Preliminary Results for the year ended 31 Dec 2008

30th Jun 2009 07:00



Environmental Recycling Technologies plc

Preliminary Results for the year ended 31 December 2008

Environmental Recycling Technologies plc ("ERT" or "the Company") (AIM: ENRT), which has developed and is exploiting the patented rights to the Powder Impression Moulding ("PIM") process capable of converting mixed waste plastics into commercially viable products, announces its preliminary results for the year ended 31 December 2008

Highlights

The Company is now operating under an out-licensing business model

- consequent significant reduction in overhead and costs

Increasing interest worldwide to use PIM Process for the Green Agenda

Production of Ecosheet by 2K Manufacturing on stream to commence in July

Major interest in other construction products in Europe and NAFTA

Collaboration agreement with Persico Srl. for future procurement of machinery and tooling 

Revenue and other income £1.35 million (2007: £0.24 million)

Loss on operations £2.75 million (2007: loss £4.74 million)

Loss attributable to equity shareholders £3.18 million (2007: loss £5.69 million)

For further information:

Environmental Recycling Technologies Plc

Ken Brooks (Chairman) 01993 779 468

David Shepley-Cuthbert (Finance Director)

Evolution Securities (Nominated Adviser)

Tim Worlledge 0207 071 4300

Bobbie Hilliam

The Company confirms that the Company's Annual Report and Accounts for the year ended 31 December 2008 has been sent to shareholders and is available on the Company's website: www.ertplc.com. Chairman's Statement

I am pleased to say that after much time and effort the Board is delighted to report on significant progress being made with regard to the commercialisation of our proprietary Powder Impression Moulding (PIM) process.

Our principal UK licensee 2K Manufacturing Limited has now been granted three licences, namely for construction boards, signage boards and wider construction products. 2K has secured its funding and its operating site. We have been advised that 2K is on course to begin manufacturing in July and that will be a major milestone achieved for the commercialisation of our process.

In the meantime, your Board has worked hard to overcome the several difficulties we faced in the course of last year. The expensive research and development projects, to which we had been committed, have all been concluded. The Replas project has been revamped and is now working extremely well and our thanks are due to Brunel University for their dedicated research work on the process.

As already announced, we have not been successful in overturning the judgement against us obtained by a former employee of the Group in Kyrgyzstan whose claims, and our costs, have been provided in note 11 to these accounts. While his claim exceeds the present cash resources of the company we are now in mediation discussions which we believe are in the best interests of both parties. 

My colleague Roger Baynham will offer in his report a more detailed analysis of the commercial position. The increasing recycling agenda that affects us all has had a major benefit for your company. We are now well placed as an intellectual property bank to out-license our technology on a lower burn rate of overheads than ever before with a greater expectation of licence fees and royalty revenue.

As always I owe a debt of gratitude to my fellow directors for all their hard work in difficult times. I am confident that the future of the Company will be positive. 

Ken Brooks

Chairman

 

 

Managing Director's Review

As we have previously set out, the Company is now operating under an out-license business model. In return for providing licenses to exploit the PIM process the company receives upfront milestone and royalty payments from its licensees, whilst operating at a low cost base.

There were however contingent production and development obligations during 2008 which the Company was committed to. By sub-contracting these activities the costs were considerably less than if they had been managed in-house. These costs were still significant and have impacted on the results for the year.

All of these commitments were met by December 2008 and as a result there are no longer any such production obligations on the Company.

The Board is pleased to report that it continues to see high levels of interest in its technology. This is in no small part due to the high profile work of its UK licensees and partners. The following provides specific updates on the latest news of our activities in 2009:

2K Manufacturing have taken occupancy of their first manufacturing site. This is a modern, high tech, 62,000 square foot facility in Luton, Bedfordshire

2K Manufacturing have reported that their activities are "on schedule" and anticipate production will commence in July 2009. 

As has previously been reported, the Company signed a Master Construction License with 2K Manufacturing in March this year and it is expected that, by utilising this showcase facility, 2K will further enhance commercialisation of the PIM process through its planned roll out and by Sub-Licensing opportunities to third parties in this sector

Contour Shower Trays have, this year, set up production of the Eco-dec products using the PIM process under their own steam. We are informed that these shower trays have been extremely well received by the market. 

