green energy catalysts - acta spa · acta was created to exploit a breakthrough catalyst...

ANNUAL REPORT AND ACCOUNTS 2006

ActA S.p.A.Via di Lavoria 56,G56040 Crespina (PI)ItalyTel: +39 050 644281Fax: +39 050 642251 UK office: +44 1223 257760

www.acta-nanotech.com

Des

ign

and

prod

uctio

n: W

ardo

ur P

ublis

hing

& D

esig

n (L

ondo

n). I

mag

e cr

edit:

Pho

todi

sc/G

etty

Im

ages

, Pho

tolib

rary

, Cor

bis,

Act

a.Pr

oduc

ts c

ourt

esy

of: H

ewle

tt P

acka

rd, S

amsu

ng, S

ony,

Son

y Er

icss

on. T

he c

urre

nt p

rodu

cts

show

n in

thi

s do

cum

ent

are

not

yet

fuel

cel

l-po

wer

ed.

GREEN ENERGy CATALySTS

our vision Acta intends to create a greener world through the introduction of affordable, high-performance catalysts that work with practical, renewable fuels.

About ActAActa manufactures a unique patented catalyst technology called HYPERMEC, which has been launched initially on the fuel cell market.

The fuel cell market currently uses platinum catalysts, which are too expensive to commercialise, too scarce to permit mass adoption and restrict the fuel cells to the use of impractical fuels. HYPERMEC is a platinum-free catalyst with exceptional performance. It can be industrialised at much lower costs than the current platinum catalysts. HYPERMEC also enables fuel cells to use ethanol, a safe and practical fuel that is produced from renewable sources.

Acta has several other potential industrial applications for its catalyst technology, including hydrogen generation from ethanol, ammonia or water.

Acta has been admitted to AIM, the London Stock Exchange’s global market for growing companies, since October 2005.

contents

03 CHAIRMAn’S STATEMEnT05 CHIEf ExECuTIvE OffICER’S And

CHIEf OPERATIng OffICER’S REvIEw15 CHIEf fInAnCIAL OffICER’S REvIEw16 bOARd Of dIRECTORS18 fInAnCIAL STATEMEnTS

+31nEw nOn-dISCLOSuRE AgREEMEnTS SIgnEd

500%gROwTH In REvEnuES In 2006

+51nEw CuSTOMERS

16PATEnT APPLICATIOnS In 2004-2006

• Good commerciAl momentum: - Revenues growth over 500%

- HYPERMEC now under trial in the automotive market in addition to the portable electronics market

- Marketing agreement with Sumitomo Corporation extended

• technicAl milestones Achieved- Power and durability data generated and

performance proven with other important new fuels such as glycerol and sodium borohydride, opening up more target customers and applications

- Operational and technical capability significantly enhanced by commissioning of new facility

• recruitment of key technicAl And commerciAl mAnAGement And stAff

• core pAtent GrAnted in the europeAn union And further pAtent ApplicAtions filed

• operAtinG cAsh outflow of ¤3.7m – less thAn budGet expectAtions

2006 HIgHLIgHTS

1 | ACTA AnnuAL REPORT And ACCOunTS 2006

ActA… Is PosItIoneD to PLAY A cRItIcAL RoLe In tHe eMeRGInG sUPPLY cHAIn, BUILDInG stRonG ReLAtIonsHIPs WItH otHeR DeVeLoPeRs AnD sUPPLIeRs oF FUeL ceLLs AnD ReLAteD coMPonents.PRIceWAteRHoUsecooPeRs

tHe YeAR HAs seen A VeRY encoURAGInG ResPonse FRoM cUstoMeRs, tHe sUPPLY cHAIn AnD oPInIon LeADeRs In tHe tecHnIcAL coMMUnItY.RoBeRt DRUMMonD non-executive chAirmAn

� | ACTA AnnuAL REPORT And ACCOunTS 2006

CHAIRMAn’S STATEMEnT

we are very pleased with the momentum growing behind Acta’s core catalysts for fuel cell applications and we look forward to developing this with additional product launches in 2007.

coMMeRcIAL AnD tecHnIcAL PRoGRessActa develops and manufactures a unique patented catalyst technology called HYPERMEC, which has been launched initially to the fuel cell market. Acta has several other applications for its catalyst technology, including hydrogen generation.

2006 has seen excellent commercial momentum with shipments and revenues increasing through the year. Total revenue of ¤70,000 was a sixfold increase on the ¤11,000 sales achieved in 2005. This reflection of significant and growing customer interest in HYPERMEC has been matched by the support of key opinion leaders in the industry and an increasing focus on the fuel cell technology which Acta promotes. we have been pleased to add automotive customers to our growing penetration of the portable electronics market. The partnership with Sumitomo Corporation continues to give Acta a real competitive advantage in the core Asian market, and we were delighted to deepen and extend that contract in September.

The company also made good technical and operational progress during 2006, achieving its technical milestones. Increasing orders from customers have driven operational improvements and a full-time production team has now been established. Acta has also generated exciting performance using an increasing range of fuels which offer further unique choices to the fuel cell industry, and has started development work at higher temperatures where performance is correspondingly enhanced.

In January 2007, Acta launched a new and unique catalyst technology for the generation of hydrogen from ammonia, which has particular significance for the automotive market. Performance trials are now underway with a global automotive manufacturer.

FInAncIAL ResULtsActa’s loss for the year ended 31 december 2006 was ¤4.8m against ¤3.2m in 2005, within plan and analysts’ expectations. The loss included ¤0.8m of non-cash share option expense and also excluded ¤0.3m of grant income which is expected to be received in 2007 for project costs incurred in 2006.

Operating cash outflow for the year was ¤3.7m in 2006, compared to ¤3.3m in 2005. Cash at year end was ¤7.0m, sufficient for trading well into 2008.

during the year, Acta purchased its manufacturing and development facility in Lavoria, Tuscany, for ¤0.6m. It also continued to invest in state-of-the-art analytical and testing equipment to support the scale-up of manufacturing and increased development activity. In view of the Company’s stage of development, a dividend is not appropriate.

BoARD cHAnGesIn May 2006, we welcomed Paul barritt as Chief financial Officer. Paul had previously worked with the Company both as non-executive director and as a director of Market Capital Italia, corporate finance advisor to Acta prior to its IPO. In december 2006, Alberto nobolo resigned from the board due to the pressure of his university commitments. I would like to thank Professor nobolo for his help and support. He has been replaced by fabio Mastrangelo, who is a highly experienced Italian professional who has advised many major companies in Italy. dr Mastrangelo will replace Professor nobolo as Chairman of the Audit Committee.

oUtLookThe outlook for 2007 continues to be very promising. we have already made an excellent start to the year and we look forward to further delivery of Acta’s commercial and technical strategy:

• Revenues are expected to continue to rise rapidly and in the first quarter of 2007 will exceed the whole of 2006.

• Commercial exploitation of the fuel cell catalyst will continue with increased customer numbers, shipments and order sizes. This engagement may also be reflected in development contracts either with customers or with other important components of the supply chain.

• The launch of the ammonia electrolyser catalyst in Q1, which opens exciting new opportunities for hydrogen generation.

• The launch of a new catalyst for fuel cells, targeted for the second quarter, with even higher performance than the existing HYPERMEC. Pre-launch testing with select customers is underway.

• Operational scale-up of the existing facility will continue with milestones set for growing batch sizes and total production levels to annualised capacity of ¤4.5m.

• further recruitment of experienced, high-quality management and development staff. In March 2007, we were delighted to welcome dr Shimshon gottesfeld as an advisor to the Company. dr gottesfeld is one of the fuel cell industry’s leading figures. dr gottesfeld will be advising Acta in particular on how it can best establish itself in the uSA and gain market presence there.

• In March the Carbon Trust awarded Acta and the university of Edinburgh £175,000 over two years to explore a novel use for Acta’s technology, an exciting endorsement of Acta’s potential by a leading carbon reduction funding body.

RoBeRt DRUMMonD non-executive chAirmAn


PAoLo BeRt chief executive officer

ActA’s FIRst YeAR As A PUBLIc coMPAnY HAs Been one oF sIGnIFIcAnt PRoGRess. We exPect to see An exPAnsIon oF ActA’s coRe FUeL ceLL MARkets Into tHe HYDRoGen GeneRAtIon AnD ReneWABLe eneRGY MARkets.


The ability to use our laptop indefinitely outside or while on the move would transform our working and leisure behaviour. fuel cells can be instantly refuelled with no lengthy recharge.

PdAs have more and more functions – all of which need power. Consumers want standby time, talktime, MP3 time and unlimited web usage. fuel cells have potentially far higher energy density than batteries.

ActA’s UnIqUe PRoDUcts AnD MARket oPPoRtUnItIesUnique catalystsActa was created to exploit a breakthrough catalyst manufacturing technology. Acta uses templating technologies to produce catalysts containing two or three different metals with a very small particle size in a stable form. These catalysts can be used to replace platinum catalysts in fuel cells, hydrogen generation devices and other applications. Platinum is too expensive and scarce for these potentially huge markets and it imposes technical limitations such as the fuels that can be used. Acta’s HYPERMEC catalysts can be mass produced at far lower cost and allow the use of a wide range of fuels, including ethanol.

Having first promoted its fuel cell catalysts, Acta has now launched its electrolyser catalysts for ammonia and water, and has announced a Carbon Trust grant to research a catalyst for the conversion of CO2 to liquid fuel. Other possible applications are also under trial.

Huge potential marketsA primary target market for fuel cells is to replace the lithium ion battery. five hundred million portable devices are produced each year containing lithium ion batteries, and this market is growing rapidly as consumers seek more mobility and more functions while on the move. The Carbon Trust has forecast the fuel cell market for portable electronics alone to be £6bn in 2011.

The renewable energy market is also an enormous potential market. The ultimate application would be in widespread automotive use, but there are other niche applications coming close to market launch.

Catalysts currently make up to 40% of the cost of a fuel cell stack. Acta has calculated that the catalyst market for laptops alone would be worth over £1bn once fuel cells are commercialised.

oUR stRAteGIc PRoGRessLast year we highlighted the five key strands of Acta’s business plan. we have delivered excellent progress in all of these areas during 2006 and expect to continue this momentum in 2007.

Buliding a global awareness of ActaActa’s HYPERMEC technology is novel and global awareness of it was very limited when we joined AIM in late 2005. Increasing awareness and acceptance by the academic and technical community is important to support our commercial focus on global fuel cell developers and users.

CHIEf ExECuTIvE OffICER’S And CHIEf OPERATIng OffICER’S REvIEw

deliverinG our strAteGy

- Successful global launch of HYPERMEC brand: top companies and technical institutes worldwide are evaluating performance

- Expansion of customer base into automotive and other markets beyond portable electronics

- Recruitment of leading global R&d figures to Acta’s team

- Scale-up of production capability at Acta’s plant, which has sufficient capacity to take the business to profitability

- Extending our patent applications and building on the core Eu patent awarded in december 2006


CHIEf ExECuTIvE OffICER’S And CHIEf OPERATIng OffICER’S REvIEw COnTInuEd


Consumers are encumbered by having to carry different chargers for each different device: phone, camera, laptop, PdA, camcorder, MP3 player etc. fuel cells lighten the load, with 5-10 times the power density.

