antonov automatic transmission
30 april 2008 antonov plc (de "Onderneming") Goedgekeurde resultaten voor het boekjaar eindigend op 31 december 2007 De Board van Antonov plc maakt haar goedgekeurde resultaten bekend voor het boekjaar eindigend op 31 december 2007. Hoofdpunten: · Totale omzet in licentie-inkomsten en technische dienstverlening gestegen tot £ 771.000 (2006: £ 11.000). · Operationeel verlies £ 3.935.000 (2006: £ 4.083.000), met inbegrip van een bedrag van £ 500.000 gerelateerd aan de sluitingskosten van de Franse bedrijfsactiviteiten en de investering in de nieuwe bedrijfsruimten in Warwick (Groot-Brittannië). · Nettoverlies £ 4.073.000 (2006: £ 3.396.000 zoals herzien). Het nettoverlies over 2006 van £ 3.396.000 werd ten gevolge van een eenmalige bate van £ 925.000 uit hoofde van financiële inkomsten positief beïnvloed. Dit was gerelateerd aan het wijzigen van de voorwaarden van de converteerbare obligatielening in 2006. · Investeringen in nieuwe technologie en commerciële producten zoals gewaardeerd in de ontwikkelingskosten zijn gestegen tot £ 2.259.000 (2006: £ 1.189.000). · Financieringsfaciliteiten ter hoogte van £ 12.613.000 beschikbaar op 31 december 2007, die samen met te genereren cash uit verwachte omzet het werkkapitaal vormen om de omzetgenererende activiteiten te ondersteunen. · Netto cashpositie per 31 december 2007 £ 98.000 (31 december 2006: £ 226.000). John Moore, Antonov's CEO, licht toe: "Ik ben zeer verheugd dat de grote veranderingen die wij in de laatste twee jaar hebben doorgevoerd hun vruchten afwerpen in de financiële resultaten met voor het eerst een aanzienlijke omzet. De hernieuwde commerciële focus heeft meer kansen gecreëerd en de consolidatie van onze activiteiten in de nieuwe faciliteit in Groot-Brittannië heeft ons in staat gesteld om het benodigde technische talent aan te trekken om de kracht van onze technologie te kapitaliseren terwijl de omzet zich verder blijft ontwikkelen." Kopieën van deze aankondiging zijn verkrijgbaar op het kantoor van Dawnay, Day Corporate Finance Limited op 17 Grosvenor Gardens, London, SW1W 0BD, Groot-Brittannië, een digitale versie is te verkrijgen via de website van de Onderneming op www.antonovat.com. Voor verdere informatie kunt u contact opnemen met: Jos Haag, Director, Antonov plc 06 51 561 767 Antonov Plc Chairman's Statement The steady transformation of the business has continued through the year and I am pleased to be able to say that all the major operational changes are complete. We now have a highly professional engineering team in an impressive facility which will stand scrutiny from experts in the automotive industry. The changes made over the last three years are also bearing fruit as evidenced by the company results as we have delivered strong growth in revenues which amount to £771k in 2007. These revenues are a combination of licence fees, engineering service fees and sales of product. This is a direct result of our much stronger commercial position created by the engineering work done over the past two years with the building of a professional engineering team. Although we have continued to incur losses, there has been a significant element of one-off costs related to setting up the new Warwick Technical Centre and closure of the Group's operations in France and The Netherlands, of £150k, £350k and £20k respectively. This compares to the French redundancy costs of £34k in the prior year The six speed programme is expected to deliver demonstration vehicles by May, in line with our plan. These will not be with Geely (as anticipated in the previous year), since the Board had to make the difficult decision in September 2007 that cooperation was hindering progress of the company rather than helping it. However, with Loncin, we believe we have a much stronger partner whose independence from car manufacturers opens up a much larger market for our transmission technology than would have been possible through Geely. Supercharger revenues were lower than anticipated. However, we now have strong industry interest in the application of the two speed unit to support engine auxiliary drives. With our new team we can now build on these opportunities and deliver a professional service to increase the success rate of our technology. At the same time, our focus on innovation has also continued with the filing of five new patent applications during the year. As we continue to increase our engagement with customers, we expect to identify new business problems and needs which will provide the opportunity for us to invent new solutions. Our previous CFO, Peter Logsdon, left the Board in July 2007 and the Board is grateful for the substantial contribution he made in the restructuring of the Company, especially in the field of finance. Mory Motabar, who joined the Board as a Non-Executive Director in April 2007, continues to act as Interim CFO as he steers the relocation of the Finance function through the move to the new location in Warwick. The Board expects to make a permanent appointment to the role of CFO following completion of the move to Warwick. The technical operation completed the move to the new Warwick Technical Centre in December 2007 and recruitment has continued. The new location has enabled us to gain access to a strong pool of talent and we now have a highly experienced and capable team of automotive industry professionals. The new building gives us a world class facility with space to accommodate future growth. The operation in Paris is now completely closed and we have no employees in France as of 31 March 2008. The high level of internal change in 2007 will be followed by a period of consolidation in 2008 but the commercial progress is expected to accelerate rapidly with the formation of the manufacturing joint venture with Loncin and the expansion of the dual speed product line. The business continues to have the confidence of its funding partners and has already entered into agreement for the funding required to implement these ambitious plans for the future. C.G.Ross Chairman Antonov Plc Antonov Plc Chief Executive Officer's report & Chief Financial Officer's review for the year ended 31 December 2007 2007 has been a year of significant internal change which has been managed without loss of focus on technical delivery and with significant commercial progress. I am very proud of the management team that has made this possible and the dedicated staff who have continued to work hard and effectively during this period of relocation and restructuring. As a result of this good work, we started 2008 with a strong team in a world class facility and with a higher level of commercial opportunities than the company has ever previously achieved. Production Programmes Six Speed Automatic Transmission Production development of the Antonov 6 speed automatic transmission continues on schedule. The first prototypes have been built and will be initially tested in the new test facility in the Warwick Technical Centre before being built into demonstrator vehicles. These will be used in Europe and China to demonstrate the transmission to prospective customers. The current design is aimed at mid-sized cars and will be suitable for gasoline/petrol engines of up to 2.5 litres and diesel engines of up to 2.0 litres. Initial discussions have been held with prospective customers in China and the next steps will be the availability of the demonstrator vehicles and the details of full product costing which are in preparation in close co-operation with Loncin Chong Qing General Purpose Engine Co. Ltd ("Loncin"). Loncin is a leading Chinese manufacturer of high specification motor-cycles, small engines and a range of automotive components. Start of production is scheduled for mid 2010 with initial planned production capacity of 200,000 units per annum. However, the current high level of interest from Chinese automotive manufacturers indicates that the plan will need to allow for growth in this capacity to above 200,000 units per annum, which is now being taken into account within the planned production facility. Joint venture negotiations with Loncin are expected to be completed in the second half of 2008 to set up a manufacturing plant in Chong Qing, PRC. Dual Speed Supercharger Many car manufacturers are seeking routes to downsize their car engines. Turbo-charging offers greater power but has limitations in generating the low speed torque needed to match the feel of a larger engine. Supercharging can offer this but loses efficiency due to the difficulty to match the supercharger to the vehicle. Antonov's unique two speed module offers a highly efficient low cost solution. Initial low volume application to vehicles such as the Hummer H3 has proven that the Antonov solution gives a great drive with no adverse fuel economy results. Aftermarket supercharger sales have been growing steadily. The decision by Hummer France to select the Antonov dual speed system as a dealer option was a significant step forward. However, it has become clear that expansion of