Preliminary Results
Futura Medical PLC
13 March 2008
For immediate release 13 March 2008
Futura Medical plc
('Futura' or 'the Group' or 'the Company')
Final Results for the year ended 31 December 2007
Futura Medical plc (AIM: FUM), the pharmaceutical group that develops innovative
products for consumer healthcare, is pleased to announce its final results for
the year ended 31 December 2007.
Operational Highlights
•Substantial progress across the Company as it moves closer to regulatory
approval of its first condom product, CSD500
•CSD500 - Statistically significant clinical trial results reinforcing the
product's commercial potential
•MED2002 - Global development, marketing and licensing agreement signed
with SSL International plc for the Company's topically applied gel for
erectile dysfunction
•TPR100 - Exclusivity agreement signed with GlaxoSmithKline Consumer
Healthcare for the evaluation of Futura's topical formulations for pain
relief and the negotiation of global distribution rights
•PET500 - Exciting new application of our DermaSys(R) technology for the
treatment of premature ejaculation. Phase I study to commence shortly
Financial Highlights
•South East England Development Agency ('SEEDA') grant awarded of up to
£200,000
•Funding raised of £1.00 million with further £1.00 million equity funding
facility arranged
•Net loss of £2.25 million (2006: net loss of £1.78 million)
•Cash of £2.64 million at 31 December 2007 (2006: £3.78 million including
medium term deposits)
James Barder, Futura's Chief Executive, said: 'We expect 2008 to be another
exciting year for Futura with the initial focus being on gaining regulatory
approval for the Durex(R) branded condom CSD500 and the subsequent launch
programme by SSL. In addition, we anticipate making significant progress across
our product portfolio including completing the pivotal study for MED2002, the
extended TPR100 optimisation programme, and the first trials on PET500.'
For any further information please contact:
Futura Medical plc
James Barder, Chief Executive Tel: +44 (0) 1483 685 670
mail to: www.futuramedical.co.uk
james.barder@futuramedical.co.uk
Canaccord Adams
Ryan Gaffney / Adria Da Breo Tel: +44 (0) 20 7050 6500
For any media enquiries please contact:
Buchanan Communications
Mark Court / Rebecca Skye Dietrich Tel: +44 (0) 20 7466 5000
Chairman's Statement
Futura is pleased to announce its full year results for the year ended 31
December 2007. The year saw another period of substantial progress for the
Company with advances across the portfolio.
Our product closest to launch is our lead condom product CSD500 which is
partnered with SSL International plc ('SSL'). We remain confident of commercial
success following our CSD500 user study, which reinforced the market potential
of this product. Of those who expressed a preference compared to using a normal
condom, firmer erections were reported by both men and women, increased penile
size by men and a longer lasting sexual experience by women. This is supported
by our intellectual property position with the continuing success of our patent
applications. We have also progressed with our second condom product, FLD500,
which has been further refined to improve our intellectual property and reduce
development risk.
We are delighted to have strengthened our commercial relationship with SSL,
through the signing in September 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 our products and as owner of the innovative, global and
market leading Durex(R) product range, is an excellent partner for MED2002. We
expect MED2002 to become the world's first non-prescription treatment for
erectile dysfunction.
In our newer therapeutic area of pain relief, we have built a team of experts
and advanced our pre-clinical and clinical studies for TPR100 and entered into
exclusive discussions with GlaxoSmithKline Consumer Healthcare ('GSK'). We are
undertaking a study to evaluate the drug delivery from topical formulations
developed by us. We were also awarded a grant to support the conduct of a
specific project in our development pipeline. In addition, we progressed a
further application of our DermaSys(R) technology with our premature ejaculation
product, PET500, which we anticipate will commence clinical studies during 2008.
On the financial side we completed a fund-raising in November with a further
facility available to enable us to maintain the momentum of product development.
Nevertheless we continue to be fiscally prudent with a small core team of only
14 and a flexible network of consultants and advisers. I would personally like
to take this opportunity to thank this highly effective group of dedicated and
hard working professionals who continue to drive the Company forward.
Notwithstanding progress elsewhere, our key focus remains the attainment of
regulatory approval for CSD500 which will herald the most exciting phase so far
in the Company's evolution by placing the Company on track to becoming a revenue
generating business with a recurring royalty income stream.
Momentum continues into 2008 and we will keep our shareholders and other
stakeholders informed of our progress as we look to the future with ever
increasing confidence.
Dr William D Potter
Executive Chairman
12 March 2008
Chief Executive's Statement
The Directors present their report and the audited financial statements of
Futura Medical plc for the year ended 31 December 2007.
Overview
It has been another year of significant commercial and operational progress
across our entire product portfolio. We have continued to enhance our expertise
in sexual healthcare and to develop our position in pain relief management. We
are poised to become revenue generating as a result of the imminently expected
completion of the regulatory approval process and subsequent launch of our first
commercial product CSD500.
We have steadfastly worked towards the key milestone of achieving regulatory
approval for CSD500 and we are pleased to report that we have coupled this with
our continued progress across the product range.
Product updates
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
year was directed at the successful completion of a clinical study comprising
108 couples, funded equally by SSL and Futura, the positive results from which
were announced on 9 August 2007. Of those who expressed a preference a
significant proportion of both men and women reported improvements in the
firmness of the man's erection during intercourse when using CSD500, compared to
using a normal condom, a result that was highly statistically significant.
Furthermore, of those who expressed a preference, a significant proportion of
both men and women also felt that CSD500 increased the penis size and a
significant proportion of women reported a longer lasting sexual experience with
CSD500. The quality of the study results has reinforced our confidence that
CSD500 has significant commercial potential. The results have been submitted to
the EU regulatory authorities and we patiently await the outcome of their review
process.
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 more than 30 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 for the lifetime of the patents.
SSL is currently carrying out the detailed preparatory work for CSD500's EU
marketing launch, 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 shown 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 GSK but in May 2007 they
returned the rights to Futura as current priorities within GSK meant they were
unlikely to approve a marketing agreement within the near future. 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 £3.8 million, of which SSL
will contribute 65% and Futura 35%.
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% of men aged 45 or over(1). This would be an
important step forward as it is estimated that only 15% of men with erectile
dysfunction seek treatment(2) due to the perceived embarrassment of having to
consult a doctor to be prescribed one of the current treatments.
A double blind placebo controlled pivotal study for over 200 men with erectile
dysfunction is shortly to commence in Germany and Greece. The study has been
powered to give statistically significant efficacy data as well as safety data
and the preliminary results are expected by the end of 2008.
