Preliminary Year End Results

Stem Cell Sciences plc 26 February 2008 Press Release Stem Cell Sciences PRELIMINARY RESULTS FOR THE YEAR ENDED 31ST DECEMBER 2007 ("Stem Cell Sciences", "SCS", "the Company") 26th February 2008 Stem Cell Sciences plc, a company focused on the commercialisation of stem cells and stem cell technologies, announced today preliminary results for the year ended 31st December 2007. Highlights •Major licensing deal with Merck & Co., Inc. for the use of novel mouse neural stem cell technology to for research use providing SCS a signing fee and milestone payments. •Signing of a diabetes contract research agreement with a major biopharmaceutical company to validate its suite of cell processing technologies for the scaled, automated production of human embryonic stem cells (ES) and demonstrate the bulk production of cells relevant for diabetes research at the SCS' Cambridge production facility. •Launch of HEScGRO animal component-free medium for human embryonic stem cell (hES) research by Millipore Corporation under royalty paying license from SCS. •Successful, over-subscribed secondary listing on the Australian Stock Exchange raising AU$12.4 million (£4.94 million) in April. •Securing EU funding for NEUROscreen, a programme that aims to discover new CNS disease drug candidates. Of a total grant of €2.4 million over 3 years, approximately €0.42 million to SCS. •Licensing-in of several new technologies including: - ROCK (Rho-associated kinase) inhibitors to block cell death during transfer and scale-up from The Institute of Physical and Chemical Research of the RIKEN Centre for Developmental Biology (Kobe, Japan); - Novel human muscle cells from the San Raffaele Scientific Institute ( Milan, Italy) for drug discovery and toxicology applications; •Granting of a broad US patent covering all methods of purifying any type of mammalian stem cell (adult and embryonic) via any introduced gene. •Appointment of seasoned CEO, Dr Alastair Riddell in November. •Initiation of restructuring programme starting with the divestment of shares in SCS KK. Rights to commercialise all technology previously licensed to SCS KK have been returned. Also licensed their neural stem (NS) cell technology, for both research and stem-cell based therapies on a global basis. Financial Highlights •Turnover £0.6 million (2006: £0.7 million) •Gross profit £0.5 million (2006: £0.6 million) •Net loss £3.5 million (2006: £2.7 million) •Loss per share of 11.6p (2006: 12.2p) •Cash balance of £3.6 million at 31st December 2007 (2006: £2.5 million) Alastair Riddell, CEO of SCS, commenting on 2007 and the outlook for 2008, said: "The changes we started to implement in 2007 are the catalyst for significant change in 2008, both in terms of business performance and operations. We believe strongly that revenue growth can be achieved by focused marketing of our stem cell product lines and technologies. We shall also actively prosecute our extensive IP portfolio. As announced recently, we have implemented an operations rationalisation and restructuring programme that will result in significant cost savings in the immediate future. We look forward to 2008 as a transformational and successful year for SCS." - Ends - For further information, please contact: Stem Cell Sciences Alastair Riddell, CEO +44 (0)1223 499160 Halsin Partners Michael Sinclair, Director +44 (0)20 7084 5955 Talk Biotech (Australia) Fay Weston +61 4 2220 6036 Notes to Editors Stem Cell Sciences plc (SCS, AIM:STEM, ASX:STC) in a leading provider of cells and cell culture media to the burgeoning stem cell research market. The successful application of stem cells in both research and clinical applications is the reproducible supply of pure, fully characterised stem cells and stem cell-derived specialised cells such as nerves and muscle. By providing these products, to the life sciences industry and academia for use in basic research and drug discovery, Stem Cell Sciences has multiple potential revenue streams. Stem Cell Sciences has multiple industry collaborations, including Millipore Corporation for the marketing and distribution of HEScGROTM, its serum free media for the growth of human embryonic stem cells and Merck & Co for the use of mouse neural stem cell technology for research applications. To access cutting edge technologies on a rapid and on-going basis, Stem Cell Sciences has built an exceptional network of highly interactive collaborations with academic centres of excellence in the stem cell field. These collaborations have been the source of our founding technologies and continue to provide an expanding pipeline of products and intellectual property that are central to the Company's strategy and success. For further information on the company please visit: www.stemcellsciences.com Chairman's Statement Action and Decisiveness are appropriate descriptors of Stem Cell Sciences (SCS) today. We are in the midst of implementing steps focused on strengthening the Company for both short and long-term shareholder value. The performance of the Company on our respective AIM and ASX stock markets has been disappointing and we are focused and committed to improving our commercial execution and operational performance, achieving improved shareholder value. That is the commitment