The joint collaboration venture with Persico Srl., has been seen by those in the plastics industry as a key development. As a leading and very well respected manufacturer of rotational moulding equipment, the PIM process is being championed by Persico to existing plastics manufacturers who wish to capitalise on the opportunities the technology offers to develop the use of mixed recycled plastic waste

The Replas project at Brunel University is nearing completion. Managed by Pera, and funded by TSB (DTI) this project has, through the involvement of its industry partners, enhanced the development of Ecosheet. More recently the PIM test rig has also been used for other project work.

The development and delivery of waste technologies and practices to reduce landfill provide a focus on the output material streams from household, municipal, electronic, automotive and other sectors. Mixed Plastics Recycling is a key desirable and is the focus of much work, notably in UK by WRAP (Waste & Resources Action Program). There is an ever increasing awareness of the solutions the PIM process can provide to some of these issues, and the opportunities a synergistic approach PIM presents when combined with other recycling and waste separation technologies.

The Board has previously said that the Company only intends to announce specific licenses when they have been signed and are material financially, or when we are required to do so for regulatory purposes in relation to existing licenses.

We do however have a substantial number of worldwide enquiries particularly from the USA which the company is currently progressing as part of our strategy to offer territorial and sector franchises to licensees. As the opportunities which the PIM process offers become more tangible, particularly in the light of wider acknowledgement of the need for "green" technologies, the Board are even more confident of accelerated commercialisation of the technology leading to a lucrative future for the Company.

Roger Baynham

Managing Director

Financial Review for the year ended 31 December 2008

Results

Revenue together with other income for the year ended 31 December 2008 was £1.35 million (2007: £0.24 million). The loss on operations was £2.75 million compared to losses of £4.74 million in 2007. Losses attributable to equity shareholders were £3.18 million (2007 loss £5.69 million).

Dividends and loss per share

No dividend payment is proposed.

The loss per share was 1.18 pence compared to a loss per share of 4.01 pence in 2007.

Trading

Revenue included licence income from 2K Manufacturing and LBOC/GTI and pre-production work. Other income arose from TSB (DTI) grants. 

Administrative expenses excluding exceptional items for the period were £2.38 million compared to £3.81 million in the same period in 2007 and include in addition to normal running expenses, corporate finance costs, legal costs associated with the on-going intellectual property rights and increased provision for depreciation for the US plant and machinery.

Exceptional expenses of £1.72 million compared to £1.18 million in 2007. They cover further costs incurred in fulfilling contractual obligations for product development for Mediwall and pre production work for Contour, additional provisions for legal and settlement costs associated with a former employee in Kyrgyzstan and settlement costs of a legal dispute in Asia. 

Financing

Total borrowings amounted to £3.13 million compared to £2.03 million at 31 December 2007.

During the period, YA Global Investments Limited ("Yorkville") advanced a further £0.35 million and converted a further £0.53 million into equity reducing the loans outstanding to £1.65 million. Since 31 December 2008, Yorkville have converted a further £175,000 of the outstanding loans. In total Yorkville has converted loans and accrued interest totalling £5.37 million at an average price of 4.78p per share. 

Other loans advanced during the year totalled £1.78 million of which £0.38 million was converted during the year into ordinary shares. These loans carry interest at rates varying from 7.5% to 15% and conversion rights into ordinary shares.

The Standby Equity Distribution Agreement (SEDA) with Yorkville to the value of £5 million was extended in the year and now expires in September 2010. The first draw down has been made against this facility. The draw down of cash through the SEDA is sufficient to cover the company's normal overheads in the year ahead. The company has had commercial discussions with lenders to ensure that existing facilities remain available or will be settled in shares rather than cash. There are currently no reasons to believe that arrangements cannot be made on acceptable terms.