(1) Massachusetts Male Ageing Study (MMAS), J Urol 1994 Jan; ISI (1): pp 54-61
(2) Prog Urol February 2003, Vol. 13 part 1, pp 85-91
FLD500: Female lubrication device
FLD500 is our condom product designed to improve natural female lubrication
during sexual intercourse. 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 optimised shelf
life for the product and refining the manufacturing process. We have developed a
new prototype of the product which will simplify the manufacturing process and
so far in pilot stability studies has shown a significantly improved shelf life.
In common with CSD500, FLD500 is licensed to SSL. We are determining the
marketing and regulatory strategy for the product with SSL prior to initializing
formal stability studies.
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.
Once CSD500 and FLD500 gain regulatory approval, there is potential for a
combination product embracing both CSD500 and FLD500. Such a product could
improve natural lubrication for women and give men a firmer erection during
protected sexual intercourse.
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. A particular application of 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, whilst
we undertook a study to evaluate the drug delivery from topical TPR100
formulations developed by Futura. Pending the outcome of Futura's study and the
subsequent completion of commercial negotiations, GSK will have the opportunity
to acquire global distribution rights.
On 23 August 2007 we announced the appointment of Professor Robert Moore DSc. to
join our team of expert consultants in the therapeutic area of pain relief.
Professor Moore's extensive knowledge of pain relief, from both academic and
commercial perspectives, is already proving to be of great value in the
development of TPR100.
PET500: Premature ejaculation treatment
We continue to make progress on our early stage portfolio, particularly with our
potential treatment for premature ejaculation, PET500, which uses our DermaSys
(R) delivery system and is now ready to enter into clinical studies. We expect
to start a Phase I study shortly to evaluate the product's characteristics.
Early stage product evaluation
We continue to evaluate the commercial and development potential of other
product concepts using our DermaSys(R) technology and our medical device
expertise. For the time being, we do not intend to report on FSD500 or any other
individual product which is at this evaluation stage, as our focus is on the
more advanced stage products including the recent addition of PET500 to the
clinical programme. As our later stage products complete the regulatory process
and move into their commercial phase we anticipate being able to introduce
further exciting products into the development portfolio at the appropriate
time.
Outlook
We expect 2008 to be another exciting year for Futura with the initial focus
being on gaining regulatory approval for the Durex(R) branded condom CSD500 and
the subsequent launch programme by SSL. In addition, we anticipate making
significant progress across our product portfolio including completing the
pivotal study for MED2002, the extended TPR100 optimisation programme, and the
first trials on PET500.
We were delighted by the support from both new and existing shareholders for the
£1.00 million placing which we completed on 15 November 2007 and this included a
further equity funding facility of up to £1.00 million which we can draw on
should we so choose. These funds enable us to maintain the momentum of product
development at Futura.
We will continue to keep our shareholders and other stakeholders informed of our
strategy and progress and look forward to being able to discuss the launch of
CSD500 in our next Annual Report.
James Barder
Chief Executive
12 March 2008
Financial Review
The Group finished the year with a comfortable cash position, costs remaining
firmly under control, an expanded development portfolio and the prospect of
recurring revenues moving closer.
International Financial Reporting Standards
The Financial Review should be read in conjunction with the financial statements
and the notes to the financial statements.
This is the first annual report for the Group presented under International
Financial Reporting Standards as adopted by the European Union ('IFRS'). The
comparative figures have also been restated to reflect this. There has been no
significant impact on the Group in either the current year results or the
restated historic results. An explanation, including the impact of transition to
IFRS, is included in the notes to the Group financial statements. The financial
statements of the Company continue to be prepared in accordance with United
Kingdom Generally Accepted Accounting Practice ('UK GAAP').
Revenue
Group revenue for the year ended 31 December 2007 was £15,000 (2006: £301).
Grant income for the year ended 31 December 2007 was £96,172 (2006: £nil).
In accordance with our revenue accounting policy, the £150,000 already received
from GSK in respect of the TPR100 exclusivity agreement has been included as
deferred income within current liabilities on the balance sheet and will be
recognised as revenue when the relevant conditions of the agreement are met.
Losses
The Group continues to maintain a focus on tight control of all expenditure.
The Group's loss after taxation for the year ended 31 December 2007 was £2.25
million (2006: £1.78 million). The Group's operating loss for the year ended 31
December 2007 was £2.62 million (2006: £2.11 million).
Loss per share for the year ended 31 December 2007 was 4.1 pence (2006: 3.4
pence).
No dividends were paid and none are proposed by the Directors (2006: £nil).
Financial instruments
The financial instruments held by the Group are disclosed in note 13.
Group research and development costs
The Group aims to achieve cost effective research and development and to bring
products to market through licensing partners as soon as is practicable.
Group research and development costs each year reflect the number of products
being developed, the stage of development reached for each and the impact on
their progress of external factors. Such factors during the year ended 31
December 2007 included pending decisions of regulatory bodies and finalisation
of joint development arrangements.
Research and development ('R&D') costs of £1,508,269 have increased compared to
the previous year, and to a level similar to that of 2005, largely due to the
utilisation of external laboratory facilities and phase I development costs for
TPR100.
The table below shows the trend in our historic research and development costs
and other administrative costs over the past five reporting periods:
Year ended Year ended Year ended Year ended 11 months
ended 31
31 December 31 December 31 December 31 December December
2007 2006 2005 2004 2003
IFRS £ IFRS £ UK GAAP £ UK GAAP £ UK GAAP £
Research and development 1,508,269 1,079,986 1,553,056 971,043 632,062
costs
Other administrative 1,227,320 1,029,075 805,161 754,725 885,888
costs
Total operating costs 2,735,589 2,109,061 2,358,217 1,725,768 1,517,950
R&D ratio 55% 51% 66% 56% 42%
The figures for the years 2005 and prior, prepared under UK GAAP, have not been
restated for the holiday pay accrual under IAS 19 as the figures are not
materially different.