we have to you...our valued investors. This year, as you already may know, we have taken decisive actions to reshape our Company for growth and value development. We have sharpened our focus and as you read this year's annual report, I believe you will share our optimism and enthusiasm regarding the future performance and success of Stem Cell Sciences. During 2007, the Board conducted a strategic review of the Company to determine how best to proceed in a more commercial orientated manner. This resulted in the appointment of Dr Alastair Riddell as CEO and Executive Director, and the transition Dr Peter Mountford into a position where his technical expertise can be successfully leveraged accordingly. Dr Riddell has extensive experience in building and running biotechnology companies. Following a complete review of operations, Dr Riddell and the Board implemented a comprehensive restructuring programme that was announced recently. We believe that these measures provide secure foundations for the future success of SCS. During 2007, SCS continued to build and invest in our stem cell technological leadership. In particular, we continued our core strategy of identifying new and emerging science that can be leveraged into both current and future commercial stem cell product offerings. A key achievement in this area was the licensing of ROCK (Rho-associated kinase) inhibitors from the RIKEN Centre in Japan. These compounds, when added to stem cell media, increase the robustness of cells allowing the large-scale automated production needed for industrial research and clinical applications, an important step forward. SCS now holds a worldwide license for the use of this technology. Our commercial development was recognised in 2007 reflected in agreements with Merck & Co for use of our mouse neural stem (NS) cell technology for research use and a large pharma partner in the diabetes field. The cells and technology for these collaborations originate from our new, state of the art automated production facility in Cambridge that was opened in December 2006. Such progress in this new part of our operation provides confidence of future success in this area. SCS also secured an innovative collaboration with the Myelin Repair Foundation, which will hopefully lead to new advances in CNS research, particularly in multiple sclerosis. A major event for the Company during 2007 was our successful stock exchange listing in Australia (ASX:"STC"). The support received by the investment community there has been highly satisfying and appreciated. We believe one of our most important tasks is not just to ensure a strong current performance, but at the same time to create the conditions for long-term success. Last year we took a major stride in that direction - in the interest of the company, our employees and, of course, our stockholders. In closing, I would like to thank you on behalf of the Board for your trust and your support. I would also like to thank Jeremy Scudamore, a fellow board member for his dedication and service as a Non-Executive Director to SCS. Jeremy retired from the board in January 2008. As a Board, we are focused and committed to ensuring improvement in the value of your investment, delivering value to our customers and providing an exciting opportunity for employees to develop their careers. It is an honour to be a part of the many new and exciting developments underway at Stem Cell Sciences. I and the other members of the Board appreciate your continued support and look forward to updating you on our continued progress and results. Thank you. David A. Dodd, Chairman 25th February 2008 Chief Executive's Review I was appointed by the Board at the end of November to guide the company through a turnaround in performance. I conducted my review in November and December and made recommendations for significant changes in the structure and organisation of the company, which were accepted. I have also engaged the new management team in compiling a business plan for 2008 and 2009 that will see the company's growth and development to a more sustainable, commercially orientated and exciting future. The principal objectives for the company this year are to increase revenues, reduce costs, generate shareholder confidence and significantly increase shareholder value. In order to improve operational efficiency and reduce costs I decided to concentrate our administration and UK research in Cambridge. We move into new premises adjacent to our existing site on Babraham Research Campus in March. Subsequent to the year end we announced that we are closing the Edinburgh facility. Melbourne continues as a research centre of excellence. Several senior positions have also been made redundant and we move forward with a simpler, more cost effective structure. The cost saving from these changes are significant and will benefit the income statement over the next two years by more than £1 million. The revenue generating areas for growth fall into three categories and demonstrate the company's focus on the use of stem cells in drug discovery and in developing the exciting new field of regenerative medicine. We intend to make full use of the company's expertise and intellectual property built up over the last 14 years in this endeavour. Our first