3g phones have more functionality: in Japan they already show television. These functions are very power-hungry and drastically reduce the phone’s battery life.

one tecHnoLoGY, tWo MARkets, MULtIPLe APPLIcAtIons

PoRtABLe PoWeR

A huge and growing marketActa has focused its main commercial effort on fuel cell applications for portable electronics. Over 500 million portable devices are produced each year which contain a lithium ion battery, and this market is continuing to grow rapidly as consumers become used to full mobility in all their devices. These devices are also becoming more advanced and more power-hungry with Tv to phones, larger screens, wireless connectivity etc.

Battery power the main constraintConsumers not only want additional functions, they also want longer battery life, which the current technology will not be able to supply. The lithium ion battery has been the mainstay of the portable electronics industry in the last decade, but it is now reaching its maximum power supply. for example most laptops are currently powered by 15-20w batteries, but manufacturers would like to double this.

Fuel cells make sensefuel cells have much higher power density and are lighter than batteries. They also can be refuelled instantly rather than by a lengthy reconnection to mains power. They are quiet, efficient and environmentally friendly.

oeMs choose fuel cells Almost all the leading portable electronics Original Electronic Manufacturers (OEMs) have active fuel cell programmes and have demonstrated prototype units for a range of applications from rechargers to laptops. Such companies include Toshiba, nEC, fujitsu, Samsung, Canon etc.

fuEL CELL CATALYSTS HYdROgEn gEnERATIOn

ELECTROnICS And bATTERY InduSTRIES MILITARY InduSTRY

AuTOMOTIvE InduSTRY POwER gEnERATORS fOR HOMES And InduSTRY

portAble power

bATTERY TECHnOLOgY

dISPOSAbLE fuEL CELLS

fuEL CELLS <1kw fuEL CELLS >1kw AMMOnIA ELECTROLYSER

REfORMIng H2O ELECTROLYSER

CO2 AbATEMEnT

renewAble enerGy

Last year was a breakthrough for Acta in its global marketing campaign. Presentations and demonstrations at the leading fuel cell exhibitions around the world have achieved widespread awareness in the industry that HYPERMEC now offers a platinum-free solution for fuel cells at a time of generally increasing platinum prices. Acta has been shipping samples to universities and technical institutes worldwide and has hosted a number of visits from leading global fuel cell experts. There has been a corresponding dramatic increase in activity and research into Acta and compatible component technology in the last few months, as outlined in the commercial review below.

we anticipate that research into this technology area will continue to accelerate and that Acta is likely to have a leading position as supplier of catalysts to the industry. The HYPERMEC brand is also securing recognition and is being used by third parties in enquiries to us and in presentations.

Manufacturing and selling catalysts for the fuel cell marketActa’s strategy is to manufacture and sell catalysts for both medium-sized and portable applications in the fuel cell market. by manufacturing the catalysts we will keep control of our intellectual property and remain close to the needs of our customer base.

during 2006 we made excellent commercial progress, selling catalysts to an increasing number of customers. we also sold electrodes, a value-added product supporting the catalyst, for the first time. This progress is explained in greater detail in the commercial review on page 9.

we made important progress in our manufacturing and development facility in Italy. Investment in the production area continued as we commissioned the main plant: the equipment that we have already installed is sufficient to take the company to profitability, but ongoing enhancements will improve efficiency and optimise the operational processes. The number of fuel cell testing stations increased from just one in late 2005 to over 50 by the end of 2006. we installed two test stations for data generation at temperatures up to 80˚C, where most current fuel cell systems operate. A further 10 temperature controlled test stations will be installed in 2007. This has been supported by new analytical equipment which has greatly enhanced the testing of both production and development batches.

commercialising opportunities in other marketsActa’s unique breakthrough is in catalyst manufacturing: we have always strongly believed that the catalysts that we produce will have multiple applications.

during 2006 we made excellent progress with new applications:• we proved the concept of the disposable fuel cell, where all the

components required for a small passive recharger unit can be assembled for very low cost.

• we have invented and patented a catalyst for an ammonia electrolyser to generate hydrogen at room temperature using very low power inputs.

• we have significantly improved the performance of our patented reformer catalyst.

• we identified other new applications and have produced early samples for testing.

the outlook for 2007 is exciting:• we will generate performance data on a prototype disposable unit and

explore opportunities for commercialisation.• In february we demonstrated the ammonia electrolyser catalyst to the

fuel cell industry at the fC Expo in Tokyo. we shall continue development of enhanced electrodes, working with the automotive industry and other interested parties.

• we will be seeking partners for ethanol reformer trials.• we have been awarded a Carbon Trust grant to explore the use of

HYPERMEC in conversion of CO2 to liquid fuels.• we will continue with other applications under trial at prospective

customers and at universities in the uK and Italy.

These applications are an extension of Acta’s core technology. we have taken care to avoid distraction to Acta’s activity in fuel cells and we believe that these applications may bring substantial new commercial opportunities.

Recruiting high-quality peopleThe success of Acta is driven by its ability to attract top-quality talent from the fuel cell industry and other relevant but more commercially mature industries. In addition to the board appointments discussed above, we were delighted in 2006 to recruit dr xiaoming Ren, a leading global fuel cell expert with experience at Los Alamos national Laboratories, and dr damian Thomas, an experienced product development manager from Johnson Matthey. In March 2007 we were delighted to welcome dr Shimshon gottesfeld as an advisor. The appointment of dr gottesfeld underlines the keen interest in Acta among world technical experts at the highest level.

control of costs in a focused business planActa’s board is experienced in the management of growth businesses. we are determined to expand in a controlled manner, keeping tight control of expenditure and investing in people and assets when we hit our milestones of commercial and technical progress. we have been very pleased to achieve all our targets for 2006 for significantly less cash outflow than expected. The outlook for 2007 is a controlled increase in cash outflow, in particular to meet the Company’s grant-related projects, much of which will be matched by grant income and loans to be received in 2008.


1�5mW/cm�

PEAK POwER Of An ETHAnOL fuEL CELL RunnIng AT 80°C

500MILLIOn PORTAbLE ELECTROnIC dEvICES ARE SOLd EACH YEAR

We ARe seeInG excItInG coMMeRcIAL MoMentUM BotH In cUstoMeR ActIVItY AnD In tHe tHIRD-PARtY tecHnIcAL ReseARcH tHAt sUPPoRts It.toBY WooLRYcH chief operAtinG officer


AcHIeVeMents In �006 AnD PLAns FoR �00��006 commercial reviewActa generated exciting commercial momentum in 2006. Total revenue increased sixfold to ¤70,000 in 2006 (2005: ¤11,000). Thirty-one non-disclosure agreements (ndAs) were signed against 13 in 2005. Products were sampled to 51 new customers, compared to six in 2005. These products included demonstration kits, catalyst powder and, for the first time, catalyst coated electrodes.

Core to Acta’s strategy in Asia is its marketing contract with Sumitomo Corporation. Sumitomo offers Acta access to the target customer base at a high level and gives superb customer service to our core prospects. Sumitomo has backed Acta’s technology not only with valuable commercial resource but also by investing heavily in local marketing and promotion. we were therefore delighted in September to extend and deepen the contract with Sumitomo. This demonstrates Acta’s satisfaction with the commercial progress made by Sumitomo and Sumitomo’s conviction that Acta’s technology is addressing the commercial needs of the market place.

Commercial acceptance in this highly technical field will also be underpinned by support from leading technical institutes and universities worldwide. Progress in this area has been very exciting in 2006. In the field of fuel cells, Los Alamos national Laboratories held a two-day conference in december specifically to review the anionic fuel cells which Acta promotes, citing Acta’s breakthrough as a major motivation for the conference. This was followed by a call for funding by the uS department of defense in early 2007 to support development of the anionic membranes which complement Acta’s catalysts. In early 2007 Acta was also invited to join IdECAT, the European forum for linking the catalyst industry with universities. Other members include Johnson Matthey, bASf, Shell, bP, dow and Huntsmann.

In the field of hydrogen generation from ammonia, Acta responded to a department of Energy (doE) consultation document to develop its breakthrough electrolyser catalyst. This has now been reflected by the first grants being made by the uS doE for further research in this field. The latest European funding platform, (fP7), also specifically includes research into low-cost catalysts and the use of bio-fuels in fuel cells as a result of the support of European technical institutes.

�00� commercial targetswe are very confident that 2007 will see more commercial progress and visible evidence that Acta’s technology is being actively pursued. Our targets for 2007 include:• Continuing our revenue momentum as larger volumes of catalyst and

electrodes are sold. Revenue in the first quarter of 2007 will exceed that of the whole of 2006.

• Selling fuel cell and hydrogen generation catalyst to the automotive and potentially other markets in addition to portable electronics.

• Creating development partnerships with customers, component makers and technical institutes to accelerate the commercial adoption of Acta’s technology.

• Sampling new catalysts to explore other market opportunities.

Have you ever run out of battery power just when something interesting was about to happen? A fuel cell would allow instant recharging so that the family history is properly recorded.



Acta shipped twice as much catalyst in 2006 as it did in 2005 and in addition launched new value-added products such as electrodes.

+110%CATALYST POwdER SHIPPEd In 2006

Total 2006

949

H2 2006

749

H1 2006

200

2005

NUMBER OF ELECTRODES SHIPPED


tHeRe Is A stRonG PUsH In FUeL ceLL ReseARcH to RePLAce PLAtInUM. RIGHt noW, tHe cost oF PLAtInUM In A FUeL ceLL stAck Is HALF tHe PRIce oF tHe stAck ItseLF.PIotR ZeLenAYreseArcher At los AlAmos nAtionAl lAborAtories

HYDRoGen GeneRAtIon

the problem of hydrogen supplyHydrogen fuel cells work well – the main problem is supplying them with hydrogen in a practical, economic and safe way. Hydrogen is very difficult to compress for storage and transportation as it is a light gas. Hydrogen compressed to 200 bar (200 atmospheric pressures) has only 10% of the energy value of an equivalent volume of gasoline. Moreover, most of the energy value of the hydrogen is used up in compressing it and getting it to the point of use. Hydrogen is also flammable and highly restricted in its use.

Potential solutionsThere are a number of potential solutions to the hydrogen supply problem, and Acta has a range of appropriate products:

• Ethanol reforming breaks safe and practical ethanol down to extract the hydrogen and feed it to a hydrogen fuel cell. Acta has an ethanol reforming catalyst in the late stages of development at the university of Trieste, Italy.

• water electrolysis breaks down water to supply hydrogen. It is extremely environmentally friendly although the energy input required is relatively high. Acta filed a patent for platinum-free catalysts for water electrolysis during 2006.

