Final Results

Environmental Recycling Technologies plc

Preliminary Results for the year ended 31 December 2012

27 June 2013

Environmental Recycling Technologies plc is developing applications for the patented rights to the Powder Impression Moulding ("PIM") process, which converts mixed waste plastics into commercially viable products, announces its preliminary results for the year ended 31 December 2012.

Financial highlights

·; Revenue for the year ended 31 December 2012 £0.04 million (2011: £0.53 million) arising from licence and royalty agreements

·; Loss on operations after exceptional items £3.34 million (2011: £5.60 million)

·; Exceptional provision of £1.57 million (2011: £4 million) for impairment of intangible assets which has no cash impact

Operational highlights

·; New Licence Agreement signed with Brownwater Plastics, a division of James Marine Inc, for production of barge covers for use on barges on USA's inland waterways

·; New Licence Agreement signed with North Brook Farms representing the first phase of our global flat sheet out licencing strategy

·; Revised Licence Agreement signed with 2K Manufacturing, reducing 2K's territorial rights to UK and Eire

Post Period End Highlights

·; A new Licence Agreement signed with Falanx Protection Limited, a subsidiary of AiM quoted Falanx Group plc, for anti-ballistic and anti-blast uses within the Middle East and North Africa

·; The global plastic recycling market opportunities for ERT substantially enhanced following the erection of the "Green Fence" by Chinese customs in early 2013

Ken Brooks, Chairman, commented

"I am pleased to say that the focus, enthusiasm and dedication of our management team has shown through in the progress which Environmental Recycling Technologies continues to make and we look forward to more exciting developments in the year ahead."

For further information:

Environmental Recycling Technologies plc www.ertplc.com

Roger Baynham, Managing Director Telephone: +44 (0) 845 071 1394

Ken Brooks, Chairman

W H Ireland

John Wakefield Telephone: +44 (0) 117 945 3470

Kreab Gavin Anderson

Robert Speed Telephone: +44 (0) 20 7074 1800

The Company confirms that the Company's Annual Report and Accounts for the year ended 31 December 2012 will be sent to shareholders and will be available on the Company's website by 30 June 2013: www.ertplc.com.

Notes to editors:

Environmental Recycling Technologies plc (ERT) is a leading developer of innovative technologies specifically focussing on plastic waste recycling. The company holds the worldwide intellectual property rights to the Powder Impression Moulding (PIM) Process.

For more information about Environmental Recycling Technologies plc please visit www.ertplc.com

Business Review for the year ended 31 December 2012

Environmental Recycling Technologies plc is pleased to announce its results for the year ended 31 December 2012.

Financial Results

Revenue for the year ended 31 December 2012 £0.04 million (2011: £0.53 million) arising from licence and royalty income agreements.

Administrative expenses reduced to £3.38 million (2011: £6.12 million)

Losses on operations after exceptional items were £3.34 million (2011: £5.60 million)

The loss for the year reduced to £3.73 million (2011: £6.90 million)

Loss per share was 0.62 pence (2011: 1.27 pence)

Overview

2012 was a significant year for ERT. It has been a period of marked progress both in respect of existing licencees and new licencees.

The appointment of Lee Clayton as COO in January 2012 was a pivotal development and recognised not just the progress the company had made in resolving many of the historic and legacy issues but crucially that the time was now right to strengthen the resources within the business in order to create step change in the promotion of PIM technology internationally.

ERT exhibited at the leading US Plastic Recycling Conference and exhibition in Atlanta in March 2012 and followed this by exhibiting at the European Plastic Recycling conference and exhibition in November. In addition both Lee Clayton and Roger Baynham presented papers at other events such as the British Plastics Federation Replast event in October and EPRO conference in December. Since the year end ERT has exhibited at Chinaplas in May 2013 and will also exhibit at the RWM exhibition at the NEC in September.

The global plastic recycling market opportunities for ERT have been substantially enhanced following the erection of the "Green Fence" by Chinese customs in early 2013 which has effectively stopped the importation of low quality and mixed waste for recycling into China. The consequence of this was that whilst there was a reasonable and growing infrastructure for recycling plastic bottles in the UK and Europe, the option of exporting to China mixed rigid plastics from the household, pots tubs and trays, and household films, which our PIM process can handle will no longer be available.