objective is to secure at least one major pharmaceutical research collaboration this year. This is likely to be in assisting the partner in its search for small molecules that may play a role in assisting cell regeneration and in developing cell based therapies for the future. Our second objective is to pursue the value existing in our extensive and fundamental intellectual property in the stem cell field. We are already identifying companies and institutions using our technology without the freedom to operate under a licence and will be seeking licences from them. Our third objective is to realise the strategic value of our specialist stem cell media business. This will most probably be with a company specialising in the manufacture, distribution and sales of such material. We intend to retain a carried interest in this business and will continue to develop new media for the partner. In research, the company has some potentially valuable early work in genetically engineered rats (taking place in Melbourne) and in the exciting field of the reprogramming of adult cells into stem cells, obviating the need for the use of embryonic cells in regenerative medicine. Dedicated teams have clear sets of objectives in these areas. 2007 was a challenging year for the company but I am confident that the actions I have already taken and the plans for the next two years will set the company on a more secure and productive path. We aim to be in the vanguard of this exciting area of discovery that has the potential to revolutionise the medical treatment of major diseases for which current therapies are problematic or non-existent. Our deal with a major pharmaceutical company announced in December will assist that company in its search for new treatments for diabetes and our recently announced collaboration with the Myelin Repair Foundation could pave the way for new treatments for multiple sclerosis. Finally, it is important for our investors and collaborators to know that all of our cells are derived from fully informed and consented donors, these cells were obtained with no financial inducement and with permission specifically for research and commercialisation purposes. We will continue to maintain the highest ethical stance in this sensitive area of medical research. Alastair Riddell, CEO 25th February 2008 CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2007 2007 2006 £'000 £'000 ASSETS Non-current assets Property, plant and equipment 516 656 Intangible assets 290 221 Investment in equity accounted investees - 284 ----------- ------------ Total non-current assets 806 1,161 ----------- ------------ Current assets Trade and other receivables 333 584 Current tax assets 133 62 Cash and cash equivalents 3,607 2,463 ----------- ------------ Total current assets 4,073 3,109 ----------- ------------ Total assets 4,879 4,270 ----------- ------------ LIABILITIES Non-current liabilities Deferred income (77) (111) ----------- ------------ Current liabilities Trade and other payables (669) (1,099) Deferred income (148) (43) ----------- ------------ Total current liabilities (817) (1,142) ----------- ------------ Total liabilities (894) (1,253) ----------- ------------ Net assets 3,985 3,017 =========== ============ EQUITY Share capital 335 223 Share premium 6,536 2,297 Capital redemption reserve 10,928 10,928 Foreign exchange reserve (110) (119) Merger reserve (1,248) (1,248) Retained deficit (12,456) (9,064) ----------- ------------ Total equity attributable to equity holders of the company 3,985 3,017 =========== ============ CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2007 2007 2006 £'000 £'000 Revenue 593 742 Cost of sales (108) (157) ----------- ----------- Gross profit 485 585 Other income 258 367 Administrative expenses (2,980) (2,505) Research and development expenses (1,335) (1,055) ----------- ----------- Loss from operating activities (3,572) (2,608) ----------- ----------- Finance income 230 178 Finance expenses (4) - ----------- ----------- Net finance income 226 178 ----------- ----------- Share of loss of equity accounted investee (294) (468) Gain on dilution of equity accounted associate - 126 ----------- ----------- Loss before income tax (3,640) (2,772) Income tax credit 133 62 ----------- ----------- =========== =========== Loss for the year attributable to (3,507) (2,710) equity holders of the company =========== =========== Loss per share Basic (11.6)p (12.2)p Diluted (11.6)p (12.2)p CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2007 2007 2006 £'000 £'000 Cash flows from operating activities Loss for the year (3,507) (2,710) Adjustments for: Depreciation 178 91 Amortisation 39 20 Capitalised development costs (108) (162) Deferred income released (123) (18) Amounts provided against investment - - Finance income (230) (178) Finance expense 4 - Share of loss of equity accounted investee 294 468 Gain on dilution of equity accounted - (126) investee Effect of changes in foreign exchange (10) - rates Equity settled share based payment 115 130 transactions Income tax income (133) (62) ------------ ----------- (3,481) (2,547) Decrease/(increase) in trade and other 277 (633) receivables (Decrease)/increase in trade and other (430) 612 payables ------------ ----------- (3,634) (2,568) Interest paid (4) - Income