Financial instruments and risk management
The following table shows the carrying amounts of financial assets and financial liabilities:
|
| | | | | |
| | | |
Financial assets | | | |
| December 31, 2017 | | December 31, 2016 |
Cash and cash equivalents | 14,973,369 |
| | 32,422,222 |
|
Loans and receivables | | | |
Other receivables | 79,840 |
| | 134,900 |
|
Total financial assets | 15,053,209 |
| | 32,557,122 |
|
| | | |
Financial liabilities | | | |
At amortized cost | | | |
Trade and other payables | 1,200,820 |
| | 1,837,997 |
|
Accrued expenses | 4,395,609 |
| | 4,652,033 |
|
Loan | 10,126,406 |
| | 12,364,204 |
|
At fair value through profit and loss | | | |
Derivative financial instruments | 1,836,763 |
| | 117,132 |
|
Total financial liabilities | 17,559,598 |
| | 18,971,366 |
|
| | | |
Fair values
The carrying amount of cash and cash equivalents, other receivables, trade and other payables and accrued expenses is a reasonable approximation of their fair value due to the short term nature of these instruments. In respect of the Company’s loan which has floating rates of interest, the fair value approximates carrying value.
Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk, credit risk, interest rate and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance. Management identifies, evaluates and controls financial risks. No financial derivatives have been used in 2017 and 2016 to hedge risk exposures. The Group invests its available cash in instruments with the main objectives of preserving principal, meeting liquidity needs and minimizing foreign exchange risks. The Group allocates its liquid assets to first tier Swiss or international banks.
Liquidity risk
The Group’s principal source of liquidity is its cash reserves which are mainly obtained through the issuance of new shares. The Group has succeeded in raising capital to fund its development activities to date and has raised funds that will allow it to meet short term development expenditures. The Company will require regular capital injections to continue its development work, which may be dependent on meeting development milestones, technical results and/or commercial success. Management monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs. The ability of the Group to maintain adequate cash reserves to sustain its activities in the medium term is highly dependent on the Group’s ability to raise further funds. Consequently, the Group is exposed to continued liquidity risk.
The table below analyses the remaining contractual maturities of financial liabilities, including estimated interest payments as of December 31, 2017 and 2016. The amounts disclosed in the table are the undiscounted cash flows:
|
| | | | | | | | | | | | | | |
| Carrying amount | | Less than 3 months | | Between 3 months and 2 years | | 2 years and later | | Total |
December 31, 2017 | | | | | | | | | |
Trade and other payables | 1,200,820 |
| | 1,200,820 |
| | — |
| | — |
| | 1,200,820 |
|
Accrued expenses | 4,395,609 |
| | 4,395,609 |
| | — |
| | — |
| | 4,395,609 |
|
Loan and borrowings | 10,126,406 |
| | 1,349,531 |
| | 9,446,716 |
| | 1,166,225 |
| | 11,962,472 |
|
Derivative financial instruments | 1,836,763 |
| | — |
| | — |
| | 1,836,763 |
| | 1,836,763 |
|
Total | 17,559,598 |
| | 6,945,960 |
| | 9,446,716 |
| | 3,002,988 |
| | 19,395,664 |
|
|
| | | | | | | | | | | | | | |
| Carrying amount | | Less than 3 months | | Between 3 months and 2 years | | 2 years and later | | Total |
December 31, 2016 | | | | | | | | | |
Trade and other payables | 1,837,997 |
| | 1,837,997 |
| | — |
| | — |
| | 1,837,997 |
|
Accrued expenses | 4,652,033 |
| | 3,632,752 |
| | 1,019,281 |
| | — |
| | 4,652,033 |
|
Loan and borrowings | 12,364,204 |
| | 311,013 |
| | 8,725,772 |
| | 6,834,249 |
| | 15,871,034 |
|
Derivative financial instruments | 117,132 |
| | — |
| | — |
| | 117,132 |
| | 117,132 |
|
Total | 18,971,366 |
| | 5,781,762 |
| | 9,745,053 |
| | 6,951,381 |
| | 22,478,196 |
|
| | | | | | | | | |
Fair value measurement
|
| | | | | |
| | Financial
assets / liabilities | Fair values as at | Fair value
hierarchy | Valuation technique(s) and key input(s) |
| | | December 31,
2017 | December 31,
2016 |
| | Derivative financial liabilities | Liability
1,836,763 | Liability
117,132 | Level 2 | Black-Scholes option pricing model
The share price is determined by our NASDAQ quoted-price. The strike price and maturity are coming from the contract. The volatility assumption is driven by our historic quoted share price and the risk free rate is estimated based on observable yield curves at the end of each reporting period. |
| |
| |
| |
| |
| |
|
| | | | | | | | | | | | | | |
| | | | | Non-cash changes | | |
| 01.01.2017 |
| | Financing Cash Flows 1) | | Fair value revaluation | | Other changes 2) | | 31.12.2017 |
|
Derivative financial instrument | 117,132 |
| | 5,091,817 |
| | (3,372,186 | ) | | — |
| | 1,836,763 |
|
Loans | 12,364,204 |
| | (2,087,076 | ) | | — |
| | (150,722 | ) | | 10,126,406 |
|
Total | 12,481,336 |
| | 3,004,741 |
| | (3,372,186 | ) | | (150,722 | ) | | 11,963,169 |
|
| | | | | | | | | |
1) The financing cash flows are from loan repayment and from issuance of new derivative 2) Internal rate of return changes and fx-difference |
Credit risk
Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents and deposits with banks, as well as from other receivables. The Company’s policy is to invest funds in low risk investments including interest bearing deposits. Other receivables were current as of December 31, 2017 and December 31, 2016, not impaired and included only well-known counterparties.
