Mesa Laboratories Inc 8-K/A, filed Jan 15, 2020
Mesa Laboratories Inc /Co/ (MLAB)
About this 8-K/A
Mesa Laboratories Inc filed this 8-K/A on January 15, 2020, reporting on events of October 30, 2019.
Items reported
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 30, 2019
MESA LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
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COLORADO |
0-11740 (Commission File Number) |
84-0872291 |
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12100 WEST SIXTH AVENUE, LAKEWOOD, COLORADO |
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80228 |
Registrant’s telephone number, including area code: 303-987-8000
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered under Section 12(b) of the Act:
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Title of each class
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Trading Symbol
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Name of each exchange on which registered
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Common Stock, no par value |
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MLAB |
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The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
EXPLANATORY NOTE
As previously disclosed in its Current Report on Form 8-K filed with the Securities and Exchange Commission on November 4, 2019 (the “Original 8-K”), Mesa Laboratories, Inc. (the “Company” or “Mesa Labs”) and its wholly-owned subsidiary MLI Sweden HoldCo AB (formerly known as Goldcup 19534 AB) purchased 100% of the outstanding shares of Gyros Protein Technologies Holding AB (“GPT”) for a cash purchase price of $180.689 million pursuant to a Sale and Purchase Agreement dated October 31, 2019. This Current Report on Form 8-K/A amends and supplements the Original 8-K to include the financial statements and pro forma financial information required under Item 9.01 in connection with the Company’s acquisition of GPT.
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ITEM 9.01 |
FINANCIAL STATEMENTS AND EXHIBITS. |
The Company is filing this amendment to the Original 8-K to provide (i) (A) the unaudited pro forma condensed combined consolidated balance sheets of Mesa Labs as of September 30, 2019, (B) the unaudited pro forma condensed combined consolidated statements of operations of the Company for the year ended March 31, 2019, (C) the unaudited pro forma condensed combined consolidated statements of income of the Company for the six months ended September 30, 2019, (D) the related notes to unaudited pro forma condensed combined consolidated financial statements; (ii) the audited financial statements of GPT, which comprise (A) the balance sheets as of December 31, 2018 and December 31, 2017; (B) the related statements of income, comprehensive income, stockholders’ equity, and cash flows for the years then ended, and (C) the related notes to the financial statements; and (iii) the unaudited financial statements of GPT, which comprise (A) the unaudited balance sheets as of June 30, 2019; (B) the related unaudited statements of income, comprehensive income, stockholders’ equity, and cash flows for the six months ended June 30, 2019 and 2018, respectively; and (C) the related notes to the financial statements.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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DATE: January 15, 2020 |
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Mesa Laboratories, Inc. |
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(Registrant) |
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BY: |
/s/ Gary M. Owens |
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Gary M. Owens |
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President and Chief Executive Officer |
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITOR
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-233042 and 333-225451) and Form S-8 (Nos. 333-206551, 333-186893 and 333-152210) of Mesa Laboratories, Inc. of our report dated January 14, 2020 relating to the financial statements of Gyros Protein Technologies Holding AB, which appears in this Current Report on Form 8-K/A.
/s/ Plante & Moran, PLLC
Denver, Colorado
January 15, 2020
Exhibit 99.2
UNAUDITED PRO FORMA FINANCIAL INFORMATION
On October 31, 2019, Mesa Laboratories, Inc. (“Mesa” or the “Company”) completed the acquisition of Gyros Protein Technologies Holding AB (“GPT”) (the “Acquisition”). The following unaudited pro forma condensed combined financial information (the “pro formas”) is based on the historical consolidated financial statements of Mesa and the historical consolidated financial statements of GPT, and has been prepared to reflect the Acquisition.
The unaudited pro forma Condensed Combined Statements of Operations for the six months ended September 30, 2019 (the “FY 2020 pro forma statement of earnings”) and for the year ended March 31, 2019 (the “FY 2019 pro forma statement of earnings”) assume that the Acquisition was completed on April 1, 2018. The unaudited pro forma condensed combined balance sheet (the “pro forma balance sheet”) as of September 30, 2019 is based on the assumption that the Acquisition occurred on that day. Pro forma adjustments, which are discussed in the notes below, are reflected in the pro formas based on items which Mesa’s management believes to be reasonable, give effect to the transaction, and are factually supportable.
The pro formas are presented for illustrative purposes only and do not necessarily reflect the results of operations or the financial position of Mesa that actually would have resulted had the Acquisition occurred at the dates indicated, nor project the results of operations or financial position of Mesa for any future date or period. No effect has been given in the pro forma financial statements for synergistic benefits that may be realized through the combination or costs that may be incurred in integrating operations. As a result, the actual amounts recorded in the consolidated financial statements of Mesa will differ from the amounts reflected in the unaudited pro forma financial statements, and the differences may be material.
The unaudited pro forma financial information has been compiled from the following sources with the following unaudited adjustments:
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Financial information for Mesa in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) has been extracted without adjustment from: (i) Mesa’s unaudited Condensed Consolidated Balance Sheets as of September 30, 2019 contained in Form 10-Q filed with the Securities and Exchange Commission (“SEC”) on November 6, 2019, as amended; (ii) Mesa’s audited Consolidated Statements of Operations for the fiscal year ended March 31, 2019 contained in Item 8. of Mesa’s 2019 Annual Report on Form 10-K filed with the SEC on June 3, 2019, as amended; and (iii) Mesa’s Condensed Consolidated Statements of Operations for the six months ended September 30, 2019 contained in Mesa's Quarterly Report on Form 10-Q filed with the SEC on November 6, 2019, as amended. |
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Financial information for GPT in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) has been extracted from the GPT audited consolidated statement of operations for the year ended December 31, 2018 contained in GPT’s audited 2018 consolidated financial statements, included in this Form 8-K/A. Such financial information has been translated into U.S. dollars using the methodology and the exchange rates noted below. |
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GPT financial information as of and for the six month period ended June 30, 2019 is from unaudited interim financial information derived from GPT’s underlying books and records maintained in accordance with IFRS as issued by the IASB. |
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GPT’s fiscal year 2018 represents the 12 months January 1, 2018 through December 31, 2018, whereas Mesa’s fiscal year 2019 represents the twelve months April 1, 2018 through March 31, 2019. Since the year end date of the acquiree is within 93 days of Mesa, the financial statements have been combined together without any recasting of periods. |
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Adjustments have been made to convert the GPT IFRS financial information to U.S. GAAP and to align those policies with Mesa’s U.S. GAAP accounting policies. The basis for these adjustments is explained in the notes to the information accompanying the tables. |
Adjustments were also made to translate GPT’s financial statements from Swedish krona (“TSEK” or “SEK”) to U.S. dollars (“USD” or “$”) based on applicable historical exchange rates, which may differ from future exchange rates. These adjustments reflect Mesa’s best estimates based upon the information available to date and are preliminary and subject to change once more detailed information is obtained.
The pro forma adjustments are based upon the best available information and certain assumptions that Mesa believes to be reasonable. Further, these adjustments could materially change as the allocation of the purchase price for GPT has not been finalized. Accordingly, there can be no assurance that the final allocation of the purchase price will not differ materially from the preliminary allocation reflected in the pro formas.
The Acquisition will be accounted for as a business combination using the acquisition method of accounting in conformity with U.S. GAAP. Under this method, the assets acquired and liabilities assumed have been recorded based on preliminary estimates of fair value.
The following pro forma financial statements should be read in conjunction with the accompanying Notes to the Unaudited Pro Forma Financial Information, the Consolidated Financial Statements of Mesa for the fiscal year ended March 31, 2019 and the notes relating thereto, the Condensed Consolidated Financial Statements of Mesa for the six months ended September 30, 2019 and the notes relating thereto, and the consolidated financial statements of GPT for the year ended December 31, 2018 and the notes relating thereto, included in this Form 8-K/A.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF SEPTEMBER 30, 2019
(IN THOUSANDS)
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Mesa |
GPT IFRS |
GPT IFRS |
U.S. GAAP |
Pro Forma |
Mesa |
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Historical |
Historical (SEK) |
Historical (USD) |
Adjustments (3(a)) |
Note |
Adjustments |
Note |
Pro Forma |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ | 245,443 |
SEK |
49,135 | $ | 5,222 | $ | $ | (180,689 | ) |
4(a) |
$ | 69,976 | ||||||||||||
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Accounts receivable, net |
12,228 | 57,677 | 6,130 | 18,358 | |||||||||||||||||||||
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Inventories, net |
6,848 | 36,801 | 3,911 | 13,275 |
4(b) |
24,034 | |||||||||||||||||||
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Prepaid income taxes |
2,896 | 1,604 | 170 | 3,066 | |||||||||||||||||||||
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Prepaid expenses and other |
3,313 | 17,882 | 1,900 | 5,213 | |||||||||||||||||||||
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Total current assets |
270,728 | 163,099 | 17,333 | (167,414 | ) | 120,647 | |||||||||||||||||||
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Property, plant and equipment, net |
21,731 | 6,834 | 726 | 22,457 | |||||||||||||||||||||
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Deferred taxes |
219 | - | -- | 219 | |||||||||||||||||||||
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Other assets |
1,173 | 16,674 | 1,772 | 2,945 | |||||||||||||||||||||
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Intangibles, net |
31,527 | 158,233 | 16,817 | (997 | ) |
3(b) |
57,029 |
4(c) |
87,559 | ||||||||||||||||
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3(c) |
(12,153 | ) |
4(i) |
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Goodwill |
67,087 | - | -- | 4,876 |
3(c) |
107,007 |
4(d) |
174,094 | |||||||||||||||||
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4(i) |
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Total assets |
$ | 392,465 |
SEK |
344,840 | $ | 36,648 | $ | (785 | ) | $ | (20,407 | ) | $ | 407,921 | |||||||||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
$ | 2,339 |
SEK |
8,292 | $ | 881 | $ | $ | $ | 3,220 | |||||||||||||||
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Accrued salaries and payroll taxes |
5,237 | 15,885 | 1,688 | 6,925 | |||||||||||||||||||||
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Current portion of long-term debt |
-- | 57,334 | 6,093 | (6,093 | ) |
4(f) |
-- | ||||||||||||||||||
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Unearned revenues |
3,980 | 23,843 | 2,534 | 6,514 | |||||||||||||||||||||
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Current portion of contingent consideration |
512 | -- | -- | 512 | |||||||||||||||||||||
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Other accrued expenses |
4,673 | 53,714 | 5,709 | 794 |
4(e) |
11,176 | |||||||||||||||||||
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Total current liabilities |
16,741 | 159,068 | 16,905 | (5,299 | ) | 28,347 | |||||||||||||||||||
| Deferred income taxes | 8,400 | 32,795 | 3,485 | (3,265 | ) | 3(d) | 13,752 | 4(j) | 22,372 | ||||||||||||||||
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Convertible senior notes, net of discounts and debt issuance costs |
137,682 | -- | -- | 137,682 | |||||||||||||||||||||
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Other long-term liabilities |
485 | 10,905 | 1,159 | 1,644 | |||||||||||||||||||||
| Total liabilities | 163,308 | 202,768 | 21,549 | (3,265 | ) | 8,453 | 190,045 | ||||||||||||||||||
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Stockholders’ equity: |
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Common stock |
152,021 | 327,852 | 34,843 | (34,843 | ) |
4(h) |
153,007 | ||||||||||||||||||
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4(g) |
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Retained earnings |
79,641 | (209,389 | ) | (22,253 | ) | (997 | ) |
3(b) |
23,038 |
4(h) |
67,374 | ||||||||||||||
| 212 |
3(c) |
(986 | ) |
4(g) |
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4(e) |
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| 3,265 | 3(d) | (13,752 | ) | 4(j) | |||||||||||||||||||||
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Accumulated other comprehensive (loss) |
(2,505 | ) | 23,609 | 2,509 | (2,509 | ) |
4(h) |
(2,505 | ) | ||||||||||||||||
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Total stockholders’ equity |
229,157 | 142,072 | 15,099 | 2,480 | (28,860 | ) | 217,876 | ||||||||||||||||||
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Total liabilities and stockholders’ equity |
$ | 392,465 |
SEK |
344,840 | $ | 36,648 | $ | (785 | ) | $ | (20,407 | ) | $ | 407,921 | |||||||||||
See Notes to Unaudited Pro Forma Condensed Combined Financial Information
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 2019
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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Mesa |
GPT IFRS |
GPT IFRS |
U.S. GAAP |
Pro Forma |
Mesa |
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Historical |
Historical (SEK) |
Historical (USD) |
Adjustments (3(a)) |
Note |
Adjustments |
Note |
Pro Forma |
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Revenues |
$ | 103,135 |
SEK 275,563 |
$ | 31,708 | 134,843 | ||||||||||||||||||||
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Cost of revenues |
42,219 | 96,887 | 11,148 | 53,367 | ||||||||||||||||||||||
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Gross profit |
60,916 | 178,676 | 20,560 | 81,476 | ||||||||||||||||||||||
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Operating expenses: |
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Selling |
8,260 | 98,307 | 11,312 | 276 |
4(g) |
19,848 | ||||||||||||||||||||
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General and administrative |
31,295 | 21,876 | 2,517 | 416 |
4(g) |
34,228 | ||||||||||||||||||||
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Research and development |
3,506 | 48,196 | 5,546 | (863 | ) |
3(b) |
8,189 | |||||||||||||||||||
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Impairment loss on goodwill and long-lived assets |
4,774 | 177,851 | 20,464 | 212 |
3(c) |
25,450 | ||||||||||||||||||||
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Legal settlement |
3,300 | -- | -- | 3,300 | ||||||||||||||||||||||
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Total operating expenses |
51,135 | 346,230 | 39,839 | (651 | ) | 692 | 91,015 | |||||||||||||||||||
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Operating income (loss) |
9,781 | (167,554 | ) | (19,279 | ) | 651 | (692 | ) | (9,539 | ) | ||||||||||||||||
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Other expense (income), net |
1,158 | 1,478 | 170 | (160 | ) |
4(f) |
1,168 | |||||||||||||||||||
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Earnings (loss) before income taxes |
8,623 | (169,032 | ) | (19,449 | ) | 651 | (532 | ) | (10,707 | ) | ||||||||||||||||
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Income tax expense (benefit) |
1,139 | (7,607 | ) | (875 | ) | 176 |
3(d) |
917 |
4(j) |
1,357 | ||||||||||||||||
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Net income (loss) |
$ | 7,484 |
SEK (161,425) |
$ | (18,574 | ) | 475 | $ | (1,449 | ) | (12,064 | ) | ||||||||||||||
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Earnings (loss) per share: |
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Basic |
$ | 1.95 | $ | (3.14 | ) | |||||||||||||||||||||
| Diluted | $ | 1.86 | 4(k) | (3.14 | ) | |||||||||||||||||||||
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Weighted-average common shares outstanding: |
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Basic |
3,839 | 3,839 | ||||||||||||||||||||||||
| Diluted | 4,033 | 4(k) | 3,839 | |||||||||||||||||||||||
See Notes to Unaudited Pro Forma Condensed Combined Financial Information
UNAUDITED PRO FORMA INCOME STATEMENT
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2019
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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Mesa |
GPT IFRS |
GPT IFRS |
U.S. GAAP |
Pro Forma |
Mesa |
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Historical |
Historical (SEK) |
Historical (USD) |
Adjustments (3(a)) |
Note |
Adjustments |
Note |
Pro Forma |
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Revenues |
$ | 51,824 |
SEK 149,639 |
$ | 16,073 | $ | 67,897 | |||||||||||||||||||
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Cost of revenues |
20,209 | 50,158 | 5,387 | 25,596 | ||||||||||||||||||||||
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Gross profit |
31,615 | 99,481 | 10,686 | -- | -- | 42,301 | ||||||||||||||||||||
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Operating expenses: |
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Selling |
4,482 | 49,644 | 5,332 | 138 |
4(g) |
9,952 | ||||||||||||||||||||
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General and administrative |
15,223 | 49,091 | 5,273 | (98 | ) |
4(e) |
20,554 | |||||||||||||||||||
| 156 |
4(g) |
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Research and development |
1,934 | 30,346 | 3,259 | (403 | ) |
3(b) |
4,718 | |||||||||||||||||||
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3(c) |
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Legal settlement |
-- | -- | -- | -- | ||||||||||||||||||||||
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Total operating expenses |
21,639 | 129,081 | 13,864 | (475 | ) | 196 | 35,224 | |||||||||||||||||||
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Operating income (loss) |
9,976 | (29,600 | ) | (3,178 | ) | 475 | (196 | ) | 7,077 | |||||||||||||||||
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Other expense (income), net |
952 | 1,440 | 155 | (83 | ) |
4(f) |
1,024 | |||||||||||||||||||
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Earnings (loss) before income taxes |
9,024 | (31,040 | ) | (3,333 | ) | 475 | (113 | ) | 6,053 | |||||||||||||||||
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Income tax expense (benefit) |
1,365 | (2,918 | ) | (313 | ) | 128 |
3(d) |
458 |
4(j) |
1,638 | ||||||||||||||||
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Net income (loss) |
$ | 7,659 |
SEK (28,122) |
$ | (3,020 | ) | 347 | (571 | ) | $ | 4,415 | |||||||||||||||
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Earnings per share: |
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Basic |
$ | 1.90 | $ | 1.10 | ||||||||||||||||||||||
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Diluted |
1.82 | 1.05 | ||||||||||||||||||||||||
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Weighted-average common shares outstanding: |
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Basic |
4,029 | 4,029 | ||||||||||||||||||||||||
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Diluted |
4,205 | 4,205 | ||||||||||||||||||||||||
See Notes to Unaudited Pro Forma Condensed Combined Financial Information
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
Note 1. Basis of Presentation
On October 31, 2019, Mesa completed the acquisition of all of the outstanding equity securities of Gyros Protein Technologies Holding AB (“GPT”) for a cash purchase price of $180.689 million (the “Acquisition”).
