Interim Results
Futura Medical PLC
24 September 2007
For immediate release 24 September 2007
Futura Medical Plc
Interim Results for the six months ended 30 June 2007
Futura Medical plc (AIM: FUM), the pharmaceutical and medical device group, is
pleased to announce its Interim Results for the six months ended 30 June 2007.
Highlights in the year to date
• Substantial progress across the Company as it moves close to the
commercial launch of its lead product, CSD500
• CSD500 - statistically significant trial results from the user study,
reinforcing the product's commercial potential
• MED2002 - Global development and licensing agreements signed with SSL
International plc for the Company's topically applied gel for erectile
dysfunction
• TPR100 - Exclusivity agreement signed with GlaxoSmithKline Consumer
Healthcare to negotiate for global rights
• South East England Development Agency ('SEEDA') grant awarded of up to
£200k for product development
• Pre-tax loss of £1.2 million for the six months ended 30 June 2007 (six
months ended 30 June 2006: pre-tax loss of £1.0 million - as restated)
• Cash of £2.7 million at 30 June 2007 (31 December 2006: £3.8 million)
Commenting on the results James Barder, Futura's Chief Executive, said: 'The
positive trial results from the CSD500 user study have set the scene for the
successful commercial launch by SSL International plc of the product as a Durex
(R) branded condom, once EU marketing approval has been received. We were
delighted to achieve another major milestone for the Company earlier this month
when SSL acquired the global rights to MED2002, our topically applied gel for
the treatment of erectile dysfunction.'
For further information:
Futura Medical plc Tel: +44 (0) 1483 685 670
James Barder, Chief Executive
email to: james.barder@futuramedical.co.uk www.futuramedical.co.uk
Canaccord Adams Tel: +44 (0) 20 7050 6500
Mark Ashurst / Erin Needra
Media enquiries:
Buchanan Communications Tel: +44 (0) 20 7466 5000
Mark Court / Rebecca Skye Dietrich
CHAIRMAN'S AND CHIEF EXECUTIVE'S JOINT REVIEW
The six months to 30 June 2007 was another period of substantial progress at
Futura. Momentum has continued post the period end and we expect to receive EU
marketing approval in the next three months for our first product, CSD500, an
innovative condom to help healthy men maintain a firm erection whilst wearing a
condom. This heralds the most exciting phase so far in the Group's evolution by
placing Futura on track to becoming a revenue generating business with a
recurring royalty income stream. Positive trial results reported post the period
end underline the significant commercial potential of the CSD500 condom, which
will be marketed under the Durex(R) brand by our marketing and distribution
partner SSL International plc (SSL). We are delighted to have strengthened our
relationship with SSL through the recent signing of a global development,
marketing and distribution agreement for MED2002, our topically applied gel for
the treatment of erectile dysfunction. We believe SSL, which now holds
distribution rights to a total of three of Futura's products, is an ideal
partner for MED2002, which is expected to become the world's first
non-prescription treatment for erectile dysfunction.
CSD500
Condom safety device
Working closely with SSL, the manufacturer of Durex(R) condoms, we made
considerable progress with CSD500, our condom product that helps healthy men
maintain a full erection whilst wearing a condom. Much of our effort during the
period was in the successful completion of a user study comprising 108 couples,
the positive results from which were announced on 9 August 2007. The study,
which was equally funded by SSL and Futura, successfully met its primary
endpoint of demonstrating a firmer erection. The study's secondary endpoints of
increased penile size and a longer-lasting sexual experience also revealed
positive, statistically significant data. The quality of the study results has
reinforced our confidence that CSD500 has significant commercial potential.
Prior to the commercial launch of CSD500, we have protected the product's unique
intellectual property position with patents now granted, or proceeding to grant,
in 36 countries throughout the world including the principal consumer markets
within Europe, the US and Canada. Futura will receive royalty based payments
from all future sales of the condom.
SSL is currently carrying out the detailed preparatory work for CSD500's
marketing launch pending EU regulatory approval, including the selection of the
product's brand name within the Durex(R) portfolio and the product's logo and
packaging. We have been delighted by the commitment and enthusiasm for CSD500
from SSL, which provides further endorsement of the commercial potential of the
product.
MED2002
Treatment for erectile dysfunction
MED2002 is our topically applied gel for the treatment of men with erectile
dysfunction. This product was initially licensed to GlaxoSmithKline Consumer
Healthcare (GSK) but, during the period, GSK returned the rights to Futura owing
to current priorities within GSK. Given the commercial potential of MED2002 we
were confident of securing a new agreement on favourable commercial terms and
were delighted to announce, on 17 September 2007, that a global development,
marketing and distribution agreement had been signed with SSL.
