30th May 2007 07:02
Futura Medical PLC30 May 2007 For Immediate Release 30 May 2007 Futura Medical plc ("Futura" or "the Group" or "the Company") Final Results for the year ended 31 December 2006 Futura Medical plc (AIM: FUM), the pharmaceutical group that develops innovativeproducts for consumer healthcare, is pleased to announce its final results forthe year ended 31 December 2006. Operational Highlights • Significant progress across our growing product and IP portfolio • CSD500 - preparation for launch underway by Durex(R)-maker SSL International plc ahead of regulatory approval for our condom product to help healthy men maintain a firm erection • MED2002 - partnering negotiations re-started following the return of development rights for our topical gel for erectile dysfunction • DermaSys(R) - launch of brand name for the Group's unique, topical drug delivery technology • TPR100 - exclusivity agreement signed with GlaxoSmithKline Consumer Healthcare for the negotiation of global distribution rights for our pain relief product Financial Highlights • Net loss of £1.8 million (2005: net loss of £1.9 million) • Net cash at 31 December 2006 of £3.8 million (2005: £1.8 million) James Barder, Futura's Chief Executive, said: "The outlook remains positive for the remainder of the year: interest frompotential partners for MED2002 is encouraging, our portfolio of productopportunities is broadening and we are on track to achieve the major milestoneof regulatory approval for our most advanced product, CSD500, putting us firmlyon course to becoming a business with a recurring royalty income stream." For any further information please contact: Futura Medical plcJames Barder, Chief Executive Tel: +44 (0) 1483 685 670Anthony Clayden, Finance Director mail to: [email protected] http://www.futuramedical.co.uk/Canaccord Adams Mark Ashurst Tel: +44 (0) 20 7050 6500Tyler Broda For any media enquiries please contact: Buchanan CommunicationsMark Court / Rebecca Skye Dietrich Tel: +44 (0) 20 7466 5000 Chairman's and Chief Executive's Joint Review We are pleased to announce Futura's results for the year ended 31 December 2006,a period of significant progress for the Group. It was a period during which ourproduct development portfolio advanced and our corporate strategy evolved withthe broadening of our involvement in the OTC market to include the newtherapeutic area of pain relief. We have also sought to leverage our drugdelivery technology by launching a distinct brand, DermaSys(R), which we believehas significant commercial potential. The current financial year promises to be a highly significant year for Futura,not least because we expect EU regulatory approval of our first product in thefourth quarter, putting the Group firmly on track to becoming a business with arecurring royalty income stream. CSD500 Condom safety device We have made tremendous progress with our condom product CSD500 with our partnerSSL International plc, the manufacturer of Durex(R) condoms, who continue toprepare for the EU marketing launch in anticipation of regulatory approval beingreceived later this year. The launch of CSD500, a product that helps healthymen maintain a full erection during intercourse whilst wearing a condom, willmark a major milestone for Futura. As we move closer to product launch, weexpect to be able to provide further details including the brand name of theproduct within the Durex(R) portfolio. Futura continues to protect future revenue streams by aggressively patenting newdevelopments. To protect CSD500's revenues, Futura has secured patentprotection, or is proceeding to obtain patent protection, in 30 consumermarkets, including the principal territories within Europe as well as the USAand Canada. Patent applications are on-going in 8 other territories. Progress continues on CSD500's sister product, FLD500, and we look forward toproviding further information in due course. MED2002 Treatment for erectile dysfunction In July 2006, we announced a development agreement for MED2002 withGlaxoSmithKline Consumer Healthcare (GSK) with a view to GSK developing andmarketing the product as the world's first OTC treatment for men with erectiledysfunction. Post the period end, in May 2007, we announced that GSK hadreturned the rights to the product to Futura owing to current priorities withinGSK which meant that they were unlikely in the near future to approve amarketing agreement for the product. Whilst GSK's decision was disappointing we have been encouraged by the level ofinterest from other potential licensees. Progress in the development of MED2002has been significant and we remain confident in our ability to secure newcommercial arrangements on favourable terms for the final stage of developmentand marketing of the product. We look forward to updating shareholders in duecourse on the progress in negotiations with other potential licensees. Evaluation work on PET500, our product for the treatment of