Final Results-Replacement

Futura Medical PLC 23 February 2004 Futura Medical plc Correction. In the preliminary results announcement released today, 23rd February at 7am, under the RNS number 6839V, the headings in the table relating to Cash Flow are incorrect. The columns should be listed as follows: 11 month ended Year ended Notes 31 December 31 December 31 January 31 January 2003 2003 2003 2003 £ £ £ £ In addition, the figure seen in note 13 relating to the Group total for 31 December 2003 should be £180,044. A corrected preliminary statement is now set out below in full: Press Release 23 February 2004 Futura Medical plc Preliminary Results for the eleven months to 31 December 2003 Futura Medical plc ('Futura'), the AIM-quoted pharmaceutical and medical device group that develops innovative products for the sexual healthcare market, reports its Preliminary Results for the eleven months ended 31 December 2003. Highlights - Futura introduced to the AIM market of the London Stock Exchange after successful fundraising prior to Introduction - Pre-tax loss of £1.46 million for 11 month period to 31 December 2003 (12 months ended 31 January 2003: £1.23 million loss) - Cash balances of £2.4 million at 31 December 2003, (£1.5 million at 31 January 2003) - DTI grant awarded to offset development of FLD500 - Phase II study for MED2001 completed. Change in regulatory strategy to potential first ethical over-the-counter treatment of erectile dysfunction - Discussions regarding distribution rights for MED2001 at an advanced stage - Worldwide distribution deal with SSL International plc for CSD500 extended to cover Japan - SSL International plc global option for FLD500. Commenting on the maiden Preliminary Results, James Barder, Chief Executive, said: 'The progress that Futura has made developing and licensing innovative products, such as MED2001 and CSD500, for the sexual healthcare markets, along with the work that we are doing on identifying the potential of other pharmaceutical drugs and devices, encourages us to believe that the Group can deliver profitable growth for the future.' For further information, please contact: Futura Medical plc James Barder, Chief Executive Tel: +44 01483 685 670 Email: james.barder@futuramedical.co.uk Media enquiries: Bankside Tel: +44 (0) 20 7444 4140 Henry Harrison-Topham / Alex Tweed Email: alexandra.tweed@bankside.com - ends - Chairman and Chief Executive Joint Review Our decision to align Futura Medical plc's financial year with the calendar year means our last trading period is only 11 months. However, significant progress has been made in this shorter financial period. Product Development MED2001 - EroxonTM Treatment for erectile dysfunction In our 2003 Interim Report we reported on the completion of the 67-patient Phase II double-blind, placebo controlled, escalating-dose ranging study. The primary purpose of this study was to assess safety on a dose-escalating basis and we were pleased to say that MED2001 was well tolerated. The systemic adverse events seen in some patients were pharmacologically predictable, dose-dependent and consisted mainly of mild, transient headaches. Local tolerability was also good. Overall good efficacy was seen for MED2001 but we also saw an unexpectedly high placebo response. This compromised our ability to demonstrate a statistically significant improvement over placebo in this study. Nevertheless, subsequent analyses have identified several factors, which we believe contributed to the high placebo response and these are being taken into account as we design the protocol for the Phase III trial. Apart from the statistical data we gained from the Phase II study we also received extremely valuable 'user' feedback. One of the main consequences of this feedback has been the design of a customised, single-unit dose container and applicator for MED2001. The container will allow direct application of the cream to the glans by the patient or their partner without the complication of product transference to their hands and fingers. Penile massage is an important part of sexual foreplay and this new device will enable the partner to become more involved without coming directly into contact with the cream. The directors believe this container will provide significant benefits for the patients and improve the safety of the product, thereby making it more acceptable to the regulatory authorities. Following the completion of our Phase II study a robust regulatory review took place with external independent experts. In light of this review we have recently modified our regulatory strategy to seek to licence MED2001 as a pharmacy line ('P-line') product rather than a Prescription Only Medicine ('POM ') within the EU. We believe this will differentiate MED2001 from all other ethical treatments for erectile dysfunction ('ED') and potentially have significant commercial advantages for us. Currently, as few as one in five men with symptoms of ED will seek treatment from their General Practitioner. The remaining four out of five sufferers represent a market