The unaudited pro forma financial information has been compiled from historical financial statements of Mesa and GPT, prepared in accordance with U.S. GAAP and IFRS, respectively, and reflects the Acquisition. The pro formas are presented for illustrative purposes only and do not necessarily reflect the results of operations or the financial position of Mesa that actually would have resulted had the Acquisition occurred on the dates indicated or project the results of operations or financial position of Mesa for any future dates or periods. The fiscal year 2019 and fiscal year 2020 pro forma statements of earnings assume the Acquisition was completed on April 1, 2018. The pro forma balance sheet as of September 30, 2019 is based on the assumption that the Acquisition occurred on that day.
Pro forma adjustments reflected in the pro forma balance sheet are based on items that are factually supportable and directly attributable to the Acquisition. Pro forma adjustments reflected in the pro forma statements of earnings are based on items that are factually supportable, which are directly attributable to the Acquisition, and which are expected to have a continuing impact on Mesa’s results of operations and/or financial position. Any nonrecurring items directly attributable to the Acquisition are included in the pro forma balance sheet but not in the pro forma statements of earnings. In contrast, any nonrecurring items that were already included in Mesa’s or GPT’s historical consolidated financial statements that are not directly related to the Acquisition have not been eliminated. The pro formas do not reflect the cost of any integration activities or benefits from the Acquisition including potential synergies that may be generated in future periods.
Unless otherwise indicated, information in this report is presented in U.S. dollars (“USD” or “$”).
GPT’s historical consolidated financial statements (“GPT’s financial statements”) were prepared in accordance with IFRS as approved by the IASB, which differs in certain respects from U.S. GAAP. Adjustments were made to GPT’s financial statements to convert them from IFRS to U.S. GAAP and to Mesa’s existing accounting presentation after evaluating potential areas of differences. In addition, reclassifications have been made to align GPT’s financial statement presentation to Mesa’s financial statement presentation, see Note 3.
Mesa follows a fiscal reporting calendar from April 1 through March 31 of each calendar year. Mesa’s fiscal year 2019 results refer to the year ended March 31, 2019 and Mesa’s fiscal first half of fiscal year 2020 results refer to the six months ended September 30, 2019. GPT follows a calendar year reporting calendar. GPT’s fiscal year 2018 results refer to the 12 months ended December 31, 2018 and GPT’s fiscal first half of 2019 results refers to the six months ended June 30, 2019. The unaudited pro forma financial information should be read in conjunction with the underlying financial information from which it was extracted: (a) the audited consolidated financial statements of Mesa as of and for the year ended March 31, 2019 and the Quarterly Report on Form 10-Q as of the six months ended September 30, 2019, prepared in accordance with U.S. GAAP; and (b) the audited consolidated financial statements of GPT as of and for the year ended December 31, 2018, and the unaudited consolidated financial statements as of and for the period ended June 30, 2019, prepared in accordance with IFRS per the IASB.
The historical financial information of Mesa has been derived from the audited consolidated financial statements of Mesa contained in its Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on June 3, 2019, as amended; and the Quarterly Report on Form 10-Q filed with the SEC on November 6, 2019, as amended. The historical annual financial information for GPT has been derived from the audited consolidated financial statements of GPT for the year ended December 31, 2018 contained in this Form 8-K/A and 2019 unaudited interim financial information. GPT financial information for January 1, 2019 through June 30, 2019 is from unaudited interim financial information derived from GPT's underlying books and records. The Acquisition has been treated as an acquisition, with Mesa as the acquirer and GPT as the acquiree. The FY 2020 Pro Forma Statement of Earnings and the FY 2019 Pro Forma Statement of Earnings assume that the Acquisition was completed on April 1, 2018. The pro forma balance sheet as of September 30, 2019 is based on the assumption that the Acquisition occurred on that day.
Mesa has used the following historical exchange rates to translate GPT’s financial statements and calculate certain adjustments to the pro forma financial statements from Swedish krona to U.S. dollars:
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Average daily closing exchange rate for the six months ended June 30, 2019 |
U.S. $0.12 / Kr1 |
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Average daily closing exchange rate for the year ended December 31, 2018 |
U.S. $0.11 / Kr1 |
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Closing exchange rate as of June 30, 2019 |
U.S. $0.11 / Kr1 |
These exchange rates may differ from future exchange rates which would have an impact on the pro forma financial information and would also impact purchase accounting.
The unaudited pro forma financial information has been compiled in a manner consistent with the accounting policies adopted by Mesa. These accounting policies differ in certain respects from the historical GPT accounting policies. Adjustments presented reflect Mesa’s best estimates based upon the information currently available to Mesa, and could be subject to change once more detailed information is obtained.
Note 2. Estimated consideration and preliminary purchase price allocation
Mesa accounted for the Acquisition as the purchase of a business under U.S. GAAP. Under the acquisition method of accounting, the assets of GPT will be recorded as of the acquisition date, at their respective fair values, and consolidated with those of Mesa. The fair value of the net tangible assets acquired is estimated to be approximately $39,753, the fair value of the intangible assets acquired is estimated to be approximately $57,029, and the residual goodwill is estimated to be approximately $107,007. The estimated consideration and preliminary purchase price information has been prepared using a preliminary valuation. The final purchase price allocation will be completed when all information is available, but definitely within one year of the closing of the transaction. The preparation of the valuation required the use of significant assumptions and estimates. Critical estimates included, but were not limited to, future expected cash flows, including projected revenues and expenses, and the applicable discount rates. These estimates were based on assumptions that Mesa believes to be reasonable. However, actual results may differ from these estimates. Cash consideration paid to the seller in the transaction was $180,689.
Acquisition related costs are not included as a component of consideration transferred, but are expensed in the periods in which the costs are incurred.
Mesa has performed a preliminary valuation analysis of the fair market value of GPT’s assets to be acquired and liabilities to be assumed. Using the total consideration for the Acquisition, Mesa has estimated the allocations to such assets and liabilities. The following table summarizes the allocation of the preliminary purchase price as of October 31, 2019 (amounts in thousands):
|
Fair Value at October 31, 2019 |
||||
|
Cash and cash equivalents |
$ | 4,767 | ||
|
Accounts receivable, net |
13,717 | |||
|
Inventories, net |
17,839 | |||
|
Prepaid expenses and other |
1,746 | |||
|
Property, plant and equipment, net |
661 | |||
| Other assets | 1,023 | |||
| Customer Relationships | 46,832 | |||
|
Trade Name |
2,321 | |||
|
Non-Compete Agreements |
156 | |||
| Acquired Technology | 7,720 | |||
|
Goodwill |
107,007 | |||
|
Total Assets acquired |
$ | 203,789 | ||
|
Accounts payable |
613 | |||
|
Other accrued expenses |
15,832 | |||
|
Other S/T Liabilities |
613 | |||
|
Unearned revenues |
2,141 | |||
| Other long term liabilities | 405 | |||
|
Deferred taxes |
3,496 | |||
|
Total liabilities assumed |
$ | 23,100 | ||
|
Total closing amount, net of cash acquired |
$ | 175,922 | ||
This preliminary purchase price allocation has been used to prepare pro forma adjustments in the pro forma balance sheet and income statement and is subject to adjustment as purchase accounting is finalized. The final purchase price allocation will be determined when Mesa has completed the detailed valuations and necessary calculations. The final allocation could differ materially from the preliminary allocation used in the pro forma adjustments. The final allocation may include, but not be limited to: (1) changes in fair values of property, plant and equipment, (2) changes in allocations to intangible assets such as trade names, technology and customer relationships as well as goodwill (3) changes to inventory and (4) other changes to assets and liabilities.
Note 3. U.S. GAAP Adjustments
Adjustments made to align GPT’s IFRS financial information with Mesa’s U.S. GAAP accounting policies are as follows:
(a) The classification of certain items presented by GPT under IFRS has been modified in order to align with the presentation used by Mesa under U.S. GAAP. A summary of these changes is as follows:
|
Presentation in GPT's IFRS Financial Statements |
Amount at June 30, 2019 (SEK, 000's) |
Presentation in Unaudited Pro Forma Condensed Combined Balance Sheet |
||
|
Current Assets |
||||
|
Trade receivables |
57,677 |
Accounts receivable, net |
||
|
Tax assets |
1,604 |
Prepaid income taxes |
||
|
Other current receivables |
5,925 |
Prepaid expenses and other |
||
|
Current Liabilities |
||||
|
Provision for product warranties |
968 |
Other accrued expenses |
||
|
Trade payables |
8,292 |
Accounts payable |
||
|
Other current liabilities |
7,132 |
Other accrued expenses |
||
|
Other current liabilities |
57,334 |
Current portion of long term debt |
||
| Other current liabilities | 5,769 | Other accrued expenses | ||
|
Accrued expenses and deferred income |
15,885 |
Accrued salaries and payroll taxes |
||
|
Accrued expenses and deferred income |
9,471 |
Other accrued expenses |
||
|
Accrued expenses and deferred income |
23,843 |
Unearned revenues |
||
| Accrued expenses and deferred income | 30,374 | Other accrued expenses |
|
Presentation in GPT's IFRS Statement of Operations |
GPT Six months ended June 30, 2019 (SEK, 000's) |
GPT Year ended December 31, 2018 (SEK, 000's) |
Presentation in Unaudited Pro Forma Condensed Combined Statement of Operations |
|||
| Other operating income and (expenses) | (923) | (2,433) | Other expense (income), net | |||
| Financial Income | (1) | (30) | Other expense (income), net | |||
| Financial Expenses | 2,364 | 3,941 | Other expense (income), net |
(b) Development costs may be capitalized as an intangible asset under IFRS if a company has the intention and technical and financial resources to complete the product for use or sale. GPT capitalized development costs for two projects prior to April 1, 2018. The adjustment presented eliminates the net asset from the pro forma balance sheet and the related amortization expense from the statement of operations on both the 2020 pro forma statement of earnings and the FY 2019 pro forma statement of earnings.
(c) The assets of one of GPT's reporting units, Protein Technologies, Inc., were determined to not be recoverable during the year ended December 31, 2018, and were written down to fair value. IFRS requires that an impairment loss is measured at the cash generating unit (“CGU”) level, and stipulates that if the recoverable amount of an individual asset is not determinable, an impairment loss first reduces the carrying amount of goodwill associated with the CGU and then the other assets of the unit are written down on a pro rata basis using the relative carrying amount of the assets. The calculation of impairment under US GAAP requires the carrying amount of assets and liabilities that are included in the asset group to be adjusted in accordance with other GAAP prior to testing the asset group for recoverability. Goodwill is tested for impairment only after the carrying amounts of the other assets of the reporting unit, including the long-lived assets covered by accounting standards codification 360, have been tested for impairment under other applicable accounting guidance.
(d) Represents the tax impact of the IFRS adjustments noted. A blended rate of 27% was applied to the adjustments.
Note 4. Pro Forma Adjustments
This note should be read in conjunction with Notes 1 and 2. Adjustments included in the pro forma adjustments column of the pro forma condensed combined consolidated statement of operations and the pro forma condensed combined consolidated balance sheet include the following, as indicated in the “Notes” column thereto (thousands):
|
(a) |
An adjustment to cash of $180,689 for the cash consideration paid to the seller in the transaction. |
| (b) |
Inventory adjustment represents the estimated step-up of GPT’s inventory by $13,275 from the carrying value. The fair value calculation is preliminary and subject to change. After the closing of the Acquisition, the step-up in inventory fair value of $13,275 will increase cost of sales as the inventory is sold, which is expected to occur within one year. This increase to cost of sales is not reflected in the pro forma condensed combined statements of operations because it does not have a continuing impact. |
|
(c) |
Reflects the adjustment of intangible assets to be acquired by Mesa to their estimated fair values of $57,029, with a continuing quarterly amortization impact of $1,429 and an annual amortization impact of $5,718. Customer relationships, trade names, and acquired technology are expected to be amortized over 10 years and non-compete agreements are currently expected to be amortized over five years. As part of the valuation analysis, Mesa identified intangible assets, including developed technology, customer relationships, trade names, and a non-compete. The fair value of identifiable intangible assets is determined primarily using the “income approach,” which requires a forecast of all the expected future cash flows associated with the identified intangible assets. |
|
(d) |
Reflects adjustment to record goodwill associated with the Acquisition. |
|
(e) |
To adjust for estimated transaction costs in connection with the Acquisition. Transaction costs incurred through September 30, 2019 totaling approximately $98 have been reflected as an adjustment to the statement of income for the six months ended September 30, 2019. $794 of estimated transaction costs yet to be incurred in the historical financial statements as of September 30, 2019 are reflected in the consolidated balance sheet as an adjustment to accrued liabilities and accumulated deficit; these items have not been reflected in the income statement as they do not have a continuing impact. |
| (f) | As the external debt previously held by GPT was repaid as part of the Acquisition, Mesa removed the related historical interest expense in the amounts of $160 and $83 for the year ended March 31, 2019 and the six months ended September 30, 2019, respectively. Additionally, removed the debt balance amounting to $6,093 from current portion of long term debt on the balance sheet. |
|
(g) |
This pro forma adjustment represents a stock-based compensation expense increase of $138 to selling and $156 to general and administrative costs for the six months ended September 30, 2019, and $276 to selling and $416 to general and administrative costs for the year ended March 31, 2019, related to time and performance based performance stock units issued to seven key GPT employees as part of the Acquisition. The fair value of the awards was $240.35, and the expense will be recognized over post-combination service periods ranging from 16 months to four years assuming the service and performance conditions are achieved. |
|
(h) |
Represents the elimination of the historical equity of GPT of $14,314. |
| (i) | To eliminate the historical GPT unamortized intangibles and goodwill. |
|
(j) |
Represents the tax effect of pro forma adjustments made as a result of the Acquisition, based on an estimated tax rate of 24.5%. The resulting tax liability of $13,752 million is an increase to deferred tax liability and retained earnings. For the six months ended September 30, 2019, and for the year ended March 31, 2019, this adjustment represents a tax benefit of $458 and $917, respectively. |
| (k) |
Since the pro forma adjustments result in a net loss for Mesa Pro Forma, weighted average diluted shares outstanding are equal to weighted average shares outstanding. Additionally, diluted loss per share is equal to basic loss per share. |
Exhibit 99.3
Gyros Protein Technologies Holding AB
Consolidated Financial Statements
for the financial years 2018 and 2017
The Board of Directors and Chief Executive Officer of
Gyros Protein Technologies Holding AB
hereby present the
Consolidated Financial Statements
for the financial years January 1 – December 31 2018 and 2017
|
Contents: |
page |
|
| Independent Auditor's Report | 1 | |
|
Consolidated Income Statement |
2 |
|
|
Consolidated Statement of Comprehensive Income |
2 |
|
|
Consolidated Balance Sheet |
3 |
|
|
Consolidated Statement of Changes in Equity |
5 |
|
|
Consolidated Cash Flow Statement |
6 |
|
|
Notes |
7 |
|
Unless otherwise stated, all amounts are thousands of Swedish kronor (TSEK).
Independent Auditor's Report
To the Board of Directors
Gyros Protein Technologies Holding AB
We have audited the accompanying consolidated financial statements of Gyros Protein Technologies Holding AB and its subsidiaries (the "Company"), which comprise the consolidated balance sheet as of December 31, 2018 and 2017 and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IASB"); this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Gyros Protein Technologies Holding AB and its subsidiaries as of December 31, 2018 and 2017 and the results of their operations and their cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the IASB.