• Ammonia electrolysis breaks down ammonia (nH3) to supply hydrogen. Ammonia is one of the most widely used and transported chemicals in the world: over 80% of it is used on fields as fertiliser. Acta’s breakthrough new catalyst produces hydrogen from ammonia at room temperature, using a fraction of the energy inputs required for water electrolysis.

�006 technology review and milestonesActa’s technology strategy for 2006 comprised: • Consolidation of existing technology through increased data generation

and performance assessment.• Improvements to the existing technology.• Securing new intellectual property through patent applications.• Continued innovation in the form of novel products and applications.

These goals have been achieved in full.

we have used the increasing testing capability of the business to develop performance data using different fuels and at a range of temperatures.

This work has confirmed that HYPERMEC has a unique ability to work with a wide range of hydrocarbon and other fuels. Performance data has now been generated on ethanol, methanol, hydrogen, ethylene glycol, glycerol, dextrose, n-butanol, methane, ammonia and sodium borohydride. Each of these fuels offers different features for different applications and so offers unparalleled choice to fuel cell developers. Acta’s research at higher temperature, has also proven that performance at 80˚C is significantly higher than at room temperature, as expected.

we have also improved performance of the base catalyst technology. Significant enhancements have been made to both catalyst and electrode structure. Cathode performance has been doubled in line with the milestones set last year. we have also significantly improved the performance of our ethanol reformer catalyst.

In december 2006, Acta received its first full Eu patent grant for its core technology, confirming the novelty of Acta’s templating polymer approach. Acta filed four new patent applications during 2006, and we have delivered Phase 1 of our fIT and fISR grant projects on time and on budget.

we have delivered in full on our plan to continue innovation. we have developed, patented and demonstrated our new catalyst to generate hydrogen from ammonia. we patented our platinum-free catalyst for hydrogen generation from water electrolysis. we have performed trials and won a Carbon Trust grant to further develop a catalyst to convert CO2 to liquid fuel and we have also made excellent progress in other potential applications which we intend to patent and disclose during the course of 2007.

�00� technical programmeActa has an exciting ongoing programme of technical work for 2007:• final development, data generation and launch of an improved fuel cell

catalyst in Q2 of 2007. Performance is expected to be 50% higher than the current catalyst.

• further development work of catalysts and electrodes at higher temperatures with the aim of proving power densities suitable for stationary or automotive applications.

• Improvements to fuel cell structure.• final development and translation to sample stage of reformer catalyst.• Increased efficiency and durability of new ammonia electrolyser catalyst.• further durability data. • Produce demonstrator disposable fuel cell and use it to generate

performance data with different fuel options.• Support the Carbon Trust project to develop a new catalyst to convert

CO2 to liquid fuels.• Patent applications as appropriate to secure the benefits of the above

technology goals.


Platinum prices continued to rise to a peak of over $1,200 per oz ($32,000 per kg) in 2006 based on an increasing demand for use in automotive catalytic convertors that is set to continue. At these price levels, there would be $90 of platinum in a laptop computer and $4,000 in a car, preventing fuel cells from competing commercially with existing technologies.


PLATINUM PRICE (US$ monthly average)

92

300

400

500

600

700

800

900

1000

1100

1200

1300

93 94 95 96 97 98 99 00 01 02 03 04 05 06

1� | ACTA AnnuAL REPORT And ACCOunTS 2006

sUMItoMo

About sumitomoSumitomo Corporation is one of the largest of the Japanese trading houses and dates back as far as the 17th century. with 51,000 employees and a global network of operations, Sumitomo has longstanding trading relationships throughout the chemical and electronics industries of Asia.

the sumitomo agreementSumitomo and Acta signed a commercial marketing and distribution agreement in 2005, which was extended in 2006, through which Sumitomo actively promotes Acta’s products in Asia in return for a commission on future revenues. The agreement now includes China and Hong Kong and includes Acta’s full portfolio of products.

Benefits for ActaSumitomo offers Acta a real competitive advantage in approaching the core Asian market for fuel cells. Sumitomo has an excellent sales force, high-level contacts in the customer base and extensive experience in managing any cultural issues arising for western suppliers who wish to sell in Asia. Sumitomo and Acta jointly exhibit at the fuel Cell Expo in Tokyo, by far the world’s largest fuel cell exhibition with over 24,000 visitors. Sumitomo also, through their extensive academic and industrial contacts, source the latest components being developed for fuel cells and offer them to Acta for early evaluation.

tHe InDUstRY In AsIA HAs Been Most ResPonsIVe to ActA’s HYPeRMec tecHnoLoGY AnD cUstoMeR InteRest Is VeRY PLeAsInG. We ARe DeLIGHteD to contInUe WoRkInG WItH ActA In oRDeR to ADDRess tHese PotentIALLY VeRY sIGnIFIcAnt MARkets.MR UeMURAsenior mAnAGer in sumitomo corporAtion

Sumitomo staff present in Japanese at the Acta/Sumitomo stand at fuel Cell Expo in Tokyo. This is the largest fuel cell exhibition in the world by far.

�006 operational reviewActa’s manufacturing facility has already installed enough capacity to make Acta profitable and scale-up work on this plant has now begun in response to increasing customer demand. Orders were generally met during 2006 by the development team, but order levels have required us to create a full-time production team in 2007. Operational capability was significantly enhanced during 2006 with new kilns and mills. Electrodes were manufactured in bulk for the first time: 949 electrodes were sold in 2006 against 0 in 2005. new analytical equipment has also improved our ability to apply quantitative analysis to each batch prior to shipment.

�00� operational targets2007 will see the beginning of the process of sustainable operational scale-up, with a programme of testing and reproducibility at increased batch sizes at each stage of the production process. Targets for volume production are as follows:

The december target capacity would equate to annualised revenue of around ¤4.5m, assuming all the capacity were sold at current pricing levels.

oUtLookActa’s first year as a public company has been one of significant progress. we are seeing exciting commercial momentum both in customer activity and in the technical research by third parties that supports it. Acta has continued to mature as a commercial enterprise and in 2007 will add operational capability to its commercial and development skills. we expect to see an expansion of Acta’s core fuel cell markets and hydrogen generation for portable electronics and renewable energy and further developments in novel applications for Acta’s innovative technology.


Acta had just one test station in late 2005. At the end of 2006 there were 52 test stations for power and durability evaluation. Two of these can operate at higher temperatures and this number will increase to at least 12 during 2007.


PRoDUct noW JUne 0� DeceMBeR 0�

Anode (g per wk) 100 500 1000

Cathode (g per wk) 500 1000 2500

Electrodes (units) 150 250 500

PAoLo BeRtchief executive officer

toBY WooLRYcHchief operAtinG officer

Dec 06

52

Mar 06

8

1

June 05

ANALYTICAL TEST STATIONS FOR R&D and QUALITY CONTROL

In �006 ActA AcHIeVeD exceLLent coMMeRcIAL AnD tecHnIcAL PRoGRess, WHILe MAIntAInInG A FRAMeWoRk oF stRIct FInAncIAL DIscIPLIne. PAUL BARRItt CHIEf fInAnCIAL OffICER


Operating losses amounted to ¤5.1m (2005: ¤3.2m), well within expectations and including non-cash costs of ¤778,000 for stock options, while cash outflow from operations was significantly lower, at ¤3.7m (2005: ¤3.3m). net cash outflow in the year was flat at ¤4.2m (2005: ¤4.2m, excluding net proceeds from the issue of share capital).

Revenues from the sale of product samples, while still modest, continued to grow strongly, with substantial growth from the first half of 2006 (¤14,000) to the second half (¤56,000), and from 2005 (¤11,000) to 2006 (¤70,000). we expect continued momentum during 2007 as increasing volumes are sampled to our growing customer base.

grant revenues are recognised upon receipt of the respective grant funding.grant income of ¤48,000 was recognised against costs in relation to the completion of Stage 1 of the ¤0.6m fISR project; while no income has been recognised in the year in relation to Stage 1 of the ¤2.1m fIT project, completed at the year end, or Stage 2 of the fISR project, due for completion in April 2007.

Operating costs in the year grew to ¤5.1m (2005: ¤3.2m), reflecting the Company’s first full year of operations, including the costs of the new technical and office facilities in Lavoria, Tuscany, additional technical and commercial staff, and the recruitment of senior management.

As indicated in the half year results, Acta acquired its technical and office facilities in July 2006, at a cost of ¤565,000, this facility having previously been rented on a short-term arrangement. The purchase was financed through a long-term mortgage, and delivers a significant unrecognised capital gain, together with a modest saving in net establishment costs. Other capital expenditure in the year amounted to ¤460,000 in tangible assets for scientific analysis and test equipment (2005: ¤810,000) and ¤102,000 in intangible assets (2005: ¤92,000), relating to patent registration costs.

The Company has adopted prudent foreign currency policies and other aspects of risk exposure, including health, safety and environmental, are reviewed regularly by the board, to ensure legal compliance and prudent risk management.

Operating losses and cash outflow are expected to rise during 2007, partly because grant project activities will increase in the year, with this increase being offset by grant income and loans to be received in 2008.

Cash and cash equivalents stood at ¤7.0m at the year end, and are sufficient to support the Company well into 2008.

PAUL BARRItt chief finAnciAl officer

Acta catalysts offer the opportunity of green energy. from ethanol fuelled laptops to zero emission cars and CO2 sequestration, Acta catalysts can contribute to a cleaner and greener planet.

CHIEf fInAnCIAL OffICER’S REvIEw


by removing the platinum from the catalyst, Acta has a strong margin advantage. The cost of the raw materials of a 50% platinum catalyst is over 20 times more than HYPERMEC.

RAW MATERIAL COST PER KG ($)

HYPERMEC

500

50% Platinum catalyst

16,000

bOARd Of dIRECTORS

1. RoBeRt DRUMMonD

�. PAoLo BeRt

3. toBY WooLRYcH

�. PAUL BARRItt

5. FABIo MAstRAnGeLo

6. GeoFF BIckneLL

�. MARco cHIARIon cAsonI

1 � 3

� 5 6

�


1. RoBeRt DRUMMonD non-executive chAirmAnAge 61. Robert has had a successful career in venture capital and is very experienced in guiding young companies through their early growth phases. He has been Managing director of natwest ventures and grosvenor Capital and was Chairman of the british venture Capital Association. He is now Chairman of Chrysalis vCT. He is a chartered accountant.

�. PAoLo BeRt chief executive officerAge 59. Having pursued a successful career in the yarn extrusion industry which saw him found and develop filteco, a leading global supplier of yarn extrusion equipment, Paolo became interested in membranes and catalysts and their use in fuel cells in 2000, and has developed the HYPERMEC technology in partnership with Alessandro Tampucci from 2002 to the present, filing patent applications to protect the development work undertaken. Since mid-2003 Paolo has dedicated himself full-time to Acta and its opportunities within the field of fuel cell catalysts.