The R&D ratio is the percentage of research and development costs relative to
total operating expenses. The Board is mindful to keep a sensible balance as
reflected in this ratio. Total research and development spend since formation of
the business in 1997 totals £7.72 million (remaining at 55% of total operating
costs as reported last year). During the year, the sole subsidiary Futura
Medical Developments Limited continued to incur this research and development
expenditure which has been accounted for as explained in accounting policy note
1.5 of the Notes to the Consolidated Financial Statements and has been written
off as incurred for all reporting periods prior to and including the year ended
31 December 2007.
The Board considers that this overall total research and development spend
relative to its pipeline of later stage products and emerging new products
distinguishes the Group's lower funding requirements and risk profile from more
typical businesses in the wider pharmaceutical industry. The Group's strategy is
to focus on medical devices and pharmaceutical drugs that offer the potential
for a significant return on the costs of development. As well as progressing its
existing research and development programme, the Group continues to seek new
opportunities for potential products to add to its portfolio.
Other administrative costs
Other administrative costs for the year ended 31 December 2007 were £1,227,320
(2006: £1,029,075). These comprise all other operating costs excluding those
relating to product development and associated intellectual property. The main
constituents and their relative proportions were:
Year ended Year ended
31 December 31 December
2007 2006
Wages and salaries 53% 52%
Legal and professional advisers 22% 23%
Office costs and staff expenses 13% 14%
Licensing negotiations 12% 11%
100% 100%
The principal reasons for the increase in other administrative costs relate to
commercial and negotiation costs in respect of the development and licensing of
MED2002 and the expansion of our small core team with the addition of two new
support staff. These were recruited in 2007 to support increased activity levels
as the Group moves towards revenue generation and seeks further product
development opportunities internally and externally. This completes the current
expansion of the central administrative functions of the Group as the platform
for the next phase of the growth strategy.
Supplier payment policy
The Group's policy concerning the payment of its trade creditors is to pay on
the basis of the agreed terms of payment established with each supplier,
providing that all terms and conditions have been complied with and are in
accordance with the Group's financial control procedures.
The average credit period (expressed as creditor days) during the year ended 31
December 2007 was 18 days (2006: 30 days) for the Group. At the year end the
Company had trade creditors totalling £2,697 (2006: £5,521) giving rise to the
average credit period for the year ended 31 December 2007 of 9 days (2006: 11
days).
Charitable and political contributions
No political donations were made during either year. Charitable donations of
£236 were made during the year (2006: £nil).
Taxation
A research and development tax credit of £208,717 (2006: £196,133) in respect of
research and development expenditure incurred has been recognised in the
financial statements. The increase compared with the prior year reflects the
increased research and development spend in the year.
Capital structure and funding
The Group remains funded primarily by equity capital. This reflects the
development status of its products.
Cash held by the Group at 31 December 2007 totalled £2.64 million. This
comprised cash and cash equivalents and medium term deposits with original
maturities of more than three months, shown below at each period end:
31 December 31 December 31 December 31 December 31 December
2007 2006 2005 2004 2003
£m £m £m £m £m
Medium term deposits - 1.04 - - -
Cash and cash 2.64 2.74 1.81 3.67 2.40
equivalents
Total cash 2.64 3.78 1.81 3.67 2.40
The Group did not have any bank borrowings at 31 December 2007 (2006: £nil).
The Group was pleased to announce, on 27 July 2007, that it had been awarded an
R&D grant of up to £200,000, from the South East England Development Agency
(SEEDA), to support the conduct of a specific project that forms part of the
overall development programme of a product that uses a particular application of
the Group's DermaSys(R) technology. This award followed a thorough review by
SEEDA. Of the grant income recognised in the income statement for the year of
£96,172, the Group had received £80,662 by the year end.
On 15 November 2007, the Group raised £1.00 million, net of costs, following a
private placing at 48.56 pence (2006: net receipts from a private placing and
the exercise of share options was £3.69 million). The funds raised are for
working capital, including the support of the ongoing development of products
within our existing pipeline and initial development of selected new
opportunities generated by our research initiatives.
This brings the total cash raised from share issues by the Group from formation
of the business in 1997 until 31 December 2007 to £14.53 million, net of costs.
In addition, as announced on 15 November 2007, there is a further equity funding
facility in place of up to £1.00 million which, if used, would involve the issue
of new ordinary shares at a price per share set at a 10 per cent discount to the
average mid-price of the Company's shares during the five trading days prior to
the agreement to issue the tranche of shares.
Other significant sources of funding received for the Group from formation of
the business until 31 December 2007 comprised research and development tax
credits of £1.04 million, bank interest of £0.73 million and R&D grants of £0.16
million.
Anthony L Clayden
Finance Director
12 March 2008
The financial information set out below does not constitute the Company's full
statutory accounts for the year ended 31 December 2007 for the purposes of
section 240 of the Companies Act 1985, but it is derived from those accounts
that have been audited. Statutory accounts for 2006 have been delivered to the
Registrar of Companies. The independent auditors have reported on those
accounts; their report was unqualified and did not include an emphasis of matter
statement. The independent auditor's report did not contain statements under the
Companies Act 1985, s237 (2) or (3).
Consolidated Income Statement
For the year ended 31 December 2007
Year ended Year ended
31 December 31 December
2007 2006
Notes £ £
Revenue 1.3 15,000 301
Grant income 4 96,172 -
Research and development costs (1,508,269) (1,079,986)
Administrative costs (1,227,320) (1,029,075)
Operating loss 5 (2,624,417) (2,108,760)
Finance income 8 161,291 136,114
Loss before tax (2,463,126) (1,972,646)
Taxation 9 208,717 196,133
Loss for the year attributable to equity holders 19 (2,254,409) (1,776,513)
of the parent company
Basic and diluted loss per share (pence) 10 (4.1p) (3.4p)
All amounts relate to continuing activities.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2007
Share Share Other Retained Total
capital premium reserve losses equity
reserve
Notes £ £ £ £ £
At 1 January 2006 97,877 8,560,987 1,152,165 (7,832,392) 1,978,637
Loss for the year 19 - - - (1,776,513) (1,776,513)
Share-based payment - - - 43,374 43,374
Shares issued during 17 12,730 3,836,420 - - 3,849,150
the year
Cost of share issues 19 - (146,132) - - (146,132)
At 1 January 2007 110,607 12,251,275 1,152,165 (9,565,531) 3,948,516
Loss for the year 19 - - - (2,254,409) (2,254,409)
Share-based payment - - - 64,651 64,651
Shares issued during 17 4,631 1,111,869 - - 1,116,500
the year
Cost of share issues 19 - (101,768) - - (101,768)
At 31 December 2007 115,238 13,261,376 1,152,165 (11,755,289) 2,773,490
The loss for the year represents the total recognised income and expense for the
year.