/s/ Plante & Moran, PLLC
January 14, 2020
Denver, Colorado
Consolidated Income Statement
|
(TSEK) |
Note |
2018 |
2017 |
|
Income Statement |
|||
|
Revenues |
5 |
275,563 |
234,805 |
|
Cost of goods and services sold |
-96,887 |
-78,642 |
|
|
Gross Profit |
178,676 |
156,163 |
|
|
Operating Expenses |
7-12 |
||
|
Selling expenses |
-98,307 |
-86,431 |
|
|
Administrative expenses |
-21,876 |
-21,009 |
|
|
Research and development expenses |
-48,196 |
-53,092 |
|
|
Other operating income and expenses |
12 |
2,432 |
-1,348 |
|
Impairment of intangibles |
3, 10 |
-177,851 |
- |
|
Total operating expenses |
-343,798 |
-161,880 |
|
|
Operating Profit/(Loss) |
-165,122 |
-5,717 |
|
|
Profit/loss from financial investments |
|||
|
Financial income |
13 |
31 |
46 |
|
Financial expenses |
14 |
-3,941 |
-4,739 |
|
Net loss from financial investments |
-3,910 |
-4,693 |
|
|
Profit/-Loss before tax |
-169,032 |
-10,410 |
|
|
Income tax |
15 |
7,607 |
21,544 |
|
Net profit/loss for the year |
-161,425 |
11,134 |
Consolidated Statement of Comprehensive Income
|
(TSEK) |
2018 |
2017 |
|
|
Net Income/(Loss) for the year |
-161,425 |
11,134 |
|
|
Other comprehensive income |
|||
|
Translation differences in the translation of foreign subsidiaries |
20,608 |
-26,779 |
|
|
Comprehensive income for the year |
-140,818 |
-15,645 |
|
Consolidated Balance Sheet
|
(TSEK) |
Note |
31-Dec |
31-Dec |
|
Assets |
|
2018 |
2017 |
|
Non-current assets |
|||
|
Intangible assets |
|||
|
Capitalized development costs |
16 |
9,379 |
16,882 |
|
Licenses |
17 |
2,425 |
|
|
Purchased software |
18 |
277 |
639 |
|
Capitalized patents |
19 |
770 |
928 |
|
Technology |
20 |
27,285 |
27,754 |
|
Customer relationships |
21 |
58,947 |
59,960 |
|
Trademark and Tradename |
22 |
59,381 |
55,843 |
|
Goodwill |
23 |
- |
159,889 |
|
158,464 |
321,895 |
||
|
Property, plant and equipment |
|||
|
Assets in progress |
24 |
1,297 |
- |
|
Machinery and other production equipment |
25 |
2,046 |
3,354 |
|
Equipment |
26 |
3,347 |
3,486 |
|
Improvements to leased property |
27 |
304 |
453 |
|
Leasing/demo instruments |
28 |
1,019 |
1,781 |
|
8,013 |
9,074 |
||
|
Total non-current assets |
|
166,477 |
330,969 |
|
Current assets |
|||
|
Inventories |
29 |
35,046 |
30,227 |
|
Trade receivables |
57,940 |
56,843 |
|
|
Tax assets |
1,901 |
1,228 |
|
|
Other current receivables |
1,155 |
40 |
|
|
Prepaid expenses and accrued income |
30 |
9,869 |
10,905 |
|
70,865 |
69,016 |
||
|
Cash and cash equivalents |
59,518 |
36,824 |
|
|
Total current assets |
165,429 |
136,067 |
|
|
Total Assets |
|
331,906 |
467,036 |
|
Equity and Liabilities |
Note |
31-Dec |
31-Dec |
|
Equity |
|
2018 |
2017 |
|
Share capital |
31 |
700 |
700 |
|
Other contributed capital |
798,700 |
796,903 |
|
|
Reserves |
24,697 |
4,089 |
|
|
Profits/loss brought forward |
-658,846 |
-497,421 |
|
|
Total Equity |
|
165,251 |
304,271 |
|
Other non-current liabilities |
|||
|
Deferred tax liabilities |
15,32 |
32,247 |
33,233 |
|
Other non-current liabilities |
33 |
715 |
62,200 |
|
Total non-current liabilities |
32,962 |
95,433 |
|
|
Current liabilities |
|||
|
Provisions for product warranties |
34 |
1,027 |
2,203 |
|
Trade payables |
5,178 |
3,574 |
|
|
Other current liabilities |
35 |
76,532 |
22,734 |
|
Accrued expenses and deferred income |
36 |
50,956 |
38,821 |
|
Total current liabilities |
|
133,693 |
67,332 |
|
Total Equity and Liabilities |
331,906 |
467,036 |
Consolidated Statement of Changes in Equity
|
(TSEK) |
Note |
Share capital |
Other contributed capital |
Reserves (transition reserve) |
Profits/loss brought forward |
Total equity |
|
|
31 |
|
|
|
|
|
|
Equity, 1 Jan 2017 |
|
696 |
784,175 |
30,868 |
-508,555 |
307,184 |
|
Net loss for the year |
11,134 |
11,134 |
||||
|
Exchange-rate difference in the translation of foreign operations |
-26,779 |
-26,779 |
||||
|
Total other comprehensive income |
-26,779 |
-26,779 |
||||
|
Comprehensive income for the year |
-26,779 |
11,134 |
-15,645 |
|||
|
Transactions with Shareholders |
||||||
|
Shares Issued |
4 |
-4 |
- |
|||
|
Share-based payments |
2,645 |
2,645 |
||||
|
Exercise of options |
10,087 |
10,087 |
||||
|
Total Transactions with Shareholders |
4 |
12,728 |
12,732 |
|||
|
Equity, 31 Dec 2017 |
|
700 |
796,903 |
4,089 |
-497,421 |
304,271 |
|
Equity, 1 Jan 2018 |
|
700 |
796,903 |
4,089 |
-497,421 |
304,271 |
|
Net loss for the year |
-161,425 |
-161,425 |
||||
|
Exchange-rate difference in the translation of foreign operations |
20,608 |
20,608 |
||||
|
Total other comprehensive income |
20,608 |
20,608 |
||||
|
Comprehensive income for the year |
0 |
0 |
20,608 |
-161,425 |
-140,817 |
|
|
Transactions with Shareholders |
||||||
|
Share-based payments |
1,662 |
1,662 |
||||
|
Exercise of options |
135 |
135 |
||||
|
Total Transactions with Shareholders |
0 |
1,797 |
0 |
0 |
1,797 |
|
|
Equity, 31 Dec 2018 |
|
700 |
798,700 |
24,697 |
-658,846 |
165,251 |
Consolidated Cash Flow Statement
|
Cash flow from operating activities |
Note |
2018 |
2017 |
|
Operating loss before financial items |
-165,122 |
-5,717 |
|
|
Depreciation and amortization |
10 |
18,755 |
18,039 |
|
Impairment of Intangibles |
3, 10 |
177,851 |
|
|
Adjustments for non-cash items, etc. |
37 |
2,272 |
2,145 |
|
33.756 |
14,467 |
||
|
Interest received |
31 |
44 |
|
|
Interest paid |
-247 |
-1,337 |
|
|
Income tax paid |
992 |
-426 |
|
|
34,532 |
12,748 |
||
|
Increase/decrease in inventories |
-4,819 |
10,772 |
|
|
Decrease/increase in trade receivables |
-1,097 |
-16,494 |
|
|
Decrease/increase in other current receivables |
-79 |
881 |
|
|
Increase/decrease in trade payables |
1,604 |
-5,459 |
|
|
Decrease/increase in other current operating liabilities |
14,101 |
-13,957 |
|
|
Cash flow from operating activities |
|
44,242 |
-11,509 |
|
Investing activities |
|||
|
Investments in property, plant and equipment and intangible assets |
-5,745 |
-4,707 |
|
|
Sale of non-current assets |
- |
||
|
Cash flow from investing activities |
|
-5,745 |
-4,707 |
|
Financing activities |
|||
|
Exercise of options |
135 |
10,087 |
|
|
Share issue |
- |
||
|
Repayment of debt |
-16,920 |
-11,866 |
|
|
Cash flow from financing activities |
|
-16,784 |
-1,779 |
|
Cash flow for the year |
21,713 |
-17,995 |
|
|
Cash and cash equivalents at beginning of year |
36,824 |
58,381 |
|
|
Exchange rate differences in cash and cash equivalents |
981 |
-3,562 |
|
|
Cash and cash equivalents at end of year |
59,518 |
36,824 |
Notes
Note 1: General Information
Gyros Protein Technologies Holding AB (“Gyros AB” or “Group” or “Company”), with its registered office in Uppsala, Sweden, is the Parent Company of the Group. The address of the head office is Dag Hammarskjölds Väg 54B, SE-751 83 Uppsala, Sweden.
Operations
Gyros Protein Technologies Holding AB is the Group’s parent company and is a holding company. The Group consists of the parent company and Gyros Protein Technologies AB (formerly Gyros AB) and its wholly owned subsidiaries including Protein Technologies Inc. (“PTI”).
Gyros Protein Technologies AB develops, manufactures and sells automated systems for protein analysis (immunoassays) based on microfluidic technology. The systems are sold under the Gyrolab®, xPand, and GyrolabTM xPlore brands. The systems utilize micro-fluidic technology in the form of plastic CDs which are sold under the Gyrolab BioaffyTM brand. A large number of nanolitre scale tests can be made in parallel on a single, disposable CD. The Company’s customers are mostly pharmaceutical and biotech companies who are developing protein based drugs.
Gyros is based in Uppsala, Sweden where research, development, manufacturing and most sales, marketing, and administrative activities are performed. Gyros has five wholly owned sales subsidiaries: in the US, UK, France, Germany, and Japan. Gyros’ US subsidiary Gyros US Inc. has wholly owned PTI since 2016.
Protein Technologies, Inc. was established in Delaware, USA in June 1989. PTI develops, manufactures and sells peptide synthesis instruments. The instruments are mostly used in chemistry-based research, and pharmaceutical research and development. PTI has more than 30 years’ experience as one of the foremost suppliers of peptide synthesis equipment for customers around the world. PTI is engaged in research, development, manufacturing, sales, marketing, and administrative activities for protein synthesizers at its facility in Tucson, Arizona USA.
The subsidiary Gyros Patent AB owns and manages Gyros’ patent and brand portfolio. Gyros Finans AB’s operations are exclusively for managing the Company’s financial investments.
Gyros US Inc is the Company’s sales office for Gyros in North America. The German subsidiary is Gyros’ sales office for Germany and parts of Austria, and Switzerland. The French subsidiary handles the French, Belgian, Dutch, and Italian markets as well as parts of the Swiss market. The UK subsidiary handles the UK and Nordic markets. The Japanese subsidiary handles the Japanese market for Gyrolab products.
Sales of Gyros product to customers in other countries are managed Gyros Protein Technologies AB mainly through agents and distributors. The company employs a sales manager based in Hong Kong through Business Sweden to manage most of its agents and distributors.
PTI manages all its sales activity including agents and distributors from its home office in Tucson.
Group Structure
Gyros Protein Technologies Holding AB is the Parent Company and owns nearly 100% of its subsidiary Gyros Protein Technologies AB, corp. ID no. 556672-5429, which in turn wholly owns Swedish subsidiaries Gyros Patent AB, corp. ID no. 556680-3069, and Gyros Finans AB, corp. ID no. 556680-3051, and the foreign subsidiaries, Gyros US Inc, corp. ID no. 0100856357, Gyros DE GmbH, corp. ID no. HRB 194218, Gyros (UK) Limited, corp. ID no. 7487233, Gyros FR SARL, corp. ID no. 537 882 896 and Gyros Japan KK, corp. ID no. 0104-01-124239. Gyros US Inc in turn wholly owns Protein Technologies Inc., corp. ID no. 86-0521947.
1.1 Basic Accounting Policies for the Group
Significant Accounting Principles and Conditions for the Preparation of the Consolidated Financial Statements.
Summary of Significant Accounting Principles for the Group
The most significant accounting principles applied for preparation these consolidated financial statements are described below. These principles have been applied consistently for all years presented, unless otherwise stated. The consolidated accounts have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and International Financial Reporting Interpretations Committee (IFRIC) interpretations. The consolidated financial statements have been prepared in accordance with the acquisition method, except for the financial assets and liabilities, which are calculated at fair value through profit or loss.
New and Amended Standards Applied by the Group
IFRS 15 Revenue from Contracts with Customers
IFRS 15 has been implemented as of January 1, 2018. It replaces all previously published standards and interpretations regarding revenue recognition such as IAS 18. The standard is based on the principle that revenue should be reported when the commitment to deliver the promised goods or services to the customer has been fulfilled. A fundamental difference compared to previous standards and interpretations is that IFRS 15 focuses on control rather than risk and benefits. The transfer of control over a product or service (and thus the fulfilment of the performance commitment) is what triggers revenue recognition rather than the transfer of risks and benefits. The Company’s customer agreements stipulate both rights and obligations, right to pay and duty to deliver, as well as rights and obligations for customers such as the right to receive delivery and obligation to pay. The commitments associated with the contracts between the Company and customers are short-term and consist mainly of goods and services that are delivered for payment. Accordingly, the customer agreements are such that under normal circumstances the commitments are terminated upon delivery, installation, or completion of the product and service to the customer and payment received.
The Company has determined that the instrument, installation, and training are distinct. Revenue is recognized for each distinct promised good or service when the performance obligation has been satisfied and the customer obtains control.
The Company has implemented IFRS 15 retroactively beginning January 1, 2018. The 2018 financial results have been stated according to the new standard. The new standard has the net effect of deferring TSEK920 of revenue in to 2018. TSEK1,759 of revenue is deferred from 2017 to 2018 and TSEK839 from 2018 to 2019. The corresponding impact to cost of goods sold and net profit is TSEK0 and TSEK920, respectively.
For additional information regarding the Group’s accounting principles for revenue recognition see “Revenue” later in these Notes.
IFRS 9 Financial Instruments
The Group implemented IFRS 9 effective January 1, 2018, replacing IAS 39 Financial Instruments: Accounting and Valuation. The standard includes rules for the classification and valuation of financial assets and liabilities, impairment of financial instruments and rules for hedge accounting.
One of the changes relates to liabilities reported at fair value. The part of the change relating to fair value attributable to credit risk should be reported in other comprehensive income instead of in the current period earnings, unless this causes inconsistency in the accounting. Gyros has no liabilities valued at fair value and is therefore not affected by the change. Another change relates to hedge accounting and requires increased disclosure of risk management and the effect of hedge accounting. Gyro's hedge accounting will be made in accordance with IAS 39 with disclosures in accordance with IFRS 9. Currently, no financial instruments for hedging are used.
Finally, new principles have been introduced regarding impairment of financial assets, where the model is based on expected losses. Gyros has analyzed the effects on the consolidated financial statements of the introduction of IFRS 9 and made the assessment that it has no significant impact on either profit or financial position. In accordance with IFRS 9, Gyros has chosen not to recalculate comparative figures.
New Standards, Amendments, and Interpretations of Existing Standards that have not yet been Applied by the Group
IFRS 16 Leases
IFRS 16 replaces IAS 17 beginning on January 1, 2019. The new standard entails a change in accounting requirements for leases, claiming that the current classification in operational and financial leasing will be replaced by a model where assets and liabilities for all leases will be reported in the balance sheet. All leases, except short-term and minor leases, shall be reported as an asset with right of use and as a corresponding liability in the lessee's balance sheet. Payments of leases shall be reported as depreciation and interest expenses. The accounting requirements for the lessor are unchanged. For 2018, implementation of IFRS 16 would have increased assets and liabilities by TSEK 19,524 and TSEK 19,559, respectively. 2018 depreciation and interest expense for leases in 2018 would be TSEK 5,694 and TSEK 1,142, respectively.
Reporting Currency
The reporting currency is Swedish kronor, which is also the Company’s functional currency. Unless otherwise stated, all figures are reported to thousands of Swedish kronor.
Basis of Preparation of Financial Statements
The financial statements have been prepared on a going concern basis and are based on historical costs unless otherwise specifically indicated.
Basis of Consolidation
The consolidated accounts comprise Gyros and its subsidiaries. The financial statements for Gyros and subsidiaries included in the consolidated financial statements pertain to the same period and are prepared in accordance with the same accounting policies.
All intra-Group transactions and dealings are eliminated in their entirety and are consequently not included in the consolidated financial statements.
Subsidiaries
Subsidiaries refer to companies where Gyros holds more than 50 percent of the shares or otherwise holds a controlling influence. Subsidiaries are included in the consolidated financial statements as of the time when the Group has control over them until the time controlling influence is no longer exercised.
Business combinations are reported according to acquisition accounting. In a business combination, the company’s assets (including intangible assets not previously recognized) and liabilities (including contingent liabilities, but excluding future restructuring costs) are valued at their respective fair values.
Translation of foreign subsidiaries’ financial statements
Foreign subsidiaries' assets and liabilities are determined in the respective functional currency, i.e. in the primary economic environment in which the company is located. For Gyro's foreign subsidiaries, all assets, provisions and other liabilities are translated to the Group's reporting currency (SEK) at the balance sheet date and the exchange rate differences are reported against other comprehensive income. All items in the income statement are translated to the average exchange rate for the year.
Goodwill and fair value adjustments arising from the acquisition of a foreign operation are treated as assets and liabilities of this business and translated at the closing date. Translation differences are reported in other comprehensive income. If a subsidiary is divested, the accumulated translation differences are reversed to the income statement.
The exchange rates used for currency translation are available at the Swedish Central Bank and presented in the table below:
|
Currency (SEK per) |
Closing day rate 31 Dec 2018 |
Average exchange rate for the year 2018 |
Closing day rate 31 Dec 2017 |
Average exchange rate for the year 2017 |
|
USD |
8.9710 |
8.6921 |
8.2322 |
8.5380 |
|
EUR |
10.2753 |
10.2567 |
9.8497 |
9.6326 |
|
GBP |
11.3482 |
11.5928 |
11.1045 |
10.9896 |
|
JPY |
0.0812 |
0.0787 |
0.073084 |
0.076091 |
Gross accounting
Gross accounting is applied throughout with regard to the recognition of assets and liabilities except in the cases where both a receivable and a liability exist against the same counterparty and there are intent and legal grounds to offset them. Gross accounting is also applied to income and expenses unless otherwise stated.