David Shepley-Cuthbert

Finance Director

  Group Income Statement

Year ended 31 December 2008

	Year ended 31 December 2008	Year ended 31 December 2007
Continuing operations	£'000	£'000
Revenue	1,089	243
Other income	262	-
Administrative expenses
Exceptional	(1,724)	(1,176)
Other	(2,379)	(3,811)
Total administrative expenses	(4,103)	(4,987)
Loss on operations	(2,752)	(4,744)
Finance income	-	9
Finance costs	(424)	(1,035)
Loss for the year before income tax	(3,176)	(5,770)
Tax credit on loss on ordinary activities	-	(80)
Loss for the year attributable to equity
Shareholders of the company	(3,176)	(5,690)
Loss per share (pence)
Basic and diluted loss per share	(1.18p)	(4.01p)

 

 

Group Balance Sheet

At 31 December 2008

		31 December		31 December
		2008		2007
Assets	£'000	£'000	£'000	£'000
Non-Current Assets
Intangible assets		10,685		11,579
Plant & equipment		296		277
Available-for-sale financial assets		855		-
Trade and other receivables		-		585
Total non current assets		11,836		12,441
Current assets
Trade and other receivables	228		537
Cash and cash equivalents	17		146
Total current assets		245		683
Total assets		12,081		13,124
Liabilities
Current liabilities
Trade and other payables	1,224		1,110
Borrowings	3,128		2,030
Provisions	563		545
Total current liabilities		4,915		3,685
Total liabilities		4,915		3,685
Net assets		7,166		9,439
Equity attributable to the shareholders of the parent
Share capital		7,160		6,310
Share premium reserve		35,500		35,447
Warrant reserve		1,021		1,367
Retained earnings		(36,515)		(33,685)
Total equity		7,166		9,439

 

Group and Company Statement of Changes in Equity

Year ended 31 December 2007

	Share	Share	Warrant	Equity	Retained
	Capital	Premium	Reserves	Reserve	earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Loss for year	-	-	-	-	(5,690)	(5,690)
Total recognised income and
expense for the year	-	-	-	-	(5,690)	(5,690)
Issue of share capital	3,654	3,234	(271)	-	-	6,617
Arising on loans	-	-	-	29	-	29
Warrants issued	-	-	261	-	-	261
Warrants revalued	-	-	334	-	-	334
Warrants and options lapsed	-	-	(278)	(67)	345	-
Movement for the year	3,654	3,234	46	(38)	(5,345)	1,551
Balance at 1 January 2007	2,656	32,213	1,321	38	(28,340)	7,888
Balance at 31 December 2007	6,310	35,447	1,367	-	(33,685)	9,439

Year ended 31 December 2008

	Share	Share	Warrant	Equity	Retained
	Capital	Premium	Reserves	Reserve	earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Loss for year	-	-	-	-	(3,176)	(3,176)
Total recognised income and
expense for the year	-	-	-	-	(3,176)	(3,176)
Issue of share capital	850	53	-	-	-	903
Warrant adjustments	-	-	26	-	(26)	-
Options lapsed	-	-	(372)	-	372	-
Movement for the year	850	53	(346)	-	(2,830)	(2,273)
Balance at 1 January 2008	6,310	35,447	1,367	-	(33,685)	9,439
Balance at 31 December 2008	7,160	35,500	1,021	-	(36,515)	7,166

 

Group and Company cash flow statement

Year ended 31 December 2008
	31 December		31 December
	2008		2007
	£'000		£'000
Continuing Activities
Loss before tax	(3,176)		(5,770)
Adjusted for:
Depreciation on property plant and equipment	312		275
Amortisation of intangible assets	894		895
Finance income	-		(9)
Finance expense	-		1,035
Fees settled in shares	-		294
	(1,970)		(3,280)
Decrease/(increase) in trade and other receivables	48		(163)
(Decrease)/increase in trade and other payables	(169)		674
Increase in provisions	18		545
Cash used by operations	(2,073)		(2,224)
Tax receipt	-		80
Net cash outflow from operations	(2,073)		(2,144)
Cash flows from investing activities
Interest received	-		9
Purchase of plant and machinery	(2)		(8)
Net cash used in investing activities	(2)		1
Cash flow from financing activities
Issue of equity share capital	-		3,338
Inception of loans	2,272		125
Repayment of loans	(325)		(!,178)
Interest paid	(1)		(51)
Net cash generated in financing activities	1,946		2,234
Net increase/(decrease) in cash	(129)		91
Cash and cash equivalents at beginning of period	146		55
Cash and cash equivalents at end of period	17		146

 

 

Notes to the financial statements 

1. Accounting policies 

Basis of accounting

While the financial information included in the preliminary announcement has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards as endorsed for use in the European Union (IFRSs), this announcement does not contain sufficient information to comply with IFRSs. The company expects to publish full financial statements that comply with IFRSs on 30 June 2009.