taxes received 62 121 ------------ ----------- Net cash used in operating activities (3,576) (2,447) ------------ ----------- Cash flows from investing activities Interest received 204 152 Acquisition of plant and equipment (34) (636) Grant income received 194 172 ------------ ----------- Net cash from / (used in) investing 364 (312) activities ------------ ----------- Cash flows from financing activities Proceeds from issue of share capital 4,351 - ------------ ----------- Net cash from financing activities 4,351 - ------------ ----------- Net increase/(decrease) in cash and cash 1,139 (2,759) equivalents Cash and cash equivalents at start of year 2,463 5,227 Effect of foreign exchange rate changes 5 (5) ------------ ----------- Cash and cash equivalents at end of year 3,607 2,463 ============ =========== CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2007 Attributable to equity holders of the company GROUP Share Share Capital Foreign Merger Retained Total premium redemption exchange reserve deficit reserve reserve capital equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 January 2006 11,151 2,297 - - (1,248) (6,484 5,716 Total income and expense recognised directly in equity being exchange differences arising on translation of overseas operations - - - (119) - - (119) Loss for the period - - - - - (2,710 (2,710) -------- -------- --------- -------- -------- -------- ------- Total recognised income and expense for the period - - - (119) - (2,710) (2,829) -------- -------- --------- -------- -------- -------- ------- Share based payments - - - - - 130 130 Capital reconstruction(10,928) - 10,928 - - - - -------- -------- --------- -------- -------- -------- ------- Balance at 31 December 2006 223 2,297 10,928 (119) (1,248) (9,064) 3,017 -------- -------- --------- -------- -------- -------- ------- Total income and expense recognised directly in equity being exchange differences arising on translation of overseas operations - - - 9 - - 9 Loss for the period - - - - - (3,507) (3,507) -------- -------- --------- -------- -------- -------- ------- Total recognised income and expense for the period - - - 9 - (3,507) (3,498) -------- -------- --------- -------- -------- -------- ------- Share based payments - - - - - 115 115 Issue of share capital 112 4,239 - - - - 4,351 -------- -------- --------- -------- -------- -------- ------- Balance at 31 December 2007 335 6,536 10,928 (110) (1,248) (12,456) 3,985 ======== ======== ========= ======== ======== ======== ======= Notes to the Preliminary Announcement 1. Financial information This preliminary announcement contains the financial information of the Stem Cell Sciences plc (the "Company") and its subsidiaries (together referred to as the "Group") for the year ended 31 December 2007. This financial information is extracted from the consolidated financial statements of the Group prepared under International Financial Reporting Standards as adopted by the EU ("adopted IFRSs") for the first time and therefore IFRS 1 "First-time adoption of International Financial Reporting Standards" has been applied. An explanation of the transition to adopted IFRS is provided in note 5 below. The Group's transition date to IFRS is 1 January 2006 and the Group prepared its opening balance sheet at that date in accordance with IFRSs effective at 31 December 2007 except as specified below. In preparing the financial statements the Group applied mandatory exceptions and certain of the optional exemptions available in IFRS 1 from the full retrospective application. This preliminary announcement was authorised by the Board on 25 February 2008 The financial information set out in this announcement for the years ended 31 December 2007 and 2006 does not constitute the Group's statutory accounts for these years within the meaning of Section 240 of the Companies Act 1985. The statutory accounts for 2006, which were prepared under UK GAAP, have been delivered to the Registrar of Companies, and those for 2007, prepared under accounting standards adopted by the EU will be delivered in due course.The auditors have reported on those financial statements. The auditors' reports were (i) unqualified; (ii) included references to matters to which the auditors drew attention by way of emphasis without qualifying their reports; and (iii) did not contain statements under section 237(2) or (3) of the Companies Act 1985. In the 2007 financial statements the auditors' report contains an emphasis of matter concerning going concern and capitalised development expenditure. In the 2006 financial statements their report contained an emphasis of matter concerning going concern and the carrying value of an investment in an associate. 