Interim Results

RNS Number : 8033D

Futura Medical PLC

19 September 2008

 



For immediate release

19 September 2008

Futura Medical plc

('Futura' or 'the Group' or 'the Company')

Interim Results for the six months to 30 June 2008

Futura Medical plc (AIM: FUM), the pharmaceutical group that develops innovative products for consumer healthcare, is pleased to announce its Interim Results for the six months to 30 June 2008.

Highlights

• Substantial progress across the Company as it moves closer to regulatory approval of its first condom product, CSD500
  

• CSD500 - Regulatory progress with further meeting and clarification of regulatory requirements
  

• TPR100 - Phase I clinical study completed with report being finalised
  

• PET500 - Phase I clinical study commenced
  

• Pre-tax loss of £1.1 million for the six months ended 30 June 2008 (six months ended 30 June 2007: pre-tax loss of £1.2 million)
  

• Cash including medium term deposits and equity facility of £2.7 million at 30 June 2008 (31 December 2007: £2.7 million) 

James Barder, Futura's Chief Executive, said: 'We are confident that Futura is on the threshold of obtaining EU marketing approval for CSD500, with the subsequent commercial launch of the product as a Durex® branded condom by SSL. We are making good progress with the other products in our pipeline of opportunities and, given our good cash position and annualised cost savings, we are able to look to the future with growing confidence.'

  For any further information please contact:

Futura Medical plc
James Barder, Chief Executive	Tel: [phone]
mail to: [e-mail]	www.futuramedical.co.uk
Canaccord Adams
Ryan Gaffney / Adria Da Breo-Richards	Tel: [phone]
For media enquiries please contact:
Buchanan Communications
Mark Court / Rebecca Skye Dietrich	Tel: [phone]

Notes to Editors

Futura Medical plc

Futura Medical is a pharmaceutical group that develops innovative products for consumer healthcare. The Company is developing a portfolio of products and its strategy is to license their manufacture and distribution to major pharmaceutical and healthcare groups.

Futura is based in Guildford, Surrey, and its shares trade on the AIM market of the London Stock Exchange.

www.futuramedical.co.uk

Chairman and Chief Executive's Joint Review

The six months to 30 June 2008 represent another period of progress across our pipeline of product opportunities. Our primary focus has been on achieving EU marketing approval for our first product, CSD500, an innovative condom to help healthy men maintain a firm erection during sex whilst wearing a condom. This product, which will be marketed under the Durex® brand by our marketing and distribution partner SSL International plc (SSL), has significant commercial potential and is set to transform Futura into a revenue generating business with a recurring royalty income stream.

In common with many other companies we are finding that the regulatory process is becoming more protracted and onerous but nevertheless we feel that good progress is being made. In response to a request from the EU regulatory authorities we have completed a further analysis of the user study, the results from which supports the position that CSD500 will lead to increased condom usage in the target population.

Notwithstanding the above we can report that we are now awaiting the outcome of what we believe to be the final review of our submission for CSD500 by the EU regulator. The Directors believe that all of the additional data requested by the EU regulatory authorities has been provided and that all outstanding issues have been addressed. As a result, whilst there is always some risk in dealing with regulators, we are confident of receiving EU marketing approval for CSD500 later this year.

We have recently completed a clinical study on TPR100 that showed between 30 and 40 times superiority in terms of skin penetration of the non-steroidal anti-inflammatory drug (NSAID) molecule compared with the commercially available market-leading product. Development work and commercial discussions progress as we continue to be excited by the significant commercial opportunity that TPR100 represents.

We continue to progress other product opportunities in our portfolio, and are pleased to announce that the first subjects have been dosed in a Phase I proof of concept clinical study of our premature ejaculation treatment, PET500.

We are also evaluating other opportunities to augment our product pipeline, although we are mindful of prudently managing our costs ahead of receiving EU marketing approval for CSD500.

During the period we made annualised cost savings of £0.4 million, which together with our current cash holdings of £1.7 million and a further £1.0 million cash facility, mean that we are in a comfortable financial position as we await EU marketing approval for CSD500 and the start of our first recurring royalty income stream.