Consolidated Balance Sheet
As at 31 December 2007
As at As at
31 December 31 December
2007 2006
Notes £ £
Assets
Non-current assets
Plant and equipment 11 35,415 20,109
Total non-current assets 35,415 20,109
Current assets
Inventories 12 23,344 32,648
Trade and other receivables 14 183,283 1,196,024
Income tax asset 9 208,717 195,034
Cash and cash equivalents 15 2,637,892 2,740,767
Total current assets 3,053,236 4,164,473
Liabilities
Current liabilities
Trade and other payables 16 (315,161) (236,066)
Total liabilities (315,161) (236,066)
Total net assets 2,773,490 3,948,516
Capital and reserves attributable to equity holders of the parent company
Share capital 17 115,238 110,607
Share premium reserve 19 13,261,376 12,251,275
Other reserve 19 1,152,165 1,152,165
Retained losses 19 (11,755,289) (9,565,531)
Total equity 2,773,490 3,948,516
The financial statements from which this final results announcement is derived
were approved and authorised for issue by the Board on 12 March 2008 and were
signed on its behalf by James H Barder, Director.
Consolidated Cash Flow Statement
For the year ended 31 December 2007
Year ended Year ended
31 December 31 December
Notes 2007 2006
£ £
Cash flows from operating activities
Loss before tax (2,463,126) (1,972,646)
Adjustments for:
Depreciation 11 15,194 10,630
Finance income 8 (161,291) (136,114)
Loss on sale of plant and equipment 5 - 6
Share-based payment charge 18 64,651 43,374
Cash flows from operating activities before changes in (2,544,572) (2,054,750)
working capital
Decrease/(increase) in inventories 12 9,304 (692)
Increase in trade and other receivables - excluding 14 (21,147) (76,067)
medium term deposits
Increase/(decrease) in trade and other payables 16 79,095 (2,616)
Cash used in operations (2,477,320) (2,134,125)
Income tax received 195,034 282,636
Net cash used in operating activities (2,282,286) (1,851,489)
Cash flows from investing activities
Purchase of plant and equipment 11 (30,500) (5,418)
Sale of plant and equipment - 44
Disposal/(acquisition) of medium term deposits 14 1,039,031 (1,039,031)
Interest received 156,148 124,730
Cash generated by/(absorbed in) investing activities 1,164,679 (919,675)
Cash flows from financing activities
Issue of ordinary shares 17 1,016,500 3,849,150
Expenses paid in connection with share issues 19 (1,768) (146,132)
Cash generated by financing activities 1,014,732 3,703,018
(Decrease)/increase in cash and cash equivalents 15 (102,875) 931,854
Cash and cash equivalents at beginning of year 15 2,740,767 1,808,913
Cash and cash equivalents at end of year 15 2,637,892 2,740,767
The notes below form part of the financial statements from which this final
results announcement is derived.
Notes to the Consolidated Financial Statements
For the year ended 31 December 2007
1. Accounting policies
1.1 Basis of preparation
The Group financial statements have been prepared in accordance with
International Financial Reporting Standards as adopted by the European Union
('IFRS') for the first time, having previously been prepared in accordance with
UK Generally Accepted Accounting Practice ('UK GAAP'). 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 23.
The preparation of the consolidated financial statements in accordance with IFRS
resulted in changes to the accounting policies compared with the most recent
Group financial statements prepared under UK GAAP. The accounting policies are
set out below have been applied to all periods presented in these Group
financial statements and are in accordance with IFRS, as adopted by the European
Union, and International Financial Reporting Interpretations Committee ('IFRIC')
interpretations that were applicable for the year ended 31 December 2007.
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
employee options 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 which were accounted
for using the merger method of accounting under UK GAAP.
The Group has made estimates under IFRS as at 1 January 2006, the date of
transition, which are consistent with those estimates made at the same date
under UK GAAP and there is no objective evidence that those estimates were in
error.
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 standards
and interpretations to be relevant to the Group and will have no effect on the
financial statements:
• IFRS 8 'Operating Segments' effective 1 January 2009.
• IFRIC 11 'IFRS 2 - Group and Treasury Share Transactions' effective 1
January 2008.
• IFRIC 13 'Customer Loyalty Programmes' effective 1 January 2009.
• IFRIC 14 'IAS 19 - The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction' effective 1 January 2008.
• IAS 23 'Borrowing Costs (revised)' effective 1 January 2009.
1.2 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 ('FMDL') as if they formed a
single entity ('the Group'). Intra group transactions and balances are
eliminated in preparing the financial statements.
1.3 Revenue
Revenue comprises the fair value received or receivable for exclusivity
arrangements, consultancy fees, milestone income and royalties, net of value
added tax.
The accounting policies for the principal revenue streams of the Group are as
follows:
(i) Exclusivity arrangements and similar agreements are recognised as revenue in
the accounting period in which the related services, or required activities, are
performed or specified conditions are fulfilled in accordance with the terms of
completion of the specific transaction.
(ii) Consultancy fees are recognised as revenue in the year in which the revenue
becomes receivable.
(iii) 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.
(iv) Non-refundable milestone income 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.
1.4 Leased assets
Leases, which contain terms whereby the Group does not assume substantially all
the risks and rewards incidental to ownership of the leased item are classified
as operating leases. Operating lease rentals are charged to the income statement
on a straight line basis over the lease term. The Group does not hold any assets
under finance leases.
1.5 Intangible assets
Research and development
Certain Group products are in the research phase and others are in the
development phase. Expenditure incurred on the development of internally
generated 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 in research and development costs recognised in the income
statement. The useful life and the value of the capitalised development cost are
assessed for impairment at least annually. The value is written down immediately
if impairment has occurred and the unimpaired cost amortised over the 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.
Development expenditure, not satisfying the above criteria, and expenditure on
the research phase of internal projects are included in research and development
costs recognised in the income statement as incurred.
Patents and trademarks
The costs incurred in establishing 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.
1.6 Plant and equipment
Plant and equipment is initially recognised at cost, and subsequently at cost
less accumulated depreciation and any accumulated impairment losses. Cost
includes expenditure that is directly attributable to the acquisition of the
items. Depreciation is charged to the income statement at rates calculated to
write off the cost, less estimated residual value, of each asset on a straight
line basis over their estimated useful lives.
The assets' residual values and useful lives are determined by the Directors and
reviewed and adjusted if appropriate at each balance sheet date.