2. Basis of preparation Going concern The financial statements are prepared on a going concern basis which the directors believe to be appropriate for the following reasons. The Group is involved in the research, development and commercialisation of stem cells and stem cell technology. At this stage of its development it has limited revenues arising from licensing arrangements, contract research and product sales and its costs exceed its revenue. The Group will continue to absorb cash until its products are commercialised. The Group's current cash resources are forecast by the directors as being sufficient to enable it to continue to trade for the foreseeable future. However the projections include revenues which are not certain and which significantly exceed those received in previous years. The Directors are currently in the process of talking with prospective licensing partners and other customers and have a reasonable expectation that these discussions will be successful. If the revenue remains consistent with previous years the Directors forecast that the Group's cash resources will be used by March 2009. While there can be no certainty that the forecast revenues will be generated, the Directors are of the opinion that, taking into account existing cash resources available to the Group, sufficient revenue will be generated to enable the Group to continue to trade for at least twelve months from the date of approval of these financial statements. If the revenue generation is later than anticipated the Directors would take appropriate steps to reduce the level of cash outflow. However, as noted there can be no certainty in relation to these matters, which may cast significant doubt on the group's ability to continue as a going concern and doubt over the recoverability of capitalised development expenditure. The group may therefore, be unable to continue realising its assets and discharging its liabilities in the normal course of business but the financial statements do not include any adjustments that would result from the going concern basis of preparation being inappropriate. The financial information set out in this announcement has been prepared on the historical cost basis and in accordance with International Financial Reporting Standards and their interpretations as adopted by the European Union ("adopted IFRS"). 3. Significant accounting policies Revenue Revenue represents amounts receivable from product sales, collaborative research agreements and license fees net of sales related taxes. Revenue is recognised when there is evidence of an agreement, delivery of the product has occurred and the selling price is determined. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of products. a) Product sales are recognised as revenue when the significant risks and rewards of ownership have been transferred to the buyer. b) Fees for collaborative research are deferred and recognised over the period of the agreement c) Revenue is recognised immediately in respect of licensed technology once all significant performance obligations have been met. Intangible assets Research and development Expenditure on research activities undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in the income statement when incurred. Development activities involve a plan or design for the production of new or substantially improved products and processes. An internally-generated intangible asset arising from the Group's development expenditure is recognised only if all of the following conditions are met: • an asset is created that can be identified (such as new processes); • there is an intention to complete and use the intangible asset; • it is probable that the asset created will generate future economic benefits; • the development cost of the asset can be measured reliably; • the product or process is technically and commercially feasible; and • sufficient resources are available to complete the development and to either sell or use the asset. Development costs recognised as intangible assets are amortised over their expected useful lives. Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred. Research and development costs include personnel charges in respect of persons working wholly or exclusively on process or product development. 4. Loss per share Basic and diluted loss per share The calculation of basic loss per share at 31 December 2007 was based on the loss attributable to ordinary shareholders of £3,507,000 (2006: £2,710,000) and a weighted average number of ordinary shares outstanding during the year ended 31 December 2007 of 30,351,000 (2006: 22,301,000), calculated as follows: 2007 2006 (000) (000) Issued ordinary shares at 1 January 22,301 22,301 Effect of shares issued in April 2007 8,050 - ----------- -------- Weighted average number of ordinary shares at 31 December 30,351 22,301 =========== ======== The loss attributable to ordinary shares and the number of ordinary shares for the purpose of calculating the diluted earnings per share are identical to those used for basic earnings per share. The exercise of share options would have the effect of reducing the loss per share and consequently is not taken into account in the calculation for diluted loss per share. At 31 December 2007 there were 2,736,200 (2006: 1,833,788) options outstanding with an average exercise price of £0.47 (2006: £0.50) which are not included in the calculation of diluted earnings per share because they are anti-dilutive at those dates. 