CSD500: Condom safety device

In our 2007 interim report, we highlighted the successful outcome of a user study involving 108 couples. The study, which was funded equally by SSL and Futura, successfully met its primary endpoint of demonstrating the maintenance of a firmer erection in healthy men during sex whilst wearing a condom. The study's secondary endpoints of increased penile size and a longer lasting sexual experience also revealed positive, statistically significant data.

In addition to positive clinical data, the results of our previously commissioned market research reinforce the commercial potential of CSD500. The market research, conducted by a reputable research company, showed that 88% of existing condom users would be interested in purchasing CSD500 and that 49% of non-condom users would be interested in purchasing the product. The research also shows that 46% of men have experienced some loss of sensitivity when using a condom during sexual intercourse, which can lead to loss of erection. This is one reason why some men avoid condoms, thereby increasing the risks of unwanted pregnancies and contracting or spreading sexually transmitted infections (STIs).

STIs are a serious and growing problem. In the UK, a Government report from the Health Protection Agency¹, published in 2007, indicated that in the previous 10 years new cases of syphilis had increased by 1130%, HIV by over 300%, gonorrhea by 45% and chlamydia by 166%.

As supported by our market research we believe that CSD500 will have a strong appeal to men and women who already use condoms as well as men and women who do not currently use condoms. This view is shared by SSL.

We have protected CSD500's unique intellectual property position throughout the world including the principal consumer markets within Europe, the US and Canada through patents now granted or proceeding to grant in 33 countries and applications pending in a further four.

MED2002: Treatment for erectile dysfunction, and FLD500: Female lubrication device

MED2002, our topically applied gel for the treatment of men with erectile dysfunction, and FLD500, our condom product designed to improve natural female lubrication during sexual intercourse, are also both licensed to SSL, underlining the strength of our relationship with the company.

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 over². This would be an important step forward as it is estimated that only 15% of men with erectile dysfunction seek treatment³ due to the embarrassment of having to consult a doctor to be prescribed one of the current treatments.

FLD500, a condom product, uses the same active compound as CSD500 but in FLD500 the active compound is on the outside of the condom and is used at a much lower dose level. 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.

For both MED2002 and FLD500, we are working closely with SSL with the objective of refining the product development strategy and regulatory pathway once the final claims and marketing position of CSD500 have been approved by the EU regulators.

TPR100: Topical pain relief

TPR100 leverages one of our key proprietary assets, DermaSys®, a highly efficient, trans-dermal delivery system which provides rapid transfer of active ingredients through the skin. In TPR100 we are using DermaSys® for the topical delivery of a non-steroidal anti-inflammatory drug (NSAID) for pain relief.

We have recently completed a clinical study that showed significant superiority in terms of skin penetration of the NSAID molecule compared with the commercially available market-leading product. We have optimised the dose and recorded skin permeation rates between 30 to 40 times higher than that achieved by the market-leading product and without observing the systemic side effects seen in oral NSAID products. We will be undertaking a formal consultation, expected to be later this year, with the UK regulatory agency to review this data and to agree with them the next phase of the clinical program.

Commercial discussions are ongoing with respect to the out-licensing of this product and we look forward to updating our shareholders in due course.

PET500: Premature ejaculation treatment

PET500, our premature ejaculation treatment which combines our DermaSys® delivery system with a well known mild topical anaesthetic compound, has just commenced a Phase I clinical study to evaluate safety, tolerability and potential effectiveness of this treatment. Results from this study will be available later in the year.

People

Futura is run on a prudent basis and we are carefully husbanding our cash resources ahead of achieving EU marketing approval for CSD500 and our first recurring royalty stream. Staff numbers (including non-executive directors) were 10 at the period end, compared with 14 at 31 December 2007.

Finance

This is the second interim report by the Group presented under International Financial Reporting Standards, (IFRS).

In accordance with our revenue accounting policy, the fee received in 2007 in respect of the TPR100 exclusivity agreement has been recognised as revenue in the current period as the relevant conditions of the agreement have now been met.