1.7 Impairment of non-financial assets
Assets that are subject to depreciation are reviewed for impairment on a half
yearly basis and when events or circumstances suggest that the carrying amount
may not be recoverable. For the purpose of assessing impairment, assets are
grouped at the lowest levels for which there are separately identifiable cash
flows (cash generating units). An impairment loss is recognised immediately in
the income statement 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.
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.
1.8 Inventories
Inventories are materials and supplies to be consumed in the course of research
and development and are initially recognised at cost, and subsequently 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.
A provision is recognised immediately in the income statement in respect of
obsolete, slow-moving or defective items where appropriate.
1.9 Financial instruments
Financial assets
The Group classifies its financial assets in the category of loans and
receivables. They are recognised initially at fair value and subsequently at
amortised cost using the effective interest rate method.
The Group's loans and receivables comprise 'trade and other receivables' (notes
1.10 and 14) and 'cash and cash equivalents' (notes 1.11 and 15).
The Group assesses at each balance sheet date whether there is objective
evidence that a financial asset is impaired.
Financial liabilities
The Group's financial liabilities comprise trade and other payables (notes 1.12
and 16) recognised initially at fair value and subsequently at amortised cost
using the effective interest rate method.
1.10 Trade and other receivables
Trade and other receivables are financial assets and are recognised initially at
fair value and subsequently measured at amortised cost using the effective
interest method, less an estimate made for impairment based on a review of all
past due amounts at the year end. A provision for impairment of trade and other
receivables is established when there is objective evidence that the Group will
not be able to collect all amounts due. If an impairment loss is required the
carrying amount of the trade or other receivable is reduced through the use of
an allowance account and the amount of the loss recognised immediately in the
income statement in administrative costs.
Included in trade and other receivables are medium term deposits, comprising
sterling fixed rate deposits, with original maturities of more than three
months.
1.11 Cash and cash equivalents
Cash and cash equivalents are financial assets and comprise cash in hand 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.
1.12 Trade and other payables
Trade and other payables are financial liabilities and are initially recognised
at fair value and subsequently measured at amortised cost using the effective
interest rate method.
1.13 Government grants
Government grants are recognised at 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 defrayed are accrued
and recognised in the income statement over the period required to match them
with the costs that they reimburse.
1.14 Taxation
Income tax is recognised or provided at amounts expected to be recovered or to
be paid using the tax rates and tax laws that have been enacted or substantively
enacted at the balance sheet date. Research and development tax credits are
recognised on an accruals basis and are included as an income tax credit under
current assets.
Deferred tax assets and liabilities are recognised where the carrying amount of
an asset or liability on the balance sheet differs from its tax base, except for
differences arising on:
• 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 profits 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 substantively 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.
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.
1.15 Foreign currency translation
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 in the
period in which they arise.
1.16 Employee benefits
(i) Defined contribution plans
The Group provides retirement benefits to all employees and Executive Directors
(except the Chairman) who wish to participate in defined contribution pension
schemes. 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.
(ii) Accrued holiday pay
Provision is made at each balance sheet date for holidays accrued but not taken
at the salary of the relevant employee at that date. The expected cost of
compensated short term absence (i.e. holidays) is charged to the income
statement on an accruals basis.
(iii) Share-based payment transactions
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.
The proceeds received when options are exercised, net of any directly
attributable transaction costs, are credited to share capital (nominal value)
and the remaining balance to share premium account.
1.17 National insurance on share options
All employee option holders enter into a HM Revenue & Customs joint election to
transfer the employers' national insurance contribution potential liability to
the employee, therefore no asset or liability arises.
1.18 Finance income
Interest income is recognised on a time-proportion basis using the effective
interest rate method.
1.19 Critical accounting estimates and judgements
Critical accounting estimates, assumptions and judgements are continually
evaluated by management based on available information and experience. As the
use of estimates is inherent in financial reporting, actual results could differ
from these estimates.
Judgements
(i) Revenue recognition
The fee received in respect of the TPR100 exclusivity agreement has not been
recognised as revenue but is shown as deferred income as the relevant conditions
of the agreement had not all been met at the relevant balance sheet date.
(ii) Intangible asset recognition
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.
(iii) Deferred tax recognition
The Directors consider that, given the current stage of development of the
business, deferred tax assets should not be recognised before the Group is
generating significant revenue.
Estimates and assumptions
(iv) Useful lives of plant and equipment
Plant and equipment is amortised or depreciated over its useful life. Useful
lives are based on the Directors' estimates of the periods over which the assets
will be used in developing revenue generating products and the estimates are
reviewed annually for continued appropriateness. The estimated useful lives are
between 2 and 5 years for computer equipment and between 3 and 10 years for
furniture and fittings. Changes to estimates can result in significant
variations in the carrying value and amounts charged to the consolidated income
statement in specific periods.
(v) Fair value of financial instruments
The Group determines the fair value of financial instruments using valuation
techniques which can be significantly affected by the assumptions used,
including interest and discount rates and estimates of future cash flows.
(vi) Inventories
The Group reviews the net realisable value of its inventories on a half yearly
basis to provide assurance that recorded inventories are stated at the lower of
cost or net realisable value. Factors that could impact realisable value include
the timing and success of future technological innovations in relation to
product research and development, competitor and Government actions, supplier
prices and economic trends.
(vii) Share-based payments
The Group operates an equity-settled, share-based compensation plan. Employee
and similar services received, and the corresponding increase in equity, are
measured by reference to the fair value of the equity instruments at the date of
grant.
1.20 Provisions
A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation as a result of a past event, and it is probable
that an outflow of economic benefits will be required to settle that obligation.
Provisions are measured at the Directors' best estimate of the expenditure
required to settle the obligation at the balance sheet date, and are discounted
to present value where the effect is material.
2. Financial risk management
2.1 Financial risk factors
The Group's activities expose it to a variety of financial risks: market risk
(including foreign exchange risk, cash flow interest rate risk and fair value
interest rate risk), credit risk and liquidity risk.
It is Group policy not to enter into speculative positions using complex
financial instruments. The Group's primary treasury objective is to minimise
exposure to potential capital losses whilst at the same time securing favourable
market rates of interest on Group cash deposits using money market deposits with
banks. Cash balances used to settle the liabilities from operating activities
are also maintained in current accounts which earn interest at variable rates.
(i) Market risk
Foreign exchange risk
The Group primarily enters into supplier contracts which are to be settled in
sterling. However, some contracts involve other major world currencies including
the US Dollar and the Euro. Where large supplier contracts of more than £100,000
total value are to be settled in foreign currencies consideration is given to
settling the sums to be paid through conversion of sterling deposits to the
appropriate foreign currency holdings at the outset of the contract to minimise
the risk of adverse currency fluctuations.