Under the terms of this agreement, Futura will receive an undisclosed royalty on
MED2002's future sales along with milestone payments of up to £18 million
subject to regulatory approvals and the achievement of sales targets. SSL and
Futura will jointly manage the completion of the clinical development of
MED2002, which is currently expected to cost up to £3.65 million of which SSL
will contribute 65 per cent and Futura 35 per cent.
Once launched, MED2002 is expected to become the world's first non-prescription
pharmaceutical treatment for men with erectile dysfunction, a condition that
affects, to some degree, 50 per cent of men aged 45 or over(1). This would be an
important step forward as it is estimated that only 15 per cent of men with
erectile dysfunction seek treatment(2) due to the embarrassment of having to
consult a doctor to be prescribed one of the current treatments.
Now that the commercial arrangements have been finalised, preparations are
moving ahead rapidly, in conjunction with SSL, regarding the commencement of the
pivotal study.
FLD500
Female lubrication device
FLD500 is our condom product designed to improve natural female lubrication
during sexual intercourse. In common with CSD500, it is licensed to SSL and uses
the same active compound. In FLD500 the active compound is on the outside of the
condom and is used at a much lower dose level than in CSD500, where it is inside
the condom. We have previously reported positive clinical data from FLD500 and
have since been working on achieving a commercially acceptable shelf life for
the product and optimising the manufacturing process. We have developed a new
prototype of the product which is easier to manufacture and in tests to date has
shown a significant improvement in shelf life. If these improvements are
maintained we would expect to submit an initial dossier in the first half of
2008 as the first step to gaining EU regulatory approval.
Our previously reported clinical data in healthy female volunteers showed that
FLD500 was safe, well tolerated and had the potential to promote the vascular
changes seen in women during clitoral stimulation and sexual arousal. This data
will form part of the regulatory submission for FLD500, although our experience
with CSD500 has demonstrated how the value of further clinical work can reduce
regulatory risk and support strong marketing claims.
In due course, but not before both CSD500 and FLD500 gain regulatory approval,
there is the potential for a combination product embracing CSD500 and FLD500.
Such a product could potentially improve natural lubrication for the female
partner whilst ensuring the firmness and size of the male partner's erection
whilst wearing a condom.
TPR100
Topical pain relief
One of Futura's key proprietary assets is its highly efficient, trans-dermal
delivery system, DermaSys(R), which is used in the Group's sexual healthcare
portfolio but which has the potential to have much broader utility across other
therapeutic areas. DermaSys(R), owing to its ability to provide rapid transfer
of active ingredients through the skin, has shown significant potential in the
provision of pain relief through our product TPR100. In April 2007, we entered
into an exclusivity agreement with GSK for the negotiation of global
distribution rights for TPR100 to be agreed no later than 31 March 2008. As
part of this exclusivity agreement we agreed to conduct a clinical study, which
is ongoing.
PET500
Premature ejaculation treatment
We continue to make progress on our early stage portfolio, particularly with our
potential treatment for premature ejaculation, PET500. The formulation of the
product, which also uses our DermaSys(R) delivery system, is in the final stages
of in vitro testing to optimise the product's delivery profile and aesthetic
qualities.
People
In preparation for the Group becoming revenue generating we have made some
additions to our infrastructure, specifically in adding personnel to our finance
and marketing functions. It is our intention to continue to run Futura on a
prudent basis with a small core team of employees. Total staff numbers
(including our non-executive directors) have increased from 12 to 14 during the
period.
Finance
This is the first report by the Group presented under International Financial
Reporting Standards, (IFRS). The interim financial information has been prepared
on the basis of the accounting policies that will be adopted in the annual
report for the year ending 31 December 2007 in accordance with IFRS. The
comparative figures have also been restated to reflect this. There has been no
significant impact on either the current period results or the restated historic
results. An explanation, including the impact of transition to IFRS, is included
in the notes to the interim financial information.
In accordance with our revenue accounting policy, the £150,000 already received
from GSK in respect of the TPR100 exclusivity agreement is recognised as
deferred income in the balance sheet and will be recognised as revenue when the
relevant conditions of the agreement are met.
Our retained loss for the six months ended 30 June 2007 was £1,119,444. Research
and development costs of £707,433 have increased over the previous six months,
largely due to the user study cost for CSD500. Overall the cumulative research
and development spend since formation of the business has reduced slightly to
54% of total operating costs. Other administrative costs of £638,615 reflect an
increase compared with the six months ended 31 December 2006 of £89,864 due to
commercial and negotiation costs for MED2002 and the expansion of our core team.