Our retained loss for the six months ended 30 June 2008 was £1,005,061. Research and development costs of £774,748 have reduced over the previous six months ended 31 December 2007 (six months ended 30 June 2007: £707,433; year ended 31 December 2007: £1,508,269), largely due to the completion in 2007 of the user study for CSD500. The cumulative research and development spend since formation of the business remains at 55% of total operating costs. Other administrative costs of £570,544 have decreased (six months ended 30 June 2007: £638,615; year ended 31 December 2007: £1,227,320) due to higher costs incurred in 2007 in relation to commercial legal negotiations and staff recruitment.

We maintain tight control over expenditure and cash and in the period we re-examined our cost base and achieved annualised cost savings of £0.4 million, which will help to conserve our cash and control our costs as we await EU marketing approval for CSD500. 

Outlook

The Directors are confident that Futura is on the threshold of obtaining EU marketing approval for CSD500, with the subsequent commercial launch of the product as a Durex® branded condom by SSL. We are making good progress with the other products in our pipeline of opportunities and, given our good cash position and annualised cost savings, we look to the future with growing confidence.

Dr W D Potter                        J H Barder

Chairman                         Chief Executive

¹ Testing Times. HIV and other Sexually Transmitted Infections in the United Kingdom: 2007. Health Protection Agency

² Massachusetts Male Ageing Study (MMAS), J Urol 1994 Jan; ISI (1)

³ Prog Urol February 2003, vol 13 part 1, pages 85-91

Consolidated Income Statement

for the six months to 30 June 2008

		Unaudited 6 months ended 30 June 2008	Unaudited 6 months ended 30 June 2007	Audited  year  ended 31 December 2007
	Note	£	£	£
Revenue		150,000	-	15,000
Grant income		59,644	21,885	96,172
Research and development costs		(774,748)	(707,433)	(1,508,269)
Administrative costs		(570,544)	(638,615)	(1,227,320)
Operating loss		(1,135,648)	(1,324,163)	(2,624,417)
Finance income		62,401	87,997	161,291
Loss before tax		(1,073,247)	(1,236,166)	(2,463,126)
Taxation		68,186	116,722	208,717
Loss for the period attributable to equity holders of the parent company		(1,005,061)	(1,119,444)	(2,254,409)
Basic and diluted loss per share (pence)	3	(1.7p)	(2.0p)	(4.1p)

All amounts relate to continuing activities.

Consolidated Statement of Changes in Equity

for the six months to 30 June 2008

		Share  Capital	Share  Premium	Merger  Reserve	Retained Losses	Total    Equity
		£	£	£	£	£
At 1 January 2007- audited		110,607	12,251,275	1,152,165	(9,565,531)	3,948,516
Loss for the period		-	-	-	(1,119,444)	(1,119,444)
Share-based payment		-	-	-	25,179	25,179
Shares issued in the period		100	16,400	-	-	16,500
At 30 June 2007 - unaudited		110,707	12,267,675	1,152,165	(10,659,796)	2,870,751
Loss for the period		-	-	-	(1,134,965)	(1,134,965)
Share-based payment		-	-	-	39,472	39,472
Shares issued in the period		4,531	1,095,469	-	-	1,100,000
Cost of share issues		-	(101,768)	-	-	(101,768)
At 1 January 2008 - audited		115,238	13,261,376	1,152,165	(11,755,289)	2,773,490
Loss for the period		-	-	-	(1,005,061)	(1,005,061)
Share-based payment		-	-	-	18,544	18,544
At 30 June 2008 - unaudited		115,238	13,261,376	1,152,165	(12,741,806)	1,786,973

Share premium represents amounts subscribed for share capital in excess of nominal value less the related costs of share issues.

Merger 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. The loss for each period represents the total recognised income and expense for that period.