For contracts with smaller values the foreign currency risk is not considered
sufficient to require the establishment of foreign currency bank accounts unless
specific circumstances are identified which warrant this.
At 31 December 2007 the Group had trade payables denominated in US dollars of
£6,611. If the US dollar exchange rate at 31 December 2007 had weakened/
strengthened against the UK pound by 5% the post-tax loss for the year and net
assets would have been £156 lower / £524 higher.
At 31 December 2006 the Group had trade payables denominated in US dollars of
£17,373. If the US dollar exchange rate at 31 December 2006 had weakened/
strengthened against the UK pound by 5% the post-tax loss for the year and net
assets would have been £1,913 lower / £1,140 lower.
Cash flow interest rate risk and fair value interest rate risk
The Group's interest rate risk arises from medium term and short term money
market deposits. Deposits which earn variable rates of interest expose the Group
to cash flow interest rate risk. Deposits at fixed rates expose the Group to
fair value interest rate risk.
The Group analyses its interest rate exposure on a dynamic basis. The impact in
the year ended 2007, of a defined interest rate shift of a 1% higher/lower rate
of interest earned per annum applied to the term deposits over the period of the
deposit, on the post-tax loss for the year and net assets would have been
£25,534 lower/higher (2006: £22,880 lower/higher).
(ii) Credit risk
Credit risk arises from cash and cash equivalents and deposits with banks and
financial institutions as well as credit exposure in relation to outstanding
receivables. Group policy is to spread deposits over at least two institutions
with investment grade A2 or better (Moody's credit rating) and deposits are made
in sterling only. The Group does not expect any losses from non-performance by
these institutions.
(iii) Liquidity risk
Liquidity risk arises from the Group's management of working capital. It is the
risk that the Group will encounter difficulty in meeting its financial
obligations as they fall due. Prudent liquidity risk management implies
maintaining sufficient cash and cash equivalents and management monitors rolling
forecasts of the Group's liquidity reserve on the basis of expected cash flow.
The Group had trade and other payables at the balance sheet date of £315,161
(2006: £236,066) as disclosed in note 16.
2.2 Capital risk management
The Group's objectives when managing capital are to safeguard the Group's
ability to continue as a going concern in order to provide returns for equity
holders of the Company and benefits for other stakeholders and to maintain an
optimal capital structure to reduce the cost of capital.
2.3 Fair value estimation
The Group uses amortised cost, using the effective interest rate method, to
determine subsequent fair value after initial recognition, for its financial
instruments.
3. Segment reporting
The Group is organised and operates as one business segment, being the
development of pharmaceutical 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 manages any overseas research and development from the UK, the primary
business segment. 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 business segment and one geographical segment, no separate segment
reporting has been prepared.
4. Government grants
Year ended Year ended
31 December 31 December
2007 2006
£ £
SEEDA R&D grant income recognised in income 96,172 -
statement
SEEDA R&D grant accrued income (note 14) 15,510 -
There were no unfulfilled conditions attaching to the government grant income
that has been recognised.
5. Operating loss
Year ended Year ended
31 December 31 December
2007 2006
Operating loss is stated after charging £ £
Depreciation of plant and equipment 15,194 10,630
Loss on sale of fixed assets - 6
Inventories consumed in research and 12,121 12,256
development
Realised exchange losses 2,774 153
Wages and salaries (note 6) 1,050,056 909,561
Operating lease costs (note 21) 75,132 70,752
The fees of the Group's auditor, BDO Stoy Hayward LLP, for services provided are
analysed below:
Year ended Year ended
31 December 31 December
2007 2006
Audit services £ £
Parent company 25,800 30,160
Subsidiary 6,050 5,720
Tax services
Parent company 850 1,200
Subsidiary 4,250 4,150
Other services
Parent company - interim review 6,000 4,000
Parent company - IFRS conversion review 6,500 -
Subsidiary 1,350 500
Total fees 50,800 45,730
6. Wages and salaries
The average monthly number of persons (including all Directors) employed by the
Group during the year was 14 (by category: R&D 5, administration 9), (2006 by
category: R&D 5, administration 7) and their aggregate emoluments were:
Year ended Year ended
31 December 31 December
2007 2006
£ £
Wages and salaries 799,892 710,008
Social security costs 94,427 84,888
Other pension and insurance benefits costs 87,031 69,902
Total cash settled emoluments 981,350 864,798
Accrued holiday pay 4,055 1,389
Share-based payment remuneration charge (note 18) 64,651 43,374
Total emoluments 1,050,056 909,561
All employees of the Group are employed by Futura Medical Developments Limited.
7. Directors' emoluments
Year ended Year ended
31 December 31 December
2007 2006
£ £
Aggregate emoluments 481,929 477,529
Company pension contributions 37,877 34,423
Emoluments disclosed above include the following amounts in respect of the
highest paid Director:
Year ended Year ended
31 December 31 December
2007 2006
£ £
Aggregate emoluments 162,461 163,256
Company pension contributions 14,717 13,725
During the year, three Directors (2006: three Directors) participated in a
private money purchase (defined contribution) pension scheme.
8. Finance income
Year ended Year ended
31 December 31 December
2007 2006
£ £
Interest receivable on medium term deposits 41,757 15,721
Interest receivable on bank deposits 119,534 120,393
161,291 136,114
9. Taxation
Current tax
Year ended Year ended
31 December 31 December
2007 2006
£ £
UK corporation tax credit on loss for the year 208,717 195,033
Adjustment for under-provision in prior year - 1,100
Total income tax expense 208,717 196,133
The tax assessed for the year is different from the standard rate of corporation
tax in the UK. The differences are explained below:
Year ended Year ended
31 December 31 December
2007 2006
£ £
Loss on ordinary activities before tax 2,463,126 1,972,646
Loss on ordinary activities at the average
standard rate of corporation tax in the UK of
19.75% (31 December 2006: 19%) 486,467 374,803
Expenses not deductible for tax purposes (1,075) (2,634)
Difference between depreciation and capital (3,001) (2,264)
allowances
Other short-term timing differences (13,195) (8,626)
Unutilised tax losses (319,591) (400,704)
Schedule 23 deduction for share options 3,061 176,501
Additional relief attaching to tax credit 56,051 57,957
claims
Adjustment for under-provision in prior year - 1,100
Total tax credit for the year 208,717 196,133
The Group has tax losses of approximately £8,932,703 (2006: £7,289,771)
available for offset against future taxable profits.
