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Other reserves consist of:
A) £23 (2024 £23) in respect of the Capital Redemption Reserve; and
B) £4,475 (2024 £6,400) in respect of a Fair Value Reserve for the Enterprise Management Incentive
Scheme. There has been a £1,925 reduction (2024 £25 increase) on the fair value reserve in regard to
the share options provided to key employees.
The company first issued share options under the terms of an Enterprise Management Incentive
Scheme (EMIS), during March 2019. The Actual Market Value, and Unrestricted Market value of each
£0.05p share was determined to be £.05p and this value has been agreed with, and formally accepted
by, HM Revenue and Customs (HMRC). The company issued further options under the terms of the
Enterprise Management Incentive Scheme (EMIS) in June 2020 and April 2023.
Under the EMIS, the Company or the Trustees of the employee trust may grant options over shares in
the Company to eligible employees. The eligible employees to whom options are granted and the terms
of such options will be determined by the Directors of the Company or the Trustees. The employees
who are eligible to participate in the EMIS are certain employees (but not currently Directors) of the
Company. Options are not transferable.
The exercise price of options may not be less than the market value of the Company’s shares (as
agreed by HMRC) on the date of grant. If the Trustees or the Directors have determined that the
exercise of an option will be satisfied by the issue of ordinary shares, the exercise price may also not be
less than the nominal value of ordinary shares.
The options may vest on the occurrence of a number of specified market conditions (including the sale
of the Company or the sale of its business activities or assets where the exit proceeds exceed
£1,250,000) or, otherwise in ten years, on 15 March 2029 (providing that the market value of the
Company at that time is at least £1,250,000). This is providing that the individuals remain employed by
the company at the time such an event takes place or, otherwise, on 15 March 2029.
Share options were initially granted in March 2019 for 338 £0.05p Ordinary shares at £0.05p. Following
a subdivision of the shares on 17 December 2019 this equates to total options for 4,394 "A" ordinary
shares of £0.0025 at £0.0025p plus 2,366 "B" ordinary shares of £0.0025 at £0.0025p.
Further additional options for 494 "A" ordinary shares of £0.0025 at £0.0025p plus 266 "B" ordinary
shares of £0.0025 at £0.0025p were granted in June 2020.
Further additional options for 494 "A" ordinary shares of £0.0025 at £0.0025p plus 266 "B" ordinary
shares of £0.0025 at £0.0025p were granted in April 2023.
During the year to 31 December 2019 one of the original six employees to whom options were issued
left the company resulting in 494 options for new "A" ordinary shares of £0.0025 and 266 options for
new "B" ordinary shares of £0.0025 being forfeited. During the year to 31 December 2020 another of
the original six employees to whom options were issued left the company resulting, in a further 728
options for new "A" ordinary shares of £0.0025 and 392 options for new "B" ordinary shares of £0.0025
being forfeited.
Based on the six (2024 six) employees that remained eligible to take part in the scheme at the
Statement of Financial Position date this might result in a further 4,160 (2024 4,160) "A" ordinary shares
of £0.0025 and 2,240 (2024 2,240) "B" ordinary shares of £0.0025 shares being issued at par.
The (credit)/charge recognised in the profit and loss account this year was £(1,925) (2024 charge of
£25). This represents the directors’ effective valuation of staff cost benefits arising to-date due to the
scheme, that they currently anticipate might be expected to vest. This charge represents an
appropriate proportion of the value of the options that remain to be allocated to this year as a proportion
of the period to March 2029, which the directors currently estimate as the shortest period of time before
the options might vest. The period of time to the point the options might vest was extended following
the disruption arising as a result of COVID 19 and then further extended to allow for the difficulty
foreseen in negotiating a full and successful disposal of the business before the option date.
Fair value is determined by applying a valuation method that reflects the value of the options after
allowing for holdings of a minority interests and allowing for the option terms and conditions. In
evaluating the fair value of the options, the model adopted also allows for a risk-free interest rate and
the expected period to the time that the options might vest. In determining the fair value, the directors
have also considered the size of the company, the restricted marketability of its share capital and all of
the associated subjective valuation variables.
The Directors’ evaluation of the Fair Value of the initial options at the time of grant (before allowance for
any potential lapses) are £17,250 (in respect of the options granted in March 2019), £1,500 (in respect
of the options granted in June 2020) and £2,500 (in respect of the options granted in April 2023).
The original value of options granted in March 2019 is based on an average share price of £3.83, an
exercise price equivalent to £.025 an expected volatility rate of 50%, a risk-free interest rate of 5% and
an expected option life of about 5 years. A 40% discount was then applied to allow for the size of the
company, the restricted marketability of its share capital and all of the associated subjective valuation
variables.
The original value of options granted in June 2020 is based on an average share price of £2.75, an
exercise price equivalent to £.025, an expected volatility rate of 50%, a risk-free interest rate of 5% and
an expected option life of about 3.75 years. A 40% discount was then applied to allow for the size of the
company, the restricted marketability of its share capital and all of the associated subjective valuation
variables.
The original value of options granted in April 2023 is based on an average share price of £5.04, an
exercise price equivalent to £.025, an expected volatility rate of 50%, a risk-free interest rate of 5% and
an expected option life of about 4 years. A 40% discount was then applied to allow for the size of the
company, the restricted marketability of its share capital and all of the associated subjective valuation
variables.
An employee non-service discount of 26.3% has been applied (including the actual non-service
completion rate to-date of 22.7%), together with a subsequent non-performance discount of 50%.
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