Classification of assets and liabilities
Non-current assets, non-current liabilities and provisions are expected to be recovered or fall due for payment later than 12 months after the closing date. Current assets and current liabilities are expected to be recovered or fall due for payment within less than 12 months after the closing date.
Note 2: Summary of Key Accounting Policies
2.1 Revenue
Revenue recognition is according to IFRS 15 which was implemented in 2018. The effect of implementation is described in Note 1.1.
Revenue comprises the fair value of what has been obtained or will be obtained for sold goods and services in the operating activities of the Company. Revenue is recognized net of VAT, sales tax, and any discounts. Revenue is recognized when the Company has fulfilled its performance obligations which means that the customer has control of the goods or benefitted from the service. Typically instrument revenue is recognized upon shipment and installation revenue upon completion of installation. These assessments are based on historical outcomes, taking account of the type of customer, type of transaction and any special circumstances applying in each case.
Sales of other goods
The sale of other goods, which comprises CDs, chemicals and peripheral equipment, is recognized when control of the goods has passed to the customer. The Company does not offer customers a right to return products, but has commercial warranties during an agreed warranty period.
Instrument sales often include installation and training which is typically quoted separately. The Company considers the instrument, installation, and training as distinct from each other. Accordingly, revenue is recognized for each distinct good and service on the instrument invoice when the performance obligation is complete. Discounts, if any, are allocated between distinct items based on the items relative list price.
Sales of services
Service contracts with customers are regarded as separate agreements and revenues under the contracts are recognized on a straight-line basis over the contract service period.
Other revenue
Other revenue earned is recognized as follows:
|
● |
Royalties, licences and similar revenue: recognized in accordance with the economic significance of the contract involved which was de minimis for 2018 and 2017. |
|
● |
Interest income: in accordance with the effective return. |
2.2 Accounting of Foreign Exchange Effects
Foreign currency transactions are translated at transaction date rates. Assets and liabilities in foreign currencies are translated at closing day rates. Foreign exchange gains and losses relating to assets and liabilities in the operations are recognized in operating profit or loss. Other foreign exchange differences are recognized in net financial income/expense.
2.3 Employee Benefits
Short-term employee benefits
Short-term employee benefits, such as salaries, social security contributions, holiday pay and bonuses, are expensed in the period in which the employees perform the services.
Termination benefits
Remuneration in case of termination is paid when an employee’s employment has been terminated before the normal time of retirement or when an employee accepts voluntary redundancy in exchange for such remuneration. The Company recognizes severance pay when the Group has an existing legal or constructive obligation, it is more probable than not that an outflow of resources will be required to settle the obligations, and the amount can be reliably estimated.
Pensions
The Company only has defined contribution pension plans. In a defined contribution plan, the Company makes fixed contributions to a separate legal entity and has no obligation to make any further contributions. Costs are charged to the income statement when the benefits are earned.
Share-based payments
The Group has a number of share-based payment plans under which payments are made in the form of shares and the Company receives services from employees in return for the Group’s equity instruments (stock options).
Share-based payments are measured based on an estimated market value of the options at the allocation date. The value of the payment is not reassessed after the allocation date. The total cost is allocated over the vesting period, which is the period during which all the specified vesting conditions must be met. The cost is accounted for as a staff cost and credited to equity. At each closing date, the Group reviews its assessments of how many shares are expected to be vested. Any deviations from the original estimates identified in such reviews are recognized in the income statement with corresponding adjustments in equity.
When options are exercised, the Company issues new shares. Received payments are credited to the share capital (the quotient value) and other contributed capital.
Social security contributions attributable to share-based instruments as described above are expensed over the periods in which the services are performed. The cost is calculated by applying the same valuation model used in the allocation of employee stock options. The liability for social security contributions which arises is reassessed at each closing date based on a new calculation of the fees that may be paid when the instruments are exercised. Therefore, the new market valuation of the options that is made at each closing date is used as a basis for calculating the liability for social security contributions. Only those social security contributions which are linked to share-based payments are expensed. When stock options are exercised they are accounted for as an issue of new shares.
2.4 Income Taxes
Reported income taxes include tax that is payable or due in respect of the current year, adjustments relating to current tax for previous years and changes in deferred tax.
All tax liabilities and assets are valued at their nominal amounts and based on the tax rules and tax rates that have been adopted or that have been announced and are highly likely to be confirmed.
Current income tax
Current tax assets and tax liabilities for current and previous periods are defined as the amount that is expected to be received back from or paid to the relevant tax authority.
Current tax attributable to items recognized in equity and in other comprehensive income is recognized in equity and other comprehensive income, and not in profit or loss.
Deferred income tax
Deferred tax is recognized at the balance sheet date in accordance with the balance sheet method for temporary differences between the carrying amounts and tax bases of assets and liabilities.
Deferred tax liabilities are recognized for all taxable temporary differences with 2 exceptions:
1) in cases where the deferred income tax liability is incurred as a result of goodwill impairment or where an asset or liability is accounted for as part of a transaction which is not a business combination and which, at the time of the transaction, neither affects the reported profit or the taxable profit or loss
2) for deductible temporary differences attributable to investments in subsidiaries where it is not possible to control the timeframe for reversal of the temporary difference and it is likely that the temporary difference will not be reversed in the near future.
Deferred tax assets are recognized for all deductible temporary differences, including tax loss carry-forwards to the extent that a taxable profit is likely to be available against which the deductible temporary differences can be utilized. The Company has chosen not to recognize deferred tax assets even though these exist. At 12/31/2018 Gyros Protein Technologies AB has 253,836 of tax loss carry-forwards.
Deferred tax assets and deferred tax liabilities are offset if there is a legal right to offset the current tax assets against current tax liabilities and the deferred tax is attributable to the same unit in the Group and the same tax authority.
2.5 Intangible Fixed Assets
Intangible assets are reported at cost less amortization and any impairment write-downs.
Capitalized Development Costs
Costs for research are expensed as incurred. Expenditure for the development phase of a project is recognized as an intangible asset if the Company has the intention as well as the technical and financial resources to complete the product or application for use or sale, and there are plans and resources to market the product. Additional requirements for capitalizing development costs are that the expenditure is likely to increase the future economic benefits and can be reliably measured. Development expenditures that do not meet these requirements are charged to expense as incurred. Development expenditures which have been expensed in previous financial statements are not capitalized in a later period. Amortization of capitalized development costs begins when the asset can be used in the manner intended by management. The assets are amortized on a straight-line basis over their expected useful lives, which is usually no more than five years. Expected useful lives are reviewed at each closing date and adjusted if appropriate.
Purchased Software
The cost of standard software programs is expensed. Costs for software which has been developed or significantly adapted for the Group is capitalized as an intangible asset if it has likely economic benefits that, after one year exceed the cost. Capitalized costs of purchased software are amortized on a straight-line basis over the estimated useful life, which is usually no more than five years. Expected useful lives are reviewed at each closing date and adjusted if appropriate.
Patents
Costs for purchased patents are capitalized as intangible assets. PTI has 2 acquired patents. These assets are amortized on a straight-line basis over the life of the patent which is 15 and 17 years, respectively. The useful life of the acquired patents is reviewed at each closing date and adjusted if necessary. These patents will be fully amortized in 2021 and 2030 respectively.
Technology
Technology acquired as part of a business acquisition is capitalized as an intangible asset and amortized straight-line over the estimate life of the asset or 15 years. The useful life is reviewed at each closing period and adjusted if necessary.
Customer Relationships
Expenses for marketing and sales are expensed as incurred. Customer relationships acquired as part of a business acquisition are capitalized as intangible assets. Customer relationships are amortized straight-line over the estimated useful life or 15 years. The useful life is reviewed at each closing period and adjusted if necessary. PTI customer relationships were formed over 30 years in business. During this time PTI’s product names such as Symphony and Prelude have become well-known in the industry. PTI has built an exceptional reputation in the industry and enjoys very high customer retention and repeat business.
Trademarks
Trademarks acquired as part of a business acquisition are capitalized as an intangible asset. The company sees no limitation on the useful life of acquired trademarks and therefore considers the useful life indefinite. The useful life is reviewed at each closing date and adjusted if necessary. PTI trademarks “Protein Technologies Inc.” and PTI product names such as Symphony and Prelude are well known in the market and represent high quality, reliability, and service. This prominent reputation was earned over 30 years in business and is especially important to customers considering a major investment in complex research equipment.
Goodwill
Goodwill acquired as part of the price of an acquired company is capitalized as intangible assets. Goodwill is tested for impairment at least once a year in accordance with IAS 36.
Intangible Asset Impairment
The recoverable amount of Technology, Customer Relations, Trademarks, and Goodwill was valued in accordance with IAS 36 as of December 31, 2018. In 2018, the intangible assets related to the acquisition of PTI were written down to equal the recoverable value.
2.6 Property, Plant and Equipment
Property and equipment, including leasehold improvements, are stated at cost and depreciated, or amortized in the case of leasehold improvements, over their estimated useful lives using straight-line method.
Expenditures for maintenance and repairs are charged to expense as incurred, whereas major improvements are capitalized as additions to property and equipment. The Group applies component depreciation so that each portion of an item of property, plant and equipment with a significant cost in relation to the total cost of the asset is depreciated separately.
An item of property, plant and equipment is removed from the balance sheet upon sale or if the asset is not expected to generate any future economic benefits either by being used or sold. Gains and losses are calculated as the difference between the consideration received and the carrying amount of the asset. The gain or loss is recognized in the income statement in the accounting period in which the asset is sold, as other expenses or other income, except for leased/demo instruments, which are recognized in net sales or cost of goods sold, respectively.
Expected useful lives are reviewed at each closing date and adjusted where required. Residual values are taken into account when calculating depreciable amounts. Depreciation is calculated using the following estimated useful lives:
|
No. of years |
|
|
Machinery and other production equipment |
5 – 7 |
|
Equipment |
5 - 7 |
|
Leased instruments |
5 |
|
Leasehold improvements |
Life of Lease |
2.7 Impairment
If there is an indication of impairment of an item of property, plant and equipment or intangible asset, the recoverable amount is calculated. If the calculated recoverable amount is less than the carrying amount, the asset is written down to its recoverable amount. The recoverable amount is the higher of net realizable value and value in use to the business. Recoverable amount assessments are made for each cash-generating unit.
A previous impairment loss is reversed if the recoverable amount is deemed to exceed the carrying amount. However, the new carrying amount resulting from the reversal may never exceed the carrying amount that would have resulted if no impairment loss had been recognized in previous periods.
2.8 Inventories
Inventories are valued at the lower of cost and net realizable value. The acquisition value is calculated by applying first-in first-out principle (FIFO). The net realizable value is the expected selling price in the current business, less selling costs. Inventory value is reported net of reserves for excess and obsolete items.
2.9 Cash and Cash Equivalents
Cash and cash equivalents are defined as cash and bank balances, and other short-term investments maturing within three months. Any amounts from overdraft facilities are reported as short-term loans.
2.10 Provisions
Provisions are recognized when the Group has a legal or contractual obligation if it is more probable than not that an outflow of resources will be required to settle the obligation and the amount is estimable. Provisions for restructuring are recognized when a detailed formal plan exists, and the general plan has been communicated to the population of employees that may be affected.
Provisions for future product warranty claims refer to the next 12 months, which is the standard warranty period offered. Provisions for warranties are based on historical information on warranty claims as well as any current trends which may indicate deviation from historical claims.
If a number of similar obligations exist, the probability that an outflow of resources will be required is determined for the group of obligations as a whole. A provision is recognized even if the probability of an outflow of resources for a specific item in this group of obligations is low.
2.11 Financial Instruments
Financial instruments are any type of agreement that gives rise to a financial asset in the Company and a financial liability or equity instrument of another company.
Financial Assets
Financial assets are divided into four categories:
|
● |
Financial assets at fair value through profit or loss. |
|
● |
Loans and receivables measured at amortized cost using the effective interest method. |
|
● |
Held-to-maturity financial assets measured at amortized cost using the effective interest method. |
|
● |
Available-for-sale financial assets measured at fair value in other comprehensive income. |
Management initially classifies financial instruments into one of the above four categories and classifications are reviewed regularly. The Company only holds financial assets belonging to the category loans and receivables. All purchases and sales of financial assets are recognized at the transaction date.
Loans and receivables
Loans and receivables are non-derivative financial assets with specified or specifiable payments that are not listed on an active market.
Loans are initially measured at fair value and are analysed regularly and systematically to determine the amounts that are expected to be received. If a loan is deemed to be doubtful, a provision for the difference between the carrying amount and the expected cash flow is made. Any interest income relating to loans is included in financial income.
Trade receivables are initially recognized at fair value. A provision is made for doubtful receivables at year-end if there is objective evidence that the full value of the asset will not be received. Losses attributable to doubtful receivables are recognized in the income statement under other operating expenses.
The Company’s cash and cash equivalents, trade receivables, and other current receivables are classified as Financial Assets.
Financial Liabilities
The Company’s financial liabilities are divided into two categories:
|
1. |
Financial liabilities at fair value through profit or loss |
The Company has no financial liabilities in this category.
|
2. |
Financial liabilities valued at amortized cost |
Borrowings are initially carried at fair value net of transaction costs. In subsequent periods these liabilities are reported at accrued acquisition value and any differences between the amount received and the repayment amount are reported in the profit and loss account distributed over the loan period using the effective interest method. Borrowings are classified as current liabilities if there is no unconditional obligation to postpone payment of the debt at least twelve months after the balance sheet date.
Impairment of Financial Assets
At each closing date, the Company assesses whether there exists any objective evidence of impairment of a financial asset. Any impairment losses are recognized in the income statement.
Fair Value of Financial Instruments
For financial instruments held in the Company that are recognized at amortized cost, the fair value is deemed to agree with the carrying amount because of their short maturities.
2.12 Borrowing Costs
Borrowing costs are charged to expense in the period in which they are incurred, except for borrowing costs that are directly attributable to the purchase, construction or production of an asset which necessarily takes a significant amount of time to complete for its intended use or sale. The company did not capitalize any borrowing costs during 2017 and 2018.
2.13 Leases
Leases are classified as finance or operating leases. When the Company, as lessee under a lease, enjoys the economic benefits and bears the economic risks associated with the leased asset, the asset is capitalized as a non-current asset. The corresponding future obligation to make lease payments is recognized as a liability. For operating leases, the lease payments are charged to expense on a straight-line basis over the term of the lease.
2.14 Contingent Liabilities
A contingent liability is recognized when there is a possible obligation arising from past events and its existence is confirmed only by the occurrence or non-occurrence of one or more uncertain future events, which are not fully within the control of the Company. A contingent liability may also be an obligation arising from past events, which is not recognized as a liability or provision because it is not probable and estimable.
2.15 Events After the Balance Sheet Date
Events after the balance sheet date which confirm the conditions applying at the balance sheet date are taken into account when valuing assets and liabilities.
|
Note 3: |
Significant Accounting Judgements, Estimates and Assumptions |
In preparing financial statements in accordance with the applied accounting policies, the Board of Directors and Chief Executive Officer are required to make certain estimates and assumptions which affect the carrying amounts of assets, liabilities, income and expenses. The areas where estimates and assumptions are of material significance for the Company and which may affect the income statement and balance sheet if they are changed are described below:
Development expenditure
Determining whether an intangible asset arising from development should be recognized as an asset or not requires a judgement of the extent to which certain predefined conditions have been met.
Deferred tax assets
Deferred tax assets relating to tax losses are recognized only if it is likely that these can be used to offset future profits. In the event that actual outcomes differ from the estimates made or if senior management in the Group adjusts these estimates in future, the value of deferred tax assets could change. Potentially, past and future changes of ownership could also limit the extent to which previous tax losses can be used to offset future taxable profits.
Inventories
Inventories are valued at the lower of cost and net realizable value. The acquisition value is calculated by applying first-in first-out principle (FIFO). The net realizable value is the expected selling price in the current business, less selling costs. Inventory value is reported net of reserves for excess and obsolete items.
Provisions for doubtful receivables
Trade receivables are initially stated at fair value and subsequently at the expected realizable value. An estimate of doubtful receivables that is based on an assessment of all outstanding amounts is made at the closing date.
Judgements made when applying accounting policies
When management applies the Company’s accounting policies it makes various judgements, in addition to those involving estimates, which can have a significant impact on the amounts recognized in the financial statements. Management and the Board of Directors do not deem that any issues of material significance relating to the application of accounting policies existed in the preparation of these financial statements.
Assessment of Technology
PTI technology includes the design and manufacturing of the valve block that is critical to the performance and reliability of its protein synthesizer instruments. Valve block technology for delivering small, precise amounts of fluid to reaction vessels for peptide synthesis was developed over many years. Technology is tested for impairment at least once per year in accordance with IAS36. As of December 31, 2018, the carrying amount of technology was tested and the carrying amount was estimated to exceed the recoverable amount.