opportunity. We believe that MED2001, as potentially the first ethical 'over the counter' ('OTC') treatment within the EU, will help to address the embarrassment problem faced by many ED sufferers when seeking treatment. It would also have the added advantage of removing the issues facing many governments over the state funding of what is considered by some to be a ' lifestyle' medication. It is estimated that five to ten percent of all ED sufferers take treatment for angina, which means they are not allowed to use any of the existing PDE5 inhibitors, such as ViagraTM or CialisTM. This represents a significant subset of patients with an unmet clinical need. Futura do not underestimate the clinical and medical challenges that will need to be overcome in developing a safe and efficacious treatment for this patient group. Nevertheless, a cardiac safety study was started in December 2003 at St John's Hospital in Brussels to assess safety of MED2001 in patients suffering from chronic angina. The trial is ongoing with initial results expected in May 2004. Our patent applications for MED2001 continue to be granted with some 22 territories already having proceeded to grant. Moreover an additional patent, covering MED2001, was submitted in October 2003 as a direct result of our Phase II study which, if it proceeds to grant, will further strengthen our patent position. Significant commercial discussions and due diligence have taken place over the past six months. The directors believe that these discussions have confirmed the attractive commercial opportunities for an OTC status in certain territories. However a safety concern has been raised during technical collaborations with potential licensing partners. We intend to advise patients through product labelling that MED2001 should not be used with any of the PDE5 inhibitors. However, the OTC status would make the product more widely available, with consequent increased risk of misuse if patients chose to ignore this advice. These safety issues do not occur for MED2001 when used alone. In order to maximise the chances of an OTC regulatory status and maximise commercial licensing opportunities, we are investigating an adjustment to the formulation of MED2001. This is aimed at improving the localisation of the physiological effect whilst minimising systemic levels of Glyceryl Trinitrate (' GTN'), thereby decreasing the risk of interaction with drugs such as PDE5 inhibitors. We do not expect this to adversely impact any of our existing clinical work although we do not intend to commence our Phase III trials until this adjustment is complete. As part of finalising our regulatory and commercial strategy, we believe that this timely change will help to maximise the commercial opportunities for MED2001 and enable the successful conclusion of distribution negotiations. CSD500 - ZanifilTM Condom safety device We are aware of increasing governmental concern over the spread of sexually transmitted infections, particularly amongst young people. The Health Protection Agency announced on 25 November 2003 that an estimated 49,500 people were living with HIV in Britain in 2002, an increase of 20 per cent on the previous year. The announcement went on to highlight that more than one third of these people do not know they are infected and therefore represent a substantial risk to further spread of infection through unprotected sex. The World Health Organisation announced on the same day that the annual worldwide death toll from Aids has reached three million. This is a stark reminder of the importance of safe sex practices such as protected intercourse through use of a condom. We believe that these statistics demonstrate the market potential for CSD500, which acts to improve the safety of the condom through reduced slippage and breakage and thereby overcomes one of the criticisms of the latex condom. Early in 2003 we signed a global distribution agreement (excluding Japan) with the world's largest branded condom manufacturer and distributor, SSL International plc (makers of the DurexTM condom range) for the lifetime of the relevant patents. We are delighted to have signed a distribution agreement with such a powerful brand, which we expect to generate significant revenue for the Company once CSD500 is licensed. An enormous amount of work has taken place over the past eleven months to complete stability in order for SSL International to proceed to manufacturing scale-up and submission of the EU dossier of CSD500 on schedule in 2004. Although the formulated gel, ZanifilTM, is stable we have encountered some loss of GTN active in the finished product (i.e. a condom, condom lubricant, Zanifil incorporated within the condom teat and packaging). Significant progress has already been achieved in understanding and correcting the reasons for this loss in activity. Further development work and stability studies are continuing on schedule for a 2004 submission. Our regulatory strategy for CSD500 remains the same, with the priority being for an EU dossier submission and with other non-EU