Registered number:
08873131
Faculty Science Limited
Unaudited
Financial statements
Information for filing with the registrar
For the year ended
31 March 2020
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Faculty Science Limited
Registered number:
08873131
Balance sheet
As at
31 March 2020
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Debtors: amounts falling due within one year
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Creditors: amounts falling due within one year
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Total assets less current liabilities
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Creditors: amounts falling due after more than one year
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Capital contribution reserve
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Page 1
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Faculty Science Limited
Registered number:
08873131
Balance sheet
(continued)
As at
31 March 2020
The directors consider that the Company is entitled to exemption from audit under section 477 of the Companies Act 2006 and members have not required the Company to obtain an audit for the year in question in accordance with section 476 of the Companies Act 2006.
The directors acknowledge their responsibilities for complying with the requirements of the Companies Act 2006 with respect to accounting records and the preparation of financial statements.
The
financial statements have been prepared in accordance with the provisions applicable to companies subject to the small companies regime and in accordance with the provisions of FRS 102 Section 1A - small entities.
The financial statements have been delivered in accordance with the provisions applicable to companies subject to the small companies regime.
The Company has opted not to file the statement of comprehensive income in accordance with provisions applicable to companies subject to the small companies' regime.
The financial statements were approved and authorised for issue by the board and were signed on its behalf by
:
................................................
S M A Ma
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The notes on pages 5 to 18 form part of these financial statements.
Page 2
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Statement of changes in equity
For the year ended
31 March 2020
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Capital contribution reserve
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Comprehensive income for the year
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Shares issued during the year
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Conversion of convertible loan notes
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Gift of cryptocurrency from shareholder
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Transfer cryptocurrency sold in the year
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Employee share schemes - value of employee services
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Total transactions with owners
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The notes on pages 5 to 18 form part of these financial statements.
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Page 3
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Statement of changes in equity
For the year ended
31 March 2019
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Capital contribution reserve
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Comprehensive income for the year
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Value of conversion rights on convertible loan notes
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Employee share schemes - value of employee services
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Total transactions with owners
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The notes on pages 5 to 18 form part of these financial statements.
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Page 4
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Faculty Science Limited
Notes to the financial statements
For the year ended 31 March 2020
The company is a private company limited by share capital and incorporated in England. Its registered office and principal place of business is 54 Wellbeck Street, London, W1G 9XS.
The financial statements are rounded to the nearest £1.
2.
Accounting policies
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Basis of preparation of financial statements
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The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Section 1A of
Financial Reporting Standard 102, the Financial Reporting Standard applicable in
the UK and the Republic of Ireland and the Companies Act 2006
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The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the Company's accounting policies (see note 3).
The following principal accounting policies have been applied:
The financial statements have been prepared on a going concern basis.
The directors have considered the future funding requirements of the business. The adverse impact of Covid-19 has been mitigated by a proportion of revenue coming from clients in counter-cyclical sectors and management of the cost base in response to revenue expectations.
Based on detailed financial forecasts incorporating year-to-date performance, the directors have concluded that the company will have sufficient funds to ensure it can meet its financial liabilities as and when they fall due.
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Foreign currency translation
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Functional and presentation currency
The Company's functional and presentational currency is GBP.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.
At each period end foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.
Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the Statement of comprehensive income within 'finance income or costs'. All other foreign exchange gains and losses are presented in the Statement of comprehensive income within administrative expenses.
Page 5
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Faculty Science Limited
Notes to the financial statements
For the year ended 31 March 2020
2.
Accounting policies (continued)
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured as the fair value of the consideration received or receivable, excluding value added tax and other sales taxes. The following criteria must also be met before revenue is recognised:
Rendering of services
Revenue from a contract to provide services is recognised in the period in which the services are provided in accordance with the stage of completion of the contract when all of the following conditions are satisfied:
∙
the amount of revenue can be measured reliably;
∙
it is probable that the Company will receive the consideration due under the contract;
∙
the stage of completion of the contract at the end of the reporting period can be measured reliably; and
∙
the costs incurred and the costs to complete the contract can be measured reliably.
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Operating leases: the Company as lessee
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Rentals paid under operating leases are charged to the Statement of comprehensive income on a straight line basis over the lease term.
Benefits received and receivable as an incentive to sign an operating lease are recognised on a straight line basis over the lease term, unless another systematic basis is representative of the time pattern of the lessee's benefit from the use of the leased asset.