Given that 2013 is the 1st year where the targets for recycling plastic packaging escalate to meet the government's target for 2017, it is telling that evidence shows the volume of plastic which has been recycled has fallen.

This is good news for ERT and the PIM process.

One of the key elements of our progress last year was the re-commissioning of a PIM R&D facility which is located in Derbyshire. Using the PIM machine which was formerly at Brunel University, albeit much improved and modified, the facility has been invaluable as a demonstration unit for existing and prospective licencees.

In particular it has been useful to demonstrate the ability of the process to use a wide variety of different types of plastic wastes for particular end use applications or to show how PIM can provide a solution to add value to particular materials. An example of this is a demonstration which was made for a substantial European waste management company. In this case the plastic raw material was too contaminated for conventional recycling processes and was supplied for incineration to cement kilns at very low value. Trials at the R&D facility showed that PIM could process such material and larger trials are scheduled for the next few weeks.

One of the other advantages of the R&D facility is the ability to work with licencees and provide technical support by running trials to identify either means of achieving enhanced technical characteristics or alternatively to reduce material cost. Contour Showers and North Brook Farms are examples of where ERT is able to enhance its offering to licencees to deliver increased revenues or speed up development.

Summary of current licencees

United Kingdom - 2K Manufacturing

Towards the end of 2012, ERT and 2K Manufacturing (2K) finally concluded a new licence agreement which reduced 2K's territorial rights from worldwide to UK and Eire which facilitated the recovery of worldwide rights for flat sheet which represents a primary focus of ERT's commercial strategy.

Fundamental to the renegotiation was the understanding that 2K would embark on expansion of production. 2K has been successful in developing a distribution infrastructure taking "Ecosheet" into both the construction and agricultural markets, as an alternative to the estimated £30 million per annum market currently served by plywood, although its progress to date in terms of ramping up production has been disappointing.

United Kingdom - Contour Shower Trays

During 2012 PIM production of Contour's "Ecodec" has been brought entirely in house at its Stoke on Trent facility. Contour's PIM production uses convection oven technology and "Ecodec" is a relatively high value niche wet room former for use particularly in the public sector.

Contour was able to acquire funding for a project, managed by our COO Lee Clayton, to rationalise and improve production increasing throughput. We are working closely with Contour on a separate project using both ERT's R&D facility and Contour's production operation to reduce raw material costs. Whilst not finalised, the savings are likely to be significant and under the agreement will result in enhanced royalties for ERT going forward. Contour has expressed interest in taking new PIM licences for other shower applications.

United States - Brownwater Plastics/James Marine

A new Licence agreement has recently been signed with Brownwater Plastics, a division of James Marine Inc. As the largest operator of barges on the Mississippi river, James Marine has pioneered the use of PIM in the production of barge covers for use on USA's inland waterways.

The key benefits of the PIM cover are that it floats if dislodged overboard (and therefore can be recovered) and can be more easily repaired. The covers are produced using a modular arrangement where a number of PIM sections are welded together. Given that each section is approx 30 ft. X 10 ft., James Marine believe this is the largest moulding ever produced using thermoplastics, and further demonstrates the scope and opportunity for the PIM process in highly technical large scale mouldings as might be found in marine, automotive and composite applications rather than simply as a recycling technology.

United States - North Brook Farms

The non-exclusive flat sheet licence granted to North Brook Farms (NBF) represents the first deal in our global flat sheet out licencing strategy. Our ambition is to offer similar non-exclusive licenses primarily in NAFTA and Europe. NBF expect to be in PIM production by Q3 2013.

Middle East and North Africa - Falanx

As recently announced, ERT has granted a licence to security company Falanx which operates in the Middle East and North Africa. Falanx listed on AiM in June and ERT has already had outline discussions regarding an expansion of the product licence terms which ERT expects to conclude shortly.

China - Chinaplas Exhibition

A number of very interesting enquiries were received at Chinaplas from a variety of countries including India, Pakistan, and China.

Most notable of these was from a Shanghai company who have developed a facility to extrude modified plastic boards from a very substantial low quality local plastic waste stream. There are two primary problems with these extruded boards: They are very heavy and not sufficiently rigid to be used as shuttering. The foamed core characteristic of PIM moulding prospectively provides a solution to this problem and a meeting took place after Chinaplas to explore further opportunities.