territories, including the USA, to follow later. During February 2004 SSL International exercised the option under the agreement signed between us in early 2003 to extend the territorial scope of the agreement to include Japan. FLD 500 Female lubrication device The first stage in the clinical development of the product will be to demonstrate physiological effects in healthy females with an active dose that is safe and well tolerated. This is described as a phase I proof of concept study. As mentioned in our 2003 Interim Report, a protocol for the proof of concept study at the Porterbrook Clinic had been submitted to the South Sheffield ethics committee. We are pleased to say that approval was subsequently granted and the first subject was enrolled into the study during December. Current timelines expect completion of this study by June 2004. In the meantime formulation work continues in parallel with the Porterbrook study in order to proceed with a pivotal home-use clinical trial later in 2004. The agreement with SSL International on our own CSD500 product also contains an option for them to extend the global distribution agreement to include FLD500. Financing Activities We have raised over £2.5 million gross during 2003 through share issues and a Government Grant. In early December we were awarded a Research Project Grant under the new Grant for Research and Development Scheme of the Department of Trade & Industry. The grant will provide up to £75,000 for the initial stages of research and development of the FLD500 product. Futura's grant submission was assessed according to level of innovation, technical risk, the strength of the management team and the overall business proposition. We were pleased to receive this independent endorsement of our technology and will continue to seek alternative sources of funding to offset development costs. Our overall loss after tax for the period ended 31 December 2003 was £1.4 million. The loss was in line with our expectations and our costs continue to be in line with our internal budgets. Cash at the end of December 2003 was in excess of £2.4 million. Board Changes Prior to our Introduction to the Alternative Investment Market ('AIM') in July, both Richard Drury and Amanda Staveley, conscious of the increasing workload at Futura once listed resigned from the Board due to their other business commitments and. In their place we welcomed both Jonathan Freeman, a former director of Beeson Gregory with over 10 years experience in corporate finance, and Andrew Slater, a former main board director of SSL International plc with over 20 years of international healthcare marketing experience. Both in preparation for Admission to AIM and since, we have maintained a continued emphasis on good corporate governance. Considerable attention and effort has been made to ensure that we achieve appropriate practice, mindful of our size and complexity, to safeguard the interests of our Shareholders as a newly quoted company. Recent Transactions Futura's principal assets are our intellectual property rights and we will take all appropriate steps to protect these and prevent, resolve or prosecute any possible infringements thereon. In November 2003 we became aware of a possible infringement by CST Medical Limited ('CST'), the manufacturers and distributors of VielleTM (a medical stimulator device, used for the treatment of female sexual dysfunction). Following discussions between the parties an agreement was entered into on 13 January 2004. In settlement of this matter, CST will transfer certain intellectual property to Futura. Futura will also receive 10 per cent of the issued share capital of CST as at 13 January 2004 (prior to any subsequent dilution due to fund raising by CST) and a royalty in respect of sales of the VielleTM stimulator up to 31 December 2008. Future Opportunities As we emphasised in our 2003 Interim Report, the mandate from our Shareholders has always been to seek to develop and licence MED2001 and CSD500. One of the reasons to float Futura on AIM was to increase the public profile of Futura in order to identify potential product distributors and also new development opportunities. As both CSD500 and MED2001 progress to a more advanced stage of their development we emphasise our interest in identifying and developing other pharmaceutical drugs and devices. They should be related to sexual health and well-being and should be able to commercially justify their development costs. Once more, we would like to extend our thanks for all their hard work not only by the staff of Futura but also by our small army of expert consultants and advisers, for whose efforts we are extremely grateful. Dr William D Potter James H Barder Chairman Chief Executive 23 February 2004 23 February 2004 Consolidated Profit and Loss Account For the 11 months ended 31 December 2003 Notes 11 months ended Year ended 31 December 31 January 2003 2003 £ £ Research and development costs (626,746) (810,754) AiM admission costs (351,299) - Other administrative costs (530,238) (485,322) Administrative