Costs associated with research activities and development expenditure are recognised as an expense in the Statement of comprehensive income when they are incurred.
Grants are accounted for under the accruals model as permitted by FRS 102.
Grants of a revenue nature are recognised in the Statement of comprehensive income in the same period as the related expenditure.
Interest income is recognised in the Statement of comprehensive income using the effective interest method.
Finance costs are charged to the Statement of comprehensive income over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.
Page 6
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Faculty Science Limited
Notes to the financial statements
For the year ended 31 March 2020
2.
Accounting policies (continued)
The Company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. Once the contributions have been paid the Company has no further payment obligations.
The contributions are recognised as an expense in the Statement of comprehensive income when they fall due. Amounts not paid are shown in accruals as a liability in the Balance sheet. The assets of the plan are held separately from the Company in independently administered funds.
Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the Statement of comprehensive income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each Balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. The cumulative expense is not adjusted for failure to achieve a market vesting condition.
The fair value of the award also takes into account non-vesting conditions. These are either factors beyond the control of either party (such as a target based on an index) or factors which are within the control of one or other of the parties (such as the Company keeping the scheme open or the employee maintaining any contributions required by the scheme).
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the Statement of comprehensive income over the remaining vesting period.
Where equity instruments are granted to persons other than employees, the Statement of comprehensive income is charged with fair value of goods and services received.
Page 7
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Faculty Science Limited
Notes to the financial statements
For the year ended 31 March 2020
2.
Accounting policies (continued)
Tax is recognised in the Statement of comprehensive income, except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.
The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the balance sheet date in the countries where the Company operates and generates income.
The company submits a research and development tax claim for all allowable research and development costs. Tax credits arising from such claims are accounted for in the tax charge as set out in note 7.
Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the Balance sheet date, except that:
∙
The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits; and
∙
Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met.
Deferred tax balances are not recognised in respect of permanent differences. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheet date.
Tangible fixed assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
At each reporting date the company assesses whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is determined which is the higher of its fair value less costs to sell and its value in use. An impairment loss is recognised where the carrying amount exceeds the recoverable amount.
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
Depreciation is provided on the following basis:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the Statement of comprehensive income.
Page 8
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Faculty Science Limited
Notes to the financial statements
For the year ended 31 March 2020
2.
Accounting policies (continued)
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Fixed asset investments (cryptocurrency)
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The company held investments in Ether and Bitcoin during the year, a type of crypto token or cryptocurrency, that are classified and accounted for under Section 18 of FRS 102 Intangible Assets other than Goodwill and are presented on the balance sheet as fixed asset investments. Both the Ether and the Bitcoin were gifts made by a Company shareholder to fund the Company's AI Safety work. At the year end, only investments in Bitcoin were held.
FRS 102 defines intangible as an identifiable non-monetary asset without physical substance. The directors consider cryptocurrencies to meet the FRS 102 definition of intangible assets based on the following assessment:
∙
Cryptocurrency holdings are considered identifiable as they can be traded on an exchange or in peer-to-peer transactions.
∙
The value of a cryptocurrency is not fixed or determinable but subject to major variations that arise from supply and demand and cannot be predicted. Therefore it is not monetary but non-monetary in nature.
∙
Cryptocurrencies are a form of digital money and do not have physical substance.
Cryptocurrencies are accounted for under the cost model and initially recognised at cost. After recognition, under the cost model, cryptocurrencies are measured at cost less any accumulated amortisation and any accumulated impairment losses.
At each reporting date the company assesses whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is determined which is the higher of its fair value less costs to sell and its value in use. An impairment loss is recognised where the carrying amount exceeds the recoverable amount.
All intangible assets are considered to have a finite useful life. Amortisation is provided on a straight line method on the following basis:
Cryptocurrencies - 3 years
Investments in subsidiaries are measured at cost less accumulated impairment.
Short term debtors are measured at transaction price, less any impairment. Loans receivable are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method, less any impairment.
Short term creditors are measured at the transaction price. Other financial liabilities, including bank loans, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method.
Page 9
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Faculty Science Limited
Notes to the financial statements
For the year ended 31 March 2020
2.
Accounting policies (continued)
Debt instruments (other than those wholly repayable or receivable within one year), including loans and other accounts receivable and payable, are initially measured at present value of the future cash flows and subsequently at amortised cost using the effective interest method. Debt instruments that are payable or receivable within one year, are measured, initially and subsequently, at the undiscounted amount of the cash or other consideration expected to be paid or received. However, if the arrangements of a short-term instrument constitute a financing transaction, the financial asset or liability is measured, initially, at the present value of the future cash flow discounted at a market rate of interest for a similar debt instrument and subsequently at amortised cost.