We continue to maintain tight control over expenditure and cash including
sterling fixed rate deposits at 30 June 2007 was £2.7 million. In accordance
with IAS 7 'Cash Flow Statements', cash held on deposit for more than three
months which is not needed to meet short-term cash commitments has been
recognised in the balance sheet as an investment.
Futura is aware of the attractiveness of raising funds without recourse to
shareholders and we were therefore delighted to announce, on 27 July 2007, that
we were awarded an R&D grant of up to £200,000 from the South East England
Development Agency (SEEDA) to support the development of a pipeline product that
uses the Group's DermaSys(R) delivery technology. The award of the grant
followed a thorough review by SEEDA, the Regional Development Agency responsible
for the sustainable economic development of the South East of England. The award
of the grant is a significant endorsement of a pipeline product, which met the
award criterion of having the potential to achieve a technological advance in a
new product or process.
Outlook
The positive trial results from the CSD500 user study have set the scene for the
successful commercial launch of the product as a Durex(R) branded condom, once
EU marketing approval has been received. We are now poised to become revenue
generating with a recurring royalty income stream from the sales of the CSD500
condom, which will transform Futura. We will continue to keep our shareholders
and other stakeholders informed of our progress and look forward to the future
with increasing confidence.
Dr W D Potter J H Barder
Chairman Chief Executive
Note
(1) Massachusetts Male Ageing Study (MMAS), J Urol 1994 Jan; ISI (1) : pages
54-61
(2) Prog Urol February 2003, vol 13 part 1, pages 85-91
CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited Unaudited
6 months 6 months year
ended ended ended
30 June 30 June 31 December
2007 2006 2006
As restated As restated
Note £ £
£
Revenue - 492 301
Grant income 21,885 - -
Research and development costs (707,433) (591,934) (1,079,986)
Administrative costs (638,615) (480,324) (1,029,075)
Operating loss (1,324,163) (1,071,766) (2,108,760)
Finance income 87,997 37,592 136,114
Loss before tax (1,236,166) (1,034,174) (1,972,646)
Taxation 116,722 109,228 196,133
Loss for the period attributable to
equity holders of the company (1,119,444) (924,946) (1,776,513)
Basic and diluted loss per share (pence) 3 (2.0p)
(1.9p) (3.4p)
All amounts relate to continuing activities.
There is no difference between the loss for the period and the total recognised
income and expense for the period attributable to equity holders of the Company,
therefore a separate statement of recognised income and expense has not been
prepared.
CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Unaudited
30 June 30 June 31 December
2007 2006 2006
As restated As restated
Notes £ £ £
Assets
Non-current assets
Plant and equipment 30,821 24,989 20,109
Total non-current assets 30,821 24,989 20,109
Current assets
Inventories 24,580 31,956 32,648
Trade and other receivables 304,443 64,448 156,993
Current tax asset 311,756 108,128 195,034
Investments 4 1,080,000 - 1,039,031
Cash and cash equivalents 5 1,579,849 1,448,665 2,740,767
Total current assets 3,300,628 1,653,197 4,164,473
Total assets 3,331,449 1,678,186 4,184,582
Liabilities
Current liabilities
Trade and other payables (460,698) (245,526) (236,066)
Total liabilities (460,698) (245,526) (236,066)
Total net assets 2,870,751 1,432,660 3,948,516
Capital and reserves attributable to equity
holders of the company
Share capital 110,707 99,337 110,607
Share premium reserve 6 12,267,675 8,925,420 12,251,275
Other reserve 1,152,165 1,152,165 1,152,165
Retained earnings 7 (10,659,796) (8,744,262) (9,565,531)
Total equity 2,870,751 1,432,660 3,948,516
CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Unaudited
6 months 6 months year
ended ended ended
30 June 30 June 31 December
2007 2006 2006
As restated As restated
£ £ £
Cash flows from operating activities
Loss before tax (1,236,166) (1,034,174) (1,972,646)
Adjustments for:
Depreciation 6,705 5,195 10,630
Finance income (87,997) (37,592) (136,114)
(Gain)/loss on sale of plant and equipment - (43) 6
Share-based payment charge 25,179 13,076 43,374
Operating loss before changes in working capital (1,292,279) (1,053,538) (2,054,750)
Decrease/(increase) in inventories 8,068 - (692)
(Increase)/decrease in trade and other receivables (144,967) 805 (76,067)
Increase/(decrease) in trade and other payables 224,632 6,447 (1,946)
Cash used in operations (1,204,546) (1,046,286) (2,133,455)
Income tax received - 282,636 282,636
Net cash used in operating activities (1,204,546) (763,650) (1,850,819)
Cash flows from investing activities
Purchase of plant and equipment (17,417) (4,414) (6,088)
Sale of plant and equipment - 43 44
Net change in sterling fixed rate deposits (40,969) - (1,039,031)
Interest received 85,514 41,880 124,730
Cash generated by / (used in) investing activities 27,128 37,509 (920,345)
Cash flows from financing activities
Issue of ordinary shares 16,500 365,893 3,703,018
Cash generated by financing activities 16,500 365,893 3,703,018
(Decrease)/increase in cash and cash equivalents (1,160,918) (360,248) 931,854
Cash and cash equivalents at beginning of period 2,740,767 1,808,913 1,808,913
Cash and cash equivalents at end of period 1,579,849 1,448,665 2,740,767
1. Basis of preparation
The unaudited Interim Report was approved by the Board of Directors on 21
September 2007.