Consolidated Balance Sheet

as at 30 June 2008

		Unaudited 30 June 2008	Unaudited 30 June 2007	Audited  31 December 2007
	Notes	£	£	£
Assets
Non-current assets
Plant and equipment		27,838	30,821	35,415
Total non-current assets		27,838	30,821	35,415
Current assets
Inventories		10,595	24,580	23,344
Trade and other receivables	4	881,617	1,384,443	183,283
Income tax asset		90,270	311,756	208,717
Cash and cash equivalents	5	1,036,218	1,654,829	2,637,892
Total current assets		2,018,700	3,375,608	3,053,236
Liabilities
Current liabilities
Trade and other payables		(259,565)	(535,678)	(315,161)
Total liabilities		(259,565)	(535,678)	(315,161)
Total net assets		1,786,973	2,870,751	2,773,490
Capital and reserves attributable to equity holders of the parent company
Share capital	6	115,238	110,707	115,238
Share premium	6	13,261,376	12,267,675	13,261,376
Merger reserve		1,152,165	1,152,165	1,152,165
Retained losses		(12,741,806)	(10,659,796)	(11,755,289)
Total equity		1,786,973	2,870,751	2,773,490

Current assets includes cash and cash equivalents of £1,036,218 plus medium term deposits of £725,939, classified within trade and other receivables (six months ended 30 June 2007: £1,654,829 plus £1,080,000 ; year ended 31 December 2007: £2,637,892 plus £Nil).

Consolidated Cash Flow Statement 

for the six months to 30 June 2008

	Unaudited 6 months ended 30 June 2008	Unaudited 6 months ended 30 June 2007	Audited year ended 31 December 2007
	£	£	£
Cash flows from operating activities
Loss before tax	(1,073,247)	(1,236,166)	(2,463,126)
Adjustments for:
Depreciation	9,082	6,705	15,194
Finance income	(62,401)	(87,997)	(161,291)
Share-based payment charge	18,544	25,179	64,651
Cash flows from operating activities before changes in working capital	(1,108,022)	(1,292,279)	(2,544,572)
Decrease in inventories	12,749	8,068	9,304
Decrease/(increase) in trade and other receivables	23,852	(144,967)	(21,147)
(Decrease)/increase in trade and other payables	(104,566)	224,632	79,095
Increase in bank overdraft	48,970	74,980	-
Cash used in operations	(1,127,017)	(1,129,566)	(2,477,320)
Income tax received	186,633	-	195,034
Net cash used in operating activities	(940,384)	(1,129,566)	(2,282,286)
Cash flows from investing activities
Purchase of plant and equipment	(1,505)	(17,417)	(30,500)
(Acquisition)/disposal of medium term deposits	(725,939)	(40,969)	1,039,031
Interest received	66,154	85,514	156,148
Cash (used in)/generated by investing activities	(661,290)	27,128	1,164,679
Cash flows from financing activities
Issue of ordinary shares	-	16,500	1,016,500
Expenses paid in connection with share issues	-	-	(1,768)
Cash generated by financing activities	-	16,500	1,014,732
Decrease in cash and cash equivalents	(1,601,674)	(1,085,938)	(102,875)
Cash and cash equivalents at beginning of period	2,637,892	2,740,767	2,740,767
Cash and cash equivalents at end of period	1,036,218	1,654,829	2,637,892

 Notes to the consolidated interim financial information 

1.    Accounting policies

1.1     Basis of preparation

The unaudited Interim Report was approved by the Board of Directors on 18 September 2008.

The consolidated interim financial information for the six months ended 30 June 2008 and for the six months ended 30 June 2007 is unaudited.

The consolidated interim financial information presented for the Group does not constitute 'statutory accounts' within the meaning of section 240 of the Companies Act 1985.

The consolidated financial information for the year ended 31 December 2007 has been extracted from the financial statements of the statutory accounts of Futura Medical plc which were prepared in accordance with International Financial Reporting Standards as adopted by the European Union ('IFRS') and have been delivered to the Registrar of Companies. The auditors have reported on those financial statements; their report was unqualified, did not include any references to which the auditors drew attention by way of emphasis without qualifying their report and did not contain any statements under either sections 237(2) or 237(3) of the Companies Act 1985.

The following new standards, amendments to standards and interpretations have been issued but are not effective for the year ending 31 December 2008. The new standards, amendments to standards and interpretations will be relevant to the Group but they have not been adopted early as the Directors do not expect these standards and interpretations to have a material effect on the financial statements:

• 'Amendment to IFRS 2:Share-based Payment - Vesting conditions and cancellations' effective 1 January 2009.

• IFRS 8 'Operating Segments' effective 1 January 2009.