IP development

We are delighted that ERT has been successful in protecting its IPR in its revocation action against Upcycle Holdings Ltd which went before the County Patent Court in December 2012. The conclusion of the judgement is that of all the claims which Upcycle made in its patent, none have been considered innovative or inventive over ERT's patents with the exception of the use of a former inserted as an additional step to create a seamless wall.

As a result, Upcycle have a patent for a former/insert process which our expert witness, Colin Williamson, referred to during court proceedings as "a crazy solution to a non-existent problem". Moreover, it can only be used in certain configurations of the PIM process and any application will require a PIM licence to be granted by ERT.

In addition as a result of an objection to our European Patent by Upcycle, the European Patent Office upheld the validity of ERT's PIM process patent. The UK Patent Office has already granted a broader patent to the basic PIM process.

2K advised the company of the publication of a patent application relating to the developments in their operations at Luton. Having just completed a patent revocation case principally for the benefit of 2K, and indeed at their insistence, ERT will continue to take all steps necessary to ensure that its own master process position is protected. Accordingly following advice from its patent advisors, ERT has made the appropriate observations to the UK patent examiner. ERT will continue to police its Intellectual Property position robustly.

Research and development

There is a Knowledge Transfer Program (KTP) proposal between Sheffield University and ERT which is due to be submitted for approval in August 2013. The objective is to create a three year program to explore and develop the use of low value mixed plastic waste into technical composite structures.

Arup

The collaboration with Arup has been further strengthened in 2012 by the appointment of our COO Lee Clayton. Arup are currently engaged in a variety of projects globally where the drivers of sustainability and corporate responsibility in the construction sector provide traction for the PIM process in product development and manufacture.

Impairment review

Following an in-depth review of 2K production volumes and prospective licencees last year, it was felt prudent to reflect an impairment in the carrying value of the intangible asset. The Board has revisited this review and although there are many more prospective licencees engaged in discussions with ERT, the time from signing a licence to the generation of income has no certainty. As previously mentioned, production levels of "Ecosheet" are lower than previously anticipated and other licencees are progressing at a slower pace.

As a result, the Board has made a further prudent provision for £1.57 million (2011: £4.0 million) which is disclosed as an exceptional item. The additional impairment does not have a cash impact on the company.

The Board remain confident in the prospects for the company.

Outlook

We believe ERT has truly turned a corner and are delighted by the progress in the last 12 months. Our updated business plans clearly lays out our ambitions and the actions required to achieve these. There is clearly traction for certain PIM products and these will continue to be the focus. Nevertheless, we will continue to encourage prospective licencees who wish to use PIM for other applications to adopt the technology but will not engage in expensive projects which have little chance in reaching a successful conclusion.

We have appointed a PR consultancy to make greater capital from our commercial and promotional activities and licensing activities. This will aid the continued global branding of PIM.

The strengthening of ERT's management team in 2012 provides the platform for further growth and we believe that the focus of the team will lead to further licencing opportunities in the future.

Ken Brooks Roger Baynham Lee Clayton

Chairman Managing Director Chief Operating Officer

Financial Review for the year ended 31 December 2012

Results

Revenue together with other income for the year ended 31 December 2012 was £0.04 million (2011: £0.53 million). The loss on operations was £3.34 million (2011: £5.60 million). Total comprehensive losses attributable to equity shareholders were £3.73 million (2011: £6.90 million).

Dividends and loss per share

At 31 December 2012 as reported in the statement of financial position, the company does not have distributable reserves and are unable to declare a dividend. The basic and diluted loss per share was 0.62 pence (2011: 1.27 pence).

Trading

Although the Company has reported another loss for the year, much progress has been made.

Revenues were disappointing and represent the final quarters royalties paid under the new licence agreement entered into with 2K Manufacturing Limited. Under the old licence and IFRS accounting rules for revenue recognition, all initial licence and minimum royalty income had been included in the accounts over the three years 2009-11. If the old licence had continued to be in force, a minimum royalty of £0.75 million would have been shown as income.

Administrative expenses for the period were £3.38 million (2011: £6.12 million). The loss on operations before exceptional items was £1.77 million (2011: £1.45 million).