Financial assets that are measured at cost and amortised cost are assessed at the end of each reporting period for objective evidence of impairment. If objective evidence of impairment is found, an impairment loss is recognised in the Statement of comprehensive income.
For financial assets measured at amortised cost, the impairment loss is measured as the difference between an asset's carrying amount and the present value of estimated cash flows discounted at the asset's original effective interest rate. If a financial asset has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.
For financial assets measured at cost less impairment, the impairment loss is measured as the difference between an asset's carrying amount and best estimate of the recoverable amount, which is an approximation of the amount that the Company would receive for the asset if it were to be sold at the balance sheet date.
Financial assets and liabilities are offset and the net amount reported in the Balance sheet when there is an enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Page 10
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Faculty Science Limited
Notes to the financial statements
For the year ended 31 March 2020
2.
Accounting policies (continued)
Classification as debt or equity
Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements entered and the definitions of a financial liability.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised as the proceeds received, net of direct issue costs.
A repurchase of the Company’s own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in the Statement of comprehensive income on the purchase, sale, issue or cancellation of the Company’s own equity instruments.
Compound instruments
The component parts of compound instruments (convertible loans) issued by the Company are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangements and definitions of a financial liability and an equity instrument. A conversion option that will be settled by the exchange of a fixed amount of cash or another financial asset for a variable number of the Company’s own equity instruments is a financial liability.
If the conversion feature fails the equity classification, the instrument is not a basic financial instrument and is accounted for at fair value through the Statement of comprehensive income under Section 12 Other Financial Instruments Issues.
At the end of each reporting period, the Company measures all financial instruments within the scope of Section 12 at fair value and recognises changes in fair value in the Statement of comprehensive income .
The proceeds received on issue of the Company's convertible debt are allocated into their liability and equity components and presented separately in the Balance sheet.
The amount initially attributed to the debt component equals the discounted cash flows using a market rate of interest that would be payable on a similar debt instrument that did not include an option to convert.
The difference between the net proceeds of the convertible debt and the amount allocated to the debt component is credited direct to equity and is not subsequently remeasured. On conversion, the debt and equity elements are credited to share capital and share premium as appropriate.
Transaction costs that relate to the issue of the instrument are allocated to the liability and equity components of the instrument in proportion to the allocation of proceeds.
Page 11
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Faculty Science Limited
Notes to the financial statements
For the year ended 31 March 2020
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Judgements in applying accounting policies and key sources of estimation uncertainty
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In the application of accounting policies, which are described in note 2, the directors are required to make judgements, estimates and assumptions about the presentation and carrying amount of assets and liabilities that are not readily apparent from other sources. The following are the critical judgements that the directors have made in the process of applying the company’s accounting policies.
Accounting for cryptocurrencies
Accounting for cryptocurrency assets does not fit easily within the FRS 102 framework. The directors’ view is that the classification of cryptocurrency as a fixed asset investment accounted for under Section 18 of FRS 102 fairly represents the intended use of the asset.
Accounting for cryptocurrency as inventory is not appropriate as it does not represent the company’s business model and intended use of the asset.
In the directors’ view, it is unlikely that cryptocurrencies would be considered financial instruments under FRS 102 as they do not meet the definition. Unlike cash, cryptocurrencies are not backed by a government or central bank and are not considered legal tender in virtually all jurisdictions. Whilst it may be possible to exchange cryptocurrencies into cash, the holder does not have cash or the right to cash. Cryptocurrencies do not give rise to equity instruments of another entity or the contractual right to receive cash, they do not give rise to a financial asset of one entity and are therefore not a financial instrument.
Fair value of share options granted
The assessment of fair value of share options at grant date is independently determined using the Black Scholes Model which takes into account the exercise price, the term of the option, the impact of dilution (where material), the share price at grant date and expected price volatility of the underlying share, the expected dividend yield, the risk free interest rate for the term of the option and the correlations and volatilities of the peer group companies.
There is significant judgement in determining the inputs such as expected price volatility and share prices, as the company has different types of shares issued and the shares are not traded.
Movements in Capital contribution reserve
The capital contribution reserve arose from a gift of cryptocurrency received from a minority shareholder. Part of the capital contribution reserve is reclassified to retained earnings when the underlying asset is sold, as the asset is readily convertible into cash.