expenses (1,508,283) (1,296,076) Operating loss 2 (1,508,283) (1,296,076) Other interest receivable and similar income 5 47,733 59,534 Interest payable and similar charges 6 (584) (714) Loss on ordinary activities before taxation (1,461,134) (1,237,256) Tax on loss on ordinary activities 7 100,771 152,175 Loss on ordinary activities after taxation and retained loss for the 20 (1,360,363) (1,085,081) period Basic and diluted loss per share 8 (3.2p) (2.7p) All amounts relate to continuing activities. There were no recognised gains and losses in the period, or in the prior periods, other than those passing through the profit and loss account above and therefore no separate statement of total recognised gains and losses has been presented. The notes on pages 13 to 22 form part of these financial statements Balance Sheets At 31 December 2003 Group Company Notes 31 December 31 January 31 December 31 January 2003 2003 2003 2003 £ £ £ £ Fixed Assets Tangible assets 9 21,901 32,228 - - Investments 10 - - 60,724 60,724 21,901 32,228 60,724 60,724 Current Assets Stock 11 17,279 - - - Debtors - due within one year 12 148,192 223,151 10,760 21,062 Debtors - due after more than one year 12 - - 3,277,983 2,186,409 165,471 223,151 3,288,743 2,207,471 Cash at bank and in hand 2,401,708 1,511,319 2,352,712 1,510,514 2,567,179 1,734,470 5,641,455 3,717,985 Creditors: amounts falling due within one 13 (180,044) (234,896) (16,150) (4,586) year Net current assets 2,387,135 1,499,574 5,625,305 3,713,399 Total assets less current liabilities 2,409,036 1,531,802 5,686,029 3,774,123 Provision for liabilities and charges 15 - (12,416) - (12,416) Net assets 2,409,036 1,519,386 5,686,029 3,761,707 Capital and reserves Called up share capital 16 90,517 83,194 90,517 83,194 Share premium account 21 5,864,117 3,621,427 5,864,117 3,621,427 Other reserves 19 1,152,165 1,152,165 - - Profit and loss account 20 (4,697,763) (3,337,400) (268,605) 57,086 Equity shareholders' funds 22 2,409,036 1,519,386 5,686,029 3,761,707 The financial statements on pages 9 to 22 were approved by the Board on 20 February 2004 and were signed on its behalf by J H Barder, Director The notes on pages 13 to 22 form part of these financial statements Consolidated Cash Flow Statement For the 11 months ended 31 December 2003 11 month ended Year ended Notes 31 December 31 December 31 January 31 January 2003 2003 2003 2003 £ £ £ £ Net cash outflow from operating activities 1 (1,533,281) (1,265,974) Returns on investments and servicing of finance Interest received 48,157 50,888 Interest paid (584) (714) Net cash inflow from returns on Investments and 47,573 50,174 servicing of finance Corporation Tax Research and development tax credit received 128,297 153,876 128,297 153,876 Capital expenditure Payments to acquire tangible fixed assets (2,213) (2,776) Net cash outflow from capital expenditure (2,213) (2,776) Net cash outflow before use of liquid resources and (1,359,624) (1,064,700) financing Management of liquid resources (841,025) 483,411 (Increase)/decrease in short term deposits Financing 2,500,000 617,500 Issue of ordinary shares Expenses paid in connection with share issues (249,987) (84,222) Net cash inflow from financing 2,250,013 533,278 Increase/(Decrease) in net cash 2 49,364 (48,011) The notes on page 12 form part of this cash flow statement. Notes to the Consolidated Cash Flow Statement For the 11 months ended 31 December 2003 1 Reconciliation of operating loss to net cash outflow from operating activities 11 months ended Year ended 31 December 03 31 January 03 £ £ Operating loss (1,508,283) (1,296,076) Depreciation 12,540 13,575 Loss on sale of fixed assets - 259 Increase in stocks (17,279) - Decrease/(Increase) in debtors 34,593 (28,822) (Decrease)/Increase in creditors (54,852) 45,090 Net cash outflow from operating (1,533,281) (1,265,974) activities 2 Analysis of net cash At 1 February 2003 Cash flow At 31 December 2003 Cash at bank and in 5,424 49,364 54,788 hand Other liquid resources 1,505,895 841,025 2,346,920 1,511,319 890,389 2,401,708 3 Reconciliation of net cash flow to movement in net funds 11 months ended Year ended 31 December 2003 31 January 2003 £ £ Increase/(decrease) in cash in the 49,364 (48,011) period Cash inflow/(outflow) from changes in 841,025 (483,411) liquid resources Movement in net funds in the period 890,389 (531,422) Net funds at start of period 1,511,319 2,042,741 Net funds at end of period 2,401,708 1,511,319 Notes to the Financial Statements For the 11 months ended 31 December 2003 1 Accounting policies 1.1 Basis of preparation The financial statements have been prepared under the historical cost accounting rules and in accordance with applicable UK accounting Standards. The following principle accounting policies have been applied. In preparing these financial statements the Company has for the first time held stock and received government grants and accounting policies are set out below in relation to these items. 