3. toBY WooLRYcH chief operAtinG officerAge 40. Toby joined Acta in May 2005 after eight years in Johnson Matthey, where he was employed in a number of senior management roles including Managing director of the company’s Speciality Coatings business and finance director of the global Colours & Coatings division. Prior to that, he was finance director of a start-up medical publishing business. He graduated from Cambridge university in 1988 and qualified as a chartered accountant with Arthur Andersen in 1991.

�. PAUL BARRItt chief finAnciAl officer Age 44. Paul joined Acta as non-executive director in 2005, and as CfO in May 2006. He has acted as key advisor to the company since 2003, providing financial, business and strategic consultancy advice. Previously, Paul was a senior consultant to Market Capital Italia, an independent advisory firm which initiated the first Italian IPO on AIM. He has an in-depth knowledge of corporate finance in both the uK and Italian markets. Paul graduated from Oxford university in 1985.

5. FABIo MAstRAnGeLo non-executive director Age 46. fabio is an Italian chartered accountant and auditor. After training with KPMg he joined Studio Mastrangelo. He has held professorships at the university of Roma Tre and at the Italian Tax Police School. He has been a member of the Council of Rome Chartered Accountants and Chairman of the Income Tax Commission. He is Chairman of the audit committees of several major Italian companies, including the Italian subsidiaries of multi-national public companies.

6. GeoFF BIckneLL non-executive directorAge 64. geoff is a chartered accountant in England and in Canada, and has held senior financial and general management positions in Rockwell International Corporation, Lucas Industries, TI group PLC and northgate Information Systems. He is currently a consultant to Maxima Holdings Plc.

�. MARco cHIARIon cAsonI non-executive directorAge 46. Marco qualified as an Italian chartered accountant in 1986. He worked as a management consultant with Studio Ambrosetti and an Italian partner of McKinsey and Co. In 1998 he founded Studio Casoni & Associati and today he is one of the partners. In 2005 Marco provided extensive consultancy support to Acta as it established its infrastructure and systems and in January 2006 he was appointed as non-executive director.


18 | ACTA ANNUAL REPORT AND ACCOUNTS 2006

fiNANCiAL STATEmENTS19 DiRECTORS’ REPORT23 CORPORATE GOvERNANCE REPORT25 STATEmENT Of DiRECTORS’ RESPONSibiLiTiES26 iNDEPENDENT AUDiTORS’ REPORT27 CONSOLiDATED iNCOmE STATEmENT28 CONSOLiDATED bALANCE ShEET29 STATEmENT Of ChANGES iN EqUiTy30 CONSOLiDATED CASh fLOw STATEmENT31 NOTES TO ThE CONSOLiDATED

fiNANCiAL STATEmENTS


DiRECTORS’ REPORT

The Directors present their Directors’ Report and the Group financial statements for the year ended 31 December 2006.

PrinciPal activityThe Group is comprised of Acta S.p.A. (“Acta” or the “Company”), which was incorporated on 28 June 2004, and its subsidiary companies idea Lab S.r.l. (“idea Lab”), and Acta Catalysts Ltd (dormant until 31 December 2006). The principal activity of the Group during the year was the research and development of platinum-free catalysts for the fuel cell industry and for renewable energy applications. The Group’s activity is carried out based on a technology originally patented by the subsidiary idea Lab but subsequently extensively developed and subject to further patent applications by Acta.

During 2006 the Group has continued to market its products to customers worldwide. Revenues from the sales of samples of catalysts and catalysed electrodes amounted to ¤70,000 during the year, compared to ¤11,000 during 2005. while the Group continues to be encouraged by strong commercial interest, no formal customer contract has been signed to date, and it is not possible to predict when the first such contract will be concluded.

Although the Group has not yet started to produce significant revenues and profits, the Directors believe that the carrying value of its patents is not impaired, and the Group will be able to recover the value of such assets through the expected future cash flows from products, based on the patented technology, which will be sold in the medium-term future.

The Group has made good progress in its commercial activity during the year, with increased numbers and volumes of product shipments. The Group’s product samples were also sold into the automotive industry for the first time.

Research and development activities progressed well, with the filing of four new patent applications, bringing the total number of applications in progress up to 16; and the development of a catalyst for the electrolysis of ammonia, a potentially important new application in the renewable energy sector. in addition, the European Patent Office formally granted the Group’s first full patent, covering the Group’s core technology. The outlook remains promising.

review of the business and future develoPmentsA detailed account of the Group’s progress during the year and its future prospects is set out in the Chairman’s Statement, the Chief Executive’s Statement and the Chief Operating Officer’s Statement, presented in the 2006 annual report.

results for the financial yearThe results for the financial year are set out on page 27.

directors and directors’ interestsThe Directors who held office during the year were as follows:

Paolo bert – Executive Director Toby woolrych – Executive Director Paul barritt (appointed 1 may 2006) – Executive Director Robert Drummond – Non-executive Director Geoffrey bicknell – Non-executive Director marco Chiarion Casoni (appointed 20 January 2006) – Non-executive Director fabio mastrangelo (appointed 18 December 2006) – Non-executive Director

Giovanni Chiarion Casoni (resigned 20 January 2006) – Non-executive Director Alberto Nobolo (resigned 18 December 2006) – Non-executive Director

The board thanks both Dr Casoni and Dr Nobolo for their contribution to the Group over the last two years.


31 December 2005 ¤000 31December2006 ¤000

DiRECTORS’ REPORT CONTiNUED

Paolo Bert

Toby Woolrych

Paul Barritt

Robert Drummond

Geoffrey Bicknell

Marco Chiarion Casoni

Alberto Nobolo

Fabio Mastrangelo

Giovanni Chiarion Casoni

Bonus

–

–

–

–

–

–

–

–

–

Total

312

272

9

35

23

–

32

–

14

Benefits

13

–

–

–

–

–

–

–

–

Share options

84

109

–

–

–

–

–

–

–

Salary

215

163

9

35

23

–

32

–

14

Bonus

20

30

–

–

–

–

–

–

–

Total

653

481

126

58

42

42

42

–

–

Benefits

1

3

1

–

–

–

–

–

–

Share options

361

248

12

5

4

4

4

–

–

Salary

271

200

113

53

38

38

38

–

–

in addition to the above remuneration, during 2006 Dr Marco Chiarion Casoni earned ¤36,000 (2005: ¤150,000), and Dr Alberto Nobolo earned ¤19,500 (2005: Nil), as consultants to the Company.

The Directors who held office at the end of the financial year had the following interests in the ordinary shares of the Company:

Paolo Bert

Toby Woolrych

Paul Barritt

Robert Drummond

Geoffrey Bicknell


Alberto Nobolo

Fabio Mastrangelo


Percentage of issued ordinary shares As at 31 Dec 2006

48.6%

0.3%

0.1%

Nil

Nil

0.3%

Nil

Nil

Nil

Number of ordinary shares As at 31 Dec 2006

17,483,022

92,592

25,000

Nil

Nil

103,035

Nil

Nil

Nil

Number of ordinary shares As at 31 Dec 2005

17,483,022

92,592

Nil

Nil

Nil

103,035

Nil

Nil

Nil

Mr Bert owns 883,022 in his own name and is the 51% shareholder in Bertam Srl, which owns 16,600,000 shares in the Company. The remaining 49% of the Bertam shares are held by Mr Tampucci, co-founder of Acta with Mr Bert.

None of the Directors who held office at the end of the financial year, nor any of their immediate families and persons connected with them, has any other disclosable interest in the shares of the Company or of its subsidiary except as disclosed above.

No rights to subscribe for shares in the Company or its subsidiary were granted to any of the Directors or their immediate families and persons connected with them, or exercised by them, during the financial year except as indicated below:

Directors’ remunerationThe Directors’ remuneration during the year was as follows:

Paolo Bert

Toby Woolrych

Paul Barritt

Robert Drummond

Geoffrey Bicknell


Alberto Nobolo

Fabio Mastrangelo


At 31 Dec 2006 Number

956,066

655,714

66,300

28,560

20,400

20,400

20,400

Nil

Nil

Number Exercised 2006 Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Number Granted 2006 147,424

108,800

66,300

28,560

20,400

20,400

20,400

Nil

Nil

At 31 Dec 2005 Number

808,642

546,914

Nil

Nil

Nil

Nil

Nil

Nil

Nil


Number of ordinary shares

3,126,112

3,005,556

1,771,406

1,441,014

1,150,000

Percentage of issued ordinary shares

8.7%

8.3%

4.9%

4.0%

3.2%

RAB Capital

Morley Fund Management Limited

Seymour Pierce Ellis Limited

Market Capital Corporation

Majedie investment Management

As noted above, Mr Bert and Mr Tampucci are indirect owners of 16,600,000 (46.2%) shares in the Company through Bertam Srl, and in addition Mr Bert owns 883,022 (2.6%) shares in the Company in his own name.

in the year ended 31 December 2005 the Group issued share capital. Details are reported in note 19.

Policy anD Practice on Payment of creDitors it is the Group’s policy to fix the terms of payment with suppliers when agreeing the terms of each transaction and to abide by these terms of payment.

Political anD charitable contributionsThe Group made no political or charitable contributions during the year.

emPloyeesThe Group’s employment policies are designed to provide equal opportunities irrespective of colour, ethnic or national origin, sex, sexual preference or mental or physical ability. Full consideration is given to the employment, training and career development of disabled persons and persons who become disabled.

corPorate GovernanceThe Directors have reviewed the requirements of the Combined Code and comply with its principles where possible given the size and stage of development of the Group. This is discussed in detail in the Corporate Governance report on page 23.

GoinG concernThe Group has incurred significant losses from operating activities in 2006. A significant loss is expected in 2007 based on current estimates.

The consolidated financial statements have been prepared on a going concern basis. Cash and cash equivalents amount to ¤7,049,000 as of 31 December 2006 and therefore are expected to be sufficient to cover the financial and liquidity needs for the Company for the year 2007 and for the first half of 2008; and the Directors believe that the Group will become profitable and cash-generating in the medium term based upon the commercialisation of its patented technology.

During 2007 the Board will seek additional sources of finance as required to support the activities of the Group beyond 2007, and the Directors have a reasonable expectation that additional resources will support the going concern in the medium term.

The Directors have a reasonable expectation that the Company and the Group as a whole has adequate resources to continue in operation for the foreseeable future. For this reason the Directors have continued to adopt the going concern basis in preparing the financial statements.

The options granted during 2006 have an exercise price of 150.50 pence sterling, and will vest following the announcement to the stock market of a six-month statutory reporting period in profit ending no later than 31 December 2009.

Paolo Bert was granted an option on 30 September 2005 to purchase 808,642 ordinary shares of the Company at an exercise price of ¤0.81 per share. The option is exercisable three to five years after the date of grant and must be exercised within six months of termination of employment.

Toby Woolrych has been granted two options to purchase a total of 546,914 ordinary shares of the Company at an exercise price of ¤0.81 per share. The options are exercisable three to five years after the dates of grant of 31 May 2005 (300,000 ordinary shares) and 30 September 2005 (246,914 ordinary shares) and must be exercised within six months of termination of employment.