Exceptional costs of £1.57 million (2011: £4.15 million) were incurred during the year in relation to the impairment of intangible assets. Excluding the impairment for intellectual property, available-for-sale financial assets and amortisation, normal overheads incurred in running the company was £1.39 million (2011: £1.08 million). Normal running costs include the litigation costs incurred protecting the Intellectual Property of the company amounting to £0.38 million (2011: £0.05 million).

Financing

The company meets its day to day cost base by managing its cash resources and securing appropriate levels of finance to settle liabilities as they fall due. Additional cash funds of £1.65 million (2011 £0.82 million) were raised from loans made to the company during the year.

Trade payables have risen by £0.03 million to £0.17 million (2011 £0.14 million). Accruals have also fallen to £0.27 million from £1.1 million in 2011 as a result of accrued principal interest on loans being settled during the year through the issue of equity.

Total borrowings amounted to £2.52 million (2011: £4.25 million).

A debt restructuring and debt-for-equity transaction during the year had the effect of significantly strengthening the company's balance sheet and eliminated debt servicing costs.

Under the agreement, the company issued 225,241,928 new Ordinary Shares of 2.5 pence each to third party lenders in satisfaction of existing loans and accrued interest amounting in total to £5.63 million. The loans were subject to annual rollover and carried an annual interest of 7.5%, with a significantly higher penal rate and costs.

The issue price of 2.5 pence was at a premium of 26.2% to the closing mid-market price of 1.98 pence per share on closing. This gave rise to a gain of £1.24 million on the settlement of these liabilities.

Further working capital loans have been made to the Company at considerable cost arising from using a stock lending program to enable the fundraising at a time when the share price was at a significant discount to the par value of the ordinary shares. The par value reduction implemented at the General Meeting on 30 April 2013 has addressed this issue. These new loans have been made since the debt conversion which together with fees amount to £0.68 million and carry an interest rate of 7.5%.

The Directors have received written assurance from Oxford Capital, the lender of £2.52 million (2011: £4.25 million) that there is no intention to request immediate repayment of the liabilities and that subject to agreement, the lender would accept repayment by way of a debt for equity swap.

Following the appointment of Lee Clayton as a Director in January 2012, the Company subsequently acquired a 20% ordinary shareholding in his trading company, Delta Waste Management Limited for £20,000 together with an option to acquire a further 20% holding. On 15 October 2012, this option was exercised for a consideration of £20,000. Delta provides consultancy, project management and machinery procurement services to ERT.

On 30 April 2013, the Company raised £693,327 under an Open Offer to shareholders. At a General Meeting held that day, resolutions were passed to consolidate the entire issued and authorised share capital into new ordinary shares of 0.25p per share and to adopt new Articles of Association. In addition, £350,000 of outstanding debt from Oxford Capital was satisfied in full by the issue of 28 million shares at the Open Offer price of 1.25p per share.

Short term funding facilities have been organised to cover the company's normal overheads for the rest of the year over and above current cash balances.

The Directors do not expect there to be a requirement to repay the loans in cash during the next 12 months.

David Shepley-Cuthbert

Finance Director

Statement of Comprehensive Income

Year ended 31 December 2012

Statement of Financial Position

At 31 December 2012

Statement of Changes in Equity

Year ended 31 December 2012

Year ended 31 December 2011

Statement of Cash Flow

Notes to the financial statements

1. Accounting policies

Basis of preparation

The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated.

These financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRS) issued by the International Accounting Standards Board (IASB) as adopted by the European Union ("adopted IFRS's"). The financial statements have also been prepared in accordance with those parts of the Companies Act 2006 applicable to companies preparing financial statements in accordance with IFRS.

The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2012 or 2011, but is derived from those accounts.

Statutory accounts for 2011 have been delivered to the Registrar of Companies and those for 2012 will be delivered prior to 30 June 2013. The auditors have reported on those accounts; their reports were unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports and did not contain statements under Section 498(2) or (3) of the Companies Act 2006.

Going concern

The group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Business and Financial Reviews. The financial position of the company, its borrowings and borrowing facilities are described in the Financial Review. In addition note 21 to the financial statements includes the company's objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments, and its exposures to credit risk and liquidity risk.