the market for the complete supercharger will require investment in additional vehicle kits. In order to speed up access to market and reduce the entry barriers, a new product has therefore been developed which is a stand alone dual speed pulley. This can be applied to any supercharger system and does not require Antonov to invest in vehicle kits. This product is now on sale and will also enable us to provide vehicle makers with a trial unit for engine auxiliary drive systems for evaluation purposes. Developing the market in the high volume sector is progressing well through Emporio which is expected to provide access to the important German auto industry with the goal of facilitating the drive to down-sized engines by providing a supercharging solution that provides high torque at low engine speeds. Dual Speed Accessory and Alternator Drives The work to commercialise the Antonov dual speed accessory drive has progressed more slowly than anticipated but with the much stronger technical capability we are now starting to accelerate interest. A number of opportunities for initial engineering projects are being pursued and these are expected to lead to licensing opportunities. Low Cost Four Speed Automatic The renewed interest in the Antonov 4 speed automatic system is expected to result in engineering projects during 2008. These will be client confidential projects and as such will not be announced to shareholders, but we will report progress as far as constraints of confidentiality allow. The good news for shareholders is that the previous investments made in development of transmissions with Honda, GM and others is now being put to good use through identifying the appropriate target market for the technology. People and Structure Following the move to the new Warwick Technical Centre, we now have a team of 26 staff, a mix of permanent and contract staff, and will continue to grow the capability as required to meet the demands of client funded commercial programmes. It is notable that the level of experience in the new senior engineering team is much greater now. The average age of the principal engineers in Paris was 31 as compared with 49 in the new team which has a higher level of experience in delivering commercial projects as opposed to merely performing generic development work. The new building has a total space area of over 2000 square metres, which provides us with the flexibility required for future planning. The investment over the last year has elevated our design and analysis capabilities to the industry's highest standards in addition to helping us to create a highly professional test capability. As a result, we are now able to meet all of our design and analysis needs in house. We can also undertake the majority of test work although we will continue to outsource the prototype manufacturing and certain specialist test requirements. The Paris facility is now completely closed and there are no remaining employees in France. The Thetford office will close by the middle of 2008 and the office in Rotterdam is now closed. However, the Rotterdam office lease will expire in March 2009 and on the basis that we do not expect to be able to exit the lease before the expiry date, full provision has been made for the remaining lease costs, which will not exceed £15k. The consolidation of all European operations in one location will help us save overheads but will also improve the efficiency of the operation, allowing everyone to be clearly focused on moving the business forward. We have initiated the setting up of a Wholly Owned Foreign Enterprise (WOFE) in Chong Qing, PRC, which will form the basis for the Loncin joint venture management. It is currently planned to comprise a permanent staff of four employees. All operational work will be referred back to the UK. Financial Group revenues for 2007 increased to £771k from £11k for the full year 2006. Revenues comprise engineering services fees from Geely and Loncin, as well as license fees from Emporio distribution agreement in Germany and receipts from sale of products, which demonstrates the success of our commercialisation strategy and our efforts to broaden our business model. The operating loss before financial expense and tax for 2007 of £3,935k was lower than the operating loss of £4,083k for 2006. Positive impact of higher revenues, as compared with 2006 revenues, was partly offset by additional one-time operational costs related to the closure of the company's operations in France and the setting up of the newly established consolidated operational facility in Warwick (UK). This has already resulted in a more efficient operation which will contribute towards our efforts to manage our operating expenses in future periods. The loss for the year (after financial expense of £29k and tax charge of £109k) was £4,073k. This compares with a loss of £3,396k (restated) in 2006 which reflects a one-off benefit of £925k (restated) relating to the financial income arising on the amendment to the terms of the Group's convertible loan notes. Investment in new technology and development of new products as capitalised within development costs increased to £2,259k in 2007, as compared with an investment of £1,189k in 2006. The company had a total funding facility of £12,613k in place at the end of December 2007, with no obligations related to external loans or borrowings. The funding facility will be used to support our commercialisation strategy, instead of development activities which has been the case historically. This will enable us to generate more revenues, enabling us to reduce our dependency on external funding. Antonov Plc Report of the directors for the year ended 31 December 2007 The directors present their report together with the audited financial statements for the year ended 31 December 2007. Results and dividends The Consolidated Income Statement is set out on page 13 and shows the loss for the year. Principal activities and review of the business The Group is engaged in the development and commercialisation of a range of transmission products for both automotive and non-automotive applications. The operating results and future prospects are discussed in the Chief Executive Officer's Report & Chief Financial Officer's Review on pages 4 to 5. No dividends (2006: £nil) are proposed and the loss of £4,073k (2006: £3,396k (restated)) has been transferred to reserves. The Group's key financial and other performance indicators during the year were as follows: 2007 2006 (restated) £'000 £'000 Group revenue 771 11 Group loss before tax (3,964) (3,158) Loss per share (pence) (8.5)P (9.5)P Cash and short term deposits 98 226 Shareholders' funds 4,213 1,985 Further details of the business review are contained in the Chief Executive Officer's Review. Capital management The primary objective of the Group's capital management is to ensure an appropriate level of liquid resources are available to fund the daily operations of the business. This has been achieved by a combination of funds received from drawdowns under the financing facilities as well as revenue received from customers. At 31 December 2007 the unutilised financing facility available amounts to £12,623k and total available cash balance was £98k. Principal risks and uncertainties · Foreign currency risk The majority of the Group's revenues are denominated in Euros while its costs are principally denominated in sterling. As a result, the Group is subject to the risks of foreign currency movements. The Group does not operate any type of hedging program to mitigate this risk. · Market risk Larger automotive-related companies are better placed and better resourced than the Group. It is possible that other companies may have competitive products in development, which are not known to the Group. Competitors may be able to develop more effective technologies which may be superior to those of the Group. o Technological Risk The Group is exposed to future changes in technology which may make the market for products based on its particular designs less effective. · Patent Protection The continuing ability to establish, protect and enforce our proprietary rights is fundamental to the Group. This is principally achieved through the process of patent application and establishing patent protection. However, should these applications or granted patents be challenged, then the defence of our rights could incur costs and the outcome cannot be predicted with certainty · Commercialisation The Group's commercial progress depends upon its ability to establish and maintain successful relationships with appropriate licensees and other third parties to exploit successfully the Antonov technologies through development, manufacturing and distribution agreements. Going concern The directors are of the opinion that the working capital now available to the Group is sufficient for its foreseeable requirements and that, together with the generation of new revenue streams in 2008, they consider that it is appropriate for the accounts to be prepared