1.2 Basis of consolidation The consolidated financial statements include the results of the Company and its subsidiary, Futura Medical Developments Limited, for the 11 month period ended 31 December 2003. The financial statements of all group companies are coterminous. Under the provisions of Financial Reporting Standard 6, Acquisitions and Mergers, these consolidated accounts are prepared using merger accounting. The consolidated profit and loss account includes the results of the subsidiary for the period and the subsidiary's reserves have been credited to Group reserves. All intra-group sales and profit are eliminated on consolidation. As permitted by Section 230 of the Companies Act 1985, the holding Company's profit and loss account has not been included in these financial statements. The Company made a loss after tax of £325,691 for the 11 month period (year ended 31 January 2003: profit after tax of £49,856). 1.3 Financial instruments In relation to the disclosures made in note 14: • the group does not hold or issue derivative financial instruments for trading purposes; • forward exchange contracts and hedging contracts are not used to fix the exchange rate of committed or anticipated foreign currency transactions. 1.4 Research and development Research and development expenditure is charged to the profit and loss account in the period in which it is incurred. 1.5 Tangible fixed assets and depreciation Tangible fixed assets are stated at cost less depreciation. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset over its expected useful life, as follows: Plant and machinery 25% Straight line Fixtures, fittings & equipment 25% Straight line 1.6 Deferred taxation Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the balance sheet date, except that the recognition of deferred tax assets is limited to the extent that the Company anticipates making sufficient taxable profits in the future to absorb the reversal of the underlying timing differences. Deferred tax balances are not discounted. 1.7 Foreign currency translation Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. All differences are taken to profit and loss account. 1.8 Pension costs The Group operates a defined contribution pension scheme for all members of staff who wish to participate. Company contributions to personal pension schemes are charged to the profit and loss account in the year in which they become payable. 1.9 Leased assets Operating lease rentals are charged to the profit and loss account on a straight line basis over the term of the lease. Notes to the Financial Statements For the 11 months ended 31 December 2003 1 Accounting policies (continued) 1.10 Share based employee remuneration When shares and share options are granted to employees a charge is made to the group profit and loss account and a reserve created in capital and reserves to record the fair value of the awards in accordance with UITF Abstract 17 ' Employee Share Schemes'. No charge has been made to date as the exercise price of all share options granted has been equal to the company's share price at the date of award. Prior to becoming quoted on AiM, the company's share price was considered to be the price of the placing preceding the particular grant of options. 1.11 National insurance on share options Where possible, all employee option holders enter into an Inland Revenue 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. 1.12 Stocks Stocks are stated at the lower of cost and net realisable value using the FIFO method. Cost includes all direct expenditure in bringing the stock to its current location and condition. 1.13 Government Grants Government grants relating to research and development expenditure are credited to the profit and loss account as the related expenditure is incurred. 1.14 Liquid resources For the purpose of the cash flow statement liquid resources are defined as short term money market deposits and notice accounts. 2 Operating loss 11 months ended Year ended 31 December 2003 31 January 2003 £ £ Operating loss is stated after charging: Depreciation of tangible assets 12,540 13,575 Loss on sale of fixed assets - 259 Hire of other assets - operating 64,462 70,722 leases Auditors' remuneration - Audit services 19,000 8,536 - Tax services 4,100 3,619 The audit services relating to the Company for 11 months ended 31 December 2003 amount to £14,000 (31 January 2003: £3,000) Notes to the Financial Statements For the 11 months ended 31 December 2003 3 Wages and salaries The average monthly number of persons employed by the group during the year which include Directors, and their aggregate emoluments are shown below: 11 months ended Year ended 31 December 2003 31 January 2003 No. No. Management and administration 8 8 The costs incurred in respect of those employed were: £ £ Wages and salaries 399,772 380,437 Social security costs 47,475 40,540 Other pension costs 24,773 22,560 4 Directors' emoluments 11 months ended 31 Year ended 31 December 2003 January 2003 £ £ Directors Aggregate emoluments 338,065 312,572 Compensation for loss of office - 30,000 Company pension contributions 18,723 19,000 Emoluments disclosed above include the following amounts paid to the highest Director: 11 months ended 31 Year ended 31 December 2003 January 2003 £ £ Directors Aggregate emoluments 116,153 117,656 Company pension contributions to money 10,347 10,500 purchase scheme During the 11 month period, one Director (year ended 31 January 2003: one Director) participated in a private money purchase pension scheme and one Director (year ended 31 December 2003: one Director) accrued a sum to be allocated to a private money purchase scheme once it has been established. 