As described in the Financial Review the progress towards profitability is challenging and the company has reported another operating loss for the year. Whilst there are a number of uncertainties, the directors' consider that the outlook is now more promising. The directors have continued to manage cash resources and secure appropriate levels of finance.

The directors are in discussions with other lenders to settle the outstanding loans by the issue of shares in the company rather than settling in cash. During the year other lenders converted £5.63 million into shares.

In addition, written assurance has been received from one lender covering £2.52 million that there is no intention to request immediate repayment and that subject to agreement the lender would accept repayment by the issue of shares in the company. Similarly the expectations arising from the terms of the remaining loan arrangement are that the lenders would accept settlement in shares if the company was unable to repay the loans.

The directors have prepared forecasts that indicate that the company have adequate resources to meet commitments as they fall due. Furthermore, the directors have obtained written confirmation from YA Global Limited ("Yorkville") confirming their willingness to make available to the company, if required, a SEDA facility amounting to the value of £2 million on acceptable terms to cover the company's normal overheads in the foreseeable future.

The directors concluded a new licence agreement with 2K Manufacturing in late 2012 which has reduced the company's reliance on this customer as well as opening up further opportunities as noted in the Business Review.

2K Manufacturing are operating in compliance with the new agreement.

The directors acknowledge that due to the reliance on 2K Manufacturing, and the reliance on the above lenders for financial support, there is a degree of uncertainty that this support will continue although, at the date of approval of these financial statements, they have no reason to believe that they will not do so. Therefore after making enquiries and considering the uncertainties described above the directors consider that the company will have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts.

The financial statements do not include any adjustments that would result from the basis of preparation being inappropriate.

2. Critical accounting estimates and judgements 

The company makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Judgements

(a) Impairment of intangible assets

The company monitors market conditions to assess indications of impairment. When an impairment review is performed the recoverable amount is determined based on value in use calculations. The use of this method requires the estimation of future cash flows and the choice of a discount rate in order to calculate the present value of the cash flows. The estimates of future cash flows assume that licencees will not cancel license and royalty agreements, if cancellations occur there would be a risk that future cash flows would be less than estimated. The estimated discount rate is to reflect current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. Actual outcomes may vary. Intangible assets are shown in note 12. An impairment charge of £1.57 million has been made during the year (2011 £4 million) (see note 5).

(b) Revenue recognition

The directors exercise judgement in determining the fair value and performance requirements of licence and royalty agreements. Estimates are reviewed based on the performance obligation of each contract and the estimates affect reported revenue.

(c) Trade receivables

The directors have made a critical judgement in determining the likely recoverability of the trade receivables loan due from 2K Manufacturing Limited totalling £1.71 million. They believe the amount to be recoverable, however there is a risk of 2K not achieving its expected production volumes. Should 2K not achieve forecast production volumes, this will affect its ability to meet its repayment obligations under the terms set out in note 12.

3. Revenue and segment information

The revenue and loss before tax are attributable to the principal activities of the company being the licencing of the intellectual property of the plastic Powder Impression Moulding system to generate licence fees and on-going royalties.

In the opinion of the directors, the only operating segment is the exploitation of the company's intellectual property. Whilst customers may be operating in different economic environments the company operates from the United Kingdom and all business is subject to English law.

All assets are held in the UK.

Reporting of external revenue by location of customer is as follows:

Revenue arises from:

Revenue of £40,000 (2011: £500,000) related to one customer.

4. Loss on operations before interest and finance

Loss on operations is stated after charging:

5. Exceptional items

The impairment of available-for-sale financial assets in the prior year arises out of the revaluation of quoted shares held.

As part of the on-going review of the company's assets, the Board recognised that commercial production, utilising the PIM process, had not achieved forecasted levels, and having prepared Discounted Cash Flow Forecasts applying a discount rate of 15%, intangible assets were written down to their recoverable value. The recoverable value of the assets was calculated as its value in use.

6. Finance income

7. Finance costs

8. Earnings per share

At 31 December 2012, there were 38,979,185 (2011: 33,879,185) of potentially issuable shares which are anti-dilutive; such shares may become dilutive in future periods.

9. Intangible assets

Licence fees are initially recognised at cost and are amortised over their useful economic life of 20 years. At 31 December 2012, the remaining amortisation period is 14 years.