The financial information for the six months ended 30 June 2007 and for the six
months ended 30 June 2006 is unaudited.
The financial information presented for the Group does not constitute 'statutory
accounts' within the meaning of Section 240 of the Companies Act 1985.
The information for the year ended 31 December 2006 has been extracted from the
financial statements of the statutory accounts of Futura Medical plc which were
prepared under UK Generally Accepted Accounting Principles ('UK GAAP') and have
been delivered to the Registrar of Companies. The auditors have reported on
those financial statements; their report was unqualified, did not include any
references to which the auditors drew attention by way of emphasis without
qualifying their report and did not contain any statements under either Section
237(2) or Section 237(3) of the Companies Act 1985. This audited information has
been restated, as necessary, for the adoption of International Financial
Reporting Standards (IFRS). The restatements have not been audited.
2. Basis of accounting
The financial information presented in this report has been prepared using
accounting policies that will be used in the preparation of the financial
statements for the year ending 31 December 2007. The policies are set out below.
These policies are in accordance with International Financial Reporting
Standards (IFRS) as endorsed for use in the European Union and International
Financial Reporting Interpretations Committee (IFRIC) interpretations that are
expected to be applicable for the year ending 31 December 2007. The disclosures
required by IFRS 1 'First-time Adoption of International Financial Reporting
Standards' concerning the transition from UK GAAP to IFRS are given in note 9.
The Group has elected to make use of the exemptions available in IFRS 1 as
follows:
• IFRS 2 'Share-based Payment' has been applied to all grants of equity
instruments after 7 November 2002 that were unvested at 1 January 2006.
• IFRS 3 'Business Combinations' has not been applied retrospectively to
business combinations that occurred before 1 January 2006.
• IAS 32 'Financial Instruments: Presentation' and IAS 39 'Financial
Instruments: Recognition and Measurement' is being applied from 1 January 2007.
The following new standards, amendments to standards and interpretations have
been issued, are not effective for the financial year ending 31 December 2007
and have not been adopted early as the Directors do not expect these
interpretations to be relevant to the Group:
• IFRS 8 'Operating Segments' effective for annual periods beginning on
or after 1 January 2009.
• IFRIC 11 'IFRS 2 - Group and Treasury Share Transactions' effective
for annual periods beginning on or after 1 January 2008.
• IFRIC 13 'Customer Loyalty Programmes' effective for annual periods
beginning on or after 1 July 2008.
• IFRIC 14 'IAS 19 - The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction' effective for annual periods
beginning on or after 1 January 2008.
• IAS 23 'Borrowing Costs' effective for annual periods beginning on or
after 1 January 2008.
The interim financial information has been prepared on the historical cost basis
or fair value as appropriate.
2.1 Basis of consolidation
Where the Company has the power, either directly or indirectly, to govern the
financial and operating policies of another entity or business so as to obtain
benefits from its activities, it is classified as a subsidiary. The consolidated
financial information presents the results of the Company and its sole
subsidiary Futura Medical Developments Limited as if they formed a single entity
('the Group'). Inter company transactions and balances between the Group
companies are therefore eliminated in full.
2.2 Revenue
Revenue comprises the fair value received or receivable for exclusivity
arrangements, royalties and milestone income, and the sale of rights to future
royalties, net of value added tax.
The accounting policies for the principal revenue streams of the Group are as
follows:
(a) Exclusivity arrangements and related services are recognised as revenue
in the accounting period in which the related services are rendered, or
activities performed, by reference to completion of the specific transaction.