The exercise price of the options granted in 2005 to Mr Bert and Mr Woolrych was converted from ¤0.81 to 56.0 pence sterling at the Annual General Meeting held on 28 June 2006.

Directors’ inDemnity ProvisionsThe Company has entered into a standard commercial insurance arrangement whereby the Directors and employees of the Company may be indemnified in respect of matters relating to the admission of the Company to the London AiM market and the normal management and operation of the Group.

substantial shareholDinGsAt 7 February 2007 the Directors have been notified of the following shareholdings in the Company (excluding holdings of the Directors).


DIRECTORS’ REPORT CONTINUED

SubSequent eventSThere are no material events that have taken place subsequent to the balance sheet date.

DiScloSure of information to auDitorSThe Directors who held office at the date of approval of this Directors’ report confirm that, so far as they are each aware, there is no relevant audit information of which the Company’s auditors are unaware; and each Director has taken all reasonable steps to make himself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information.

auDitorSUnder Italian legal requirements, auditors are appointed under a three-year contract. Acta’s contract with KPMG SpA to act as auditors will expire at the signing of the accounts for 2006.

A resolution to confirm the appointment of Company auditors for the three-year period 2007 to 2009 is to be proposed at the forthcoming Annual General Meeting.

By order of the Board,

Paolo bertChief exeCutive OffiCer


CORPORATE GOvERNANCE REPORT

Acta is committed to the principles of Corporate Governance contained in the Combined Code on Corporate Governance (“the Code”) for which the Board is accountable to shareholders. Since admission to AIM on 4 October 2005 the Company has been in compliance with the Code provisions set out in section 1 of the Code.

The Company has applied the principles set out in section 1 of the Code by complying with the Code as reported above. Further explanation of how the principles and supporting principles have been applied is set out below and in the Directors’ remuneration report.

boarD StructureThe Company is headed by an effective and objective Board which is collectively responsible for setting the Company’s strategic aims. The Board has put in place a framework of prudent and effective controls which enables strategy, budget and risks to be assessed and managed. All major decisions concerning the management of risk, the recruitment of key staff, investor communications, strategic investments and the entering into material contracts are approved by the Board in advance. The Board contained three Executive and four Non-executive Directors during 2006. On 18 December 2006 Dr Mastrangelo joined the Board as Non-executive Director and Audit Committee Chairman, replacing Dr Nobolo, who previously held these roles.

The Board considers all the Non-executive Directors to be independent in accordance with the requirements of the Code. All committees, as well as Directors individually, have the authority to access independent professional advice at the Company’s expense. All the Directors have written letters of appointment that have been approved by the Board. The committees have written terms of reference which are reviewed annually. The Board meets on a regular basis, usually monthly, or otherwise as may be required to ensure the satisfactory execution of its duties.

nomination committeeThe Nomination Committee consists of the Chairman and Chief Executive. The committee has clear terms of reference and has been made responsible for all Board appointments. All Directors will be subject to re-election by rotation every three years. Italian law also requires that the shareholders approve executive appointments in advance and approve all Non-executive appointments at the next general meeting.

remuneration committeeThe Remuneration Committee’s role is to determine the senior executive remuneration policy including bonus and share option policies and levels of remuneration for the Company’s senior management. Directors’ remuneration is set at the level required to attract and retain the Directors needed to run the Company successfully, this level being set after consultation with independent executive search firms and by reference to comparable companies. The Remuneration Committee is chaired by Mr Bicknell and consists of Mr Bicknell, the Chairman and the Chief Executive.

auDit committeeThe Audit Committee is chaired by Dr Mastrangelo, a professional fiscal advisor (Dottore Commercialista) with an established practice in Rome, and includes the Chairman and Mr Bicknell, both chartered accountants. The Audit Committee members have all been reviewed to ensure their independence. Italian law requires that the Chairman of the Audit Committee is a qualified Italian accountant. The Committee’s terms of reference include review of the Company’s interim and annual financial statements, accounting policies and internal management and financial controls. The Audit Committee also oversees the organisational structure of the Company, its internal control system and its accounting system, in order to verify its ability to fairly represent the operations and transactions of the Company. It also considers the appointment and fees of the external auditors, with whom it meets at least once a year, and discusses the audit scope as well as the findings arising from audits.

internal auDitThe Group currently does not have an internal audit function. The Directors believe that this would not be appropriate given its size and stage of development.

boarD PerformanceIn 2006 the Board maintained an informal process for the evaluation of its own performance during the year. The Board believes that this evaluation process is commensurate with the current size and activities of the Group.

communication with ShareholDerSThe Board takes the opportunity afforded by the Annual General Meeting and meetings with institutional investors to ensure that the Company’s objectives are widely communicated and understood. All preliminary, final and interim results presentations to investors and industry analysts, together with major press releases, are published on the Group’s website. Financial reporting is presented in such a way as to provide a balanced and understandable assessment of the Company’s position and prospects.

internal controlThe Board is responsible for the Company’s system of internal control and for regularly reviewing its effectiveness. The Board has reviewed the effectiveness of the systems of internal control for the accounting year and the period to the date of approval of the financial statements. This review covered all material controls, including financial, operational and compliance controls and the risk management systems and is in compliance with Turnbull guidance to the extent reasonably possible in a small company. It should be understood that such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and provides reasonable rather than absolute assurance against material misstatement or loss.


CORPORATE gOvERNANCE REPORT CONTiNUED

Board attendance of MeetingsThe following table shows the frequency of, and attendance at, full Board and Committee meetings during the year to 31 December 2006.

Board Audit Remuneration Nomination

total held 8 6 2 1

robert drummond (Chairman) 8 6 2 1

Paolo Bert (Chief Executive Officer) 7 n/a 2 1

toby Woolrych (Chief Operating Officer) 7 n/a n/a n/a

Paul Barritt (Chief Financial Officer) 8 n/a n/a n/a

alberto nobolo (Non-executive Director) 7 6 n/a n/a

geoff Bicknell (Non-executive Director) 7 5 2 n/a

Marco casoni (Non-executive Director) 8 n/a n/a n/a

fabio Mastrangelo (Non-executive Director) 0 n/a n/a n/a

giovanni casoni (Non-executive Director) 0 n/a n/a n/a

Remuneration Committee meetings took place during Board meetings during the year.


STATEmENT OF DiRECTORS’ RESPONSiBiLiTiES iN RESPECT OF ThE DiRECTORS’ REPORT AND ThE FiNANCiAL STATEmENTS

The Directors are responsible for preparing the Directors’ report and the group and parent company financial statements, in accordance with applicable law and regulations (italian regulation and Aim rules).

The group financial statements are required by italian law and international Financial Reporting Standards as adopted by the European Union (EU) to present fairly the financial position and the performance of the group.

in preparing each of the group financial statements, the Directors are required to:

• �select suitable accounting policies and then apply them consistently;

• �make judgments and estimates that are reasonable and prudent;

• �state whether they have been prepared in accordance with international Financial Reporting Standards as adopted by the EU and;

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the parent company will continue in business.

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with international Accounting Standards and with applicable italian law as appropriate. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent and detect fraud and other irregularities.

The Directors are also responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website.


INDEPENDENT AUDITORS’ REPORT

We have audited the accompanying consolidated financial statements of Acta S.p.A. (“the Company’’), which comprise the consolidated balance sheet as at 31 December 2006, and the consolidated income statement, consolidated statement of changes in equity and consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatements, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the 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. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Company as at 31 December 2006, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union.

As more fully described in the notes, the Group has not yet started to produce significant revenues and in the year 2006 has incurred significant losses from operating activities; in addition, based on current estimates, management expects additional significant losses in the year 2007. Management provides, in note 10 to the consolidated financial statements, a description of the reasons supporting the recoverable amount of the patents at 31 December 2006 and in note 1 to the consolidated financial statements, a description of the reasons supporting the preparation of the consolidated financial statements based on the going concern assumption.

Florence, 4 April 2007

KPMG S.p.A.

Riccardo Cecchi Director of Audit


CONSOLIDATED INCOME STATEMENT

Notes

Revenue 3

Other operating revenue

Raw materials and consumables used 12

Personnel expense 4

Depreciation and amortisation expense 9/10

Other operating expenses 5

Loss from operations

Financial income 6

Financial expenses 6

Loss before tax

Current tax expense 7

Deferred tax expense 7

Loss for the period

Attributable to:

Equity holders of the parent

Minority interest

Basic earnings per share (euro) 8

Year ended 31 December 2006 ¤000

70

2

72

(142)

(3,088)

(269)

(1,625)

(5,052)

242

(18)

(4,828)

0

0

(4,828)

(4,779)

(49)

(4,828)

(0.13)


11

0

11

(84)

(1,394)

(190)

(1,532)

(3,189)

84

(39)

(3,144)

(7)

(8)

(3,159)

(3,159)

0

(3,159)

(0.11)


CONSOLIDATED bALANCE ShEET

Notes

ASSETSNon-current assets

Property, plant and equipment 9

Goodwill 10

Intangible assets 10

Total non-current assets

Current assets

Inventories 12

Trade receivables 13

Non-trade receivables 13

Cash and cash equivalents 14

Total current assets

Total assets

EquiTy ANd LiABiLiTiESEquity attributable to equity holders of the parent

Share capital 19

Capital reserves

Retained losses

Minority interest

Total equity

Non-current liabilities

Employee benefits 17

Long-term provisions 25

Long-term borrowings 15

Total non-current liabilities

Current liabilities

Financial liabilities 24

Short-term borrowings 15

Trade and other payables 16

Deferred government grants 5

Current tax payables 7

Total current liabilities

Total liabilities

Total equity and liabilities

These financial statements were approved by the board of Directors on 16 March 2007.