Intellectual property is initially recognised at cost and is amortised over its estimated useful economic life of 20 years aligned to the underlying patents that have been granted. At 31 December 2012, the remaining amortisation period is 8 years.

At 31 December 2012 the company made an impairment provision totalling £1.59 million (2011: £4 million) against the carrying value of its intellectual property (see note 5).

10. Plant and Machinery

11. Available-for-sale financial assets

During 2008, 500,000 shares in Longborough Capital Corp Inc. (LBOC), a company with shares traded on pink sheets in New York, were received in settlement of licence fees amounting to US$625,000 due from LBOC. In addition GTI Inc. a subsidiary of LBOC paid licence fees due amounting to US$650,000 by issuing 1,083,333 shares. These GTI Inc. shares were exchanged for 520,000 shares in LBOC on 30 March 2009.

Listed shares are normally carried at fair value based on quoted market prices (level 1). Since the market value of LBOC is a nominal US$0.02, the balance of the carrying value has been provided for.

Unlisted shares are carried at cost.

Associated company

The following entity meets the definition of an associate:

Proportion of voting rights

Name Country of incorporation Held at 31 December 2012

Delta Waste Management Limited United Kingdom 40%

During the year, the Company entered into an agreement to subscribe for a 20% ordinary shareholding in Delta Waste Management Limited at a cost of £20,000 together with an option to acquire a further 20% ordinary shareholding. On 15 October 2012, the option was exercised for a further consideration of £20,000 increasing the company's overall interest in Delta Waste Management to 40%.

Delta Waste Management Limited has not been accounted for as an associated undertaking on the basis that its results are not material to the company.

12. Trade and other receivables

2K Manufacturing have repaid £50,000 of the trade receivable loan since the year end in accordance with their new licence agreement.

All receivable balances are in sterling.

A provision of £nil (2011: £133,000) has been made against accrued income.

The company's main income is from licence and royalty fees. Accrued income and receivables relating to the UK licence holder are regularly reviewed by the board of directors to assess the recoverability of amounts due.

During the year, the accrued income of £1,708,000 was converted to a non-interest bearing trade loan repayable over five years.

13. Trade and other payables - current

Book value is a fair approximation for fair value and debts are due for repayment under normal trading terms.

All trade and other payables fall due for payment within one year.

14. Borrowings

The carrying value (which is a reasonable approximation to fair value) of borrowings analysed by lender is as follows:

Cash loans advanced during the year totalled £1,650,000 (2011: £823,000).

A further £1,317,545 (2011: £827,679) costs were incurred for stock lending and arrangement fees. Loans totalling £nil (2011: £263,000) were repaid and £5,631,048 (2011: £1,024,487) was converted during the year into Ordinary Shares.

On 12 October 2012, the balance of the Company's debt at that date (including all interest and fees) amounting to £1,841,369 was converted to a secured five year loan note carrying an interest rate of 2% above the Bank of England base rate. The balance of loans outstanding carry interest at 7.5%.

The company has no other borrowing facilities.

15. Related party transactions

Invoices totalling £61,060 (2011: £47,923) were received from the A H Brooks Partnership for services rendered and recoverable expenses. The partners are K W Brooks and Mrs N Brooks, wife of K W Brooks. The amount outstanding at the year-end was £nil (2011: £8,949), which was due to the A H Brooks Partnership.

Aston Hall Limited invoiced £50,966 (2011: £47,766) to the Company in respect of Director's fees and expenses for D C Shepley-Cuthbert who is also a director and controlling party of Aston Hall Limited. The amount outstanding at the year-end was £2,548 (2011: £8,170).

Oakridge Business Services Limited invoiced £15,000 (2011: £15,000) to the Company in respect of Director's fees for R J Baynham. The amount outstanding at the year-end was £3,750 (2011: £3,750).

Delta Waste Management Limited invoiced £72,589 (2011: £nil) to the Company in respect of consultancy fees and expenses for L A Clayton. The amounts invoiced were offset against short term-loans made to Delta Waste Management Limited during the year of £110,000 (2011: £nil) of which £37,411 (2011: £nil) was outstanding at the year-end.

16. Share based payments

Environmental Recycling Technologies plc operates an unapproved option scheme for Executive Directors, senior management and certain employees.

All share options outstanding at 31 December 2012 had vested and were exercisable.