(b) Royalty and milestone income comprise revenue generated from product
out-licensing and research and development collaboration agreements. Where
licensing agreements include non-refundable milestone income, revenue is
recognised on achieving the milestones. If any milestone income is creditable
against royalty payments then it is deferred and released to the income
statement over the period in which the royalties would otherwise be receivable.
Royalty income relating to the sale by a licensee of licensed product is
recognised on an accruals basis in accordance with the substance of the relevant
agreement and based on the receipt from the licensee of the relevant information
to enable calculation of the royalty due.
(c) Sales of the rights to future royalties are recognised as revenue on the
date on which the revenue becomes receivable.
2.3 Leased assets
Operating lease rentals are charged to the income statement on a straight line
basis over the lease term.
2.4 Intangible assets
Research and development
Certain Group products are in the research phase and others are in the
development phase.
Expenditure on internally developed products is capitalised if it can be
demonstrated that:
• It is technically feasible to develop the product for it to be sold;
• Adequate resources are available to complete the development;
• There is an intention to complete and sell the product;
• The Group is able to sell the product;
• Sale of the product will generate future economic benefits; and
• Expenditure on the project can be measured reliably.
Capitalised development costs are amortised over the periods in which the Group
expects to benefit from selling the products developed. The amortisation
expense is included within the cost of sales line in the income statement.
Development expenditure not satisfying the above criteria and expenditure on the
research phase of internal projects are recognised in the income statement as
incurred.
2.4 Intangible assets (continued)
Research and development (continued)
The useful life and value of the capitalised development cost is assessed for
impairment at least annually. The value is written down immediately if
impairment has occurred and the remaining cost is amortised over its reduced
useful life.
The Directors consider that the criteria to capitalise development expenditure
are not met for a product prior to receiving regulatory approval for sale in at
least one country.
Patents and trademarks
Patents and trademarks are either expensed or capitalised in accordance with the
corresponding treatment of the development expenditure for the product to which
they relate.
2.5 Plant and equipment
Plant and equipment are stated at historical cost less accumulated depreciation
and any accumulated impairment losses. Historical cost includes expenditure that
is directly attributable to the acquisition of the items. Depreciation is
charged to the income statement on all plant and equipment at rates calculated
to write off the cost or valuation, less estimated residual value, of each asset
on a straight line basis over their estimated useful lives, which is between 2
and 5 years for plant and equipment and between 3 and 10 years for furniture and
fittings.
The assets' residual values and useful lives are determined by the Directors and
reviewed and adjusted if appropriate at each balance sheet date in accordance
with Group policy for impairment of assets (note 2.6).
2.6 Impairment of assets
Assets that have a finite useful life and are not yet in use and are not subject
to amortisation or depreciation are tested annually for impairment.
Assets that are subject to amortisation are reviewed for impairment annually and
when events or circumstances suggest that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the
asset's carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the
asset.
For the purpose of assessing impairment, assets are grouped at the lowest levels
for which there are separately identifiable cash flows (cash generating units).
If the recoverable amount of an asset is estimated to be less than its carrying
amount, the carrying amount of the asset is reduced to its recoverable amount.
An impairment loss is recognised immediately in the income statement, unless the
relevant asset is carried at a revalued amount, in which case the impairment
loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset
is increased to the revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that would have
been determined had no impairment loss been recognised for the asset in prior
periods. A reversal of an impairment loss is recognised immediately in the
income statement, unless the relevant asset is carried at a revalued amount, in
which case the reversal of the impairment loss is treated as a revaluation
increase.
2.7 Inventories
Inventories are materials and supplies to be consumed in the course of research
and development and are stated at the lower of cost and net realisable value.
Cost includes materials, related contract manufacturing costs and other direct
costs. Cost is calculated using the first-in first-out method. Net realisable
value is based on estimated selling price, less further costs expected to be
incurred to completion and disposal. Provision is made for obsolete,
slow-moving or defective items where appropriate.
2.8 Trade and other receivables
Trade and other receivables are measured at initial recognition at fair value
and are subsequently measured at amortised cost using the effective interest
rate method.
2.9 Investments
Cash held in sterling fixed rate deposits with original maturities of more than
three months are treated as investments.
2.10 Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, bank overdrafts and sterling
fixed rate deposits with original maturities of three months or less which are
held by the Group so as to be available to meet short term cash commitments.
2.11 Trade and other payables
Trade and other payables are initially measured at fair value and subsequently
measured at amortised cost using the effective interest rate method.
