note 18)
Cash and cash equivalents (refer
Note 22)
Amounts owed by group
undertakings (refer Note 21)
Total financial assets
Financial liabilities not
measured at fair value
Trade and other payables (refer
Note 27)
Total financial liabilities
Original
classification
under IAS 39
New
classification
under IFRS
Original
carrying
amount
under IAS
39
New
carrying
amount
under
IFRS 9
Original
carrying
amount
under IAS
39
New
carrying
amount
under
IFRS 9
€’000
€’000
US$’000
US$’000
Amortised cost
Amortised cost
Amortised cost
Amortised cost
2,837
2,837
3,398
3,398
27,145
27,145
28,599
28,599
Amortised cost
Amortised cost
693
693
830
830
30,675
30,675
32,827
32,827
Amortised cost
Amortised cost
6,535
6,535
7,828
7,828
6,535
6,535
7,828
7,828
These equity securities represent investments that the Group intends to hold for the long term for strategic purposes. As
permitted by IFRS 9, the Group has designated these investments at the date of initial application as measured at FVOCI. Unlike
IAS 39, the accumulated fair value reserve related to these investments will never be reclassified to profit or loss. The adoption
of this classification was based on assessments have been made on the basis of the facts and circumstances that existed at the
date of initial application. Therefore, the comparative has not been restated.
36
Disposal group classified as held for sale and discontinued operations
Management of the Group has a detailed plan and currently looking for interested parties with respect to the sale of
its subsidiaries, CJSC Bulun, Magsel LLC and Comtrans LLC, which is involved in the exploration of mining in the Russian
Federation. The disposal is consistent with the Group’s long-term policy to refocus its activities as a bio-pharmaceutical
company in 2018. The disposal is expected to be completed in the next following twelve months.
Consequently, assets and liabilities allocated the exploration segment of the Group were classified as a disposal group.
Revenues and expenses, gains and losses relating to the discontinuation of this segment have been eliminated from profit
or loss from the Group’s continuing activities and are shown as a single line item on the face of the consolidated income
statement. The combined results of the discontinued operations included in the loss for the financial period are set out below.
31/12/2018
31/12/2018
31/12/2018
€’000
€’000
US$’000
31/12/2018
US$’000
Administration expenses (Note 5)
Other losses (Note 7)
Operating loss
Finance costs
Finance income
Loss before tax
Income tax
Loss after tax for the financial year from
discontinued operations
(94)
(580)
(674)
(2)
-
(676)
-
(676)
(141)
(5)
(146)
(2)
-
(148)
-
(148)
(111)
(670)
(781)
(2)
-
(783)
-
(783)
(159)
(6)
(165)
(3)
-
(168)
-
(168)
75
7. NOTES TO THE FINANCIAL STATEMENTS
Cash flows from discontinued operations
Operating activities
Net cash flows used in discontinued operations
31/12/2018
31/12/2018
31/12/2018
31/12/2018
€’000
2018
€
(24)
(24)
€’000
2017
(3)
(3)
US$’000
US$’000
2018
2017
(27)
(27)
€
(4)
(4)
The carrying amount of assets and liabilities in this disposal group are summarised as follows:
-------------------------------------Group------------------------------
2018
€’000
€
449
3
5
24
481
2017
€’000
2018
2017
US$’000
US$’000
€
512
1,451
5
7
27
551
5
5
4
1,465
986
4
4
3
997
Assets classified as held for resale:
Non-current assets:
Property, plant and equipment (Note 17)
Current assets:
Inventories (Note 20)
Trade and other receivables (Note 21)
Cash and cash equivalents (Note 22)
Assets classified as held for resale
Liabilities classified as held for resale:
Current liabilities:
Liabilities classified as held for resale
8
5
9
6
37
Subsequent events
Acquisition of Additional Interest in IVIX
The Company also had the right to acquire a further participation interest (shareholding) to be issued by IVIX for US$2.04
million which would increase its overall participation interest in the charter capital of IVIX by 9.9 per cent. On 27 March 2019
the Board of Ovoca approved the acquisition of this further participation interest in IVIX. Following the exercise of the option,
Ovoca now holds an approximately 59.84 per cent interest in the charter capital of IVIX.
38
Approval of the financial statements
These financial statements were approved by the Board of Directors 20 June 2019.
76
Annual
Report
2018