5 Other interest receivable and similar income 11 months ended 31 Year ended 31 December 2003 January 2003 £ £ Bank interest receivable 47,733 59,534 Notes to the Financial Statements For the 11 months ended 31 December 2003 6 Interest payable and similar charges 11 months ended 31 Year ended 31 December 2003 January 2003 £ £ Bank interest and similar charges 584 714 7 Taxation 11 months ended 31 Year ended 31 December 2003 January 2003 £ £ Current tax UK corporation tax on loss for the period (100,771) (128,297) Underprovision in prior year - (23,878) _______ _______ Taxation on loss on ordinary activities (100,771) (152,175 _______ _______ The tax assessed for the period is different from the standard rate of corporation tax in the UK. The differences are explained below: 7 Taxation (continued) 11 months ended Year ended 31 31 January 2003 December 2003 £ £ Loss on ordinary activities before tax (1,461,134) (1,237,256) ________ ________ Loss on ordinary activities at the standard (277,615) (247,451) rate of corporation tax in the UK of 19% (31 January 2003 - 20%) Expenses not deductible for tax purposes 68,432 206 Difference between depreciation and capital 1,547 1,580 allowances Unutilised tax losses 147,804 138,751 Additional relief attaching to R&D tax claim (40,939) (21,383) Underprovision in current year - (23,878) _______ _______ Current tax charge for the period (100,771) (152,175) _______ _______ The Group has tax losses of approximately £3,300,000 (31 January 2003: £2,500,000) available for offset against future taxable profits. Deferred tax assets amounting to £630,162 (31 January 2003: £480,811) have not been recognised on the basis that their future economic benefit is not certain. The deferred tax asset comprises: 11 months ended Year ended 31 31 December 2003 January 2003 £ £ Accelerated capital allowances (1,658) (3,204) Other short term timing differences 2,835 2,834 Unutilised tax losses 628,985 481,181 ________ ________ 630,162 480,811 ________ ________ Notes to the Financial Statements For the 11 months ended 31 December 2003 8 Loss per ordinary share Basic loss per share has been calculated in accordance with FRS14. Basic loss per share has been calculated by dividing the loss on ordinary activities after taxation by the weighted average number of ordinary shares in issue during the period. The weighted average number of equity shares in issue was 42,907,701 (year ended 31 January 2003: 40,730,808 shares) and the loss for the period was £1,360,363 (year ended 31 January 2003: £1,085,081). The effect of all potential ordinary shares is antidilutive. 9 Tangible fixed assets All fixed assets of the group are held in Futura Medical Developments Limited. Fixtures, Total fittings, Plant and machinery and equipment Cost £ £ £ At 1 February 2003 23,103 32,360 55,463 Additions 1,660 553 2,213 At 31 December 2003 24,763 32,913 57,676 Depreciation At 1 February 2003 9,787 13,448 23,235 Charge for period 5,112 7,428 12,540 At 31 December 2003 14,899 20,876 35,775 Net book value At 31 December 2003 9,864 12,037 21,901 At 31 January 2003 13,316 18,912 32,228 10 Fixed asset investments Shares in subsidiary undertakings Company £ Cost and net book value at 1 February 2003 60,724 Additions Cost and net book value at 31 December - 2003 _______ 60,724 _____________ Interests in group undertakings Subsidiary undertaking Description of Proportion of nominal value of issued and shares held voting rights Futura Medical Developments Limited Ordinary £1 100% shares The above company is incorporated in England and Wales, and is included in the consolidated accounts. Futura Medical Developments Limited undertakes research, development, production and sale of pharmaceutical products. Notes to the Financial Statements For the 11 months ended 31 December 2003 11 Stock Group Company 31 December 2003 31 January 2003 31 December 2003 31 January 2003 £ £ £ £ Raw materials and 17,279 - - - consumables 12 Debtors Group Company 31 December 2003 31 January 2003 31 December 2003 31 January 2003 £ £ £ £ Amounts receivable within one year: Corporation tax 100,771 128,297 - - repayable Other debtors 15,295 55,114 12,416 Prepayments and 32,126 39,740 10,760 8,646 accrued income _______ _______ _______ _______ 148,192 223,151 10,760 21,062 Amounts receivable after more than one year: Amounts owed by - - 3,277,983 2,186,409 subsidiary 13 Creditors: amounts falling due within one year Group Company 31 December 2003 31 January 2003 31 December 2003 31 January 2003 £ £ £ £ Trade creditors 67,525 145,638 - - Taxation