2.12 Government grants
Government grants are recognised at their fair value where there is a reasonable
assurance that the grant will be received and the Group will comply with all
attached conditions. Government grants relating to costs are deferred and
recognised in the income statement over the period required to match them with
the costs that they are intended to compensate.
2.13 Taxation
Deferred tax assets and liabilities are recognised where the carrying amount of
an asset or liability in the balance sheet differs to its tax base, except for
differences arising on:
• The initial recognition of goodwill;
• Goodwill for which amortisation is not tax deductible;
• The initial recognition of an asset or liability in a transaction which
is not a business combination and at the time of the transaction affects neither
accounting or taxable profit; and
• Investments in subsidiaries and jointly controlled entities where the
group is able to control the timing of the reversal of the difference and it is
probable that the difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is
probable that taxable profit will be available against which the difference can
be utilised.
The amount of the asset or liability is determined using tax rates that have
been enacted or substantially enacted by the balance sheet date and are expected
to apply when the deferred tax liabilities / (assets) are settled / (recovered).
Deferred tax balances are not discounted.
2.13 Taxation (continued)
Deferred tax assets and liabilities are offset when the Group has a legally
enforceable right to offset current tax assets and liabilities and the deferred
tax assets and liabilities relate to taxes levied by the same tax authority on
either:
• The same taxable group company; or
• Different group entities which intend to settle current tax assets and
liabilities on a net basis, or to realise the assets and settle the liabilities
simultaneously, on each future period in which significant amounts of deferred
tax assets or liabilities are expected to be settled or recovered.
Current tax is provided at amounts expected to be recovered or to be paid using
the tax rates and tax laws that have been enacted or substantially enacted at
the balance sheet date. When research and development tax credits are claimed
they are recognised on an accruals basis and are included as a taxation credit.
2.14 Foreign currency translation
The financial statements for each of the Group's entities are measured using the
currency of the primary economic environment in which the entity operates (the
functional currency). The consolidated financial information is presented in
sterling, which is the Group's functional currency and presentation currency.
All the Group's entities have the same functional currency and presentation
currency.
Foreign currency transactions are translated into the functional currency using
the exchange rates prevailing at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions and from the
translation at period end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the income statement.
2.15 Pension costs
The Group provides retirement benefits to all employees and Executive Directors
(except the Chairman) who wish to participate by defined contribution pension
schemes. The Group pays fixed contributions and has no legal or constructive
obligations to pay further contributions. The assets of these schemes are held
separately from those of the Group in independently administered funds.
Contributions made by the Group are charged to the income statement in the
period in which they become payable.
2.16 Share-based payments
The Group operates an equity-settled, share-based compensation plan. Where share
options are awarded to employees and others providing similar services on or
after 7 November 2002, the fair value of the options at the date of grant is
charged to the income statement over the vesting period. Non-market vesting
conditions are taken into account by adjusting the number of equity instruments
expected to vest at each balance sheet date so that, ultimately, the cumulative
amount recognised over the vesting period is based on the number of options that
eventually vest. Market vesting conditions are factored into the fair value of
the options granted. As long as all other vesting conditions are satisfied, a
charge is made irrespective of whether the market vesting conditions are
satisfied. The cumulative charge is not adjusted for failure to achieve a market
vesting condition. If the terms and conditions of options are modified before
they vest, the change in the fair value of the options, measured immediately
before and after the modification, is also charged to the income statement over
the remaining vesting period. Where equity instruments are granted to persons
other than employees and others providing similar services, the income statement
is charged with the fair value of goods and services received.
2.17 National insurance on share options
Where possible, all employee option holders enter into an HM Revenue & Customs
joint election to transfer the employers' national insurance contribution
potential liability to the employee. To the extent that such an election has not
been entered into and where the share price at the balance sheet date is greater
than the exercise price on options granted after 19 May 2000, provision for any
employers' national insurance contribution has been made based on the prevailing
rate of national insurance. However, under the terms of all option rules any
liability which may arise is recoverable from each option holder and a
corresponding debtor is also included.
2.18 Segment reporting
The Group is organised and operates as one business unit being pharmaceutical
drugs and medical devices. The principal activity of the Group is the research
and development of drugs and medical devices and their commercial exploitation.
The main area of research and development continues to be in the field of
innovative products for the consumer healthcare market with the main focus being
on sexual health.
The Group operates in and manages any overseas research and development from the
UK. Segment revenue is based on the geographical location of the Group's
customers which at this stage is solely the UK. Since there is currently only
one primary segment and one geographical segment, no separate segment reporting
has been prepared.