• IAS 1 (Revised) 'Presentation of Financial Statements' effective 1 January 2009.

• 'Improvements to IFRSs' effective 1 January 2009.

• IAS 27 (Amendment) 'Consolidated and Separate Financial Statements' effective 1 July 2009.

• IFRS 3 (Revised) 'Business Combinations' effective 1 July 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 consolidated financial statements.

Accounting policies (continued)

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.

Revenue comprisesthe 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 period 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 as revenue in the accounting period in which the milestones are achieved. 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.

Accounting policies (continued)

1.5     Intangible assets (continued)

Research and development (continued)

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 that product 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 comprise 'trade and other receivables' and 'cash and cash equivalents'. They are recognised initially at fair value and subsequently at amortised cost using the effective interest rate method.

Trade and other receivables are recognised initially at fair value and are 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 period 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.

Medium term deposits, comprising sterling fixed rate deposits, with original maturities of more than three months are included in trade and other receivables.

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.

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 recognised initially at fair value and subsequently at amortised cost using the effective interest rate method.

1.10     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 which they reimburse.

Accounting policies (continued)

1.11     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 which at the time of the transaction affects neither accounting nor 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.

1.12 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.

1.13 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. For all share options awarded to employees, and others providing similar services, 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 reserve. 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.

1.14     Finance income

Interest income is recognised on a time-proportion basis using the effective interest rate method.

1.15 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 2007 in respect of the TPR100 exclusivity agreement was recognised in the current period as the Directors consider that the relevant conditions of the agreement have now all been met.

(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.

Accounting policies (continued)

1.16 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. 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.

3.  Loss per share

The calculation of the loss per share is based on a loss of £1,005,061 (six months ended 30 June 2007: loss of £1,119,444; year ended 31 December 2007: loss of £2,254,409) and on a weighted average number of shares in issue of 57,618,840 (six months ended 30 June 2007: 55,343,656; year ended 31 December 2007: 55,603,121).

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, 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'.

4.  Trade and other receivables

	Unaudited   30 June   2008	Unaudited   30 June   2007	Audited 31 December 2007
	£	£	£
Trade receivables	44,447	150,863	81,967
Other receivables	16,666	16,222	31,764
Medium term deposits	725,939	1,080,000	-
Prepayments and accrued income	94,565	137,358	69,552
	881,617	1,384,443	183,283

Trade receivables that are under three months past due are not considered impaired.

As of 30 June 2008 there were no trade receivables past due (30 June 2007: £44,014 past due but not impaired, 31 December 2007: £49,492 past due but not impaired). These related to established healthcare groups for whom there was no history of default. The ageing analysis of the past due trade receivables is:

	Unaudited   30 June   2008	Unaudited   30 June   2007	Audited 31 December 2007
	£	£	£
Under three months past due	-	44,014	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.

5. Cash and cash equivalents

	Unaudited   30 June   2008	Unaudited   30 June   2007	Audited 31 December 2007
	£	£	£
Cash in hand	103,612	18,363	263,183
Sterling fixed rate deposits of up to three months maturity	932,606	1,636,466	2,374,709
Cash and cash equivalents	1,036,218	1,654,829	2,637,892

Medium term deposits, comprising sterling fixed rate deposits, with original maturities of more than three months are included in trade and other receivables.

Bank overdraft of £48,970 (30 June 2007: £74,980, 31 December 2007: £Nil) is included in trade and other payables.

6. Share capital and share premium

There were no shares issued in the period.

On 20 June 2008 290,000 options over new ordinary shares were granted to employees (not Directors). During the period 445,000 options lapsed. Following these changes, there were 1,070,000 options over new ordinary shares outstanding.

7. Related party transactions

Related parties are the wholly owned subsidiary company, Futura Medical Developments Limited, and the Board. Transactions between the Company and the wholly owned 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 period of £42,804 (six months ended 30 June 2007: £39,421; year ended 31 December 2007: £79,668), the amount outstanding at 30 June 2008 including VAT was £8,822 (six months ended 30 June 2007: £7,775; year ended 31 December 2007: £7,651).

 

END

 

 

IR SFAFMASASESU