5. Explanation of transition to IFRSs This is the first year that the Company has presented its financial statements under IFRSs. The following disclosures are required in the year of transition. The last financial statements under UK GAAP were for the year ended 31 December 2006 and the date of transition to IFRSs was therefore 1 January 2006. Reconciliation of consolidated income statement for year end 31 December 2006 UK GAAP IAS 38 Restated under IFRS £'000 £'000 £'000 Revenue 742 - 742 Cost of sales (157) - (157) ------------- ----------- -------------- Gross profit 585 - 585 Research and development (1,197) 142 (1,055) Administrative expenses (2,505) - (2,505) Other income 367 - 367 ------------- ----------- -------------- Operating loss (2,750) 142 (2,608) Net finance costs 178 - 178 Share of results of (468) - (468) associate Gain on dilution of equity accounted - 126 126 associate ------------- ----------- -------------- Loss before tax (3,040) 268 (2,772) Taxation 62 - 62 ------------- ----------- -------------- Loss for period (2,978) 268 (2,710) ============= =========== ============== Under UK GAAP accounting policies, research and development expenditure was charged to profit and loss account when incurred. Under IAS 38 Intangible Assets, the Group capitalises development expenditure that meets the criteria set out in the standard. The Group's accounting policy in respect of research and development expenditure is set out in note 3 to this financial information. Under IFRS the gain on dilution of investment in an equity accounted associate is recognised in the income statement. Under UK GAAP this dilution was dealt with as an adjustment to reserves. 5. Explanation of transition to IFRS (cont'd) Reconciliation of equity as at 31 December 2006 UK GAAP IAS 38 IFRS 1 Total effect Restated of under transition IFRS to IFRS (a) (b) £'000 £'000 £'000 £'000 £'000 Non-current assets Property, plant and equipment 656 - - - 656 Intangible assets - 221 - 221 221 Investments accounted for using the equity method 284 - - - 284 -------- -------- -------- -------- ------- 940 221 - 221 1,161 -------- -------- -------- -------- ------- Current assets Trade and other receivables 584 - - - 584 Current tax assets 62 - - - 62 Cash and cash equivalents 2,463 - - - 2,463 -------- -------- -------- ------- ------- 3,109 - - - 3,109 -------- -------- -------- -------- ------- Total Assets 4,049 221 - 221 4,270 -------- -------- -------- ------- ------- Non-current liabilities Deferred income 111 - - - 111 Current liabilities Trade and other payables 1,099 - - - 1,099 Deferred income 43 - - - 43 -------- -------- -------- ------- ------- Total Liabilities 1,253 - - - 1,253 -------- -------- -------- ------- ------- Net Assets 2,796 221 - 221 3,017 ======== ======== ======== ======== ======= Capital and reserves Share capital 223 - - - 223 Share premium account 2,297 - - - 2,297 Capital redemption reserve 10,928 - - - 10,928 Foreign exchange reserve (144) - 25 25 (119) Merger reserve (1,248) - - - (1,248) Retained earnings (9,260) 221 (25) 196 (9,064) -------- -------- -------- -------- ------- Total Equity attributable to ordinary shareholders 2,796 221 - 221 3,017 ======== ======== ======== ======== ======= 5. Explanation of Transition to IFRS (cont'd) Reconciliation of equity as at 1 January 2006 UK IAS38 IFRS Total effect of Restated GAAP 1 transition to IFRS under IFRS (a) (b) £'000 £'000 £'000 £'000 £'000 Non-current assets Property, plant and equipment 115 - - - 115 Intangible assets - 79 79 79 Investments accounted for using the equity method 710 - - - 710 -------- -------- ------- -------- -------- 825 79 - 79 904 -------- -------- ------- -------- -------- Current assets Trade and other receivables 322 - - - 322 Cash and cash equivalents 5,227 - - - 5,227 -------- -------- ------- -------- -------- 5,549 - - - 5,549 -------- -------- ------- -------- -------- Total Assets 6,374 79 - 79 6,453 -------- -------- ------- -------- -------- Non-current liabilities Trade and other - - - - - payables Current liabilities Trade and other payables (737) - - - (737) - - -------- -------- ------- -------- -------- Total Liabilities (737) - - - (737) -------- -------- ------- -------- -------- Net Assets 5,637 79 - 79 5,716 ======== ======== ======= ======== ======== Capital and reserves Share capital 11,151 - - - 11,151 Share premium account 2,297 - - - 2,297 Foreign exchange reserve (25) - 25 25 - Merger reserve (1,248) - - - (1,248) Accumulated profits (6,538) 79 (25) 54 (6,484) -------- -------- ------- -------- -------- Total equity attributable to ordinary shareholders 5,637 79 - 79 5,716 ======== ======== ======= ======== ======== Notes to the reconciliations of equity a) IAS 38 intangible assets has resulted in the Group capitalising development expenditure that meets the criteria set out in the standard. The Group's accounting policy in respect of research and development expenditure is set out in note 3 to this financial information. b) The group has taken advantage of the exemption under IFRS 1 - First Time Adoption of International Financial Reporting Standards to reset cumulative translation differences at the date of transition to zero. Cash flow statement A separate cash flow reconciliation has not been provided in the notes as all information relevant to understanding the cash flow statement has been included on the face of the statement. Transition to IFRS has resulted in the Company disclosing a cash flow statement for the first time. This information is provided by RNS The company news service from the London Stock Exchange

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