Assessment of Customer Relationship
PTI has been on the market for over 30 years. During this time, the company's name and its product names such as Symphony and Prelude have become well-known in industry for their quality and reliability. PTI has built an exceptional reputation in the industry, thus having a very high percentage of recurring purchases among its customers. Customer Relationships is tested for impairment at least once a year in accordance with IAS 36. As of December 31, 2018, the carrying amount of customer relationships was tested and the carrying amount was estimated to exceed the recoverable amount.
Assessment of Trademark and Tradenames
PTI trademarks “Protein Technologies Inc.” and PTI product names such as Symphony and Prelude are well known in the market and represent high quality, reliability, and service. This prominent reputation was earned over 30 years in business and is especially important to customers considering a major investment in complex research equipment. The trademark is held by title. The company sees no limitation on the useful life of acquired trademarks and therefore considers the useful life indefinite. Trademarks are tested for impairment requirements at least once a year in accordance with IAS 36. As of December 31, 2018, the carrying amount of trademarks was tested and the carrying amount was estimated to exceed the recoverable amount.
Assessment of Goodwill
The market for PTI's instruments, consumables and services continues to grow. In 2018 the Company saw an indication of impairment since growth has been slower than expected. The Company tested for impairment according to IAS 36. As of December 31, 2018, the carrying amount of the goodwill was tested and the carrying amount was estimated to exceed the recoverable amount.
Intangible Asset Write-down for Impairment
As of December 31, 2018, the net recoverable value was estimated to be less than the carrying value of technology, customer relations, and trademarks combined. The carrying value of goodwill was written down to zero. The carrying value of the other intangible assets resulting from the acquisition of PTI were written down by the same proportion so that the resulting total carrying value is equal to the recoverable value.
|
Intangible Asset (kSEK) |
Carrying Value Pre-Write Down |
Write-Down 2018 |
Carrying Value 12/31/2018 |
|
Technology |
27.962 |
677 |
27.285 |
|
Customer Relations |
60.410 |
1.463 |
58.947 |
|
Trademarks |
60.854 |
1.473 |
59.381 |
|
Goodwill |
174.238 |
174.238 |
- |
|
Deferred Income Taxes |
-80.866 |
-44.463 |
-36.403 |
|
Total |
242.598 |
133.388 |
109.210 |
Note 4: Financial Risks and Risk Management
Through its operations the Company is exposed to various financial risks, including the effects of changes in exchange rates, interest rates, and prices in the debt and capital markets. The Company’s central risk management program, which has been formalized in a policy adopted by the CEO, focuses on the unpredictability of financial markets and strives to minimize potential adverse effects on the Company’s financial results. The financial policy for the Group was adopted in early 2012.
Risk management and financial issues are handled chiefly by the Group’s Chief Financial Officer under the direction and supervision of the Board of Directors. The general objective for these activities is to provide cost-effective and secure funding for the Group, manage currency risks and interest rate risks, and ensure an effective cash management structure for the Group.
Currency Risks
The Group operates internationally and is exposed to transaction risks relating to purchases, sales, and financial transactions in foreign currency. Currency exposure is primarily to US dollars (USD), Euro (EUR), and Japanese Yen (JPY).
The Group has foreign subsidiaries in the US, Germany, the UK, France and Japan, whose net assets are exposed to foreign currency translation risks. Gyros accounts for only a small portion of the currency exposure. The subsidiary Gyros Protein Technologies AB accounts for the majority of the Group’s currency exposure. Other companies in the Group mostly transact in their own local currency. Currently, no financial instruments for hedging are used.
If the Swedish krona had weakened by 10 percent against the USD, the profit for the full year 2018 would, holding all other variables constant, have been 16,842 (14,753) higher. The corresponding figure for EUR would have been TSEK 5,147 (4,474) higher, for GBP 455 (531) lower, and for JPY 464 (979) higher.
Interest Rate Risks
The Group’s income and cash flow from operating activities are essentially independent of changes in market interest rates. The Group has no interest-bearing assets other than bank deposits.
In 2014 and 2015, Gyros Protein Technologies AB raised loans from its majority owner SLS Invest AB. In connection with the merger with PTI Inc., the loan was moved to the Company. At December 31, 2018 and 2017, these loans amounted to SEK 30 million plus accrued interest. The interest rate is fixed. At December 31, 2018, the Company has a corresponding receivable from Gyros Protein Technologies AB.
The Company has a receivable from the Group company Gyros US Inc. The interest rate is based on the official US interest rates. At December 31, 2018 and 2017, the loan amounted to kSEK 155,200 and 248,517, respectively, including accrued interest.
PTI Inc. has two long-term loans. A bank loan from Square1 Bank with an original amount of TUSD 4,750. At December 31, 2018 and 2017, the loan amounted to TUSD 239 and 2,125, respectively, of which TUSD 159 and 1,881, respectively, is classified as short term. The interest rate on the loan is the higher of the prime rate +1.75% or 5%. At December 31, 2018 and 2017, the interest rate was 7.25% and 6.25%, respectively. In April 2019 the Company paid-off the entire note principal and accrued interest.
On June 15, 2015, PTI was acquired by Ampersand 2014 Limited Partnership. As part of the sale an agreement was reached with 3 former owners for subordinate loan agreements with the same terms for a total of TUSD 3,000. All of the company’s assets form security for the loan. For 2018 and 2017, the interest rate was 5 percent. The loan amount and all accrued interest are due at the earlier of 15 June 2019 or a change of control of the company. In June 2019 2 of the sub-loans were paid in full and the third sub-loan was amended such that $1.6M was paid and the remaining TUSD 1,843 is due in 2 payments. The first payment of TUSD 900 is due on March 31, 2020 and the remaining balance and all accrued interest is due on June 30, 2020.
Credit Risk
The Group has a certain concentration of credit risks. The Group has adopted a set of guidelines to ensure that products and services are sold only to customers with an appropriate credit history. The five largest customers in the Group accounted for 29% of total trade receivables at December 31, 2018 (2017: 29%). In view of the type of customers involved, the risk is deemed to be limited.
|
Breakdown of trade receivables, past due but not impaired |
2018 |
2017 |
|
|
<30 days |
11,375 |
15,729 |
|
|
30-90 days |
4,234 |
2,559 |
|
|
91-180 days |
839 |
-23 |
|
|
>180 days |
4,314 |
63 |
|
|
Amount at end of year (TSEK) |
20,762 |
18,328 |
For total trade receivables, there is collateral at a value of TSEK 0, of which TSEK 0 is comprised of bank guarantees.
Provisions for doubtful receivables correspond to 0 per cent (0) of the total receivables and have changed as follows:
|
Provisions for doubtful receivables |
2018 |
2017 |
|
|
Provision at beginning of year |
- |
35 |
|
|
Provision for expected losses |
- |
- |
|
|
Actual losses (TSEK) |
- |
-35 |
|
|
Reversal of unused provisions |
- |
- |
|
|
Foreign exchange effects |
- |
- |
|
|
Amount at end of year (TSEK) |
- |
- |
The credit risk in other financial assets, such as cash and cash equivalents, is equal to the carrying amounts of these assets.
Liquidity Risk
The Group aims to maintain an up-to-date, detailed one-year liquidity plan. Bank balances must at all times cover planned capital needs for the next 30 days. Any excess which with a high degree of precision is deemed not to be required within 30 days may be invested in SEK-denominated Swedish AAA fixed income instruments for a maximum term of 360 days. All investments of this type are subject to approval by the Board. In addition to cash and cash equivalents, the Group had an available overdraft facility of TSEK 0 (0).
Management continually monitors forecasts for the Group’s cash flows and liquidity reserve to ensure that the Group has adequate cash and cash equivalents to meet its operational needs. The table below shows maturities of the Company’s financial liabilities. The amounts indicated in the table are the contractual, undiscounted cash flows, which are the same as the carrying amounts.
|
31 December 2018 |
< 1 year |
1–5 years |
> 5 years |
Total |
|
Other long-term liabilities |
715 |
- |
715 |
|
|
Accounts Payable |
5,178 |
- |
- |
5,178 |
|
Accrued expenses |
125,608 |
2,630 |
277 |
128,515 |
|
Total (TSEK) |
130,786 |
3,345 |
277 |
134,408 |
|
31 December 2017 |
< 1 year |
1–5 years |
> 5 years |
Total |
|
Other long-term liabilities |
62,200 |
- |
62,200 |
|
|
Accounts Payable |
3,574 |
- |
- |
3,574 |
|
Accrued expenses |
61,380 |
2,079 |
299 |
63,758 |
|
Total (TSEK) |
64,954 |
64,279 |
299 |
129,532 |
Management of Capital
The Group’s managed capital consists of equity. Changes in managed equity are thus shown in the “Consolidated statement of changes in equity”. The Group’s financial objective is to generate a good long-term return on equity. No dividends have been paid in the last several years.
Note 5: Distribution of Revenue
Net Sales by customer geographic location
|
Group |
2018 |
2017 |
|
|
Europe |
99,284 |
93,440 |
|
|
North America |
146,739 |
110,454 |
|
|
Asia |
29,540 |
30,911 |
|
|
Total (TSEK) |
275,563 |
234,805 |
Net Sales by type
|
Group |
2018 |
2017 |
|
|
Goods |
225,268 |
188,931 |
|
|
Services |
50,295 |
45,386 |
|
|
Licenses |
0 |
488 |
|
|
Total (TSEK) |
275,563 |
234,805 |
Note 6: Related-Party Transactions
SLS Invest AB owns 54.48% of the Parent Company’s shares and thereby has a controlling influence over the Group. SLS Invest AB is in turn wholly owned by the Swedish Pension Fund 6th Fund Management (“AP6”). Therefore, AP6 has ultimate control of the Group.
At 31 December 2018, Gyros Protein Technologies Holding AB had a debt agreement with the majority owner, SLS Invest AB. For more information, see Note 34.
The Group has not had any transactions with SLS Invest AB or other portfolio companies owned by SLS Invest AB except for minor travel expenses invoiced by SLS. Similarly, the Group has not had any transactions with Ampersand Capital or other portfolio companies owned by Ampersand Capital except for minor travel expenses invoiced by Ampersand for minor travel expenses incurred by Board members.
Gyros has not made any guarantees or provided surety bonds to or on behalf of any Directors or other senior executives. None of the Directors or other senior executives had any direct or indirect business transactions with the Group in 2018 or 2017 other than the remuneration described in Note 8.
Transactions between the Parent Company and other Group companies
The Parent Company only has interest income from Group companies and Group contributions to Gyros Protein Technologies AB, all of which is eliminated in consolidation.
Note 7: Salaries, Other Benefits, Social Security Contributions and Obligations
Of the Parent Company’s pension costs (including tax), TSEK 0 (0) refers to the Board and CEO, and the corresponding amount for the Group is TSEK 96 (0).
|
2018 |
2017 |
||||
|
(TSEK) |
Salaries and other benefits |
Social security contributions (of which pension costs) |
Salaries and other benefits |
Social security contributions (of which pension costs) |
|
|
Group |
91,062 |
22,849 (8,139) |
79,186 |
23,043 (8,336) |
|
Salaries and Other Benefits by Country:
|
(TSEK) |
2018 |
2017 |
||
|
Parent Company |
Board & CEO |
Other Employees |
Board & CEO |
Other Employees |
|
Sweden |
- |
- |
- |
- |
|
Subsidiaries |
||||
|
Sweden |
- |
25,164 |
- |
24,454 |
|
England |
- |
4,800 |
- |
4,031 |
|
Germany |
- |
3,320 |
- |
1,302 |
|
France |
- |
1,910 |
- |
2,441 |
|
USA |
4,015 |
48,550 |
4,556 |
39,223 |
|
Japan |
- |
3,303 |
- |
3,179 |
|
Group |
4,015 |
87,047 |
4,556 |
74,630 |
The increase in salaries and other benefits from 2017 to 2018 is mostly due to increased bonuses and commissions. Salary increases and exchange rates also contributed to the increase.
Note 8: Remuneration of Senior Executives
Principles
The Chairman and Directors receive Directors’ fees in accordance with the resolution of the AGM. No separate fees are payable for committee work.
In 2018, the CEO received remuneration in the form of salary, variable remuneration, other benefits, and pension totalling TSEK 4,015 (4,557). Remuneration of other senior executives is comprised of basic salary, variable remuneration, other benefits, and pension. Other senior executives include seven employees who together with the CEO make up company management for 2018. The sales executives for Europe and for Asia are employed by external companies but are included as senior executives for the period of April 2017 to December 2018 and throughout 2017 and 2018 respectively.
Remuneration Issues
The Board of Directors determines the policies for remuneration of senior executives including the amounts of fixed and variable incentive compensation and the size of salary increases. The Board also decides on the criteria for assessing bonus pay-outs, equity grants, pension benefits, and severance pay.
Remuneration and Other Benefits in 2018
|
(TSEK) |
Basic salary/ Director’s fee |
Invoiced InvoicedInvoiced |
Variable remuneration |
Pension costs |
Share-based payments |
Total |
|
Board Members |
- |
1,237 |
- |
- |
334 |
1,571 |
|
CEO |
3,476 |
- |
104 |
96 |
339 |
4,015 |
|
Other senior executives (7 people) |
8,247 |
4,767 |
898 |
1,043 |
643 |
15,598 |
|
Total |
11,723 |
6,004 |
1,002 |
1,139 |
1,316 |
21,184 |
Remuneration and Other Benefits in 2017
|
(TSEK) |
Basic salary/ Director’s fee |
Invoiced InvoicedInvoiced |
Variable remuneration |
Pension costs |
Share-based payments |
Total |
|
Board Members |
- |
1,216 |
- |
- |
642 |
1,858 |
|
CEO |
3,414 |
- |
510 |
- |
633 |
4,557 |
|
Other senior executives (8 people) |
8,323 |
3,873 |
1,638 |
940 |
920 |
15,694 |
|
Total |
11,737 |
5,089 |
2,148 |
940 |
2,195 |
22,109 |
Comments on the tables
|
● |
The Company only has defined contribution pension plans. The pension cost refers to the cost expensed in that year. See below for more information about pensions. |
Variable Remuneration
Variable remuneration is paid only when the targets or sales levels defined by the Board have been achieved.
Share-Based Payments
The amounts of share-based payments to senior executives in the table below refers to costs recognized according to IFRS 2 Share-Based Payment for these people. Additional descriptions of the share-based payment programs are in Note 9.
|
Stock Options (No. of Shares) |
Program PTI 1 |
Program PTI 2 |
Program CEO |
Program Gyros |
GPTH 1 |
GPTH 2 |
GPTH 3 |
Total |
|
Board Members |
|
218,647 |
|
|
585,201 |
195,426 |
999,274 |
|
|
CEO |
|
|
1,077,513 |
|
1,075,000 |
|
2,152,513 |
|
|
Other Senior Exectuives (7) |
399,895 |
|
|
200,000 |
880,000 |
252,500 |
1,732,395 |
|
|
Other |
369,142 |
69,215 |
|
315,000 |
210,000 |
|
90,000 |
1,053,357 |
|
Not awarded |
|
|
|
|
|
895,451 |
895,451 |
|
|
Summary |
769,037 |
287,862 |
1,077,513 |
515,000 |
2,750,201 |
447,926 |
985,451 |
6,832,990 |
Pensions
For the CEO, up to 4% of salary is paid with a cap of USD 23,000 per year to the company’s 401k plan.
Other senior executives without 401k plan benefits receive defined contribution pension benefits.
Severance Pay Agreements
The Company and the CEO have a severance agreement that provides for a mutual six month notice period. In addition to the notice period upon termination by the company severance pay in an amount equal to six months of salary is payable.
The other senior executives employed in Sweden have an agreement that provides a mutual notice period of three months. Other senior executives have severance agreements with a mutual notice period of 0-6 months and if terminated by the company severance pay equal to 0-6 months of salary.
Note 9: Share-Based Payments
To attract and retain skilled and motivated staff, Gyros has introduced share-based remuneration schemes. The options have been granted free of charge to the Directors and employees (employee stock options). Stock option have been granted to employees in exchange for options awarded from earlier, pre-merger plans and for incentive awards post-merger.
Share-based payment expense in 2018 was 1,639 (2,725), of which social costs were -22 (80). The liability for social security contributions related to share-based payments at year-end was 277 (299).
Employee Stock Options Program PTI 1, 2016
Employee stock options were granted to PTI Inc. employees in exchange for cancelled PTI Inc. options. The options are exercisable from one year after the date of grant until December 2, 2024. Options are vested by 1/48 per month starting from December 15, 2015, provided that the employee remains in continued service during that period.
Employee Stock Options Program PTI 2, 2016
Employee stock options were granted to PTI Inc. employees and Directors in exchange for cancelled PTI Inc. options. The options are exercisable from one year after the date of grant until July 20, 2025. Vesting occurs with an initial 4/16 vesting on August 1, 2016 and thereafter by 1/16 per quarter assuming grantee remains employed with the company.
Employee Stock Options CEO, 2016
Employee stock options were granted to the CEO in exchange for cancelled Gyros AB options. The options are exercisable from the date of grant until June 30, 2020. The options were granted free of charge.