1,754

11

858

2,623

74

55

737

7,049

7,915

10,538

216

16,686

(8,358)

8,544

52

8,596

32

89

596

717

57

70

1,098

0

0

1,225

1,942

10,538


886

11

865

1,762

14

10

691

11,284

11,999

13,761

216

15,908

(3,578)

12,546

100

12,646

10

89

88

187

57

22

787

47

15

928

1,115

13,761


STATEMENT OF ChANGES IN EqUITY

At 1 January 2005

Issue of share capital

Share issue expenses

Share-based payment

Loss for the period

New shares issued in Idea Lab

At 31 december 2005

At 1 January 2006

Share-based payment

Loss for the period

At 31 december 2006

Minority interest ¤000

(1)

0

0

0

0

101

100

100

0

(49)

52

Total ¤000

184

17,740

(2,445)

225

(3,159)

101

12,646

12,646

778

(4,828)

8,596

Retained loss ¤000

(419)

0

0

0

(3,159)

0

(3,578)

(3,578)

0

(4,779)

(8,358)

Capital reserve ¤000

482

17,646

(2,445)

225

0

0

15,908

15,908

778

0

16,686

Share capital ¤000

122

94

0

0

0

0

216

216

0

0

216

Total ¤000

185

17,740

(2,445)

225

(3,159)

0

12,546

12,546

778

(4,779)

8,544

Attributable to equity holders of the parent


CONSOLIDATED CASh FLOW STATEMENT

Notes

Cash flows from operating activities

Loss from operations

Adjustments for:

Depreciation, amortisation 9/10

Movement in provision for employees’ benefits (TFR) 17

bonus accrual 16

Income taxes 7

Stock option expenses 18

Cash outflow before changes in working capital and provisions

(Increase) in trade and other receivables 13

(Increase) in inventories 12

Increase/(Decrease) in trade and other payables 16

(Decrease)/increase in deferred government grants 5

Increase in provisions 25

Cash outflow from operations

Cash flows from investing activities

Acquisition of property, plant and equipment net of finance leases 9/15/22

Acquisition of intangible assets 10

Net cash used in investing activities

Cash flows from financing activities

Proceeds from the issue of share capital

Share capital issue expenses

Proceeds from minorities in Idea Lab

Proceeds from new loan 15

Payment of lease finance

Net cash inflows from financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at 1 January

Effect of exchange rate fluctuations on cash held

Cash and cash equivalents at 31 december


(4,828)

269

22

389

0

778

(3,370)

(92)

(60)

(91)

(47)

0

(3,660)

(1,028)

(102)

(1,130)

0

0

0

565

(10)

555

(4,235)

11,284

0

7,049


(3,159)

190

8

90

15

225

(2,631)

(562)

(14)

(247)

47

89

(3,318)

(810)

(92)

(902)

17,740

(2,445)

101

0

0

15,396

11,176

161

(53)

11,284


NOTES TO ThE CONSOLIDATED FINANCIAL STATEMENTS (FORMING PART OF ThE FINANCIAL STATEMENTS)

SiGNifiCANT ACCOuNTiNG POLiCiESThe following accounting policies have been applied consistently in dealing with items which are considered material in relation to the report and financial statements.

a. Statement of complianceThe consolidated financial statements have been prepared in accordance with the current version of International Financial Reporting Standards (IFRS) issued by the International Accounting Standards board (IASb), as applied by the European Union.

Under Italian law (d.l. 24/2/1998 n. 58 art. 119) the Company is not required to prepare the statutory financial statements under IFRS, as a consequence of the fact that the Company is admitted to the Alternative Investment Market (AIM) which, for the CONSOb, is an unregulated stock exchange (effective 15/11/2005).

however, the 2006 consolidated financial statements have been prepared under IFRS in accordance with the requirements of the rules (July 2005) of the Alternative Investment Market, part 1.19.

based on the d.l. 28/02/05 n. 38 art. 2 and art. 3, the Directors have decided to prepare both the statutory consolidated financial statements (ex. d.l. 9/4/91 n. 127 art. 27) and the separate financial statements of Acta S.p.A. in accordance with IFRS. The Company’s subsidiary, Idea Lab, prepares separate financial statements in accordance with Italian Generally Accepted Accounting Principles, which have been adjusted in order to prepare consolidated financial statements under IFRS.

The consolidated financial statements as at 31 December 2006 have been prepared in accordance with the current Italian statutory law (art. 2423 and subs. of Italian Civil Code, adopting also the rules of the d.l. n. 6 17/01/2003 and following modifications and integration).

The Company is not subject to Direction and Coordination of another company in accordance with art. 2497 of the Italian Civil Code.

The Company does not have treasury shares.

The Group has engaged KPMG S.p.A. for the audit of the separate financial statements for the three years ending 31 December 2004, 2005 and 2006 in accordance with art. 2409-ter of the Civil Code and for the audit of the consolidated financial statement for the years ending 31 December 2005 and 2006.

b. Basis of preparation (framework)Acta is a company incorporated in Italy.

The Group financial statements consolidate those of the Company and its subsidiary (together referred to as the “Group”). The parent company financial statements present information about the Company as a separate entity and not about its Group.

The Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the EU (“Adopted IFRS”).

The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these Group consolidated financial statements.

The preparation of consolidated financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies. Associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the result of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised 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.

The consolidated financial statements are composed of the income statement, balance sheet, statement of changes in equity, statement of cash flows and notes to the financial statements. The notes provide further information regarding the income statement, balance sheet, cash flow statement and movement in capital and reserves.

The Group has incurred significant losses from operating activities in 2006. A significant loss is expected in 2007 based on current estimates.

The consolidated financial statements have been prepared on a going concern basis. Cash and cash equivalents amount to ¤7,049,000 as of 31 December 2006 and therefore are expected to be sufficient to cover the financial and liquidity needs for the Company for the year 2007 and for the first half of 2008; and the Directors believe that the Group will become profitable and cash-generating in the medium term based upon the commercialisation of its patented technology.

Furthermore, during 2007 the board will seek additional sources of finance as required to support the activities of the Group beyond 2007.

c. Measurement conventionThe financial statements are presented in thousands of Euro and have been prepared on the historical cost basis.


NOTES TO ThE fiNANCiAL STATEmENTS CONTiNUED

Significant accounting policieS CONTiNUEDd. Basis of consolidationSubsidiariesSubsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. in assessing control, potential voting rights that are currently exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The subsidiaries consolidated in the Group financial statements are idea Lab and Acta Catalysts Ltd, incorporated on 30 October 2006.

transactions eliminated on consolidationintragroup balances and transactions, and any unrealised gains and losses or income and expenses arising therefrom, are eliminated in preparing the consolidated financial statements.

Unrealised losses are eliminated in the same way as unrealised gains, not only to the extent that there is no evidence of impairment.

e. foreign currency (iaS 21)The functional and presentational currency of the Group is the Euro.

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the foreign exchange rate ruling at that date. foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated at foreign exchange rates ruling at the dates the fair value was determined.

f. classification of financial instruments issued by the group (iaS 32 and 39)financial instruments issued by the Group are treated as equity (i.e. forming part of shareholders’ funds) only to the extent that they meet the following two conditions:

1. They include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Group; and

2. Where the instrument will or may be settled in the Company’s own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the Company’s own equity instruments or is a derivative that will be settled by the Company’s exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.

To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes the legal form of the Company’s own shares, the amounts presented in these financial statements for called up share capital and share premium account exclude amounts in relation to those shares.

finance payments associated with financial liabilities are dealt with as part of finance expenses. finance payments associated with financial instruments that are classified in equity are dividends and are recorded directly in equity.

g. property, plant and equipment (iaS 16 – iaS 17)owned assetsProperty, plant and equipment are stated at cost less accumulated depreciation and impairment losses.

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

Depreciation is charged to the income statement on a straight-line basis over the estimated useful life of each part of an item of property, plant and equipment. Land is not depreciated. The estimated useful lives are as follows:

Buildings 33 years

Laboratory equipment 7 years

Plant and equipment 3 – 8 years

furniture and office equipment 3 – 8 years

leased assetsLeases in which the Group assumes substantially all the risks and rewards of ownership of the leased asset are classified as finance leases. Leased assets acquired by way of finance lease are stated at an amount equal to the lower of their fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and impairment losses. Lease payments are accounted for as described below.


h. intangible assets and goodwill (iaS 38)goodwillBusiness combinations are accounted for by applying the purchase method.

Goodwill represents the difference between the consideration paid for the acquisition of a subsidiary and the fair value of the identifiable assets and liabilities and contingent liabilities acquired. identifiable intangibles are those which can be sold separately or which arise from legal rights regardless of whether those rights are separable.

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is not amortised but is tested annually for impairment.

Research and DevelopmentExpenditure on research activities is recognised in the income statement as an expense as incurred.

Expenditure on development activities is capitalised if the product or process is technically and commercially feasible and the Group has sufficient resources to complete development. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads. Other development expenditure is recognised in the income statement as an expense as incurred. Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses. All the internal research and development costs incurred by the Group from its inception have been expensed, as none of these costs met the capitalisation criteria.

other intangible assetsOther intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses. Expenditure on internally generated goodwill and brands is recognised in the income statement as an expense as incurred.

amortisationAmortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. intangible assets with an indefinite useful life and goodwill are systematically tested for impairment at each balance sheet date. Other intangible assets are amortised from the date they are available for use. The estimated useful life of patents is 10 years.

i. financial assets and liabilities (iaS 39 and 32)financial assets and liabilities includes receivables, loans and payables and are valued at amortised cost.

j. inventories (iaS 2)inventories are stated at the lower of cost and net realisable value. Cost is based on the first-in first-out (fifO) principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

in the case of manufactured inventories and work in progress, cost includes an appropriate share of overheads based on normal operating capacity.

k. cash and cash equivalents (iaS 1)Cash and cash equivalents comprise cash balances and call deposits, together with interest accrued on deposits maturing within three months. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose only of the statement of cash flows.

l. impairment (iaS 36)The carrying amounts of the Group’s assets other than cash, inventories and deferred tax assets, are reviewed at each balance sheet date to determine whether there is any indication of impairment. if any such indication exists, the asset’s recoverable amount is estimated.

for goodwill, assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date.

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. impairment losses are recognised in the income statement.

impairment losses recognised in respect of units expected to generate cash, on completion of relevant development activities, are allocated first to reduce the carrying amount of any goodwill allocated to these units and then to reduce the carrying amount of the other assets in the unit on a pro rata basis. A cash-generating unit is the smallest identifiable group of assets that generates or is expected to generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

m. employee benefits (iaS 19)Defined benefit plansThe italian leaving indemnity provision for employees, which is known as Trattamento di fine Rapporto (“TfR”), is defined by law and is accounted for on an accrual basis considering an actuarial valuation. The financial cost payable on the departure of an employee is fixed and known. Nonetheless, under iAS 19, TfR is a defined benefit plan. The Directors have therefore valued the potential TfR liability according to an actuarial model and recorded any derived losses in the accounts as an expense.



n. Share-based payment transactions (ifRS 2)The share option programme allows certain Group Directors and staff to acquire shares of the parent company. The fair value of options granted is recognised as a personnel expense with a corresponding increase in equity. The fair value is measured at grant date and is recorded as an expense over the period during which the beneficiary becomes unconditionally entitled to the options (the Vesting Period). The fair value of the options granted is measured using an option valuation model, taking into consideration the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest except where forfeiture is due only to share prices not achieving the threshold for vesting.

o. provisions for liabilities and charges (iaS 37)A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. if the effect of time value is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

p. government grants (iaS 20)A government grant is not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to it, and that the grant will be received. Receipt of a grant does not of itself provide conclusive evidence that the conditions attaching to the grant have been or will be fulfilled.

q. Revenue (iaS 18)Revenue from the sale of goods is recognised in the income statement when the significant risks and rewards of ownership have been transferred to the buyer.

Revenue from services rendered is recognised in the income statement in proportion to the stage of completion of the transaction at the balance sheet date. The stage of completion is assessed by reference to surveys of work performed. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due, associated costs, a possibility of the return of the goods or continuing management involvement with the goods.