on a going concern basis. Post balance sheet events Post balance sheet events are set out in note 32 to the financial statements. Directors The directors that held office during the year were: R Antonov (resigned 2 April 2007) D A Bovell (resigned 2 April 2007) J E Haag P N L Logsdon (resigned 24 July 2007) J W Moore C G Ross M Motabar (appointed 26 April 2007) Beneficial interests The directors of the company during the year and their beneficial interests (unless otherwise stated) in the ordinary share capital of the parent company, options to purchase such shares under the Senior Executive Savings Related Share Option Scheme, and interests arising from the long term incentive scheme, were as follows: Options and similar interests Shares 31 December 31 December 31 December 31 December 2007 2006 2007 2006 R Antonov 75,000 250,571 2,956,704 2,956,704 D A Bovell 100,000 100,000 438,936 438,936 J E Haag 510,000 100,000 - - J W Moore 568,334 133,334 - - C G Ross 510,000 125,000 59,700 59,700 M Motabar 300,000 - - - Major interests The directors are aware of the following interests that represent three percent or more of the issued share capital of the company at 31 March 2008: Shareholder Number of Percentage ordinary of ordinary shares shares Euroclear 38,093,431 63.8% Quivest 11,635,560 19.5% HSBC Global Custody Nominee Ltd 3,705,047 6.2% Antonov SARL 2,956,704 5.0% Research and development The Group continues to invest in research and development. This has resulted in improvements in current intellectual property and new ideas being developed which will benefit the Group going forward. Certain costs in relation to the supercharger and TX6 automatic gearbox projects totalling £2,259k have been capitalised in the balance sheet and the remainder has been written off as incurred through the Income Statement. Disabled employees The Group gives full consideration to applications for employment from disabled persons where the candidate's particular aptitudes and abilities are consistent with adequately meeting the requirements of the job. Directors' indemnity insurance The Group has granted an indemnity to one or more of its directors against liability in respect of proceedings bought by third parties, subject to the conditions set out in the Companies Act 1985. Such qualifying third party indemnity provision remains in force as at the date of approving the directors' report. Financial instruments Details of the use of financial instruments by the company are contained in notes 21 and 22 and its subsidiary undertakings are contained in note 11 to the financial statements. Policy on the payment of creditors The Group and the company's policy is that payments to suppliers are made in accordance with those terms and conditions agreed between the Group and its suppliers, provided that all trading terms and conditions have been complied with. The number of average days purchases of the company represented by trade creditors at 31 December 2007 was: 48 days (2006: 23 days), Group: 81 days (2006: 49 days). Directors' statement as to disclosure of information to auditors The directors who were members of the board at the time of approving the directors' report are listed on page 7. Having made enquiries of the directors and of the company's auditors, each of the directors confirms that: · to the best of each director's knowledge and belief, there is no information relevant to the preparation of their report of which the Group's auditors are unaware; and · each director has taken all the steps a director might reasonably be expected to have taken to be aware of relevant audit information and to establish that the Group's auditors are aware of that information. Auditors A resolution to reappoint Ernst & Young LLP as the company's auditors will be put to the forthcoming Annual General Meeting. By order of the Board S Alexander Company Secretary Antonov Plc Statement of directors' responsibilities The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the company, for safeguarding the assets, for taking reasonable steps for the prevention and detection of fraud and other irregularities and for the preparation of financial statements which comply with the requirements of the Companies Act 1985. The directors are responsible for preparing the annual report and the financial statements. The directors are required to prepare financial statements for the Group in accordance with International Financial Reporting Standards as adopted by the European Union. Group financial statements Company law requires directors to prepare such financial statements in accordance with IFRS's, the Companies Act and Article 4 of the IAS regulation. This requires the faithful representation of the effects of the transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board's "Framework for the preparation and presentation of financial statements'. In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable International Financial Reporting Standards. A fair presentation also requires the directors to: · properly select and apply appropriate accounting policies in accordance with IAS 8; · present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; and · provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance. · International Accounting Standard 1 requires that financial statements present fairly for each financial year the company's financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board. The directors are required to state that the Group has complied with IFRSs, subject to any material departures disclosed and explained in the financial statements. The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and to enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Antonov Plc Independent auditors' report to the members of Antonov Plc We have audited the Group financial statements of Antonov Plc for the year ended 31 December 2007 which comprise the Consolidated Income Statement, the Consolidated Statement of Changes in Equity, the Consolidated Balance Sheet, the Consolidated Cash Flow Statement and the related notes 1 to 32. These Group financial statements have been prepared under the accounting policies set out therein. We have reported separately on the parent company financial statements of Antonov Plc for the year ended 31 December 2007. This report is made solely to the company's members, as a body, in accordance with Section 235 of the Companies Act 1985. 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 auditors' 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. Respective responsibilities of directors and auditors The directors are responsible for preparing the Annual Report and the Group financial statements in accordance with applicable United Kingdom law and International Financial Reporting Standards (IFRSs) as adopted by the European Union as set out in the Statement of Directors' Responsibilities. Our responsibility is to audit the Group financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the Group financial statements give a true and fair view and whether the Group financial statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation. We also report to you whether in our opinion the Directors' Report is not consistent with the Group financial statements. In addition we report to you if, in our opinion, we have not received all the information and explanations we require for our audit, or if the information specified by law regarding director's remuneration and other transactions is not disclosed. We read other information contained in the Annual Report and consider whether it is consistent with the audited Group financial statements. The other information comprises only the Financial Highlights, Chairman's Statement, Chief Executive Officer's Report and Chief Financial Officer's Review. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the Group financial statements. Our responsibilities do not extend to any other information. Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the Group financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the Group financial statements, and of whether the accounting policies are appropriate to the Group's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Group financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the Group financial statements. Opinion In our opinion: · the Group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the Group's affairs as at 31 December 2007 and of its loss for the year then ended; · the Group financial statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation; and · the information given in the Directors' Report is consistent with the Group financial statements. Ernst & Young LLP Registered Auditor Manchester Antonov Plc Consolidated income statement for the year ended 31 December 2007 Restated * Note 2007 2006 £'000 £'000 Revenue 7 771 11 Cost of sales (26) - _______ _______ Gross profit 745 11 Operating expenses (4,680) (4,094) _______ _______ Loss from operations 8 (3,935) (4,083) Finance (expense)/income 11 (29) 925 ________ ________ Loss before tax (3,964) (3,158) Taxation 12 (109) (238) _______ _______ Loss for the year 26 (4,073) (3,396) _______ _______ Loss per share - Basic and diluted 13 (8.5p) (9.5p) (pence) _______ _______ The notes on pages 18 to 43 form part of these financial statements. * restated for correction of share issue costs (see note 2). Antonov Plc Consolidated statement of changes in equity for the year ended 31 December 2007 Share Restated Capital Foreign Warrant Restated* Restated Capita *Share Redemptio Exchang Reserve Retained * l Premium n Reserve e Losses Total Reserve Equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 01 January 2006 6,163 20,467 2,587 (85) - (31,688) (2,556) Adjustment to foreign - - - 47 - - 47 exchange Net income recognised directly - - - 47 - - 47 in equity Loss for the year as restated - - - - - (3,396) (3,396) Total recognised income and - - - 47 - (3,396) (3,349) expense for the year as restated Increase in share capital 2,565 5,162 - - - - 7,727 Share issue costs as - (269) - - - - (269) restated Movement on exchange of - - - - 361 - 361 warrants Share based payment - - - - - 71 71 Balance at 31 December 8,728 25,360 2,587 (38) 361 (35,013) 1,985 2006 as restated Adjustment to foreign - - - 114 - - 114 exchange Net income recognised directly - - - 114 - - 114 in equity Loss for the year - - - - - (4,073) (4,073) Total recognised income and - - - 114 - (4,073) (3,959) expense for the year Increase in share capital 1,858 4,582 - - - - 6,440 Share issue costs - (484) - - - - (484) Movement on exchange of - - - - 9 - 9 warrants Share based payment - - - - - 222 222 Balance at 31 December 10,586 29,458 2,587 76 370 (38,864) 4,213 2007 All amounts are attributable to equity holders of the parent. The notes on pages 18 to 43 form part of these financial statements. * restated for correction of share issue costs (see note 2). Antonov Plc Consolidated balance sheet at 31 December 2007 Restated * Note 2007 2006 £'000 £'000 ASSETS Non-current assets Property, plant and equipment (PPE) 14 509 370 Intangible assets 15 4,524 2,212 Total non-current assets 5,033 2,582 Current assets Inventories 17 35 - Trade and other receivables 18 1,424 434 Cash and short term deposits 98 226 Total current assets 1,557 660 Total assets 6,590 3,242 LIABILITIES AND EQUITY Current liabilities Trade and other payables 19 2,377 1,248 Total current liabilities 2,377 1,248 Non-current liabilities Other creditors Euro warrants 20 - 9 Total non-current liabilities - 9 Total liabilities 2,377 1,257 Equity attributable to equity holders of the parent company Share capital 25 10,586 8,728 Share premium reserve 26 29,458 25,360 Capital redemption reserve 26 2,587 2,587 Foreign exchange reserve 26 76 (38) Warrant reserve 26 370 361 Retained losses 26 (38,864) (35,013) Total equity 4,213 1,985 Total liabilities and equity 6,590 3,242 * restated for correction of share issue costs (see note 2). The financial statements on pages 13 to 43 were approved by the Board of Directors and authorised for issue on 29 April 2008 and were signed on its behalf by: J W Moore M Motabar Director Director The notes on pages 18 to 43 form part of these financial statements. Antonov Plc Consolidated cash flow statement for the year ended 31 December 2007 Restated * Restated * 2007 2007 2006 2006 £'000 £'000 £'000 £'000 Operating activities Loss before tax (3,964) (3,158) Adjustments for: Depreciation 110 130 Amortisation 43 81 Accelerated amortisation of intangible - 384 assets Loss on disposal of tangible assets 60 15 Share based payments - stock options 222 71 Share based payments - Non cash 19 298 payments _______ ______ 454 979 Adjustments for non cash movements: Financial liabilities convertible debt - (740) Exchange movements 33 - Euro warrants - (185) Other 29 - _ ______ _______ 62 (925) _______ _______ Cash flow from operations before (3,448) (3,104) changes in working capital and provisions (Increase)/Decrease in trade and other (536) 254 receivables (Increase)/Decrease in inventories (35) 116 Increase/(Decrease) in trade and other 1,535 (88) payables _______ _______ 964 282 _______ _______ Cash outflow from operating activities (2,484) (2,822) carried forward * restated for correction of share issue costs (see note 2). Consolidated cash flow statement for the year ended 31 December 2007 (continued) Restated * Restated * 2007 2007 2006 2006 £'000 £'000 £'000 £'000 Cash outflows from operating activities brought forward (2,484) (2,822) Investing activities Payments to acquire PPE (417) (251) Proceeds on sale of PPE 123 - Payments to acquire intangible assets (41) (90) Capitalisation of development costs (2,259) (1,189) (2,594) (1,530) Financing activities Proceeds from issue of ordinary 4,950 1,837 shares Issue of convertible debt - 2,471 _______ _______ 4,950 4,308 _______ _______ (Decrease) in cash (128) (44) Cash and cash equivalents at the beginning of the period 226 270 Cash and cash equivalents at the _______ _______ end of the period 98 226 _______ _______ The notes on pages 18 to 43 form part of these financial statements. * restated for correction of share issue costs (see note 2). Antonov Plc Notes forming part of the financial statements for the year ended 31 December 2007 1 Corporate Information Antonov plc is a public limited liability company incorporated in the United Kingdom under the Companies Act 1985. The address of the registered office is 2 Hawkes Drive, Heathcote Industrial Estate, Warwick, Warwickshire, CV34 6LX. Antonov's shares are publicly traded on AIM (The Alternative Investment Market of the London Stock Exchange) with a secondary listing on Euronext Amsterdam. 2 Basis of preparation and statement of compliance The accounting policies which follow set out those policies which apply in preparing the financial statements for the year ended 31 December 2007. These Group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union as they apply to the financial statements of the Group for the year ended 31 December 2007. The parent Company financial statements of Antonov plc have been prepared in accordance with UK GAAP. The consolidated financial statements have been prepared under the historical cost convention, unless otherwise stated below, and are presented in Sterling. Going concern The accounts have been prepared on a going concern basis which assumes that the Group will continue in operational existence for the foreseeable future. At 31 December 2007, the Group had cash of £98k (2006: £226k) and an undrawn committed borrowing facility in respect of convertible loan notes of 2,100k, approximately £1,510k (2006: £2,000k) and 15,100k, approximately £11,103k from a committed share finance facility agreement (2006: £4,200k). Since 31 December 2007 the Group has received £288k from ordinary share warrants that have been exercised and £1,360k from the share finance facility agreement. The directors are of the opinion that the working capital now available to the Group is sufficient for its foreseeable requirements. The directors therefore consider that it is appropriate for the accounts to be prepared on a going concern basis. Prior year adjustment In preparing the financial statements for the current year the Group identified £269k of share issue costs that had been charged to the income statement in the prior year as opposed to being charged to the share premium account. This has resulted in a prior year adjustment for the Group. The finance income in the prior year has increased by £269k and consequently the loss for the prior year has decreased by £269k. There is no impact on total equity. 3 Basis of consolidation Where the company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial statements present the results of the company and its subsidiaries ("the Group") as if they formed a single entity. Inter company transactions and balances between Group companies are therefore eliminated in full. he financial statements of subsidiaries are prepared for the same reporting year as the T parent company using consistent accounting policies. 4 Significant accounting estimates The key source of estimation uncertainty that has a significant risk of causing material adjustment to the carrying amounts of liabilities within the next financial year is the estimation of share-based payment costs. The estimation of share-based payment costs requires the selection of an appropriate valuation model, consideration as to the inputs necessary for the valuation model chosen and the estimation of the number of awards that will ultimately vest and the continuing participation of employees (see note 28). 