Employee Stock Options Program Gyros, 2016
Employee stock options were granted to Gyros AB employees in exchange for cancelled Gyros AB options. The options are exercisable from one year after the date of grant until June 30, 2020. Options are vested in portions of 20 percent, 20 percent, 20 percent and 40 percent each year starting from March 31, 2015, provided that the employee remains in continued service during that period.
Employee Stock Options GPTH 1, 2016
Employee stock options were granted to employees and Directors. The options are exercisable from one year after the date of allocation until July 11, 2026. Vesting occurs with an initial 4/16 vesting on August 1, 2017 and thereafter by 1/16 per quarter, provided that the employee remains in continued service during that period.
Employee Stock Options GPTH 2, 2016
Employee stock options were granted to the members of the Board. The options are exercisable from one year after the date of grant until December 15, 2026. Vesting occurs with an initial 4/16 vesting on December 1, 2017 and thereafter by 1/16 per quarter, provide that the Board member remains in continued service during that period.
Employee Stock Options GPTH 3, 2016
Employee stock options were granted to the members of the Board. The options are exercisable from one year after the date of grant until December 15, 2026. Vesting occurs with an initial 4/16 vesting on December 1, 2017 and thereafter by 1/16 per quarter, provide that the Board member remains in continued service during that period.
For all Programs above the option holders have the right to exercise their options in the event that a third party makes an offer to acquire more than 50% of all shares of Gyros Protein Technologies Holding AB and the shareholders resolve to accept the offer. Holders have the right to exercise all their options if the Company’s shares begin to be traded on a stock exchange or other marketplace.
Summary of the Number of Outstanding Options
|
Program name |
Subscription period |
Type of plan |
Share class |
Exercise price (SEK) |
Program total number options / corresponding number of shares |
|
Program PTI 1 |
July 2016 - 2 December 2024 |
Employee Stock Options |
A shares |
SEK 1.28 |
769,037 |
|
Program PTI 2 |
July 2016 - 20 July 2025 |
Employee Stock Options |
A shares |
SEK 4.54 |
287,862 |
|
Program CEO |
July 2016 - 30 June 2020 |
Employee Stock Options |
A shares |
SEK 6.70 |
1,077,513 |
|
Program Gyros |
July 2016 - 30 June 2020 |
Employee Stock Options |
A shares |
SEK 6.70 |
515,000 |
|
GPTH 1 |
July 2016 - 11 July 2026 |
Employee Stock Options |
A shares |
SEK 7.17 |
2,750,201 |
|
GPTH 2 |
July 2016 - 26 April 2027 |
Employee Stock Options |
A shares |
SEK 7.17 |
447,926 |
|
GPTH 3 |
July 2016 – 26 July 2028 |
Employee Stock Options |
A Shares |
SEK 7.17 |
90,000 |
|
Total no. Options |
5,937,539 |
Change in Number of Outstanding Options by Program
|
Program PTI 1 |
Program PTI 2 |
Program CEO |
Program Gyros |
GPTH 1 |
GPTH 2 |
GPTH 3 |
|
|
Financial year |
2018 |
2018 |
2018 |
2018 |
2018 |
2018 |
2018 |
|
Outstanding at 1 January |
769,037 |
287,862 |
1,077,513 |
535,000 |
2,800,201 |
447,926 |
0 |
|
Awarded |
90,000 |
||||||
|
Exchanged to |
|||||||
|
Utilised |
|||||||
|
Expired |
|
|
-20,000 |
-50,000 |
|
||
|
Outstanding at 31 December 2018 |
769,037 |
287,862 |
1,077,513 |
515,000 |
2,750,201 |
447,926 |
90,000 |
|
Program PTI 1 |
Program PTI 2 |
Program CEO |
Program Gyros |
GPTH 1 |
GPTH 2 |
|
|
Financial year |
2017 |
2017 |
2017 |
2017 |
2017 |
2017 |
|
Outstanding at 1 January |
838,252 |
287,862 |
1,077,513 |
575,000 |
2,900,201 |
195,426 |
|
Awarded |
252,500 |
|||||
|
Exchanged to |
||||||
|
Utilised |
||||||
|
Expired |
-69,215 |
|
|
-40,000 |
-100,000 |
|
|
Outstanding at 31 December 2017 |
769,037 |
287,862 |
1,077,513 |
535,000 |
2,800,201 |
447,926 |
The table below shows the key variables used in determining the fair values of the options at the grant dates.
|
Expected dividend |
0% |
|
Expected volatility |
22-38% |
|
Risk-free rate |
0.78% |
|
Expected duration of the options from original program start |
6-10 years |
|
Share price at grant date |
SEK 7.17 |
|
Option valuation model |
Black-Scholes |
Options in the programs are distributed by target group as follows at December 31, 2018.
|
Target group |
No. of Options |
|
|
Board members |
999,274 |
|
|
CEO |
2,152,513 |
|
|
Other senior executives (8 people) |
1,732,395 |
|
|
Other personnel |
1,053,357 |
|
|
Total allocated options |
5,937,539 |
|
Note 10: Depreciation, Amortization, and Impairment
|
Depreciation and Amortization Expense, Net |
2018 |
2017 |
|
Capitalized Development Costs |
7,503 |
7,503 |
|
Licenses |
597 |
|
|
Purchased Software |
362 |
653 |
|
Capitalized Patents and Technology |
2,452 |
2,395 |
|
Capitalized Customer Relationships |
4,777 |
4,698 |
|
Machinery and other Production Equipment |
1,362 |
1,173 |
|
Equipment |
1,030 |
1,043 |
|
Improvements to Leased Property |
184 |
179 |
|
Leased/demo Instruments |
488 |
395 |
|
Impairment of Intangible Assets |
177,851 |
- |
|
Total (TSEK) |
196,606 |
18,039 |
Depreciation/amortization is recognized in the income statement as follows:
|
Depreciation and Amortization Expense, Net |
2018 |
2017 |
|
Cost of Goods and Services Sold |
2,292 |
1,638 |
|
Selling Expense |
5,833 |
5,644 |
|
Administrative Expense |
274 |
318 |
|
Research & Development Expense |
10,356 |
10,439 |
|
Total (TSEK) |
18,755 |
18,039 |
Note 11: Operating Leases
The operating lease expense for the year in the Group is TSEK 7,646 (7,591), which has been reported in operating profit. The majority of operating leases is for facilities. The breakdown by nominal value of future contracted lease payments is as follows:
|
(TSEK) |
2018-12-31 |
2017-12-31 |
|
Due within one year |
12,801 |
5,687 |
|
Due within 5 years and after 1 year |
14,439 |
5,675 |
Note 12: Other Operating Income and Operating Expenses (TSEK)
|
Group |
2018 |
2017 |
|
Foreign exchange gains |
4,420 |
1,911 |
|
Total Other Operating Income |
4,420 |
1,911 |
|
Foreign exchange losses |
-1,988 |
-3,259 |
|
Total Other Operating Expense |
-1,988 |
-3,259 |
Note 13: Interest Income and Similar Items (TSEK)
|
Group |
2018 |
2017 |
|
Interest Income |
31 |
46 |
Note 14: Interest Expense and Similar Items (TSEK)
|
Group |
2018 |
2017 |
|
Interest Income /(Expense) |
-3,941 |
-4,739 |
Note 15: Income Taxes (TSEK)
|
Compilation of Recognized tax expenses |
Group |
|
|
2018 |
2017 |
|
|
Current tax expense |
12,393 |
411 |
|
Tax in respect of prior years |
1,156 |
-15 |
|
Deferred tax arising from temporary differences and tax losses |
-5,942 |
21,148 |
|
Total reported tax |
7,607 |
21,544 |
|
Reconciliation of effective tax rate |
Group |
||
|
2018 |
2017 |
||
|
Loss before tax |
-169,032 |
-10,410 |
|
|
Tax expenses 22% (22%) |
37,187 |
2,290 |
|
|
Adjustment for tax conditions and taxes in other countries |
9,767 |
1,000 |
|
|
Unrecognized deferred tax asset for the year attributable to tax losses |
-3,761 |
-2,692 |
|
|
Change in deferred taxes due to temporary differences in patents, trademarks, and customer relations |
4,624 |
19,856 |
|
|
Non-deductible expenses |
-42,203 |
-1,278 |
|
|
Non-taxable income |
1,993 |
2,368 |
|
|
Total reported tax |
7,607 |
21,544 |
|
Changes in deferred tax liabilities and tax assets in 2017 and 2018 are presented below.
|
Deferred tax liabilities |
Group |
|
|
At 31 December 2016 |
-60,319 |
|
|
Recognized in the income statement |
21,148 |
|
|
Recognized in other comprehensive income |
0 |
|
|
Recognized directly in equity |
- |
|
|
Foreign exchange differences |
5,938 |
|
|
At 31 December 2017 |
-33,233 |
|
|
Recognized in the income statement |
5,942 |
|
|
Recognized in other comprehensive income |
0 |
|
|
Recognized directly in equity |
- |
|
|
Foreign exchange differences |
-4,956 |
|
|
At 31 December 2018 |
-32,247 |
|
Deferred taxes are in the US subsidiaries and consist of product warranty, holiday pay accruals, deferred revenue, depreciation and costs added to inventory.
Deferred tax assets relating to tax losses are recognized to the extent that it is probable that the loses will be used to offset future taxable profits. At year-end 2018 Gyros Protein Technologies AB had tax loss carry-forwards of TSEK 253.836 (293,319). These tax loss carry-forwards are not recognized as tax assets because of uncertainty about the extent to which they may be used. They have no time limit. Gyros has no unrecognized tax loss carry-forwards.
Note 16: Capitalized Development Costs
Development costs for 2 Gyros projects were capitalized in prior years. The first was a Gyros chemicals project with an original investment of TSEK 6,449 that is now fully written off. The second was a Gyros instrument project with an original investment of TSEK 37,516. Amortization of this project’s costs run over five years ending in March 2020.
|
(TSEK) |
31 Dec 2018 |
31 Dec 2017 |
|
Group |
||
|
Cost at beginning of year |
43,965 |
43,965 |
|
Change for the year |
||
|
- Purchases |
- |
- |
|
Cost at end of year |
43,965 |
43,965 |
|
Amortization at beginning of year |
-27,083 |
-19,580 |
|
Change for the year |
||
|
- Amortization charge |
-7,503 |
-7,503 |
|
Amortization at end of year |
-34,586 |
-27,083 |
|
Net Carrying amount at end of year |
9,379 |
16,882 |
Note 17: Licenses
Capitalized Licenses are paid in advance licenses to utilize technology and reagents.
|
(TSEK) |
31 Dec 2018 |
31 Dec 2017 |
|
Group |
||
|
Cost at beginning of year |
0 |
- |
|
Change for the year |
||
|
- Purchases |
3,022 |
- |
|
Cost at end of year |
3,022 |
- |
|
Amortization at beginning of year |
0 |
- |
|
Change for the year |
||
|
- Amortization charge |
-597 |
- |
|
Amortization at end of year |
-597 |
- |
|
Net Carrying amount at end of year |
2,425 |
0 |
Note 18: Purchased Software
The asset refers to software components developed in-house for CRM systems within the Gyro business. Purchased software assets are amortized over five years.
|
(TSEK) |
31 Dec 2018 |
31 Dec 2017 |
|
Group |
||
|
Cost at beginning of year |
5,731 |
5,771 |
|
Change for the year |
||
|
- Purchases |
- |
- |
|
-Disposal |
- |
-40 |
|
Cost at end of year |
5,731 |
5,731 |
|
Amortization at beginning of year |
-5,092 |
-4,479 |
|
Change for the year |
||
|
- Amortization charge |
-362 |
-653 |
|
-Disposal |
40 |
|
|
Amortization at end of year |
-5,454 |
-5,092 |
|
Net Carrying amount at end of year |
277 |
639 |
Note 19: Capitalized Patents
PTI has 2 patents that were purchase in prior years. Amortization of the purchase prices are over 15 and 17 years, respectively. Amortization of the first patent ends in 2021 and the second ends in 2030.
|
(TSEK) |
2018 |
2017 |
|
Group |
||
|
Cost at beginning of year |
1,378 |
1,952 |
|
Change for the year |
||
|
-Foreign exchange differences |
490 |
-574 |
|
Cost at end of year |
1,868 |
1,378 |
|
Amortization at beginning of year |
-450 |
-682 |
|
Change for the year |
||
|
- Amortization charge |
-241 |
-221 |
|
-Foreign exchange differences |
-407 |
453 |
|
Amortization at end of year |
-1,908 |
-450 |
|
Net Carrying amount at end of year |
770 |
928 |
Note 20: Technology
PTI has specialized design, manufacturing, and assembly technology for its valve blocks which are a critical component for protein synthesizer performance and reliability. The valve block delivers small, precise, repeatable amounts of fluids to reaction vessels in the instruments. This technology and know-how was developed over many years. PTI manufactures its valve blocks in-house because they are critical and complex. In December 2018 the carrying value of PTI’s technology was tested. The carrying amount was estimated to exceed the recoverable amount and an impairment charge was booked (see Note 3: Assessment of Technology).
|
Technology (TSEK) |
31-Dec-18 |
31-Dec-17 |
|
Group |
|
|
|
Cost at beginning of year |
31,419 |
34,720 |
|
Change for the year |
|
|
|
-PPA |
|
- |
|
-Foreign exchange differences |
2,820 |
-3,301 |
|
Cost at end of year |
34,239 |
31,419 |
|
Amortization at beginning of year |
-3,665 |
-1,736 |
|
Change for the year |
|
|
|
- Amortization charge |
-2,211 |
-2,174 |
|
- Foreign exchange differences |
-400 |
245 |
|
Amortization at end of year |
-6,276 |
-3,665 |
|
Impairment Charge |
-677 |
|
|
Net Carrying amount at end of year |
27,285 |
27,754 |
Note 21: Customer Relationships
PTI has been serving the life science and biotech market for more than 30 years. During this time, the company’s name and its product names, such as Symphony and Prelude, have become well-known in the industry. PTI has built a reputation in the industry which has enabled a large share of recurring purchases by its customers. In December 2018 the carrying value of PTI’s customer relationships was tested. The carrying amount was estimated to exceed the recoverable amount and an impairment charge was booked (see Note 3: Assessment of Customer Relationships).
|
Customer Relationships (TSEK) |
31-Dec-18 |
31-Dec-17 |
|
Group |
|
|
|
Cost at beginning of year |
67,880 |
75,012 |
|
Change for the year |
|
|
|
-PPA |
|
- |
|
-Foreign exchange differences |
6,092 |
-7,132 |
|
Cost at end of year |
73,972 |
67,880 |
|
Amortization at beginning of year |
-7,920 |
-3,751 |
|
Change for the year |
|
|
|
- Amortization charge |
-4,777 |
-4,698 |
|
- Foreign exchange differences |
-865 |
529 |
|
Amortization at end of year |
-13,562 |
-7,920 |
|
Impairment Charge |
-1,463 |
|
|
Net Carrying amount at end of year |
58,947 |
59,960 |
Note 22: Trademark and Trade Name
PTI’s trade name or brand “Protein Technologies Inc.” and its product names such as Prelude, Symphony, and Tribute are considered valuable since they are differentiating factors in customers decision to buy. PTI has earned an excellent reputation for protein synthesizer equipment, service and reagents over 30 years. PTI’s customers make large investments in complex scientific equipment so a reputation for quality and support is especially important. These names are in use and continue to represent quality and reliability, and service and support. In December 2018 the carrying value of PTI’s trademark and trade name was tested. The carrying amount was estimated to exceed the recoverable amount and an impairment charge was booked (see Note 3: Assessment of Trademark and Trade Name).
|
Trademark and Trade Name (TSEK) |
31-Dec-18 |
31-Dec-17 |
|
Group |
|
|
|
Cost at beginning of year |
55,843 |
61,710 |
|
Change for the year |
|
|
|
-PPA |
|
- |
|
-Foreign exchange differences |
5,011 |
-5,867 |
|
Cost at end of year |
60,854 |
55,843 |
|
Amortization at beginning of year |
|
|
|
Change for the year |
|
|
|
- Amortization charge |
|
|
|
- Foreign exchange differences |
|
|
|
Amortization at end of year |
0 |
0 |
|
Impairment Charge |
-1,473 |
|
|
Net Carrying amount at end of year |
59,381 |
55,843 |
Note 23: Goodwill
Goodwill is tested for impairment at least once a year in accordance with IAS 36. In December 2018 the carrying value of PTI’s goodwill was tested. The carrying amount was estimated to exceed the recoverable amount and an impairment charge was booked (see Note 3: Assessment of Goodwill).