Revenue from royalties, licence fees receivable and other income derived from the Group’s intangible assets are recognised proportionately to the relevant contract with the customer.

income from grants is recognised when received in cash or when certainty exists that payment approval has been obtained. Such income is offset against grant project costs in other operating expenses.

r. expensesoperating lease payments (iaS 17)Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense.

s. finance lease payments (iaS 17)minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

net financing costsNet financing costs comprise interest payable, finance charges on shares classified as liabilities and finance leases, interest receivable on funds invested, and foreign exchange gains and losses.

interest income and interest payable is recognised in profit or loss as it accrues, using the effective interest rate method.

t. taxation (iaS 12)Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination; and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. The Group has incurred tax losses in 2006 and prior years, but it has not recognised the related deferred tax asset, given the uncertainty with regard to the probability of recovery of such amounts.


Numberofemployees 31December 2006

3

6

2

10

21

Number of employees 31 December 2005

3

1

0

5

9

management

Administration

Commercial

Research and development

idea Lab S.r.l.

Ownership 31December 2006

90%

Ownership 31 December 2005

90%

Country of incorporation

italy

Class of shares held

Ordinary

2 conSoliDateD companieSThe consolidated financial statements of Acta at 31 December 2006 include investments in the following subsidiary:

in 2004 Acta S.p.A. purchased 90% of the share capital of idea Lab S.r.l. for the purpose of obtaining control of the patent assets owned by idea Lab S.r.l. The cost of the investment, together with amounts invested subsequently to effect the recapitalisation of idea Lab, amounted to ¤906,111. Goodwill of ¤11,000 arose from these transactions.

The loss for the period and total equity of idea Lab are as shown below:

Acta Catalysts Ltd was incorporated on 30 October 2006 as an operating vehicle for the Group’s UK activities. The company remained dormant until 31 December 2006.

3 Revenue

Loss for the period (e000)

Total equity (e000)

31December 2006

(482)

525

31 December 2005 (10)

1,007

Acta Catalysts Ltd

31December 2006

100%

31 December 2005

0%

Country of incorporation

UK

Class of shares held

Ordinary

Electrodes and catalysts

31December 2006

¤000

70

31 December 2005

¤000

11

The primary focus of the Group is to develop its range of platinum-free catalysts and to produce and market these products when at a suitable stage of development.

During the year Acta continued to sell sample catalysts and electrodes for testing. These sales were made to the Group’s marketing and distribution partner, Sumitomo, in Japan, for onwards sale primarily to Japanese and Taiwanese consumer electronics manufacturers.

4 peRSonnel expenSeSThe average number of persons employed by the Group (including Directors) during the year, analysed by category, was as follows:

The increase in personnel numbers and costs reflects the strengthening of the Group’s research and development activities, the commencement of commercial activities, and the internalisation of administrative functions, following the admission of Acta to Aim in October 2005.



4 personnel expenses CONTiNUEDThe aggregate payroll costs of these persons, including Directors’ emoluments, were as follows:

31December 2006 ¤000

2,056

778

25

230

3,088

31 December 2005 ¤000

1,038

225

9

122

1,394

Wages and salaries

Stock option expenses

Employee benefits

Social security costs

Directors’ emoluments were as follows:


939

31

638

0

5

1,613

31 December 2005 ¤000

553

37

203

225

25

1,043

Directors’ remuneration

Social security costs

Stock option expenses

Termination

Directors’ benefits

Detailed information on the Directors’ remuneration is set out in the Directors’ report on page 20. The Directors’ remuneration disclosed above includes bonus payments made in respect of 2005, net of bonus accruals made in 2005, together with bonus accruals made in respect of 2006. A termination indemnity payment of ¤226,000 was made in 2005 to the Group’s former CEO.

5 other operating expenses

Research expenses relates to external costs incurred by the research and development department, which increased during the year due to costs incurred in relation to the fiT grant project. This does not include external patent costs of ¤102,000 (2005: ¤92,000) which were capitalised and certain employee costs which relate to the research and development department.

Credit for government grants utilised in the period refers to grant income recognised by idea Lab on the fiSR project (¤47,000; 2005: ¤79,000). During the year, idea Lab undertook work on both the fiSR project (development of inorganic and hybrid catalysts for fuel cells) and the fiT project (development of a prototype direct ethanol fuel cell stack), for which no income was recognised. Grant income is recognised over the duration of each project, in accordance with the stage payments received or approved following the achievement of each project milestone. Project costs are expensed as incurred.

Commercial and operations expenses refers to costs of trade fairs and commercial travel. These increased due to the higher level of commercial activity undertaken during the year.

finance, management and administration expenses include ¤934,000 (2005: ¤1,184,000) relating to Acta and ¤158,000 (2005: ¤35,000) relating to idea Lab. These expenses primarily include consultancy costs ¤689,000 (2005: ¤485,000), and general expenses ¤192,000 (2005: ¤263,000). Consultancy costs, including broker fees, financial PR fees, and Stock Exchange-related expenses, have increased in the year following the admission of the Group to Aim in October 2005.


342

(47)

202

1,092

3

33

1,625

31 December 2005 ¤000

179

(79)

140

1,219

52

20

1,532

Research expenses

Credit for government grants utilised in the period

Commercial and operations expenses

finance, management and administration expenses

foreign exchange losses

Other operating costs


31December 2006 ¤000 –

–

–

–

–

–

31 December 2005 ¤000 (7)

–

(8)

–

–

(15)

recognised in the income statement

Current tax expense

Current year adjustments for prior years

Deferred tax expense

Origination and reversal of temporary differences

Benefit of tax losses recognised

Total tax in income statement

33.0%

–

(32.0%)

(0.5%)

0.5%

31 December 2005 ¤000

(3,144)

(1,038)

1

1.005

17

(15)

recognised in the income statement

Loss before tax

income tax using domestic corporation tax rate

iRAP

Deferred taxes recognised in income

Non-deductible expenses


(4,828)

(1,593)

–

1,570

(23)

–

33.0%

–

(33.0%)

0%

0%

Auditors’ remuneration included in finance, management and administration is detailed as follows:

Auditors’ remuneration


75

75

31 December 2005 ¤000

36

36

in 2005, the auditors received ¤340,000 in respect of services relating to the admission to Aim, which was charged to reserves as a capital-raising exercise.

6 Financial income and expense 31December 2006 ¤000

242

242

31 December 2005 ¤000

84

84

interest income

financial income


(18)

(18)

31 December 2005 ¤000

(39)

(39)

interest expense

financial expense

interest income grew in 2006 due to the full-year impact of higher cash balances following the capital increase undertaken in October 2005.

7 taxationThe companies of the Group are subject to two income taxes: (i) iRES - corporate income tax at 33% and (ii) iRAP – regional tax on productive activities at 4.25%. iRES is calculated on profit before taxes, with certain adjustments according to current fiscal regulations to derive taxable income from profit before taxes; iRAP is instead determined as 4.25% of the difference between ”production value” and operating costs, both with certain adjustments to take account of costs not considered deductible (for example payroll costs and financial charges).

The table below shows income taxes in detail and provides a reconciliation between the theoretical tax charge and the effective tax charge:



31December2006 ¤000

(177)

–

(177)

31 December 2005 ¤000

709

15

724

deferred tax recognised directly in equity

Related to iPO expenses

Other minor adjustments

8 loss per shareThe calculation of basic loss per share is based upon the net loss attributable to the ordinary shareholders of ¤4,779,484 (2005: ¤3,158,992) and a weighted average number of shares in issue of 35,995,126 (2005: 26,999,788).

31December2006 ¤

(0.13)

(4,779)

35,995,126

0

0

0

0

0

0

0

0

0

0

35,995,126

31 December 2005 ¤

(0.12)

(3,159)

20,356,000

166,027

470,137

19,384

1,563,356

828,560

1,554,233

94,487

312,329

39,371

1,595,904

26,999,788

Basic loss per share (euro)

loss attributable to ordinary shareholders (¤000)

Weighted average number of ordinary shares

issued ordinary shares at 1 January

Effect of issue on 4 march 2005




Effect of issue on 4 may 2005

Effect of issue on 26 July 2005

Effect of issue on 3 August 2005

Effect of issue on 9 September 2005

Effect of issue on 26 September 2005

Effect of shares issued on 4 October 2005

Weighted average number of ordinary shares at 31 December

in accordance with iAS 33.41, the potential ordinary shares have not been treated as dilutive because their conversion to ordinary shares would decrease loss per share for the year ended 31 December 2006.

7 taxation CONTiNUED


1,570

(177)

1,393

31 December 2005 ¤000

1,005

724

1,729

summary deferred taxes

Deferred taxes recognised in income

Deferred taxes recognised directly in equity


motor vehicles ¤000

114

12

–

126

27

29

–

56

87

70

Total ¤000

971

1,028

–

1,999

85

159

–

244

886

1,754

cost

Balance at 1 January 2006

Additions

Disposals

Balance at 31 december 2006

depreciation and impairment


Depreciation for the year

Disposals


net book value

Balance at 31 December 2005


machinery and equipment ¤000

578

428

–

1,005

51

115

–

165

527

840

Buildings ¤000

279

454

–

733

8

15

–

23

271

710

Land ¤000

–

134

–

134

–

–

–

–

–

134

9 property, plant and equipment

Land and Buildings refers to the Group’s technical and office facilities in Lavoria (Pi). The Group completed the purchase of these facilities, which had previously been rented on a short-term arrangement, for ¤565,000 in July 2006. This purchase was financed through a long-term mortgage facility.

machinery and equipment refers to laboratory test equipment used in research activities, together with iT and network equipment. Additions in the year mainly refers to scientific testing equipment acquired for the fiT and fiSR grant projects.

Patents at 31 December 2006 refers to the intellectual property rights of the Group. Additions in the year refers to patent registration fees capitalised at cost.

Although the Group has not yet started to produce significant revenues and profits, the Directors believe that the value of patents is not impaired, and the Group will be able to recover the value of such assets through the expected future cash flows from products based on the patented technology, which will be sold in the medium-term future.

The recoverable amount of the value of the patents has been tested at the year end compared with the fair value, using the cost method, on the basis of their reconstruction cost, The Directors have determined that no impairment of value is required.

10 intangiBle assets and goodWill Patents ¤000

1,107

102

1,210

242

110

351

866

858

Total ¤000

1,118

102

1,221

242

110

351

877

869

cost


Other acquisitions – externally purchased


amortisation and impairment


Amortisation for the year


net book value

Balance at 31 December 2005


Goodwill ¤000

11

–

11

–

–

–

11

11



Deferred tax assets primarily refer to the fiscal effect (for the purpose of iRES) of previous losses that can be unlimitedly carried forward (amounting to ¤356,063 for the year 2004, ¤2,931,365 for the year 2005, and ¤3,532,966 for the year 2006) and to temporary variance related to salaries and bonus paid to Directors and employees and, for both taxes, to the tax effect connected to the multi-year expenses for the iPO in 2005.