The consolidated financial information set out above does not constitute statutory financial statements for the years ended 31 December 2008 or 2007 as defined in Section 240 of the Companies Act 1985. The annual statutory report for the year ended 31 December 2007 has been filed with the Registrar of Companies and that for 2008 will be filed in due course. The auditors have reported on those accounts, their reports were unqualified and did not contain statements under Section 237 (2) or (3) of the Companies Act 1985.

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 Reviews. The financial position of the group, its borrowings and borrowing facilities are described in the Financial Review. In addition note 24 to the financial statements includes the group'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 group 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 instituted measures to manage cash resources and secure appropriate levels of finance. At the date of approving these accounts the company's debt to Yorkville is £1.9 million including interest and debts to other lenders amount to £1.5 million. 

The Yorkville convertible loan is due to be repaid or converted before 31 December 2009. Of the other loans written assurance has been received from the lender of £1.175 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. The remaining loans are due for repayment by 1 June 2010 at which date the lenders gain conversion rights. 

The directors do not expect there to be a requirement to repay the loans in cash during the next 12 months. Although no formal commitment has been received discussions with Yorkville indicate that it will be possible to extend the loan or to request the conversion of loan into equity. The directors believe that arrangements to renew the loan facilities or convert debt into equity will be achievable however the Standby Equity Distribution Agreement ("SEDA") could be used to facilitate settlement of claims and repayment of loans over time.

The arrangements to issue shares for debt need the renewal of the annual resolutions to empower directors to allot shares. Appropriate resolutions will be put to the 2009 AGM together with a resolution to increase the authorised share capital. The directors are confident that shareholder consent will be obtained. 

Based upon forecasts prepared, after making enquiries and the comments made above, the directors have a reasonable expectation that the company and the group have adequate resources to meet commitments as they fall due and continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts. 

Basis of consolidation

The financial statements consolidate the accounts of Environmental Recycling Technologies plc and its non-trading subsidiary undertakings. Intercompany transactions and balances between companies are eliminated in full. 

The company has taken advantage of the exemption allowed under Section 230 of the Companies Act 1985 and has not presented its own profit and loss account in these financial statements.

2. Revenue and segment information

The revenue and loss before tax are attributable to the principal activities of the Group being the licensing of the intellectual property of the plastic Powder Impression Moulding system to generate licence fees and ongoing royalties.

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

Except for assets with a book value of £nil (2007 £272,000) held in the USA, all assets are held in the UK.

Secondary reporting of external revenue by location of customer is as follows:

 

	Year ended		Year ended
	31 December		31 December
	2008		2007
	£'000		£'000
United Kingdom	203		92
Rest of Europe	14		45
North America	872		106
	1,089		243

Revenue arises from:

 

	Year ended		Year ended
	31 December		31 December
	2008		2007
	£'000		£'000
Licence income	1,038		243
Pre-production sales	51		-
	1,089		243

 

3. Loss on operations before interest and finance

Loss on operations is stated after charging/ (crediting):

	Year ended		Year ended
	31 December 2008		31 December 2007
	£'000		£'000
Depreciation of plant and equipment	312		275
Amortisation of intangible fixed assets	894		895
Fees payable to the Company's auditor in respect of -
- Audit of the Company's annual accounts	48		52
- Tax services	7		12
- All other services	20		20
Hire of other assets - operating leases	18		18
Net (gain)/loss on foreign currency translation	(17)		(1)
Equity settled share based payments	-		6
Grant income	(262)		-

Grant income is of a revenue nature.

4. Exceptional items

	Year ended	Year ended
	31 December 2008	31 December 2007
	£'000	£'000
Legal and settlement costs	642	545
Product development work	1,082	631
	1,724	1,176

The legal and settlement costs are associated with the claim from a former employee in Kyrgyzstan and settlement costs of a legal dispute in Asia. The product development work relates to fulfilling contractual obligations for product development for Mediwall and pre production work for Contour.