|
Goodwill (TSEK) |
31-Dec-18 |
31-Dec-17 |
|
Group |
|
|
|
Cost at beginning of year |
159,889 |
176,687 |
|
Change for the year |
|
|
|
-PPA |
|
- |
|
-Foreign exchange differences |
14,349 |
-16,798 |
|
Cost at end of year |
174,238 |
159,889 |
|
Amortization at beginning of year |
|
|
|
Change for the year |
|
|
|
- Amortization charge |
|
|
|
- Foreign exchange differences |
|
|
|
Amortization at end of year |
0 |
0 |
|
Impairment Charge |
-174,238 |
|
|
Net Carrying amount at end of year |
0 |
159,889 |
Note 24: Assets in Progress
|
Assets in Progress (TSEK) |
31 Dec 2018 |
31 Dec 2017 |
|
Cost at beginning of year |
0 |
718 |
|
Change for the year |
||
|
-Purchases |
1,297 |
89 |
|
-Reclassifications |
0 |
-807 |
|
Cost at end of year |
1,297 |
0 |
|
Net Carrying amount at end of year |
1,297 |
0 |
Note 25: Machinery and Other Production Equipment
|
Machinery and Other Production Equipment |
31 Dec 2018 |
31 Dec 2017 |
|
Group (TSEK) |
||
|
Cost at beginning of year |
14,754 |
14,989 |
|
Changes for the year |
||
|
-Purchases |
0 |
1,188 |
|
-Reclassifications |
0 |
807 |
|
-Disposals |
0 |
-1,950 |
|
-Foreign exchange differences |
189 |
-280 |
|
Cost at end of year |
14,943 |
14,754 |
|
Depreciation at beginning of year |
-11,400 |
-12,263 |
|
Change for the year |
||
|
-Depreciation charge |
-1,362 |
-1,173 |
|
-Disposals |
0 |
1,950 |
|
-Foreign exchange differences |
-135 |
86 |
|
Depreciation at end of year |
-12,897 |
-11,400 |
|
Net Carrying amount at end of year |
2,046 |
3,354 |
Note 26: Equipment
|
Equipment |
31 Dec 2018 |
31 Dec 2017 |
|
Group |
||
|
Cost at beginning of year |
8,096 |
8,044 |
|
Changes for the year |
||
|
-Purchases |
672 |
1,164 |
|
-Disposals |
-9 |
-736 |
|
-Foreign exchange differences |
896 |
-376 |
|
Cost at end of year |
9,655 |
8,096 |
|
Depreciation at beginning of year |
-4,610 |
-4,482 |
|
Change for the year |
||
|
-Depreciation charge |
-1,030 |
-1,043 |
|
-Disposals |
0 |
736 |
|
-Foreign exchange differences |
-668 |
179 |
|
Depreciation at end of year |
-6,308 |
-4,610 |
|
Net Carrying amount at end of year |
3,347 |
3,486 |
Note 27: Improvements to Leased Property
|
Leasehold Improvements (TSEK) |
31 Dec 2018 |
31 Dec 2017 |
|
Group |
||
|
Cost at beginning of year |
1,098 |
1,233 |
|
Changes for the year |
||
|
-Purchases |
0 |
50 |
|
-Disposals |
||
|
-Foreign exchange differences |
163 |
-185 |
|
Cost at end of year |
1,261 |
1,098 |
|
Depreciation at beginning of year |
-645 |
-597 |
|
Change for the year |
||
|
-Depreciation charge |
-184 |
-179 |
|
-Disposals |
||
|
-Foreign exchange differences |
-128 |
131 |
|
Depreciation at end of year |
-957 |
-645 |
|
Net Carrying amount at end of year |
304 |
453 |
Note 28: Leasing/Demo Instruments
|
Demo and Lease Instruments (TSEK) |
31 Dec 2018 |
31 Dec 2017 |
|
Group |
||
|
Cost at beginning of year |
3,942 |
2,751 |
|
Changes for the year |
||
|
-Purchases |
754 |
2,216 |
|
-Disposals |
-408 |
- |
|
-Sold |
-1,020 |
-1,025 |
|
Cost at end of year |
3,268 |
3,942 |
|
Depreciation at beginning of year |
-2,161 |
-2,121 |
|
Change for the year |
||
|
-Depreciation charge |
-488 |
-395 |
|
-Disposals |
54 |
- |
|
-Sold |
346 |
355 |
|
Depreciation at end of year |
-2,249 |
-2,161 |
|
Net Carrying amount at end of year |
1,019 |
1,781 |
Note 29: Inventories
|
Group (TSEK) |
31 Dec 2018 |
31 Dec 2017 |
|
Operating inventories consist of the following: |
||
|
Raw materials |
16,370 |
14,520 |
|
Goods in progress |
316 |
590 |
|
Finished goods |
18,360 |
15,117 |
|
Total Inventory, gross |
35,046 |
30,227 |
Note 30: Prepaid Expenses and Accrued Income
|
31 Dec 2018 |
31 Dec 2017 |
|
|
Group (TSEK) |
||
|
Prepaid rents |
836 |
1,421 |
|
Other items |
9,033 |
9,484 |
|
9,869 |
10,905 |
Note 31: Equity
Parent Company Shares
The share capital of TSEK 700 (700) comprises 69,993,021 (69,993,021) fully paid-up shares with a par value of SEK 0.01 per share. There is only one share class (common shares) and all shares convey the same rights to a share in the assets of Gyros Protein Technologies Holding AB. Each share entitles the holder to one vote at general meetings of shareholders without limitation. There are no legal restrictions on transferability or in the articles of association. Gyros Protein Technologies Holding AB holds no treasury shares.
Note 9 describes outstanding stock options which when exercised would dilute the ownership share of current stock holders.
The Company’s Ownership Structure at December 31, 2018 is as Follows:
|
Shareholder |
Total no. of shares |
Share of votes |
|
SLS Invest AB |
38,135,434 |
54.48 % |
|
Ampersand |
30,592,559 |
43.71 % |
|
Nate Cosper |
1,079,737 |
1.54 % |
|
Others |
185,291 |
0.27 % |
|
Total |
69,993,021 |
100.00 % |
Note 32: Other Non-Current Liabilities
|
Group (TSEK) |
31 Dec 2018 |
31 Dec 2017 |
|
Deferred tax liabilities |
32,247 |
33,233 |
|
32,247 |
33,233 |
Note 33: Other Non-Current Liabilities
|
Group (TSEK) |
31-Dec-18 |
31-Dec-17 |
|
Square1 Bank |
715 |
2,007 |
|
Former Owners of PTI |
0 |
24,697 |
|
SLS Invest AB (owners) |
0 |
35,496 |
|
Total Group |
715 |
62,200 |
PTI Inc. has two long-term loans. A bank loan from Square1 with an original amount of TUSD 4,750. At 31 December 2018, the loan amounted to TUSD 239 which matures in June 2020. In April 2019 the Company paid off the Square1 note and all accrued interest early. Subsequently, Square1 Bank released all security interests in the Company.
On 15 June 2015, PTI was acquired by Ampersand 2014 Limited Partnership. As part of the sale an agreement was reached with the 3 former owners for three subordinate loan agreements with the same terms for a total of TUSD 3,000. All of PTI’s assets form security for the loan. The loan amount and all accrued interest are due at the earlier of 15 June 2019 or a change of control of the company. In May 2019 the Company and one of the former owners amended their loan agreement such that TUSD 1,600 of principal will be paid by June 15, 2019. The remaining balance of principal and accrued interest will continue to accrue interest at 5.0% and is due in two installments: TUSD 900 on 3/31/2020 and the remaining balance on 6/30/2020. In June 2019 the other two former owners subordinate loans were paid in full.
The table below shows the remaining contractual terms of the financial debt until maturity as of December 31, 2018. The amounts stated in the table are the contractual, undiscounted cash flows.
|
< 1 Year |
1-5 Years |
> 5 Years |
Total |
|
|
Group (TSEK) |
||||
|
Term Debt – 31 Dec 2018 |
65,646 |
715 |
66,361 |
|
|
Term Debt – 31 Dec 2017 |
18,790 |
62,200 |
- |
80,990 |
Note 34: Provision for Product Warranties
|
Warranty (TSEK) |
31 Dec 2018 |
31 Dec 2017 |
||||
|
At 1 January |
2,203 |
2,640 |
||||
|
Foreign exchange differences |
167 |
-535 |
||||
|
Used |
-2,370 |
-2,257 |
||||
|
Reversal of unused provisions |
0 |
152 |
||||
|
Additional provisions |
1,027 |
2,203 |
||||
|
1,027 |
2,203 |
|||||
Warranty provisions are reported as short-term because the warranty period expires before 12 months.
Note 35: Other Current Liabilities
|
Group (TSEK) |
31 Dec 2018 |
31 Dec 2017 |
|
Current liability to owner SLS Invest AB |
37,304 |
- |
|
Other loans |
28,342 |
18,790 |
|
Other items |
10,886 |
3,944 |
|
76,532 |
22,734 |
Current liability to owner SLS Invest AB is a note that matures in June 2019. In April 2019 this note was amended so that the maturity date is June 2020. Other loans include the current portion of the loans described in Note 33.
Note 36: Accrued Expenses and Deferred Income
|
Group (TSEK) |
31 Dec 2018 |
31 Dec 2017 |
|
Accrued holiday pay including social security contributions |
2,531 |
7,477 |
|
Accrued bonuses to employees including social security contributions |
15,584 |
4,163 |
|
Sales in later periods |
21,303 |
19,986 |
|
Redundant personnel including social security contributions |
0 |
18 |
|
Accrued social security contributions |
1,388 |
1,482 |
|
Social security contributions for options |
4,187 |
299 |
|
Other items |
5,963 |
5,396 |
|
50,956 |
38,821 |
Note 37: Adjustments for Non-Cash Items
|
Group (TSEK) |
31 Dec 2018 |
31 Dec 2017 |
|
|
Share-based payments |
1,662 |
2,645 |
|
|
Unrealized exchange rate differences |
-427 |
-1,170 |
|
|
Sale of non-current assets |
1,037 |
670 |
|
|
2,272 |
2,145 |
||
Note 38: Provisions and Contingent Liabilities
|
Group (TSEK) |
31 Dec 2018 |
31 Dec 2017 |
|
Pledged assets |
40,732 |
51,195 |
|
Contingent liabilities |
None |
None |
PTI’s assets have been pledged against PTI’s loans with Square1 Bank and the Former PTI Owners as described in Note 33.
Note 39: Financial Instruments
|
Group (TSEK) |
31 Dec 2018 |
31 Dec 2017 |
|
Trade receivables |
57,940 |
56,843 |
|
Other current receivables |
3,056 |
1,268 |
|
Cash and cash equivalents |
59,518 |
36,824 |
|
Total Assets |
120,514 |
94,935 |
|
Assets are reported at their full net value including a provision for bad debt 0 (0) |
||
The Group’s financial instruments consist of accounts receivable, accrued income, cash and cash equivalents, trade payables, accrued supplier costs, and interest bearing liabilities. Interest bearing liabilities are subject to interest rate terms which are equivalent to market rates. Other financial assets and liabilities have short maturities. Therefore, reported book values are equivalent to fair value.
|
Group (TSEK) |
||||
|
31 Dec 2018 |
Customer & Other |
Accrued Financial Assets & Liabilities |
Book Value |
Fair Value |
|
Trade receivables |
57,940 |
57,940 |
57,940 |
|
|
Other current receivables |
3,056 |
3,056 |
3,056 |
|
|
Cash and cash equivalents |
59,518 |
|
59,518 |
59,518 |
|
Total Assets |
120,514 |
120,514 |
120,514 |
|
|
Bank Debt |
2,144 |
2,144 |
2,144 |
|
|
Other interest-bearing long-term liabilities |
69,251 |
69,251 |
69,251 |
|
|
Accounts Payable |
5,178 |
5,178 |
5,178 |
|
|
Other Current Liabilities |
|
5,852 |
5,852 |
5,852 |
|
Total Liabilities |
82,425 |
82,425 |
82,425 |
|
Group (TSEK) |
||||
|
31 Dec 2017 |
Customer & Other |
Accrued Financial Assets & Liabilities |
Book Value |
Fair Value |
|
Trade receivables |
56,843 |
56,843 |
56,843 |
|
|
Other current receivables |
1,268 |
1,268 |
1,268 |
|
|
Cash and cash equivalents |
36,824 |
|
36,824 |
36,824 |
|
Total Assets |
94,935 |
94,935 |
94,935 |
|
|
Bank Debt |
17,586 |
17,586 |
17,586 |
|
|
Other interest-bearing long-term liabilities |
60,193 |
60,193 |
60,193 |
|
|
Accounts Payable |
3,574 |
3,574 |
3,574 |
|
|
Other Current Liabilities |
|
7,155 |
7,155 |
7,155 |
|
Total Liabilities |
88,508 |
88,508 |
88,508 |
Note 40: Significant Events After the Financial Year
As described in Notes 33 Square1 term note was paid in full in April 2019. In May 2019 the Seller note and the SLS note were amended as described in Notes 35.
On October 31, 2019, the common stock of Gyros was acquired by Mesa Laboratories, Inc. for cash consideration of approximately USD $180 million, subject to purchase price adjustments.