The Directors believe that the Company will generate sufficient future tax profits able to recover the deferred tax assets described, although given the uncertainty about future taxable income, they have decided not to recognise any deferred tax assets in the accounts.

No deferred tax liabilities exist at 31 December 2006.

12 InventorIes

Tax loss 2004

Tax loss 2005

Tax loss 2006

iPO expenses

Other

total

Unrecognised

Recognised

Variance on unrecognised

iRAP (4.25%)

–

–

–

81

7

88

–

–

–

2005 ¤000

Tax effect

118

967

–

709

59

1,854

1,854

–

1,729

iRES (33%)

118

967

–

628

52

1,766

–

–

–

2006 ¤000

Tax effect

118

967

1,166

532

463

3,247

3,267

–

1,393

Amounts

356

2,931

–

1.903

156

5,346

–

–

–

IRAP (4.25%)

–

–

–

61

6

67

–

–

–

IRES (33%)

118

967

1,166

471

457

3,179

–

–

–

Amounts

356

2,931

3,533

1,427

1,387

9,634

–

–

–

Raw materials and consumables


74

31 December 2005 ¤000

14

Raw materials and consumables to the value of ¤142,000 were recognised as expenses in the year (2005: ¤85,000). These raw materials and consumables were utilised within the Group’s research and development activities.

13 trade and other receIvables 31December 2006 ¤000

55

577

160

792

31 December 2005 ¤000

10

687

4

701

Trade receivables

Other debtors

Prepaid expenses

All of the receivables are expected to be recovered within 12 months. Other debtors mainly relates to VAT receivables and other taxes which are recoverable against payroll taxes in the next financial period. Prepaid expenses includes prepayments for project costs, insurance and other operating expenses relating to 2007.

11 deferred tax assets and lIabIlItIesThe Group did not recognise any deferred tax assets for the year ended 31 December 2006. The table below shows the summary of the unrecognised deferred tax assets with comparative figures.


Trade payables are due in 12 months and include payables relating to normal operating activities. Other creditors and accruals include bonus accruals for ¤420,000 (2005: ¤90,000). The executives and staff of the Group may qualify for performance-related bonuses according to their achievement, as assessed by the Remuneration Committee, of financial, technical and commercial performance criteria.

Trade payables

Employee taxation payable

Other creditors and accruals


457

87

554

1,098

31 December 2005 ¤000

450

72

265

787

15 Interest-bearIng loans and borrowIngs (secured)

non-current liabilities

Bank loan

finance lease liabilities

current liabilities

Bank loan



549

47

596

16

54

70

31 December 2005 ¤000

–

88

88

–

23

23

The bank loan is secured by a mortgage of ¤565,000 (2005: Nil) over the Group’s land and buildings, repayable over 20 years at 5.5% fixed interest rate per annum.

interest-bearing loans and borrowings include ¤47,000 (2005: ¤88,000) for the non-current portion of finance lease liabilities and ¤54,000 (2005: ¤23,000) for the current portion.

The finance leases are secured by the assets leased (cars and computer equipment), and are repayable over three to five years at 6.0% fixed interest rate per annum.

16 trade and other payables


7,049

31 December 2005 ¤000

11,284

Repurchase agreement

Bank account in Euro

Bank account in GBP

Cash


6,430

522

93

4

7,049

31 December 2005 ¤000

6,000

3,295

1,983

6

11,284

Cash and cash equivalents consist of cash at bank, cash on hand and investments in money market instruments as follows:

14 cash and cash equIvalents

Cash and cash equivalents



Weighted average exercise price 2005 ¤

–

–

–

0.81

–

0.81

0.00

Number of options 2005 ¤

–

0

0

1,671.605

0

1,671.605

0.00

Numberofoptions 2006 ¤

1,671,605

0

0

458,364

0

2,129,969

0.00

Weightedaverage exerciseprice 2006 ¤

0.81

–

–

2.24

–

1.12

0.00

Outstanding at the beginning of the period

forfeited during the period

Exercised during the period

Granted during the period

Lapsed during the period

Outstanding at the end of the period

Exercisable at the end of the period

The options outstanding at the year end have an exercise price of ¤0.81 and ¤2.24 and a weighted average contractual life of two years.

The fair value of services received in return for share options granted is measured by reference to the fair value of share options granted. The calculations were produced by Enumera, an independent actuarial consultancy. The estimate of the fair value of the services received is deduced from the Euroswap rates that existed on the assignment dates using the Bootstrap technique. The assumed dividend rate implicit within the technique used is Nil.

An amount of ¤778,000 (2005: ¤224,900) is charged to the income statement within the personnel expense amount.

further information in respect of the options granted to employees to purchase the Company’s ordinary shares which were granted in the year ended 31 December 2006:

The expected volatility is based on the historic volatility of the London Aim market since October 4th 2005 (calculated based on the weighted average remaining life of the share options and the market sector within which the Company is classified), adjusted for any expected changes to future volatility due to publicly available information.

The total expense for the year ended 31 December 2006 related to stock options amounts to ¤778,000 (2005: ¤225,000).

Type B option 2005

376.500

1.25

0.81

37%

3

Nil

4.5%

Type A option 2005

1,707.236

1.25

0.81

37%

3

Nil

4.5%

2006options Total

462,948

1.01

2.17

33%

4,00

Nil

4,75%

fair value at measurement date (Euro)

Weighted average share price (GBP)

Exercise price (¤)

Expected volatility (expressed as a percentage used in the modelling under the Bootstrap technique)

Option life in years (expressed as weighted average life used in the modelling under the Bootstrap technique)

Expected dividends

Risk-free interest rate (based on Euroswap rates)

17 employee personal benefIts The Group operates a statutory employee benefit scheme (“TfR”) in accordance with italian law. The Group is liable to award a termination sum to any leaving employee subject to the scheme which varies with both remuneration and length of service of the employees. The total expense relating to these plans in the current year was ¤24,602 (2005: ¤10,817). The TfR liability at the year end is ¤31,981.

18 share-based paymentsThe fair value of services received in return for share options granted, during the year, was ¤778,000 (2005:¤225,000). The number and weighted average exercise prices of share options are as follows:


21 foreIgn currency rIsk 31December 2006 ¤000 93

–

41

3

7

31 December 2005 ¤000 1,983

–

–

–

–

Sterling bank deposits

Sterling trade and other receivables

Sterling trade and other payables

US Dollar trade and other receivables

US Dollar trade and other payables

31December 2006

35,995,126

–

35,995,126

31 December 2005

220,356,000

15,639,126

35,995,126

19 capItal and reserves

share capital

Number of ordinary shares

On issue at 1 January 2006

issued for cash

On issue at 31 December 2006 – fully paid

¤

229,000

215,971

¤

226,300

215,971

Authorised

Ordinary shares of e0.006 each

Allotted, called up and fully paid

Ordinary shares of e0.006 each

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.

20 fInancIal Instruments: effectIve Interest rates and reprIcIng analysIsin respect of income-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates at the balance sheet date and the periods in which they mature or, if earlier, are repriced.

1 to <2 years ¤000

0

(23)

(23)

2005 2 to <5 years ¤000

0

0

0

Cash and cash equivalents

Bank loan


0 to <1 year ¤000

11,284

(88)

11,197

Total ¤000

11,284

(110)

11,174

Effective interest rate (%)

1.30%

6.00%

2to <5years ¤000

0

(109)

0

(109)

1to <2years ¤000

0

(17)

(40)

(58)

0to <1year ¤000

7,049

(16)

(54)

6,979

Total ¤000

7,049

(565)

(94)

6,390

Effective interest rate(%)

2.64%

5.47%

6.0%

2006 >5years ¤000

0

(422)

0

(422)

sensitivity analysis in managing interest rate and currency risks the Group aims to reduce the impact of short-term fluctuations on the Group’s earnings whilst taking advantage of the higher interest rates available in respect of surplus monies held in Sterling. Over the longer term, however, once trading commences a comprehensive foreign exchange policy will be adopted designed to minimise the Group’s exposure to foreign currency exchange rate fluctuations.

The fluctuation of the exchange rate between Sterling and the Euro is not expected to have a significant effect upon the Group as all investments in Sterling are determinable at short notice.



23 operatIng leasesNon-cancellable operating lease rentals are payable as follows:

The Group leases motor vehicles and computer equipment used within its business.

During the year¤55,000 was recognised as an expense in the income statement in respect of operating leases (2005: ¤56,000).

24 related partIesThe transactions incurred in the year 2006 with the Directors are as disclosed in note 4.

Shareholder loans are non-interest bearing and undated. At 31 December 2006, they comprise ¤57,000 (¤57,000 at 31 December 2005) lent by mr matteo Bert when he was the owner of 90% of idea Lab S.r.l.

On 27 November 2006 a staff loan of ¤45,000 was made to mr Tampucci, a related party by virtue of his interest in the shares of Bertam S.r.l., a major shareholder of Acta. The loan is interest-bearing at commercial rates and is repayable in full on 28 June 2007.

There were no related party transactions in 2006, other than those disclosed above.

25 provIsIonProvision at 31 December 2006 (¤89,000) relates to the accrual of the period in connection with certain litigation in order to cover the potential future legal costs.

26 accountIng estImates and judgementsThe financial statements have been prepared on the basis that the current development activity being undertaken in respect of the fuel cell technology for which the Group owns certain existing patents will lead to the eventual development of marketable products which can be exploited by the Group.

27 subsequent eventsThere are no material events that have taken place subsequent to the balance sheet date.

31December 2006 ¤000 48

32

–

80

31 December 2005 ¤000 39

65

-

105

Not longer than 1 year

Longer than 1 year and not longer than 5 years

Longer than 5 years

31December 2006 ¤000 54

40

–

94

31 December 2005 ¤000 22

88

-

110

Not longer than 1 year

Longer than 1 year and not longer than 5 years

Longer than 5 years

22 fInancIal leases

ANNUAL REPORT AND ACCOUNTS 2006

ActA S.p.A.Via di Lavoria 56,G56040 Crespina (PI)ItalyTel: +39 050 644281Fax: +39 050 642251 UK office: +44 1223 257760

www.acta-nanotech.com

Des

ign

and

prod

uctio

n: W

ardo

ur P

ublis

hing

& D

esig

n (L

ondo

n). I

mag

e cr

edit:

Pho

todi

sc/G

etty

Im

ages

, Pho

tolib

rary

, Cor

bis,

Act

a.Pr

oduc

ts c

ourt

esy

of: H

ewle

tt P

acka

rd, S

amsu

ng, S

ony,

Son

y Er

icss

on. T

he c

urre

nt p

rodu

cts

show

n in

thi

s do

cum

ent

are

not

yet

fuel

cel

l-po

wer

ed.

GREEN ENERGy CATALySTS

green energy catalysts - acta spa · acta was created to exploit a breakthrough catalyst...

Documents