5. Finance costs

	Year ended	Year ended
	31 December 2008	31 December 2007
	£'000	£'000
Loan interest	221	194
Bank interest	1	2
Amortisation of finance costs	202	839
Total finance costs	424	1,035

 

6. Earnings per share

		Year ended	Year ended
		31 December 2008	31 December 2007
		£'000	£'000
Numerator
Loss used for calculation of basic and diluted EPS		(3,176)	(5,690)
		Year ended	Year ended
		31 December 2008	31 December 2007
		£'000	£'000
Denominator
Weighted average number of shares used in basic and diluted EPS		270,112,435	141,959,606

At 31 December 2008, there were 22,041,785 (2007: 23,946,785) of potentially issuable shares which are anti-dilutive; such shares may become dilutive in future periods.

7. Available-for-sale financial assets

				Listed	Unlisted
				Shares	Shares	Total
Group and Company				£'000	£'000	£'000
Cost
At 1 January 2008				-	-	-
Additions				410	445	855
Net gain/(losses) transferred				-	-	-
At 31 December 2008				410	445	855
Provisions
At 1 January 2008				-	-	-
Charge for the year				-	-	-
At 31 December 2008				-	-	-
Net book value
At 31 December 2008				410	445	855
At 31 December 2007				-	-	-

During the year, 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 has paid licence fees due amounting to US$650,000 by issuing 1,083,333 shares. The Boards of LBOC and ERT agreed in December 2008 that the GTI Inc. shares be exchanged for 520,000 shares in LBOC, the exchange was on 30 March 2009. The fair value is calculated based on the closing bid prices as at the year end date.

 

					Unlisted
					Shares	Total
Group and Company					£'000	£'000
Cost
At 1 January 2007					331	331
Disposals					(331)	(331)
At 31 December 2007					-	-
Provisions
At 1 January 2007					234	234
Disposals					(234)	(234)
At 31 December 2007					-	-
Net book value
At 31 December 2007					-	-
At 31 December 2006					97	97

In 2007 the investment in Medical Waste Solutions Limited was disposed of at a value of £75,000. The investment in Value Plastic Technologies LLC was disposed of at a value of £23,393. Both these investments were sold to Environmental Polymer Technologies Limited and offset against amounts due by that company.

Company

The Company's investment in the capital of unlisted subsidiary undertakings is less than £1,000 in total and it represents:

	Nature of business	Shareholding	Incorporated
3DM Product Developments Limited	Dormant	100%	England
Camco Corporation Limited	Dormant	100%	England
Camco Investments Limited	Dormant	100%	Jersey

The total cost of these investments is £602 against which there is an impairment provision of £600.

8. Trade and other receivables

	31 December 2008	31 December 2007
Non current - due after one year	£'000	£'000
Other receivables	-	585
In 2007, other receivables were represented by the loan arising from the sale of Bedwas to Environmental Polymer Technologies Limited in November 2006. During 2008, the loan was offset against the creditor balance with EPT companies. .
Current - due within one year
Trade receivables	134	404
VAT recoverable	1	60
Other debtors and prepayments	93	73
	228	537

All receivable balances are in sterling, none were overdue and no provisions have been made. 

9. Trade and other payables - current

	31 December 2008	31 December 2007
	£'000	£'000
Trade payables	839	694
Social security and other taxes	9	13
Accruals and deferred income	376	403
	1,224	1,110

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

10. Borrowings 

	31 December 2008	31 December 2007
Current - due within one year	£'000	£'000
Short term borrowings	1,479	75
Current portion of long term borrowings	1,649	1,955
	3,128	2,030
Total borrowings	3,128	2,030

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

YA Global Investment Limited - current	1,649	1,955
Other loans	1,479	75
Total borrowings	3,128	2,030

The amounts due to YA Global Investments Limited ("Yorkville") are stated net of unamortised finance costs. This convertible loan was unsecured and denominated in Sterling. Pursuant to an agreement dated 27 March 2008 Yorkville borrowings are secured by a debenture over the entire undertaking. The loan is due for repayment on or before 31 December 2009 and interest is being charged at 12% per annum. Subject to certain conditions Yorkville may convert their loan to ordinary shares of the company. 

Other loans advanced during the year totalled £1,782,000 of which £378,000 was converted during the year into ordinary shares. These loans carry interest at rates varying from 7.5% to 15% and conversion rights into ordinary shares. 

The company has no other borrowing facilities except for the SEDA referred to in the Financial Review.