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The average monthly number of employees, including directors, during the year was 108
(2019 -
74
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Page 12
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Faculty Science Limited
Notes to the financial statements
For the year ended 31 March 2020
Page 13
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Faculty Science Limited
Notes to the financial statements
For the year ended 31 March 2020
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Charge for the year on owned assets
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Investments in subsidiary companies
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The following was a subsidiary undertaking of the Company:
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Faculty Science Nominee Limited
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54 Welbeck Street, United Kingdom
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Page 14
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Faculty Science Limited
Notes to the financial statements
For the year ended 31 March 2020
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Prepayments and accrued income
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Creditors: Amounts falling due within one year
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Other taxation and social security
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Accruals and deferred income
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Creditors: Amounts falling due after more than one year
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On 5 November 2019, the nominal value of the convertible loan notes of £1,830,000 were converted to share capital with the issue of 1,184,283 series 3 ordinary shares of £0.0000001 each.
The convertible notes are presented in the statement of financial position as follows:
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At the beginning of the year
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Face value of notes issued
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Face value of notes converted during the year
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Page 15
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Faculty Science Limited
Notes to the financial statements
For the year ended 31 March 2020
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Allotted, called up and fully paid
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8,997,300
(2019 -
89,501
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Ordinary
shares of £0.0000001
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(2019 - £0.00001) each
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3,849,500
(2019 -
38,495
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Ordinary 'A'
shares of £0.0000001
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(2019 - £0.00001) each
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24,912,500
(2019 -
249,125
)
Deferred
shares of £0.0000001
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(2019 - £0.00001) each
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3,779,474
(2019 - 0
)
Series 3
shares of £0.0000001
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each
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On 11 April 2019 and 11 September 2019 the company issued 10 ordinary shares of £0.00001 each and 29 ordinary shares of £0.00001 each respectively for a total consideration of £19 on the exercise of share options.
On 5 November 2019 the company subdivided its existing ordinary shares, A ordinary shares and deferred shares from £0.00001 each to £0.0000001 each. On the same date the company issued 1,184,283 series 3 shares of £0.0000001 for a total consideration of £1,830,000 for the conversion of the convertible loan notes. Also on the same date the company issued a further 2,595,191 series 3 shares of £0.0000001 each for a total cash consideration of £6,000,001.
On 17 December 2019 the company issued 43,300 ordinary shares of £0.0000001 each for a total consideration of £217 on the exercise of share options.
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Page 16
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Faculty Science Limited
Notes to the financial statements
For the year ended 31 March 2020
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The company operates an unapproved option scheme and an Enterprise Management Incentive ("EMI") scheme for certain directors, employees and contractors. Share options are exercisable for Ordinary shares at prices determined at the date of grant. The share options were granted on dates between 16 February 2016 and 17 May 2019 with the expiry dates being ten years following the date of grant.
Movements in share options during the year
Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:
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Weighted average exercise price (pence)
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Weighted average exercise price (pence)
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Outstanding at the beginning of the year
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Arising on subdivision of number of options in existence
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Cancelled during the year
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Exercised during the year
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Forfeited during the year
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Surrendered and replaced during the year
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Outstanding at the end of the year
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During the year the company subdivided its shares on the basis of 1:100. A commensurate adjustment was made to the number of options in issue and their exercise price.
Fair value of share options granted
Options were priced using the Black-Scholes option pricing model. Inputs into the model included the expected volatility which was determined based on the historic volatility of comparable companies which ranged from 102.15% to 79.88%, and the risk free return which is the rate offered for UK gilt deposits which ranged from 1.44% to 1.035%, over the period from when the first options were granted. The company recognised total expenses of £107,261 (2019 - £140,496) related to equity settled share based payment transactions in the Statement of comprehensive income. The valuation of the Company's share price was independently determined using an adjusted form of the Black-Scholes model.
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Page 17
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Faculty Science Limited
Notes to the financial statements
For the year ended 31 March 2020
The company operates a defined contributions pension scheme. The assets of the scheme are held separately from those of the Company in an independently administered fund. The pension cost charge represents contributions payable by the Company to the fund and amounted to £422,438 (2019 - £205,576). Contributions totalling £49,027 (2019 - £20,964) were payable to the fund at the balance sheet date and are included in creditors.
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Related party transactions
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On 5 November 2019 the nominal value of the convertible loan notes were converted into Series 3 ordinary shares.
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Page 18
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