Deferred tax
Deferred tax assets amounting to £1,996,394 (2006: £1,404,565) have not been
recognised on the basis that their future economic benefit is not certain.
Assuming a prevailing tax rate of 22% (2006: 19%) when the timing differences
reverse, the unrecognised deferred tax asset comprises:
Year ended Year ended
31 December 31 December
2007 2006
£ £
Depreciation in excess of capital allowances 5,401 1,575
Other short term timing differences 25,798 20,774
Unutilised tax losses 1,965,195 1,382,216
1,996,394 1,404,565
10. Loss per share
The calculation of the loss per share is based on a loss of £2,254,409 (2006:
loss of £1,776,513) and on a weighted average number of shares in issue of
55,603,121 (2006: 52,299,053).
The loss attributable to equity holders of the parent company for the purpose of
calculating the diluted loss per share is identical to that used for calculating
the basic loss per share. The exercise of share options, details of which are
disclosed in note 18, or the issue of shares under the long term incentive
scheme, would have the effect of reducing the loss per share and is therefore
anti-dilutive under the terms of IAS 33 'Earnings per Share'.
11. Plant and equipment
Computer Furniture and
equipment fittings Total
Cost £ £ £
At 1 January 2007 33,796 45,037 78,833
Reclassifications (50) (25) (75)
Additions 22,468 8,032 30,500
At 31 December 2007 56,214 53,044 109,258
Depreciation
At 1 January 2007 20,573 38,151 58,724
Reclassifications (50) (25) (75)
Charge for year 10,248 4,946 15,194
At 31 December 2007 30,771 43,072 73,843
Net book value
At 31 December 2007 25,443 9,972 35,415
At 31 December 2006 13,223 6,886 20,109
Computer Furniture and
equipment fittings Total
Cost £ £ £
At 1 January 2006 31,192 42,353 73,545
Additions 2,604 2,814 5,418
Disposals - (130) (130)
At 31 December 2006 33,796 45,037 78,833
Depreciation
At 1 January 2006 13,275 34,900 48,175
Charge for year 7,298 3,332 10,630
Disposals - (81) (81)
At 31 December 2006 20,573 38,151 58,724
Net book value
At 31 December 2006 13,223 6,886 20,109
At 31 December 2005 17,917 7,453 25,370
All fixed assets of the Group are held in Futura Medical Developments Limited.
12. Inventories
31 December 31 December
2007 2006
£ £
Raw materials and consumables 23,344 32,648
13. Financial instruments by category
The accounting policies for financial instruments have been applied to the line
items below:
Assets as per balance sheet 31 December 31 December
2007 2006
Loans and receivables £ £
Trade and other receivables 183,283 1,196,024
Cash and cash equivalents 2,637,892 2,740,767
Total loans and receivables 2,821,175 3,936,791
31 December 31 December
Liabilities as per balance sheet 2007 2006
£ £
Total trade and other payables 315,161 236,066
14. Trade and other receivables
31 December 31 December
2007 2006
Amounts receivable within one year: £ £
Trade receivables 81,967 -
Other receivables 31,764 34,819
Medium term deposits - 1,039,031
Prepayments and accrued income 69,552 122,174
183,283 1,196,024
Trade receivables that are under three months past due are not considered
impaired.
As of 31 December 2007, trade receivables of £49,492 were past due but not
impaired (2006: £nil). These relate to a single independent established
healthcare group for whom there is no history of default. The ageing analysis of
the past due trade receivables is:
31 December 31 December
2007 2006
£ £
Under three months past due 49,492 -
The other classes within trade and other receivables do not contain impaired
assets. The Group does not hold any collateral as security and the maximum
exposure to credit risk at the reporting date is the fair value of each class of
receivable.
15. Cash and cash equivalents
31 December 31 December
2007 2006
£ £
Cash in hand 263,183 80,767
Sterling fixed rate deposits of up to three months 2,374,709 2,660,000
maturity
2,637,892 2,740,767
16. Trade and other payables
31 December 31 December
2007 2006
£ £
Trade payables 99,243 123,070
Social security and other taxes 38,147 36,685
Accrued expenses 27,771 76,311
Deferred income 150,000 -
315,161 236,066
17. Share capital
Authorised 31 December 31 December 31 December 31 December
2007 2006 2007 2006
No. No. £ £
Ordinary shares of 0.2 500,000,000 500,000,000 1,000,000 1,000,000
pence each
Allotted, called up and 31 December 31 December 31 December 31 December
fully paid 2007 2006 2007 2006
No. No. £ £
Ordinary shares of 0.2 57,618,840 55,303,601 115,238 110,607
pence each
The number of issued ordinary shares as at 1st January 2006 was 48,938,601.
During the year ended 31 December 2006 the Company issued shares of 0.2 pence
each as follows:
Month Reason for issue Gross Shares issued
consideration
£ No.
January 2006 Exercise of share options 165,500 350,000
February 2006 Exercise of share options 200,400 380,000
July 2006 Private placing at 78 pence per 2,652,000 3,400,000
share
July 2006 Exercise of share options 831,250 2,235,000
3,849,150 6,365,000
During the year ended 31 December 2007, the Company issued shares of 0.2 pence
each as follows:
Month Reason for issue Gross Shares issued
consideration
£ No.
January 2007 Exercise of share options 16,500 50,000
November 2007 Private placing at 48.56 pence per 1,000,000 2,059,308
share
November 2007 Placing arrangement fee 100,000 205,931
1,116,500 2,315,239
The arrangement fee, in connection with the placing which took place on 15
November 2007, was not settled in cash but by the issue of 205,931 shares at the
placing price of 48.56 pence per share.
The further equity funding facility would if called upon by the Company involve
the issue of new ordinary shares at a price per share set at a 10 per cent
discount to the average mid-price of the Company's shares during the five
trading days prior to the agreement to issue the tranche of shares. The call
option may only be exercised in respect of multiples of £0.50 million and in
respect of a maximum aggregate amount of £1.00 million and may be exercised at
any time prior to 20 May 2009.
18. Share options
At 31 December 2007, the number of ordinary shares of 0.2 pence each subject to
options granted under the Group's Approved and Unapproved Share Option Schemes
were:
Exercise
price At 1 Grants At 31
Exercise Period per January during Options Options December
share 2007 year expired exercised 2007
p No. No. No. No. No.