5 Accounting policies he accounting policies adopted are consistent with those of the previous financial year T except as follows: The Group has adopted the following new and amended IFRS and IFRIC interpretations during the year.Adoption of these revised standards and interpretations did not have any effect on the financial performance or position of the Group in the current or prior periods. In certain cases, they did however give rise to additional disclosures. · IFRS 7 Financial Instruments: Disclosures · IAS 1 Amendment Presentation of Financial Statements: Capital Disclosures · IFRIC 8 Scope of IFRS 2 · IFRIC 9 Reassessment of Embedded Derivatives · IFRIC 10 Interim Financial Reporting and Impairment The principal effects of these changes are as follows: IAS 1 Presentation of Financial Statements This amendment requires the Group to make new disclosures to enable users of the financial statements to evaluate the Group's objectives, policies and processes for managing capital. These new disclosures are shown in the capital management section of the Operating and Financial Review. Revenue Revenue represents amounts receivable for goods and services provided in the normal course of business, net of trade discounts, VAT and other sales related taxes. Amounts receivable consist of royalties, licence fees, professional services and support and maintenance payments. Revenue is recognised for any element of a sale when all of the basic criteria are met for that element. These are given below. Licence Fees and Royalties revenue is recognised when persuasive evidence for the arrangement exists, delivery has occurred, fees are fixed or determinable, non refundable and require no further commitments with the collection being probable. rofessional Services invoiced in line with customer contracts and recognised P on the basis of work performed using the stage of completion method and based on achievement of key milestones defined in the project. Product Sales revenue is recognised when the significant risks and rewards of ownership of the products have passed to the buyer, usually on despatch. evenue is also accrued on the above elements when revenue can be recognised R but has not been invoiced. evenue is deferred on the above elements when it has not been recognised but R the invoice has been raised. evenue relating to contracts with multiple elements is allocated based on the fair R value of each element and is recognised in accordance with the accounting principles for each element described above. Foreign currencies Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which it operates (the "functional currency") are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rate ruling at the balance sheet date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are similarly recognised immediately in the income statement. On consolidation, the results of overseas operations are translated into sterling at rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at the rate ruling at the balance sheet date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised directly in a separate component of equity (the "foreign exchange reserve"). Exchange differences on foreign currency borrowings, to the extent that they are used to finance or provide a hedge against foreign equity investments, are also taken to equity. On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the income statement as part of the profit or loss on disposal. The functional currency and the presentational currency of the Group is sterling Intangible Assets The significant intangibles recognised by the Group, their useful economic lives and the methods used to determine the cost of intangibles acquired in a business combination are as follows: Useful economic life Amortisation method Patent and trademark applications 20 years Straight line basis Software 3 years Straight line basis Development costs 5 years Straight line basis Patents and trademarks Patent and trademark costs, which are included in intangible assets, are stated at cost, reduced by a provision for amortisation over the period of their expected useful lives of 20 years. The directors review the carrying value of all such assets for impairment when events or changes in circumstances indicate that the carrying value may be impaired. Research and development expenditure Expenditure on research and development activities that does not meet the criteria as stated below, is recognised as an expense in the Income Statement in the period in which it is incurred. Development costs are capitalised if it can be demonstrated that: · it is technically feasible to develop the product for it to be sold; · adequate resources are available to complete the development; · there is an intention to complete and sell the product; · the Group is able to sell the product; · sale of the product will generate future economic benefits; and · expenditure on the project can be measured reliably. Capitalised development costs are amortised over the periods the Group expects to benefit from selling the products developed. The carrying value of capitalised development expenditure is reviewed for impairment annually before being brought into use. Property, plant and equipment Property, plant, and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Depreciation is provided on all other items of property, plant and equipment to write off the cost, less estimated residual value, based on prices prevailing at the balance sheet date, evenly over their expected useful economic lives as follows:- Useful economic life Amortisation method Motor vehicles 3 years Straight line basis Equipment 3 years Straight line basis Leasehold property 5 years Straight line basis improvements Impairment of assets The carrying value of property, plant and equipment and intangible assets are reviewed for impairment if events or changes in circumstances indicate the carrying value is not recoverable. An impairment loss is recognised for the amount by which the asset's carrying value exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. Income tax The tax expense represents the sum of the tax currently payable and deferred tax, together with research and development tax credits received. Income tax is charged to equity or credited directly to equity if it relates to items that are credited or charged to equity. Otherwise income tax is recognised in the income statement. Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates and laws that are enacted or substantially enacted by the balance sheet date. Deferred taxation Deferred tax assets and liabilities are recognised on all temporary differences arising between the carrying amount of an asset or liability in the balance sheet differs to its tax base, except for differences arising on: · the initial recognition of goodwill; · the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and · investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future. A deductible temporary difference arises on share-based payments calculated as the difference between the tax base of the remuneration expense (being the option's intrinsic value at its future exercise date) and its carrying value of nil on the balance sheet. This gives rise to a deferred tax asset. As the tax deduction is based on the unknown future share price at the date of exercise, the tax base is estimated on the basis of the entity's share price at each balance sheet date. Where this amount exceeds the cumulative amount of the remuneration expense on equity-settled transactions recognised in the income statement and credited to equity, the excess deferred tax is recognised in equity in accordance with the principle that the tax follows the item. The deferred tax effects of cash settled transactions are always recognised in the income statement. Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised. The amount of the asset or liability is determined using tax rates that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered). Deferred tax balances are not discounted. Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either the same taxable Group company; or different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered. Inventories Inventories are stated at the lower of cost and net realisable value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Net realisable value is based on estimated selling price less any further costs expected to be incurred to completion and disposal. Trade receivables Trade receivables are measured at initial recognition at fair value and are subsequently measured at amortised cost using the effective interest rate method where the true value of money is material. Appropriate allowances for estimating irrecoverable amounts are recognised in the Income Statement when there is evidence that the asset is impaired. This impairment would be recognised within administrative expenses. Cash and cash equivalents Cash and short term deposits in the balance sheet comprise of cash on hand and demand deposits, and other short term highly liquid investments that are readily convertible into known amounts of cash and are subject to an insignificant risk of changes in value. For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts Share-based payments equity settled transactions Where share options are awarded to employees, the cost is measured by reference to the fair value of the options at the date of grant and is charged to the income statement over the vesting period. Fair value is determined by an external valuer using an appropriate pricing model. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition. Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the income statement over the remaining vesting period. No reduction is recognised if the fair value decreases. Where an equity settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any cost not yet recognised in the income statement for the award is expensed immediately. Where equity instruments are granted to persons other than employees, the income statement is charged with the fair value of goods and services received. Retirement benefit costs The Group does not have a pension scheme for employees. However, the Group pays a contribution into personal pension schemes for certain employees on a salary-sacrifice basis. Leased assets Where substantially all of the risks and rewards incidental to ownership are retained by the lessor (an "operating lease"), the total rentals payable under the lease are charged to the income statement on a straight-line basis over the lease term. Financial assets Loans and receivables. These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers (trade debtors), but also incorporate other types of contractual monetary asset. They are carried at amortised cost using the effective interest method if the time value of money is significant less any provision for impairment. Equity instruments Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. The carrying amount of the equity component is not re-measured in subsequent years. Financial liabilities Trade payables: Trade payables are initially measured at fair value, and are subsequently measured at amortised cost Warrants: Where warrants are denominated in the functional currency of the parent entity, sterling, with a fixed price, they are treated as equity. Where instruments are denominated in a currency other than the functional currency of the entity, they are considered to have a variable price and as such are recorded as a liability at fair value, with any movements on subsequent measurement through the income statement. The warrants have been valued using an option pricing model. The model takes into account the risk free interest rate for the life of the option, the exercise price of the option, the current price of the underlying shares, the life of the option, the expected volatility of the option and any market based vesting conditions. Other financial liabilities: These include trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently re-measured at amortised cost using the effective interest method. 6 New standards and interpretations not applied During the year, IASB and IFRIC have issued the following standards and interpretations with an effective date after the date of these financial statements: Effective International Accounting Standards (IAS/IFRSs) Date Amendment to IFRS 2 Vesting 1 January IFRS 2 conditions and cancellations 2009 Business combinations (revised January IFRS 3 1 July 2009 2008) 1 January IFRS 8 Operating segments 2009 Presentation of Financial Statements 1 January IAS 1 (Revised September 2007) 2009 1 January IAS 23 Borrowing Costs (Revised March 2007) 2009 IAS 27 Consolidated and separate financial statements 1 July 2009 (revised January 2008) . International Financial Reporting Interpretations Committee Effective (IFRIC) Date IFRIC 1January Service Concession Arrangements 12 2008 IFRIC Customer Loyalty Programmes 1 July 2008 13 IAS 19 The Limit on a Defined Benefit Asset, IFRIC 1 January Minimum Funding Requirements and their 14 2008 Interaction The Group has not yet completed a detailed evaluation of the impact of the above standards and interpretations on its financial position but does not currently expect the adoption of these to have impact on its current financial condition. 7 Revenue 2007 2006 £'000 £'000 Revenue arises from: Professional services - design and development 398 11 Product sales 35 - License fees and royalties 338 - _______ _______ 771 11 _______ _______ 8 Loss from operations 2007 2006 £'000 £'000 This is stated after charging: Depreciation of property, plant and equipment 110 130 Loss on disposal of property, plant and equipment 60 15 Amortisation of intangible fixed assets 43 465 Foreign exchange differences 31 3 Operating lease expense: Property 107 187 Auditors remuneration: Audit of the financial statements * 52 42 Local statutory audits for subsidiaries 3 24 Fees paid to the company's auditors for non-audit services: Fees in respect of prospectus for working capital review 25 15 *£11k (2006: £10k) of this relates to the company _______ _______ 9 Staff costs 2007 2006 £'000 £'000 Staff costs (including directors) comprise: Wages and salaries 1,352 1,312 Share-based payment expense * 289 242 Social security costs 242 252 Pension costs 75 126 _______ _______ 1,958 1,932 _______ _______ * The share-based payment expense comprises the following:- 2007 2006 £'000 £'000 Payments settled by grant of stock options (note 28) 222 71 Payments settled by issue of shares 67 171 289 242 The average number of employees (including directors) during the year, analysed by category, was as follows: 2007 2006 Number Number Administration 13 8 Research and development 21 16 34 24 The emoluments of the individual directors were as follows: 2007: Director Basic Bonu Compen Benefits Total Social Pension salar s sation in kind charges contributions y and for loss and other fees of office insurances £'000 £'000 £'000 £'000 £'000 £'000 £'000 R Antonov 22 - - - 22 3 3 D A Bovell 6 - - - 6 1 - J E Haag 48 - - - 48 - - P N L Logsdon 69 20 38 - 127 22 - J W Moore 114 42 - 6 162 19 11 C G Ross 48 - - - 48 - - M Motabar 128 - - - 128 - - 435 62 38 6 541 45 14 J W Moore's remuneration as stated above includes £45k to be paid in shares of Antonov plc (bonus: £40k, salary: £5k). M Motabar's remuneration as stated above includes £22k to be paid in shares of Antonov plc. There have been no options exercised during the year. The Group paid into a personal pension scheme for J W Moore and paid into a statutory government scheme for R Antonov and French employees during the year. 2006: Director Basic Bonu Benefit Total Social Pension salary s s in charges and contribution and kind other s fees insurances £'000 £'000 £'000 £'000 £'000 £'000 R Antonov 99 - 5 104 13 13 D A Bovell 71 30 - 101 13 - J E Haag 48 - - 48 - - P N L Logsdon 67 20 - 87 - - J W Moore 84 40 6 130 16 23 C G Ross 30 30 - 60 - - 399 120 11 530 42 36 D A Bovell received 165,449 shares in the company in part-payment of his salary and bonus. The fair value of these shares was £89,000. C G Ross received 59,700 shares in part-payment of his fees and bonus. The fair vale of these shares was £40,000. 10 Segment information The Group's primary reporting format for reporting segment information is business segments. The Group has one business segment which is the development and commercialisation of Antonov Automotive Transmissions. Therefore, all revenue, assets and liabilities and all other assets and liabilities and all other costs relate to this one business segment in both 2007 and 2006. The Group's secondary reporting format for reporting segment information is geographic segments. External revenue Total assets Capital expenditure by location of by location of assets by location of assets customers 2007 2006 2007 2006 2007 2006 £'000 £'000 £'000 £'000 £'000 £'000 China 398 - - - - - France 31 11 69 502 - 79 Netherlands - - 704 2,316 - 146 UK 2 - 5,817 424 2,798 1,305 Luxembourg 340 - - - - - _______ _______ _______ _______ _______ _______ 771 11 6,590 3,242 2,798 1,530 _______ _______ _______ _______ _______ _______ 11 Finance (expense)/income Restated * 2007 2006 £'000 £'000 Convertible debt - 740 Euro warrants - 185 Other (29) - _______ _______ (29) 925 _______ _______ * restated for correction of share issue costs (see note 2). 12 Tax on loss from operations 2007 2006 £'000 £'000 Current tax Foreign tax charge / (credit) 109 (38) Adjustment for prior periods - 276 _______ _______ 109 238 Deferred tax Origination and reversal of temporary differences - - _______ _______ - - _______ _______ Total tax charge/(credit) 109 238 _______ _______ The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the UK applied to losses for the year are as follows: Restated * 2007 2006 £'000 £'000 Loss before tax (3,964) (3,158) _______ _______ Expected tax credit based on the standard rate of corporation tax in the UK of 30% (2006 - 30%) (1,189) (947) Expenses not deductible for tax purposes 167 (736) Tax losses not recognisable 1,071 1,630 Adjustment for prior periods - 276 Other adjustments 60 15 _______ _______ Total tax charge/(credit) 109 238 _______ _______ * restated for correction of share issue costs (see note 2). The adjustment for prior periods in 2006 is the result of a reassessment of tax to be reclaimed on research and development activities undertaken by a subsidiary undertaking. The computations containing these claims are still available for review by the local tax authorities. 