and social 19,349 13,311 - - security Accruals and deferred 87,333 75,947 16,150 4,586 income Government Grant 5,837 - - - ____________ ____________ ____________ ____________ 180,044 234,896 16,150 4,586 Notes to the Financial Statements For the 11 months ended 31 December 2003 14 Financial Instruments The group holds or issues financial instruments to finance its operations and to manage the interest rate risks arising from its operations and from its sources of finance. Trade creditors are the only other financial instrument that arises directly from the group's operations. The group has no trade debtors as at 31 December 2003. In the 11 month period the group's financial instruments comprised financial assets, held in sterling and in US dollars. Details of which are as follows: Financial assets The group's financial assets at 31 December 2003 were cash at bank and in hand, made up as follows: 31 December 2003 £ Currency Sterling 2,387,967 US Dollar 13,741 _______ The group's financial assets comprise money held in bank current accounts, which are instant access, and sterling cash deposits on the money market at monthly rates. Interest rates and currency of financial assets Fixed rate financial assets of £2,346,920 were held in sterling cash deposits at the year end. The weighted average period sterling cash deposits at the period end are held is for 45 days, with a weighted average interest rate of 3.564%. Deposits are held with Leopold Joseph and Royal Bank of Scotland. In addition, cash of £54,788, including £13,741 held in a US dollar account, was held on current account at Leopold Joseph, earning nominal amounts of interest. This money is used to provide the necessary finance for the group's operations. Currency exposures The group enters into various contracts with suppliers, which are paid in US dollars. To mitigate the risk of any exposure to foreign currency fluctuations, once a price for a contract has been decided, funds are transferred to the US Dollar bank account immediately, and so are translated at the exchange rate at the date of agreement. The group will therefore not be exposed to the risks of changing exchange rates, but they will also not benefit from any exchange rate gains. There were no foreign exchange creditors at 31 December 2003. Financial liabilities The group does not have any financial liabilities at 31 December 2003. 15 Provision for liabilities and charges Group Company 31 December 2003 31 December 2003 £ £ National Insurance on share options At 1 February 2003 12,416 12,416 Reversal of provision (12,416) (12,416) _______ _______ At 31 December 2003 - - _______ _______ Notes to the Financial Statements For the 11 months ended 31 December 2003 16 Share capital Authorised 31 December 2003 31 January 2003 31 December 2003 31 January 2003 No No £ £ Ordinary shares of 500,000,000 500,000,000 1,000,000 1,000,000 0.2 pence each __________ __________ __________ __________ Allotted, called up and fully paid 31 December 2003 31 January 2003 31 December 2003 31 January 2003 No No £ £ Ordinary shares of 45,258,426 41,597,000 90,517 83,194 0.2 pence each __________ __________ __________ __________ On 22 July 2003, the company issued 2,428,571 ordinary shares of 0.2 pence each for the gross consideration of £1,700,000 and, on 27 November 2003, the company issued 1,232,855 ordinary shares of 0.2 pence for the gross consideration of £800,000. 17 Share options At 31 December 2003, the number of ordinary shares subject to options granted under the Share Option Schemes were: No of share options granted Exercise price per share Exercise period 05 March 2002 1,750,000 £0.33 1 Aug 2004 - 31 Jan 2006 21 March 2002 1,640,000 £0.53 1 Feb 2004 - 31 Jan 2006 29 July 2002 130,000 £0.50 1 Feb 2004 - 31 Jan 2006 06 August 2002 250,000 £0.50 1 Feb 2004 - 31 Jan 2006 08 July 2003 360,000 £0.70 1 Aug 2005 - 31 Jul 2007 Subsequent to 31 December 2003 the option for 250,000 ordinary shares granted on 6 August 2002 has been waived by C Kemp, a former director of the company. 18 Warrants over shares Under the Warrant Instruments dated 14 July 2003, and 28 November 2003 there are warrants outstanding over the ordinary shares of 0.2 pence each of the Company as follows: Date of Issue Number of shares Exercise price per Expiry Date share 22 July 2003 250,000 63 pence 22 July 2004 28 November 2003 250,000 64.89 pence 29 November 2004 Furthermore, the company has entered into an arrangement with a counterparty giving the company the option to require that party to subscribe to £800,000 of shares ('subscription shares') during the months of February and July 2004 with the price per share equal to 90% of the average middle market price of the company's share price for the 5 days prior to the company exercising its option. When the company exercises this call option, the counterparty will receive warrants to subscribe to a further 250,000 shares during the subsequent 12 months at the same price it was required to pay for the subscription shares. On 2 February 2004 the company exercised one of these call options as set out in Note 24. 