The exercise price of options outstanding at the end of the year ranged between 2.5 pence and 72 pence (2011: 2.5 pence and 72 pence) and their weighted average contractual life was 0.9 years (2011: 1.2 years)

The weighted average fair value of each option granted during the year was 2.0 pence.

The following information is relevant in the determination of the fair value options granted during the year under the unapproved options scheme operated by Environmental Recycling Technologies plc:

2012 2011

Equity-settled

Option pricing model used Black Scholes Black Scholes

Weighted average share price at grant date (pence) 2.0 -

Exercise price (pence) 2.5 -

Weighted average contractual life (days) 337 -

Equity-settled

Expected volatility 97.5% -

Expected dividend growth rate - -

Risk-free interest rate 1.1% -

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 3 years.

Environmental Recycling Technologies plc issues warrants to third parties for the provision of services rendered and the provision of finance.

All warrants outstanding at 31 December 2012 had vested and were exercisable.

In 2011, an expense of £203,000 has been deducted from share premium in respect of 6,000,000 warrants issued to satisfy transaction costs of the shares issued on 31 January 2011.

The exercise price of warrants outstanding at the end of the year ranged between 2.5 pence and 88 pence (2011: 2.5 pence and 88 pence) and their weighted average contractual life was 0.9 years (2011: 1.7 years).

The weighted average share price (at the date of exercise) of warrants exercised during the year was 5.6 pence (2011: 5.6 pence)

The weighted average fair value of each warrant granted during the year was 1.9 pence (2011: 4.2 pence)

The following information is relevant in the determination of the fair value warrants granted during the year under the unapproved options scheme operated by Environmental Recycling Technologies plc:

 2012 2011

Equity-settled

Option pricing model used Black Scholes Black Scholes

Weighted average share price at grant date (pence) 1.9 5.6

Exercise price (pence) 2.5 2.5

Weighted average contractual life (days) 308 613

Equity-settled

Expected volatility 97.5% 96.2%

Expected dividend growth rate - -

Risk-free interest rate 1.1% 1.1%

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 3 years.

17. Post balance sheet events

Conditional Open Offer for new Ordinary Shares

On 30 April 2013, the Company confirmed that it had received valid applications for a total of 55,466,133 new ordinary shares under the Open Offer ("the New Ordinary Shares") which closed for acceptance at 11.00 on Monday 29 April 2013, raising a total of £693,327 for the Company and representing approximately 67 per cent of the amount available for acceptance under the Open Offer.

Of the shares applied for, 30,609,976 shares represented individual shareholders' basic entitlements and the balance of 24,855,157 shares were shares applied for by shareholders in excess of their basic entitlements.

General Meeting held on 30 April 2013

All resolutions were passed to give the directors authority to issue the New Ordinary Shares; to consolidate the entire issued and authorised share capital into new ordinary shares of 0.25p per share; and to adopt new Articles of Association. Dealings in the New Ordinary Shares began on commencement of business on Wednesday 1 May 2013.

Debt conversion

At the General Meeting held on 30 April 2013, the Company confirmed that it had agreed with Oxford Capital Limited ("Oxcap") that £350,000 outstanding debt in the Company owned by Oxcap was satisfied in full by the issue of a further 28m shares at the Open Offer price of 1.25p per share. Following this repayment, the balance of debt owned by Oxcap (including accrued interest) was approximately £2,406,250. As a result, Oxcap owned 253,241,928 shares in the Company representing approximately 29.12 per cent of the issued share capital following completion of the Open Offer and this debt conversion. Application was made for the new ordinary shares arising out of this exercise to be admitted to AiM.

New Licence Agreement

The Company announced on 9 May 2013 that it had granted a licence to Falanx Protection Limited ("Falanx").

The licence allows the manufacture and sale of products made using the PIM process for anti-ballistic and anti-blast uses within the Middle East and North Africa ("MENA"). Under the terms of the agreement, Falanx will pay ERT a licence fee of US$100,000 in addition to annual royalties based on sales of products made using the PIM process. 

Falanx is a wholly owned subsidiary of Falanx Group plc, a security and risk management consultancy working with blue chip and government clients worldwide. Falanx has a number of potential governmental and commercial contracts under discussion. Falanx Group also offers training to companies and governments in security and close protection.