13 Loss per share Restated * 2007 2006 Basic and diluted loss per share (8.5p) (9.5p) £'000 £'000 Numerator Loss for the year (4,073) (3,396) Loss used in basic EPS and diluted EPS (4,073) (3,396) Denominator Number of Number of shares Shares Weighted average number of shares used in basic and diluted 47,681,072 35,836,277 EPS Contingently issuable shares Number of shares Share options 2,315,647 Warrants 8,374,242 Total contingently issuable shares 10,689,889 * restated for correction of share issue costs (see note 2). All the contingently issuable shares (see note 25 for full details) have been excluded in the calculation of the weighted average number of shares for diluted EPS as they are anti-dilutive for the periods presented. The significant ordinary shares issued after the year end are detailed below: There have been 9,413,671 shares issued after the year end in relation to: Number of Shares Exercise of warrants 841,640 Issued under the terms of share finance facility agreement 7,129,723 Settlement of creditor 1,442,308 9,413,671 14 Property, plant and equipment Equipment Motor Leasehold Total vehicles property improvements £'000 £'000 £'000 £'000 At 31 December 2006 Cost 607 208 - 815 Accumulated depreciation (325) (120) - (445) Net book value 282 88 - 370 At 31 December 2007 Cost 401 219 148 768 Accumulated depreciation (120) (139) - (259) Net book value 281 80 148 509 Year ended 31 December 2006 Opening net book value 215 43 - 258 Additions 170 81 - 251 Disposals (12) (2) - (14) Depreciation (95) (35) - (130) Exchange differences 4 1 - 5 Closing net book value 282 88 - 370 Year ended 31 December 2007 Opening net book value 282 88 - 370 Additions 258 11 148 417 Disposals (183) - - (183) Depreciation (91) (19) - (110) Exchange differences 15 - - 15 Closing net book value 281 80 148 509 At 31 December 2007 the Group had £305k (2006: £nil) in respect of contractual commitments for tangible fixed assets. 15 Intangible assets Development Software Patent and Total costs trademark application costs £'000 £'000 £'000 £'000 At 31 December 2006 Cost 1,604 123 2,918 4,645 Accumulated amortisation - (109) (2,324) (2,433) Net book value 1,604 14 594 2,212 At 31 December 2007 Cost 3,863 14 3,156 7,033 Accumulated amortisation - (14) (2,495) (2,509) Net book value 3,863 - 661 4,524 Year ended 31 December 2006 Opening net book value 415 21 944 1,380 Additions - Internally developed 1,189 - - 1,189 - Externally acquired - - 90 90 Amortisation - (7) (458) (465) Exchange differences - - 18 18 Closing net book value 1,604 14 594 2,212 Year ended 31 December 2007 1,604 14 594 2,212 Opening net book value Additions - Internally developed 2,259 - - 2,259 - Externally acquired - - 41 41 Amortisation - (14) (29) (43) Exchange differences - - 55 55 Closing net book value 3,863 - 661 4,524 At 31 December 2007 the Group had no contractual commitments for development or other intangible fixed assets (2006: £nil). 16 Subsidiaries The principal subsidiaries of Antonov Plc, all of which have been included in these consolidated financial statements, are as follows: Name Country of Proportion Nature of Parent Status incorporatio of business n and ownership operation interest Antonov The 100% Licensing Antonov Plc Trading Automotive Netherlands Technologies BV (AAT) Antonov United 100% Design, Antonov Plc Trading Automotive Kingdom research & Technologies Ltd development, sales & marketing Antonov The 100% Licensing AAT Non-trading Automotive Netherlands Europe BV Antonov The 100% Licensing AAT Non-trading Automotive Far Netherlands East BV Antonov The 100% Licensing AAT Non-trading Automotive Netherlands North America BV Antonov France 100% Research & AAT Trading Automotive Development Technologies France SARL As a result of the relocation of operations from France to Warwick (UK), Antonov Automotive Technologies France SARL is in the process of being liquidated. 17 Inventories 2007 2006 £'000 £'000 Work-in-progress 35 - _______ _______ 18 Trade and other receivables 2007 2006 £'000 £'000 Trade debtors 446 - Other debtors and prepayments 978 299 Taxation - 98 Amounts owed by Directors - 34 Amounts owed by related parties - 3 _______ _______ 1,424 434 _______ _______ Trade debtors of £344k at 31 December 2007 are denominated in Euros (2006:£nil). Carrying Less Between Between More Trade debtors Amount than 30 31 and 60 61 and than 90 £000 days days 90 days days £000 £000 £000 £000 As at 31 December 446 88 3 11 344 2007 Trade debtors due more than 90 days are primarily due from one customer, which will be received during 2008. The maximum amount owed by directors during the year was £34,000 (2006: £34,000). This relates to R Antonov who resigned as a director on 02 April 2007. 19 Trade and other payables - current 2007 2006 £'000 £'000 Trade creditors 1,029 525 Other creditors and accruals 1,348 694 Amounts owed to related parties - 29 _______ _______ 2,377 1,248 _______ _______ 20 Financial liabilities 2007 2006 £'000 £'000 Other creditors - Euro warrants - 9 _______ _______ - 9 _______ _______ 21 Financial instruments - Risk Management The Group is exposed through its operations to one or more of the following financial risks: · Fair value or cash flow interest rate risk · Foreign currency risk · Liquidity risk · Market price risk · Credit risk Policy for managing these risks is set by the Board following recommendations from the Chief Financial Officer. Certain risks are managed centrally, while others are managed locally following guidelines communicated from the centre. The policy for each of the above risks is described in more detail below. Fair value and cash flow interest rate risk It is currently Group policy that all of its external Group borrowings (excluding short-term overdraft facilities) are fixed. This policy is managed centrally. Operations are not permitted to borrow long-term from external sources locally. Foreign currency risk Foreign exchange risk arises because the Group has operations located in various parts of the world whose functional currency is not the same as the Group's primary functional currency (sterling). Although its global market penetration arguably reduces the Group's risk in that it has diversified into several markets, the net assets from such overseas operations are exposed to currency risk giving rise to gains or losses on retranslation into sterling. The Group does not consider hedging its net investments in overseas operations as generally it does not consider that the cash flow risk created from such hedging techniques warrants the reduction in the small movements in the consolidated net assets. Foreign exchange risk also arises when individual Group operations enter into transactions denominated in a currency other than their functional currency. The foreign exchange risk is minimal and no hedging techniques have been considered appropriate. Liquidity risk The liquidity risk of each Group entity is managed centrally by management of Antonov plc in the UK. Management assess what funds are required on a monthly basis and ensure that adequate funds are available to all operations using drawdown facilities on convertible debt or by issuing shares for cash via new share issues or the conversion of warrants. Market price risk The directors believe that the exposure to market price risk from activities negligible. Credit risk In 2007, the Group had a number of credit sales related to projects which exposed the Group to credit risk. It is the Group's policy to assess the credit risk of new customers before entering contracts. The exposure to credit risk in other circumstances is not considered significant. 22 Financial assets and liabilities Numerical information Maturity of financial liabilities The carrying amounts of financial liabilities, all of which are exposed to cash flow or fair value interest rate risk, are repayable as follows: 2007 2006 £'000 £'000 Within one year - 9 _________ _________ - 9 _________ _________ 23 Financial assets and liabilities Numerical information (continued) Borrowing facilities The Group has un-drawn committed borrowing facilities available at 31 December 2007 in which all conditions have been met. Fixed rate 2007 total £'000 £'000 Expiry within 1 year 1,511 1,511 1,511 1,511 The Group had undrawn committed borrowing facilities available at 31 December 2006 in which all conditions had been met. Fixed rate 2006 total £'000 £'000 Expiry in more than 2 years 1,950 1,950 1,950 1,950 Interest rate risk The Group had no loans or other borrowings during the year. Fair values The book value and fair value of financial assets and liabilities are as follows: Book Fair Book Fair value value value value 2007 2007 2006 2006 £'000 £'000 £'000 £'000 Cash 98 98 226 226 Financial liabilities Euro warrants - - (9) (9) _______ _______ _______ _______ 98 98 217 217 _______ _______ _______ _______ To the extent that financial assets are not carried at fair value in the consolidated balance sheet, book value approximates to fair value at 31 December 2006 and 2007. 