19 Other Reserves Other reserves represents the reserve arising on the acquisition of Futura Medical Developments Limited on 6 June 2001 via a share for share exchange accounted for as a Group reconstruction using merger accounting. Notes to the Financial Statements For the 11 months ended 31 December 2003 20 Profit and loss account Group Company £ £ Profit and loss account brought (3,337,400) 57,086 forward Loss for the period (1,360,363) (325,691) _____________ Profit and loss account carried (4,697,763) (268,605) forward _____________ 21 Share premium Group & Company £ At 1 February 2003 3,621,427 Premium on shares issued during the period 2,492,677 Less: share issue costs (249,987) _____________ At 31 December 2003 5,864,117 _____________ 22 Reconciliation of movements in shareholders' funds Group Group Company Company 31 December 31 January 31 December 31 January 2003 2003 2003 2003 (Loss)/profit for the (1,360,363) (1,085,081) (325,691) 49,856 financial period Net proceeds from issue of 2,250,013 605,685 2,250,013 605,685 shares ________ ________ ________ ________ Net addition / (reduction) to shareholders' funds 889,650 (479,396) 1,924,322 655,541 Opening shareholders funds 1,519,386 1,998,782 3,761,707 3,106,166 Closing shareholders' funds 2,409,036 1,519,386 5,686,029 3,761,707 ________ ________ ________ ________ 23 Related party transactions During the 11 month period the Company lent Futura Medical Developments Limited, its wholly owned subsidiary, a further £1,091,574 (year ended 31 January 2003: £1,055,790). At the balance sheet date the amount owed by Futura Medical Developments Limited amounted to £3,277,983 (31 January 2003: £2,186,409). Dr W D Potter, a Director of the Company, provides consulting services to Futura Medical Developments Limited through Stapleford Scientific Services Limited. Of the total fees and expenses invoiced by Stapleford Scientific Services Limited of £42,019 (31 January 2003: £38,197), the amount outstanding at 31 December 2003 to Stapleford Scientific Services Limited was £4,057 (31 January 2003: £4,777). J D Freeman, a Director of the Company, was a partner in Gambit Corporate Finance and they initially billed the Group for his Directors fees and expenses totalling £5,030. Prior to his becoming a Director of the Company, Gambit Corporate Finance entered into a consulting contract with the company and received fees and expenses relating to the Company being admitted to trading on AiM totalling £26,159. There was no amount outstanding at 31 December 2003 to Gambit Corporate Finance (31 January 2003: £nil). R D Drury, a former Director of the Company, who resigned during the period on 8 July 2003, provides consulting services to Futura Medical Developments Limited through Swan Lane Limited. Of the total fees and expenses invoiced of £12,840 (31 January 2003: £nil) up to the point of his resignation, there was no amount outstanding at 31 December 2003 (31 January 2003: £Nil) Notes to the Financial Statements For the 11 months ended 31 December 2003 24 Post balance sheet events On 13 January 2004, the Company entered into an agreement with CST Medical Limited ('CST'), a private company that specialises in developing products to address female sexual dysfunction. The agreement was in settlement of an intellectual property dispute. Under the agreement, CST will transfer certain intellectual property to the subsidiary Futura Medical Developments Limited. In addition, Futura Medical Developments Limited will receive 10 per cent of the issued share capital of CST as at 13 January 2004 (prior to any subsequent dilution due to fund raising by CST) and will receive a royalty in respect of sales of the Vielle stimulator between 1 January 2004 and 31 December 2008. On 2 February 2004, The directors approved the exercise of the Second Call Option and the allotment of 1,125,175 new Ordinary Shares at a price of 71.10 pence per share, the issue of warrants to subscribe for a total of 250,000 Ordinary Shares at an exercise price of 71.10 pence per share and payment of the related commission of £20,000 pursuant to the Share Subscription and Call Option Agreement between the Company and Long Fleet Systems Inc dated 19th June 2003. The exercise terms have been varied slightly enabling settlement in several tranches during February 2004. Applications had been received through Long Fleet Systems Inc to subscribe at a total consideration of £800,000 for 1,125,175 Ordinary Shares in the Company. A further 87,658 shares remain to be issued in accordance with the second call option. Upon completion of all tranches, warrants will be issued over 250,000 ordinary shares exercisable at any time over the next 12 months at an exercise price of 71.10 pence per ordinary share in accordance with the subscription agreement with Long Fleet Systems Inc. This information is provided by RNS The company news service from the London Stock Exchange

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Futura Medical (FUM)
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