2.19 Interest income
Interest income is recognised on a time-proportion basis using the effective
interest rate method.
3. Loss per share
The loss attributable to shareholders and weighted average number of shares for
the purpose of calculating the diluted loss per share are identical to those
used for calculating the basic loss per share. This is because the exercise of
share options would have the effect of reducing the loss per share and is
therefore anti-dilutive under the terms of IAS 33 'Earnings per Share'.
The calculation of the loss per share is based on a loss of £1,119,444 (six
months ended 30 June 2006: loss of £924,946 as restated; year ended 31 December
2006: loss of £1,776,513 as restated) and on a weighted average number of shares
in issue of 55,343,656 (six months ended 30 June 2006: 49,556,032; year ended 31
December 2006: 52,299,053).
50,000 shares were issued in the period in relation to an exercise of share
options for a gross consideration of £16,500 (six months ended 30 June 2006:
730,000 shares for a gross consideration of £365,900; year ended 31 December
2006: 6,365,000 shares for a gross consideration of £3,849,150).
4. Investments
Unaudited Unaudited Unaudited
30 June 30 June 31 December
2007 2006 2006
£ £ £
Sterling fixed rate deposits of greater than three 1,080,000 - 1,039,031
months maturity
5. Cash and cash equivalents
Unaudited Unaudited Unaudited
30 June 30 June 31 December
2007 2006 2006
£ £ £
Cash in hand 18,363 122,726 80,767
Sterling fixed rate deposits of up to three 1,636,466 1,325,939 2,660,000
months maturity
Bank overdrafts (74,980) - -
Cash and cash equivalents 1,579,849 1,448,665 2,740,767
6. Share premium reserve
Unaudited Unaudited Unaudited
30 June 30 June 31 December
2007 2006 2006
£ £ £
Opening share premium reserve 12,251,275 8,560,987 8,560,987
Premium on shares issued 16,400 364,433 3,690,288
Closing share premium reserve 12,267,675 8,925,420 12,251,275
7. Retained earnings
Unaudited Unaudited Unaudited
30 June 30 June 31 December
2007 2006 2006
As restated As restated
£ £ £
Opening retained earnings (9,565,531) (7,832,392) (7,832,392)
Retained loss for the period (1,119,444) (924,946) (1,776,513)
Share-based payment 25,179 13,076 43,374
Closing retained earnings (10,659,796) (8,744,262) (9,565,531)
8. Post balance sheet events
On 9 July 2007, 350,000 options over new ordinary shares were granted to
employees (not Directors) and a consultant. On 31 July 2007, 410,000 options
over new ordinary shares granted to Directors, employees and a consultant
expired unexercised. Following these changes, there were 1,275,000 options over
new ordinary shares outstanding.
On 27 July 2007, it was announced that the Group had been awarded a grant for
research and development of up to £200,000 from the South East England
Development Agency ('SEEDA') to support the development of a pipeline product
that uses the Group's novel DermaSys(R) trans-dermal technology. Under the terms
of the SEEDA grant, contributions to development costs are receivable with
effect from 26 April 2007. Accordingly, grant income of £21,885 has been
recognised in the income statement in the period and a corresponding amount
included in trade and other receivables at 30 June 2007 in respect of the
accrued grant receivable.
On 17 September 2007 our subsidiary, Futura Medical Developments Limited ('FMDL
'), signed global development and marketing and distribution agreements with LRC
Products Limited, a subsidiary of SSL International plc (together 'SSL') for
worldwide rights to MED2002. Under the terms of the agreement an undisclosed
royalty will be paid to FMDL with milestone payments of up to £18 million,
subject to regulatory approval and sales targets being achieved. SSL and FMDL
will jointly manage the completion of the clinical development programme of
MED2002 currently expected to cost up to £3.65 million, with SSL contributing
65% of the costs which would result in SSL paying £2.4 million and FMDL paying
£1.2 million over the period of the development programme.
9. Explanation of transition to IFRS
This is the first year that the Group has presented its full financial
information under IFRS. The requirements of Financial Reporting Standard 20 '
Share-based Payment' were applied for the first time for the year ended 31
December 2006. The last financial statements under UK GAAP were for the year
ended 31 December 2006 and the date of full transition to IFRS was therefore 1
January 2006. The following disclosures are required in the year of transition.