Exhibit 99.4
Condensed Consolidated Income Statement
|
Six Months Ended June 30, |
Six Months Ended June 30, |
||||||||
| Notes |
2019 |
2018 |
|||||||
|
Revenues |
2 | SEK | 149,638,669 | SEK | 124,484,692 | ||||
|
Cost of goods and services sold |
50,157,727 | 44,553,805 | |||||||
|
Gross profit |
99,480,942 | 79,930,887 | |||||||
|
Operating expenses: |
|||||||||
|
Selling |
49,644,498 | 44,647,859 | |||||||
|
Administrative expenses |
49,091,255 | 11,517,925 | |||||||
|
Research and development expenses |
30,345,642 | 25,969,753 | |||||||
|
Other operating income and expenses |
(923,294 | ) | (2,354,906 | ) | |||||
|
Total operating expenses |
128,158,101 | 79,780,631 | |||||||
|
Operating loss |
(28,677,159) | 150,256 | |||||||
|
Financial Income |
626 | 1,939 | |||||||
|
Financial Expenses |
(2,363,805 | ) | (2,037,883 | ) | |||||
|
Net loss from financial investments |
(2,363,179 | ) | (2,035,944 | ) | |||||
|
Loss before tax |
(31,040,338) | (1,885,688 | ) | ||||||
|
Income tax (benefit) |
(2,918,301 | ) | (4,350,250 | ) | |||||
|
Net profit/loss for the period |
SEK | (28,122,037) | SEK | 2,464,562 | |||||
The above condensed consolidated income statement should be read in conjunction with the accompanying notes
Condensed Consolidated Statement of Comprehensive Income
|
Six Months Ended June 30, |
||||||||
|
2019 |
2018 |
|||||||
|
Net income |
SEK | (28,122,037) | SEK | 2,464,562 | ||||
|
Other comprehensive income, net of tax: |
||||||||
|
Foreign currency translation adjustments |
4,513,282 | 20,570,322 | ||||||
|
Comprehensive income |
SEK | (23,608,755) | SEK | 23,034,884 | ||||
The above condensed consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
Condensed Consolidated Balance Sheet
| Note |
June 30, 2019 |
December 31, 2018 |
|||||||
|
ASSETS |
|||||||||
|
Non-current assets: |
|||||||||
|
Intangibles |
4 | SEK | 158,232,725 | SEK | 158,464,436 | ||||
|
Total intangible assets |
158,232,725 | 158,464,436 | |||||||
|
Property, plant and equipment, net |
3 | 6,833,983 | 8,013,114 | ||||||
| Right of use asset | 11 | 16,674,035 | -- | ||||||
|
Total non-current assets |
181,740,743 | 166,477,550 | |||||||
|
Current Assets: |
|||||||||
|
Inventories |
36,800,859 | 35,045,784 | |||||||
|
Trade receivables |
57,677,184 | 57,939,689 | |||||||
|
Tax assets |
1,604,175 | 1,900,960 | |||||||
|
Other current receivables |
5,925,107 | 1,155,712 | |||||||
|
Prepaid expenses and accrued income |
11,957,041 | 9,868,788 | |||||||
|
Cash and cash equivalents |
49,135,180 | 59,517,772 | |||||||
|
Total current assets |
163,099,546 | 165,428,705 | |||||||
|
Total assets |
SEK | 344,840,289 | SEK | 331,906,255 | |||||
|
Equity and Liabilities |
|||||||||
|
Equity: |
|||||||||
|
Share capital |
SEK | 699,930 | SEK | 699,930 | |||||
|
Other contributed capital |
799,129,276 | 798,699,676 | |||||||
|
Reserves |
29,211,638 | 24,698,356 | |||||||
|
Profits/loss brought forward |
(686,968,611) | (658,846,574 | ) | ||||||
|
Total Equity |
142,072,233 | 165,251,388 | |||||||
|
Other non-current liabilities |
|||||||||
|
Deferred tax liabilities |
32,795,025 | 32,247,434 | |||||||
|
Other non-current liabilities |
11 | 10,904,763 | 714,576 | ||||||
|
Total non-current liabilities |
43,699,788 | 32,962,010 | |||||||
|
Current liabilities: |
|||||||||
|
Provisions for product warranties |
5 | 967,949 | 1,026,874 | ||||||
|
Trade payables |
8,291,554 | 4,617,112 | |||||||
|
Other current liabilities |
5, 11 | 70,235,354 | 76,532,372 | ||||||
|
Accrued expenses and deferred income |
7 | 79,573,411 | 51,516,500 | ||||||
|
Total current liabilities |
159,068,268 | 133,692,858 | |||||||
|
Total equity and liabilities |
SEK | 344,840,289 | SEK | 331,906,255 | |||||
The above condensed consolidated balance sheet should be read in conjunction with the accompanying notes
Condensed Consolidated Statement of Changes in Equity
|
Share Capital |
Other contributed capital |
Reserves (transition reserve) |
Profits/loss brought forward |
Total equity |
||||||||||||||||
|
December 31, 2017 |
SEK | 699,930 | SEK | 796,903,000 | SEK | 4,089,067 | SEK | (497,421,100 | ) | SEK | 304,270,897 | |||||||||
|
Net loss for the year |
-- | 2,464,562 | 2,464,562 | |||||||||||||||||
|
Fx difference in translation of foreign operations |
20,570,322 | -- | 20,570,322 | |||||||||||||||||
|
Total other comprehensive income |
-- | -- | 20,570,322 | 2,464,562 | 23,034,884 | |||||||||||||||
|
Comprehensive income for the year |
-- | -- | 20,570,322 | 2,464,562 | 23,034,884 | |||||||||||||||
|
Transactions with shareholders |
||||||||||||||||||||
|
Shares issued |
-- | -- | -- | |||||||||||||||||
|
Share-based payments |
-- | 830,654 | 830,654 | |||||||||||||||||
|
Exercise of stock options |
-- | 135,368 | 135,368 | |||||||||||||||||
|
Total transactions with shareholders |
-- | 966,022 | -- | -- | 966,022 | |||||||||||||||
|
June 30, 2018 |
SEK | 699,930 | SEK | 797,869,022 | SEK | 24,659,389 | SEK | (494,956,538 | ) | SEK | 328,271,803 | |||||||||
|
Net loss for the year |
-- | (163,890,036 | ) | (163,890,036 | ) | |||||||||||||||
|
Fx difference in translation of foreign operations |
38,967 | -- | 38,967 | |||||||||||||||||
|
Total OCI |
-- | -- | 38,967 | (163,890,036 | ) | (163,851,069 | ) | |||||||||||||
|
Comprehensive income for the year |
-- | -- | 38,967 | (163,890,036 | ) | (163,851,069 | ) | |||||||||||||
|
Transactions with shareholders |
-- | |||||||||||||||||||
|
Shares issued |
-- | -- | -- | |||||||||||||||||
|
Share-based payments |
-- | 830,654 | 830,654 | |||||||||||||||||
|
Exercise of stock options |
-- | -- | -- | |||||||||||||||||
|
Total transactions with shareholders |
-- | 830,654 | -- | -- | 830,654 | |||||||||||||||
|
December 31, 2018 |
SEK | 699,930 | SEK | 798,699,676 | SEK | 24,698,356 | SEK | (658,846,574 | ) | SEK | 165,251,388 | |||||||||
|
Net loss for the year |
(28,122,037) |
(28,122,037) | ||||||||||||||||||
|
Fx difference in translation of foreign operations |
4,513,282 | 4,513,282 | ||||||||||||||||||
|
Total OCI |
-- | -- | 4,513,282 | 4,513,282 | ||||||||||||||||
|
Comprehensive income for the year |
-- | -- | 4,513,282 | (28,122,037) | (23,608,755) | |||||||||||||||
|
Transactions with shareholders |
||||||||||||||||||||
|
Shares issued |
-- | |||||||||||||||||||
|
Share-based payments |
429,600 | 429,600 | ||||||||||||||||||
|
Exercise of stock options |
-- | |||||||||||||||||||
|
Total transactions with shareholders |
-- | 429,600 | -- | -- | 429,600 | |||||||||||||||
|
June 30, 2019 |
SEK | 699,930 | SEK | 799,129,276 | SEK | 29,211,638 | SEK | (686,968,611) | SEK | 142,072,233 | ||||||||||
Condensed Consolidated Statement of Cash Flows
|
Six Months Ended June 30, |
||||||||
|
2019 |
2018 |
|||||||
|
Cash flows from operating activities: |
||||||||
|
Operating profit before financial items |
SEK | (28,677,159) | SEK | 150,256 | ||||
|
Depreciation and amortization |
9,619,486 | 8,937,453 | ||||||
|
Adjustments for non-cash items |
1,798,517 | (1,908,881 | ) | |||||
|
Interest received |
626 | 1,939 | ||||||
|
Interest paid |
(2,363,805 | ) | (2,037,883 | ) | ||||
|
Income tax paid |
6,190,059 | 5,890,109 | ||||||
|
Increase/decrease in inventories |
(1,755,076 | ) | (2,217,159 | ) | ||||
|
Increase/decrease in trade receivables |
262,505 | (4,985,090 | ) | |||||
|
Increase/decrease in other current receivables |
(6,560,862 | ) | (4,400,572 | ) | ||||
|
Increase/decrease in trade payables |
3,674,442 | 2,992,955 | ||||||
|
Increase/decrease in other current operating liabilities |
27,997,986 | 3,326,646 | ||||||
|
Cash flow from operating activities |
SEK | 10,186,719 | SEK | 5,749,773 | ||||
|
Investing activities: |
||||||||
|
Investments in property, plant and equipment and intangibles |
(643,225 | ) | (805,344 | ) | ||||
|
Cash flow used in investing activities |
SEK | (643,225 | ) | SEK | (805,344 | ) | ||
|
Financing activities: |
||||||||
|
Share issue |
830,654 | 830,654 | ||||||
|
Repayment of debt |
(17,484,982 | ) | (11,298,083 | ) | ||||
|
Cash flow used in financing activities |
SEK | (16,654,328 | ) | SEK | (10,467,429 | ) | ||
|
Cash flow for the period |
(7,110,834 | ) | (5,523,000 | ) | ||||
|
Cash and cash equivalents at beginning of period |
59,517,772 | 36,824,016 | ||||||
|
Exchange rate differences in cash and cash equivalents |
(3,271,758 | ) | (1,539,859 | ) | ||||
|
Cash and cash equivalents at end of period |
SEK | 49,135,180 | SEK | 29,761,157 | ||||
The above condensed consolidated statement of cash flows should be read in conjunction with the accompanying notes
Notes to Condensed Consolidated Interim Financial Statements
Note 1 – Basis of Preparation
General Information
Gyros Protein Technologies Holding AB (“GPTH” or “Parent”) is the Group’s parent company and is a holding company. The Group (“Group” or “Company”) consists of the parent company and Gyros Protein Technologies AB (formerly Gyros AB) and its wholly owned subsidiaries including Protein Technologies Inc (“PTI”). The address of the head office is Dag Hammarskjölds Väg 54B, SE-751 83 Uppsala, Sweden. The Group’s financial year starts on January 1st and ends on December 31st of each year and the main activity of the Group is development, manufacture and sale of automated systems for protein analysis (immunoassays) based on microfluidic technology. The Company is not subject to significant seasonality in revenue or earnings.
Basis of Preparation
The unaudited condensed consolidated interim financial statements for the six months ended June 30, 2019 and 2018 have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and Interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”); specifically International Accounting Standard ("IAS") 34, 'Interim Financial Reporting'. The condensed consolidated interim financial statements have been prepared using accounting policies and methods of computation consistent with those applied in the consolidated financial statements for the year ended December 31, 2018, except for new accounting pronouncements which have become effective this period and which are discussed below.
The condensed consolidated interim financial statements are presented on a condensed basis as permitted by IAS 34 and therefore do not include all disclosures that would otherwise be required in a full set of financial statements. Accordingly, this report should be read in conjunction with the annual financial statements for the year ended December 31, 2018.
The financial information contained in these condensed consolidated interim financial statements is unaudited.
In the application of the Group's accounting policies, management is required to make judgements, estimates and assumptions about the carrying value of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. In preparing these condensed consolidated interim financial statements, the significant judgements and key sources of estimation uncertainty were the same as those applied to the annual financial statements for the year ended December 31, 2018. The financial risks that the company are exposed to are the same as those considered for the year ended December 31, 2018, except as otherwise noted in the notes below.
All amounts are in TSEK unless otherwise noted.
Changes in Accounting Policies
The Company adopted IFRS 16 Leases effective January 1, 2019. The new standard entailed a change in accounting requirements for leasees, whereby the current classification in operational and financial leasing was replaced by a model where assets and liabilities for all leases are reported in the balance sheet as of June 30, 2019. All leases, except short-term and minor leases, are reported as an asset with right of use and as a corresponding liability in the lessee's balance sheet. Payments of leases are reported as depreciation and interest expenses. The accounting requirements for the lessor are unchanged.
No other IFRSs or IFRS Interpretations Committee interpretations that have not yet gone into effect are expected to have any significant impact on the Group.
Note 2 – Distribution of Revenue
Net Sales by customer geographic location were as follows for the six months ended June 30:
|
2019 |
2018 |
|||||||
|
Europe |
SEK | 55,336,310 | SEK | 44,885,222 | ||||
|
North America |
84,846,357 | 67,842,413 | ||||||
|
Asia |
9,456,002 | 11,757,057 | ||||||
|
Total |
SEK | 149,638,669 | SEK | 124,484,692 | ||||
Net Sales by type were as follows for the six months ended June 30:
|
2019 |
2018 |
|||||||
|
Goods |
SEK | 120,286,660 | SEK | 100,401,235 | ||||
|
Services |
29,352,009 | 24,083,457 | ||||||
|
Total |
SEK | 149,638,669 | SEK | 124,484,692 | ||||
Note 3 - Property, Plant and Equipment
Property, Plant and equipment consisted of the following:
|
June 30, |
December 31, |
|||||||
|
2019 |
2018 |
|||||||
|
Assets in progress |
SEK | -- | SEK | 1,297,127 | ||||
|
Machinery and other production equipment |
1,464,086 | 2,045,328 | ||||||
|
Equipment |
2,763,320 | 3,347,895 | ||||||
|
Improvements to leased property |
215,304 | 303,263 | ||||||
|
Leasing/Demo Instruments |
2,391,273 | 1,019,501 | ||||||
|
Property, plant and equipment, net |
SEK | 6,833,983 | SEK | 8,013,114 | ||||
Note 4 - Intangible Assets
Intangible assets consisted of the following:
|
June 30, |
December 31, |
|||||||
|
2019 |
2018 |
|||||||
|
Capitalised development costs |
SEK | 5,627,362 | SEK | 9,378,937 | ||||
|
Capitalised patents |
31,106,193 | 30,756,914 | ||||||
|
Customer relationships |
60,130,364 | 58,947,532 | ||||||
|
Trademarks and tradenames |
61,368,806 | 59,381,053 | ||||||
|
Total intangible assets |
SEK | 158,232,725 | SEK | 158,464,436 | ||||
Note 5 – Other Current Liabilities and Provision for Product Warranties
Other current liabilities consisted of the following:
|
June 30, 2019 |
December 31, 2018 |
|||||||
|
Current liability to SLS Invest AB |
SEK | 38,234,635 | SEK | 37,303,967 | ||||
|
Other loans |
-- | 1,429,170 | ||||||
|
PTI Sellers’ Notes |
17,090,459 | 26,913,372 | ||||||
|
Other items |
9,140,988 | 10,885,863 | ||||||
|
Warranty provisions |
967,949 | 1,026,874 | ||||||
| Current portion of lease liabilities | 5,769,272 | -- | ||||||
|
Total |
SEK | 71,203,303 | SEK | 77,559,246 | ||||
Current liability to owner SLS Invest AB is a note that was scheduled to mature in June 2019. In April 2019, this note was amended so that the maturity date was June 2020.
Warranty provisions are reported as short-term because the warranty period expires before 12 months.
Note 6 - Other Non-Current Liabilities - Debt
PTI Inc. has held two long-term loans during the periods. A bank loan from Square1 with an original amount of TUSD 4,750. In April 2019 the Company paid off the Square1 note and all accrued interest early. Subsequently, Square1 Bank released all security interests in the Company.
On June 15, 2015, PTI was acquired by Ampersand 2014 Limited Partnership. As part of the sale, an agreement was reached with the three former owners for three subordinate loan agreements with the same terms for a total of USD 3,000. All of PTI’s assets formed security for the loan. The loan amount and all accrued interest were due at the earlier of June 15, 2019 or a change of control of the company. In May 2019 the Company and one of the former owners amended their loan agreement such that USD 1,600 of principal would be paid by June 15, 2019. The remaining balance of principal and accrued interest would continue to accrue interest at 5.0% and was due in two installments: USD 900 on 3/31/2020 and the remaining balance on 6/30/2020. In June 2019 the other two former owners subordinate loans were paid in full.
Note 7 – Accrued Expenses and Deferred Income
|
June 30, 2019 |
December 31, 2018 |
|||||||
|
Accrued holiday pay including social security contributions |
SEK | 8,159,375 | SEK | 14,417,699 | ||||
|
Accrued bonuses to employees including social security contributions |
37,816,652 | 6,845,921 | ||||||
|
Sales in later periods |
23,842,757 | 21,430,056 | ||||||
|
Other accrued expenses |
8,811,325 | 7,629,162 | ||||||
|
Deferred Revenue |
659,636 | 916,662 | ||||||
|
Social security contributions for options |
283,666 | 277,000 | ||||||
|
Total |
SEK | 79,573,411 | SEK | 51,516,500 | ||||
Note 8 - Events Occurring After the Reporting Period
On October 31, 2019, Mesa Laboratories, Inc. (“Mesa”) wholly owned subsidiary MLI Sweden Holdco AB entered into sale and purchase agreement with SLS Invest AB, Ampersand 2014 Limited Partnership, and certain other shareholders (collectively, the “Sellers”), providing for the purchase and sale by the Company from the Sellers of 100% of the outstanding shares of GPTH for a cash purchase price of $180 million, subject to certain adjustments. The Purchaser and Sellers made customary warranties as set forth in the Purchase Agreement.
Note 9 - Related Party Transactions
SLS Invest AB owns 54.48% of the Parent Company’s shares and thereby has a controlling influence over the Group. SLS Invest AB is in turn wholly owned by the Swedish Pension Fund 6th Fund Management (“AP6”). Therefore, AP6 has ultimate control of the Group.
At June 30, 2019, GPTH had a debt agreement with its majority owner, SLS Invest AB. The Company has not had any transactions with SLS Invest AB or other portfolio companies owned by SLS Invest AB except for minor travel expenses invoiced by SLS. Similarly, the Company has not had any transactions with Ampersand Capital or other portfolio companies owned by Ampersand Capital except for minor travel expenses invoiced by Ampersand for minor travel expenses incurred by Board members. The Company has not made any guarantees or provided surety bonds to or on behalf of any Directors or other senior executives. None of the Directors or other senior executives had any direct or indirect business transactions with the Company in the first half of 2019 or 2018 other than remuneration in the normal course.
Transactions between the Parent Company and other Group companies
The Parent Company only has interest income from Group companies and Group contributions to Gyros Protein Technologies AB.
Note 10 - Fair Value of Financial Instruments
The Company’s financial instruments consist of accounts receivable, accrued income, cash and cash equivalents, trade payables, accrued supplier costs, and interest-bearing liabilities. Interest bearing liabilities are subject to interest rate terms which are equivalent to market rates. Other financial assets and liabilities have short maturities. Therefore, reported book values are equivalent to fair value.
Note 11 - Adjustments Recognized on Adoption of IFRS 16
The Company leases office and warehouse space. Rental contracts are typically made for fixed periods of 3 to 8 years but may have extension options. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. Until the 2018 financial year, leases of property, plant and equipment were classified as either finance or operating leases. Payments made under operating leases (net of any incentives received from the lessor) were charged to profit or loss on a straight-line basis over the period of the lease. From January 1, 2019, leases are recognized as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.
On adoption of IFRS 16, the group recognized lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of January 1, 2019. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on January 1, 2019 was 5.07%.
For leases previously classified as finance leases the entity recognized the carrying amount of the lease asset and lease liability immediately before transition as the carrying amount of the right of use asset and the lease liability at the date of initial application. The measurement principles of IFRS 16 are only applied after that date. The remeasurements to the lease liabilities were recognized as adjustments to the related right-of-use assets immediately after the date of initial application. Operating lease commitments disclosed at December 31, 2018 were discounted using the lessee’s incremental borrowing rate at the date of initial application and a lease liability recognized as at January 1, 2019. The lease liability was classified as either current lease liabilities or long term lease liabilities.
The associated right-of-use assets for property leases were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognized in the balance sheet as at 31 December 2018. There were no onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application. Recognized right of use assets were as follows:
|
June 30, 2019 |
January 1, 2019 |
|||||||
|
Leased Property |
SEK | 16,674,035 | SEK | 18,597,126 | ||||
In addition to the right of use asset shown above, the change in accounting policy affected the following items in the balance sheet on January 1, 2019:
|
● |
lease liabilities – increase by SEK 19,558,671 |
|
● |
prepayments – decrease by SEK 961,545 |
In applying IFRS 16 for the first time, the group has used the following practical expedients permitted by the standard:
● the use of a single discount rate to a portfolio of leases with reasonably similar characteristics
● reliance on previous assessments on whether leases are onerous
● the accounting for operating leases with a remaining lease term of less than 12 months as at January 1, 2019 as short-term leases
● the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application, and
● the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
The Company has also elected not to reassess whether a contract is or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date the group relied on its assessment made applying IAS 17 and IFRIC 4 Determining whether an Arrangement contains a Lease.
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