 

 

11. Provisions

	31 December 2008	31 December 2007
Legal claims	£'000	£'000
At 1 January 2008	545	-
Increase in provisions	179	545
Utilised in year	(161)	-
At 31 December 2008	563	545

Provisions cover claims for legal and settlement costs associated with a former employee in Kyrgyzstan. The provision was increased to cover further legal costs incurred during the year and interest accruing on the court judgement. Amounts paid to the former employee and legal advisors were offset against the provision. 

12. Commitments under operating leases

The Group total contracted lease payments under non-cancellable operating leases as set out below.

	Lease commitments
	31 December 2008	31 December 2007
	Motor vehicles	Motor vehicles
	£'000	£'000
Within one year	4	18

13. Related party transactions

Invoices totalling £27,746 (2007: £3,485) 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 £10,781 (2007: £4,095), which was due to the A H Brooks Partnership. 

Invoices totalling £8,333 (2007: £15,933) were received from Oxford Corporate Services Limited for recoverable expenses. This Company is controlled by Mrs N Brooks, wife of K W Brooks. The amount outstanding at the year end was £nil (2007: £2,536), which was due to Oxford Corporate Services Limited. 

Aston Hall Limited invoiced £49,288 (2007: £50,060) to the Group in respect of director's fees 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 £13,448 (2007: £5,017).

Oakridge Business Services Limited, of which Mrs A Baynham wife of R Baynham is a director, invoiced £30,000 (2007: £15,000) in the year for director's fees. The amount outstanding at the year end was £7,500 (2007: £15,000).

Philip Tyler Polymers Limited, a company that K W Brooks and R Baynham are directors of, invoiced £29,945 (2007: £7,344) to the Group in respect of support services. The amount outstanding at the year end was £14,872 (2007: £7,344). 

 

14. Share based payments 

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

		2008		2007
	Weighted		Weighted
	average		Average
	Exercise price		Exercise price
	(pence)	number	(pence)	number
Outstanding at the beginning of the year	59	3,863,000	59	4,463,000
Granted during the year	-	-	-	-
Exercised during the year	-	-	-	-
Lapsed during the year	61	(1,042,000)	58	(600,000)
	59	2,821,000	59	3,863,000

The exercise price of options outstanding at the end of the year ranged between 6p and 72p (2007: 6p and 72p) and their weighted average contractual life was 4.8 years (2007 - 6.2 years)

The weighted average share price (at the date of exercise) of options exercised during the year was nil p (2007: nil p)

The weighted average fair value of each option granted during the year was nil p (2007: nil p)

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

		2008		2007
	Weighted		Weighted
	average		Average
	Exercise price		Exercise price
	(pence)	number	(pence)	number
Outstanding at the beginning of the year	11	20,115,785	17	33,532,754
Granted during the year	-	-	4	11,912,600
Exercised during the year	8	(125,000)	3	(7,350,000)
Lapsed during the year	24	(1,770,000)	17	(17,979,569)
	7	18,220,785	11	20,115,785

The exercise price of warrants outstanding at the end of the year ranged between 2.5p and 88p (2007: 2.5p and 88p) and their weighted average contractual life was 1.6 years (2007 - 2.4 years)

The weighted average share price (at the date of exercise) of warrants exercised during the year was 8p (2007: 3p)

The weighted average fair value of each warrant granted during the year was nil p (2007: 2 p)

 

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

 

Equity-settled		2007
Option pricing model used		Black Scholes
Weighted average share price at grant date (pence)		4
Exercise price (pence)		4
Weighted average contractual life (days)		859
Equity-settled
Expected volatility		28.05%
Expected dividend growth		-
Risk-free interest rate		4.43

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.

The weighted average share price (at the date of exercise) of options exercised during the year was nil p (2007: nil p)

	2008	2007
The share based remuneration expense (note 3) comprises:	£'000	£'000
Third parties	-	6
Employees	-	-
Equity settled schemes	-	6

15. Events after balance sheet date

The Standby Equity Distribution Agreement (SEDA) with Yorkville to the value of £5 million has been extended and now expires in September 2010. The first draw down has been made against this facility. 

The company has not succeeded in overturning the original judgement obtained by a former employee of the Group in relation to the compensation claim which amounts to £0.56 million and is provided for in the accounts (see note 11) and the claim is now subject to mediation. 

ENDFR EANKNAEENEFE

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Related Shares:

ENRT.L