The Group has been holding cash and cash equivalents in the Group’s principal operating currencies (CHF, USD and EUR) with international banks of high credit rating.
The Group’s maximum exposure to credit risk is represented by the carrying amount of each financial asset in the consolidated statement of financial position:
|
| | | | | |
| December 31, 2017 | | December 31, 2016 |
Financial assets | | | |
Cash and cash equivalents | 14,973,369 |
| | 32,442,222 |
|
Other receivables | 79,840 |
| | 134,900 |
|
Total | 15,053,209 |
| | 32,577,122 |
|
| | | |
As of December 31, 2017 and December 31, 2016 other receivables consisted of other non-current receivables from third party and deposits for rent.
Market risk
Currency risk
The Group operates internationally and is exposed to foreign exchange risk arising from various exposures, primarily with respect to US Dollar and Euro. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations. The summary of quantitative data about the exposure of the Group’s financial assets and liabilities to currency risk was as follows:
|
| | | | | | | | | | | |
| 2017 | | 2016 |
in CHF | USD | | EUR | | USD | | EUR |
Cash and cash equivalents | 13,901,698 |
| | 116,942 |
| | 31,124,874 |
| | 444,075 |
|
Trade and other payables | (365,999 | ) | | (426,050 | ) | | (501,249 | ) | | (847,892 | ) |
Accrued expenses | (1,750,752 | ) | | (1,692,946 | ) | | (1,031,096 | ) | | (2,964,552 | ) |
Loan and borrowings | (10,126,406 | ) | | — |
| | (12,364,204 | ) | | — |
|
Derivative financial instruments | (1,836,763 | ) | | — |
| | (117,132 | ) | | — |
|
Net statement of financial position exposure -asset/(liability) | (178,222 | ) | | (2,002,054 | ) | | 17,111,193 |
| | (3,368,369 | ) |
| | | | | | | |
As of December 31, 2017, a 5% increase or decrease in the USD/CHF exchange rate with all other variables held constant would have resulted in a CHF 8,662 (2016: CHF 872,443) increase or decrease in the net result. Also, a 5% increase or decrease in the EUR/CHF exchange rate with all other variables held constant would have resulted in a CHF 117,320 (2016: CHF 180,595) increase or decrease in the net result.
The Company has subsidiaries in the United States and Ireland, whose net assets are exposed to foreign currency translation risk. Due to the small size of the subsidiaries the translation risk is not significant.
Interest rate risk
On July 19, 2016, the Company entered into a Loan and Security Agreement for a secured term loan facility of up to $20.0 million with Hercules Capital, Inc. as administrative agent (“Hercules”) and the lenders party thereto. An initial tranche of $12.5 million was drawn on July 19, 2016, concurrently with the execution of the loan agreement. The loan matures on January 2, 2020 and bears interest at a minimum rate of 9.55% per annum, and is subject to the variability of the prime interest rate. The Company’s exposure to interest rates on financial assets and financial liabilities is resulting from loan and cash at banks. As of December 31, 2017 an increase or decrease in interest rates on financial obligations by 50 basis points with all other variables held constant would have resulted in a CHF 62,500 (2016: 28,276) increase or decrease in the net result.
Capital risk management
The Company and its subsidiaries are subject to capital maintenance requirements under local law in the country in which it operates. To ensure that statutory capital requirements are met, the Company monitors capital, at the entity level, on an interim basis as well as annually. From time to time the Company may take appropriate measures or propose capital increases to ensure the necessary capital remains intact.