24 Deferred tax A deferred tax asset has not been recognised for the following: 2007 2006 £'000 £'000 Unused tax losses 11,178 10,353 Fixed asset timing differences (11) - _______ _______ 11,167 10,353 _______ _______ The movement in the Group's unrecognised deferred tax assets in the year relates to exchange differences, the loss arising in the year and a review of the brought forward tax position. If the Group generates profits in the future the unrecognised deferred tax assets are potentially recoverable. 25 Share capital Authorised 2007 2007 2006 2006 Number £'000 Number £'000 Ordinary shares of 20p each 60,000,000 12,000 60,000,000 12,000 Issued and fully paid 2007 2007 2006 2006 Number £'000 Number £'000 Ordinary shares of 20p each At 01 January 2007 43,638,606 8,728 30,813,526 6,163 Debt conversion rights exercised 725,972 145 4,117,697 824 Issue of shares 7,775,671 1,555 8,707,383 1,741 Exercise of warrants 790,903 158 - - At 31 December 2007 52,931,152 10,586 43,638,606 8,728 During the year a total of 9,292,546 shares were issued. Total proceeds from the issue of shares were £4.95m. Shares are reserved to issue under share option contracts. The terms and conditions are: Senior Executive Share Options At 31 December 2007 the following share options were outstanding in respect of the ordinary shares: Date of Number of grant Shares Period of Option Exercise price 2002 464,815 September 2002 April 2007 1.07 2005 58,334 May 2006 January 2008 1.20p 2005 108,333 December 2006 November 1.60 2007 2006 400,000 February 2006 February 2009 120p 2007 1,605,000 October 2007 October 2012 62p Contingently issuable shares Year ended 31 December 2007: At the New in the Exercised in Lapsed in At the end of Exercise Exercise beginning of year the year the year the year period price the year Warrants issued pursuant to placings: - unlisted 3,259,263 2,461,560 (790,903) (621,887) 4,308,033 to Dec 09 0.58-0153 - listed 4,066,209 - - - 4,066,209 to Dec 09 124p 336p 7,325,472 8,374,242 Options granted to Directors and Employees: R Antonov 250,571 - - (175,571) 75,000 to 01.02.09 120p D A Bovell 100,000 - - - 100,000 to 01.02.09 120p J N Dickens 10,000 - - - 10,000 to 25.04.12 160p M Emmerson 266,764 - - (266,764) - - - J E Haag 100,000 435,000 - (25,000) 510,000 to 15.10.12 62p 120p K E Ludvigsen 10,000 - - - 10,000 to 25.04.12 160p C Minnar 10,000 - - - 10,000 to 25.04.12 160p J W Moore 133,334 435,000 - - 568,334 to 15.10.12 62p - 120p C G Ross 125,000 435,000 - (50,000) 510,000 to 15.10.12 62p - 120p M Motabar - 300,000 - - 300,000 to 15.10.12 62p Employee 25,813 200,000 - (3,500) 222,313 to 15.10.12 62p 160p share options 1,031,482 2,315,647 8,356,954 4,266,560 (790,903) (1,142,722) 10,689,889 Year ended 31 December 2006: At the New in the Exercised in Lapsed in At the end of Exercise Exercise beginning of year the year the year the year period price the year Warrants issued pursuant to placings: - unlisted 3,422,181 1,056,867 (764,035) (455,750) 3,259,263 to Dec 09 0.58-0.80 - listed 3,591,209 475,000 - - 4,066,209 to Dec 09 124p 336p - 7,013,390 7,325,472 Options granted to Directors and Employees: R Antonov 175,571 75,000 - - 250,571 to Feb 09 1.07 D A Bovell 25,000 75,000 - - 100,000 to Feb 09 1.07 J N Dickens 10,000 - - - 10,000 to 25.04.12 160p M Emmerson 266,764 - - - 266,764 to 18.04.07 41p 84p J E Haag 25,000 75,000 - - 100,000 to Feb 09 107p 120p K E Ludvigsen 10,000 - - - 10,000 to 25.04.12 160p C Minnar 10,000 - - - 10,000 to 25.04.12 160p J W Moore 33,334 100,000 - - 133,334 to Feb 09 120p C G Ross 50,000 75,000 - - 125,000 to Feb 09 107p 120p Employee 39,413 - - (13,600) 25,813 to 20.05.09 40p 108.5p share options 645,082 1,031,482 7,658,472 1,931,867 (764,035) (469,350) 8,356,954 26 Reserves Restated* Capital Foreign Warrant Restated* Share Redemption Exchange Reserve Retained Premium Reserve Reserve Losses £'000 £'000 £'000 £'000 £'000 Balance at 01 January 2006 20,467 2,587 (85) - (31,688) Proceeds on share issue 5,162 - - - - Share issue costs (as restated) (269) - - - - Translation differences on - - 47 - - overseas operations Share based payment expense - - - - 71 Movement on exchange of - - - 361 - warrants Loss for the year as restated - - - - (3,396) Balance at 31 December 2006 25,360 2,587 (38) 361 (35,013) as restated Proceeds on share issue 4,582 - - - - Share issue costs (484) - - - - Translation differences on - - (392) - - overseas operations Exchange difference on long- - - 506 - - term loan Share based payment expense - - - - 222 Movement on exchange of - - - 9 - warrants Loss for the year - - - - (4, 073) Balance at 31 December 2007 29,458 2,587 76 370 (38,864) * restated for correction of share issue costs (see note 2). 27 Leases Operating leases - lessee The minimum total of future lease payments due are as follows: 2007 2006 £000 £000 Not later than one year 147 27 Later than one year and not later than five years 485 - Later than five years 546 - 1,178 27 28 Share-based payments The company operates an equity-settled share based remuneration scheme for directors and staff. 2007 2007 2006 2006 Weighted Number Weighted Number average average exercise exercise price price Outstanding at 01 January 2007 102.0p 1,031,482 93.4p 645,082 Granted during the year 62.0p 1,805,000 120.0p 400,000 Lapsed in the year 230.0p (520,835) 227.2p (13,600) Outstanding at 31 December 2007 76.9p 2,315,647 102.0p 1,031,48 2 Included in the total outstanding at 31 December 2007 are options to purchase shares held by the following ex-directors: R Antonov 75,000 D Bovell 100,000 J N Dickens 10,000 K E Ludvigsen 10,000 C Minnaar 10,000 The exercise price of options outstanding at the end of the year ranged between 62p and 160p (2006: 40p and 160p) and their weighted average contractual life was 4 years (2006: 2 years). Under the scheme, options vest if the share price reaches or exceeds a value within the range of 240p to 140p, dependent on the option, for a continuous period of ten consecutive business days. Of the total number of options outstanding at the end of the year, nil (2006: nil) had vested and were exercisable at the end of the year. There were no options exercised during the period. The weighted average exercise price of each option granted during the year was 62p (2006: 120p). The following information is relevant in the determination of the fair value of options granted during the year under the equity-settled and cash-settled share based remuneration schemes operated by the Group. In 2007, share options were granted on 16 October 2007. The exercise prices of the options granted on those dates were 62p, and their estimated fair values were 23p. The fair values were calculated using the Monte Carlo Model. The principal assumptions used were: 16 October 2007 Share price at date of grant £0.60 Exercise price £0.62 Expected volatility 45.00% Risk free rate 5.20% Expected dividend yield nil Expected volatility was determined by reference to historic volatility of the company's share price in the period before the date of grant. The Group recognised total expenses of £222k (2006: £71k) relating to stock option equity-based payments during the year. During the year, one supplier was paid in shares for services provided to the Group. The fair value of the services provided was £406k. 29 Related party transactions Trading transactions During the year Group companies entered into the following transactions with related parties who are not members of the Group. Sales of Goods Purchases of Amounts owed by Amounts owed to goods related parties related parties Year Year Year Year Year Year Year Year ended ended ended ended ended ended ended ended 31/12/07 31/12/06 31/12/07 31/12/06 31/12/07 31/12/06 31/12/07 31/12/06 £ £ £ £ £ £ £ £ Four 25,589 7,035 - - - 28,920 - - Stroke SARL Antonov - 544 - 367 - - 2,981 3,015 Holdings SARL All of the entities listed are considered to be related parties as they are controlled by R Antonov, a former director of the Group and a significant shareholder. The above transactions were undertaken on normal commercial terms. Details of director's remuneration are given in note 9. There are no additional key management personnel. Details of subsidiaries are given in note 16. The Group is dependent upon its significant shareholder for funding. The funds provided during the year by this shareholder was as follows: Shareholder 2007 2006 £'000 £'000 Quivest BV 4,500 1,200 30 Other commitments The Group had no other commitments outstanding as at 31 December 2007. 31 Contingent liabilities There are no contingent liabilities to report for the year. 32 Post balance sheet events The parent company entered into a new equity financing agreement with Quivest BV on 17 January 2008 for 25m. This agreement replaces t he equity financing agreement signed on 27 July 2007 for 15m. Quivest is a substantial shareholder of Antonov Plc and as such the agreement of the extended credit facility is classed as a related party transaction.
Deel: ' Goedgekeurde resultaten 2007 Antonov plc '