1 August 2004 - 31 33 165,000 - 115,000 50,000 -
January 2007
1 August 2004 - 31 50 10,000 - 10,000 - -
January 2007
1 August 2005 - 31 July 70 410,000 - 410,000 - -
2007
1 October 2006 - 30 Sept. 70 150,000 - - - 150,000
2008
1 April 2007 - 31 March 76 425,000 - - - 425,000
2009
1 February 2008 - 31 74.50 350,000 - - - 350,000
January 2013
1 February 2009 - 31 56.25 - 350,000 - - 350,000
January 2014
1,510,000 350,000 535,000 50,000 1,275,000
The options outstanding at 31 December 2007 represent 2.2% of the issued share
capital as at that date (2006: 2.7%) and the weighted average remaining life of
the options was 42 months (2006: 38 months), with a weighted average remaining
exercise price of 69.46p (2006: 66.24p).
The options exercised during the year would otherwise have expired on 31 January
2007. In respect of the options exercised during the year, the weighted average
share price at the date of exercise was 64p.
On 9 July 2007, 350,000 options over new ordinary shares were granted to
employees (not Directors) and a consultant.
The Group's share option scheme rules apply to 1,175,000 of the options
outstanding at 31 December 2007 and include a rule regarding forfeiture of the
unexercised options by a director or employee upon the cessation of their
employment (except in specific circumstances).
There were no market conditions within the terms of the grant of the options.
The Black-Scholes-Merton formula is the option pricing model applied to the
grants of all options made on or after 7 November 2002 in respect of calculating
the fair value of the options.
31 December 31 December
Inputs to option pricing model 2007 2006
Grant date 9 July 2007 8 July 2006
Number of shares under option 350,000 350,000
Share price at date of grant 55.30p 75.00p
Option exercise price 56.25p 74.50p
Expected life of options - based on previous 3 years 3 years
exercise history
Expected volatility - based on 30 day annualised 39.23% 25.70%
history
Dividend yield - no dividends assumed 0% 0%
Risk free rate - yield on treasury stock at date of 5.76% p.a. 4.75% p.a.
grant
Outputs generated from option pricing model 31 December 31 December
2007 2006
Fair value per share under option 18p 18p
Total expected charge over the vesting period £63,000 £63,000
Recognised in the income statement for the year 31 December 31 December
2007 2006
The share-based remuneration charge (note 6)
comprises:
Share-based payments £64,651 £43,374
19. Reserves
Share Other Retained
premium reserve losses
reserve
£ £ £
At 1 January 2006 8,560,987 1,152,165 (7,832,392)
Retained loss for the year - - (1,776,513)
Share-based payment - - 43,374
Shares issued during the year 3,836,420 - -
Cost of share issues (146,132) - -
At 1 January 2007 12,251,275 1,152,165 (9,565,531)
Retained loss for the year - - (2,254,409)
Share-based payment - - 64,651
Shares issued during the year 1,111,869 - -
Cost of share issues (101,768) - -
At 31 December 2007 13,261,376 1,152,165 (11,755,289)
The share premium reserve represents amounts subscribed for share capital in
excess of nominal value less the related costs of share issues.
The other reserve 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 under UK GAAP.
Retained losses represent cumulative net losses recognised in the consolidated
income statement.
20. Pension costs
The pension charge represents contributions payable by the Group to
independently administered funds which during the year ended 31 December 2007
amounted to £67,258 (2006: £55,273). Pension contributions payable but not yet
paid at 31 December 2007 totalled £nil in respect of pension contribution
entitlements where employees had not yet provided details of the funds to which
the contributions should be made (2006: £2,125). In addition, pension
contributions payable one month in arrears at 31 December 2007 totalled £2,258
(2006: £2,027). All unpaid contributions are included in accrued expenses at the
relevant balance sheet date.
21. Commitments
At 31 December 2007 the Group had operating lease commitments in respect of
property leases cancellable on one month's notice of £6,014 (2006: £5,896).
22. Related party transactions
Related parties, as defined by IAS 24 'Related Party Disclosures', are the
wholly owned subsidiary company, Futura Medical Developments Limited, and the
Board. Transactions between the Company and the subsidiary company have been
eliminated on consolidation and are not disclosed in this note.
W D Potter, a Director of the Company, provides consulting services to the
wholly owned subsidiary, Futura Medical Developments Limited, through Stapleford
Scientific Services Limited. Of the total fees and expenses, excluding VAT,
invoiced during the year of £79,668 (2006: £79,479), the amount outstanding at
31 December 2007 including VAT was £7,651 (2006: £7,680).
Key management compensation
The Directors' represent the key management personnel. Details of their
compensation and share options are given in note 7.
23. Explanation of transition to IFRS
This is the first year that the Group has presented its full consolidated
financial information under IFRS. The transition to IFRS has had no impact on
the Group cash flow statement, other than on the layout. The requirements of
Financial Reporting Standard 20 'Share-based Payment' were applied for the first
time for the year ended 31 December 2006 (on the same basis as apply under IFRS
2 'Share-based Payment'). 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 UK GAAP IFRS IFRS
Restatement
£ £ £
Plant and equipment 25,370 - 25,370
Inventories 31,956 - 31,956
Trade and other receivables 69,543 - 69,543
Income 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 losses (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 losses
The impact of (i) is a charge to retained earnings of £1,534 at the date of
transition.
23. Explanation of transition to IFRS (continued)
Reconciliation of Group equity at 31 December 2006
Note UK GAAP IFRS IFRS
Restatement
£ £ £
Plant and equipment 20,109 - 20,109
Inventories 32,648 - 32,648
Trade and other receivables (i) 156,993 1,039,031 1,196,024
Income tax asset 195,034 - 195,034
Cash and cash equivalents 3,779,798 (1,039,031) 2,740,767
Total assets 4,184,582 - 4,184,582
Trade and other payables (ii) (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 losses (iii) (9,562,608) (2,923) (9,565,531)
Total equity 3,951,439 (2,923) 3,948,516
Note (i): Trade and other receivables
IFRS 7 'Financial Instruments: Disclosures' requires reclassification of medium
term deposits.
Note (ii): Holiday pay provision
IAS 19 'Employee Benefits' requires the creation of an accrued holiday pay
provision. This was not required under UK GAAP.
Note (iii): Retained losses
The impact of (i) is a charge to retained earnings (ii) of £2,923 at 31 December
2006.
Reconciliation of consolidated income statement for year ended 31 December 2006
Note UK GAAP IFRS IFRS
Restatement
£ £ £
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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