Reconciliation of Group equity at 1 January 2006 (date of transition to IFRS)
Note Audited Effect of Unaudited
UK GAAP IFRS IFRS
Restatement As restated
£ £ £
Plant and equipment 25,370 - 25,370
Inventories 31,956 - 31,956
Trade and other receivables 69,543 - 69,543
Current tax asset 281,536 - 281,536
Cash and cash equivalents 1,808,913 - 1,808,913
Total assets 2,217,318 - 2,217,318
Trade and other payables (i) (237,147) (1,534) (238,681)
Total net assets 1,980,171 (1,534) 1,978,637
Share capital 97,877 - 97,877
Share premium reserve 8,560,987 - 8,560,987
Other reserve 1,152,165 - 1,152,165
Retained earnings (ii) (7,830,858) (1,534) (7,832,392)
Total equity 1,980,171 (1,534) 1,978,637
Note (i): Holiday pay provision
IAS 19 'Employee Benefits' requires the creation of an accrued holiday pay
provision. This was not required under UK GAAP.
Note (ii): Retained earnings
The impact of (i) is a charge to retained earnings of £1,534 at the date of
transition.
Reconciliation of Group equity at 30 June 2006
Note Unaudited Effect of Unaudited
UK GAAP IFRS IFRS
Restatement As restated
£ £ £
Plant and equipment 24,989 - 24,989
Inventories 31,956 - 31,956
Trade and other receivables 64,448 - 64,448
Current tax asset 108,128 - 108,128
Cash and cash equivalents 1,448,665 - 1,448,665
Total assets 1,678,186 - 1,678,186
Trade and other payables (i) (242,266) (3,260) (245,526)
Total net assets 1,435,920 (3,260) 1,432,660
Share capital 99,337 - 99,337
Share premium reserve 8,925,420 - 8,925,420
Other reserve 1,152,165 - 1,152,165
Retained earnings (ii) (8,741,002) (3,260) (8,744,262)
Total equity 1,435,920 (3,260) 1,432,660
Reconciliation of Group equity at 31 December 2006
Note Audited Effect of Unaudited
UK GAAP IFRS IFRS
Restatement As restated
£ £ £
Plant and equipment 20,109 - 20,109
Inventories 32,648 - 32,648
Trade and other receivables 156,993 - 156,993
Current tax asset 195,034 - 195,034
Cash, cash equivalents and investments 3,779,798 - 3,779,798
Total assets 4,184,582 - 4,184,582
Trade and other payables (i) (233,143) (2,923) (236,066)
Total net assets 3,951,439 (2,923) 3,948,516
Share capital 110,607 - 110,607
Share premium reserve 12,251,275 - 12,251,275
Other reserve 1,152,165 - 1,152,165
Retained earnings (ii) (9,562,608) (2,923) (9,565,531)
Total equity 3,951,439 (2,923) 3,948,516
Note (i): Holiday pay provision
IAS 19 'Employee Benefits' requires the creation of an accrued holiday pay
provision. This was not required under UK GAAP.
Note (ii): Retained earnings
The impact of (i) is a charge to retained earnings (ii) of £3,260 at 30 June
2006 and £2,923 at 31 December 2006.
Reconciliation of consolidated income statement for six months ended 30 June
2006
Note Unaudited Effect of Unaudited
UK GAAP IFRS IFRS
Restatement As restated
£ £ £
Revenue 492 - 492
Research and development costs (i) (588,901) (3,033) (591,934)
Administrative costs (i) (481,631) 1,307 (480,324)
Operating loss (1,070,040) (1,726) (1,071,766)
Finance income 37,592 - 37,592
Loss before tax (1,032,448) (1,726) (1,034,174)
Taxation 109,228 - 109,228
Loss for the period attributable to equity
holders of the company (923,220) (1,726) (924,946)
Note (i): Holiday pay provision
IAS 19 'Employee Benefits' requires the creation of an accrued holiday pay
provision. This was not required under UK GAAP.
Reconciliation of consolidated income statement for year ended 31 December 2006
Note Audited Effect of Unaudited
UK GAAP IFRS IFRS
Restatement As restated
£ £ £
Revenue 301 - 301
Research and development costs (i) (1,077,312) (2,674) (1,079,986)
Administrative costs (i) (1,030,360) 1,285 (1,029,075)
Operating loss (2,107,371) (1,389) (2,108,760)
Finance income 136,114 - 136,114
Loss before tax (1,971,257) (1,389) (1,972,646)
Taxation 196,133 - 196,133
Loss for the year attributable to equity holders
of the company (1,775,124) (1,389) (1,776,513)
Note (i): Holiday pay provision
IAS 19 'Employee Benefits' requires the creation of an accrued holiday pay
provision. This was not required under UK GAAP.
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