prematureejaculation, is progressing and we expect to be in a position to updateshareholders on progress later in the year. DermaSys(R) Drug delivery technology At the half year stage, we highlighted that the Group was carrying out astrategic review to determine the best way of leveraging its intellectualproperty assets, know-how and commercial expertise. This review focussed in parton the versatile and proprietary drug delivery technology that the Group hasdeveloped for the rapid and localised delivery of drugs through the skin. We hadoriginally developed this technology for MED2002 but have since been assessingthe technology against a wide range of generic drugs where improved topicaldelivery might bring commercial opportunities. This assessment reinforces our belief that the technology has a range ofapplications in addition to MED2002. To increase the awareness and visibility ofthis technology and its technical and commercial potential we branded itDermaSys(R) and launched its brand name in February 2007. DermaSys(R) can be adapted to suit specific compounds and the therapeuticindication being targeted with the result that an optimised delivery profile canbe achieved in terms of dose, onset time and duration of effect. We intend tocontinue to leverage the DermaSys(R) asset in opportunities - developed in-houseor through licensing arrangements - that offer clear commercial potential. Webelieve that our DermaSys(R) technology, combined with our commercial knowledgeof routes to market, offers partnership opportunities with other technologycompanies to co-develop products. TPR100 Topical pain relief Our assessment work on DermaSys(R) identified significant opportunities toimprove the effectiveness of topical pain relief products. As announced inSeptember 2006, we were able to show, through in vitro human skin permeationstudies, improved drug delivery rates in excess of eight times higher than theworld's current market leading non-prescription topical analgesic. These studieswere carried out by a world-renowned expert, Professor Mike Roberts at theUniversity of Queensland, Australia. We recently announced an exclusivity agreement with GSK for the negotiation ofglobal distribution rights for the provision of pain relief using our DermaSys(R) technology. As part of the agreement, GSK has paid an upfront fee whichwill provide sufficient funding to cover the costs of the initial clinical work. Topical pain relief marks a new therapeutic area for Futura, expanding ourinitial focus on sexual healthcare into a broader involvement with the consumerhealthcare market. The worldwide market for pain relief is estimated at US$ 50billion for 2005 and is expected to increase to US$ 75 billion by 20101. Theglobal market for OTC sales of topical analgesics is estimated at US$ 2.6billion2. This evolution of our business model, based on the common theme of our DermaSys(R) drug delivery technology, will be continued into other therapeutic areas ifwe are satisfied with the potential commercial returns and overall fit with ourstrategy. Whilst being very interested in new opportunities, we are determined to adhereto our principle of using lower-risk chemical actives, where there is a historyof safe use in humans, rather than looking at new chemical entities, which carrya significantly increased risk profile. Finance The Group reported a net loss after tax in the year ended 31 December 2006 of£1.8 million (year ended 31 December 2005 as restated: £1.9 million). The Groupraised £3.7 million net of costs during the year ended 31 December 2006following a placing of shares in July 2006 and various exercises of optionsthroughout the year. This provided us with a cash balance at 31 December 2006of £3.8 million (year ended 31 December 2005: £1.8 million). Outlook As the Group moves towards revenue generation, we have updated the style andcontent of our website and Annual Report to reflect our increasing confidenceand to appeal to a wider consumer audience as well as to our shareholders. Wewill continue to develop our communication with our audiences to keep ourshareholders and other stakeholders informed of our strategy and progress. The outlook remains positive for the remainder of the year: interest frompotential partners for MED2002 is encouraging, our portfolio of productopportunities is broadening and we are on track to achieve the major milestoneof regulatory approval for our most advanced product, CSD500, putting us firmlyon course to becoming a business with a recurring royalty income stream. Dr W D Potter, Executive Chairman J H Barder, Chief Executive 29 May 2007 Note 1 Pain Therapeutics - Drugs, Markets and Companies, October 2005 2 DB6 2007 database (MSP), Nicholas Hall & Company Financial Review The Group finished the year with a healthy cash position, costs firmly undercontrol and the prospects for revenue moving closer. The Financial Review should be read in conjunction with the financial statementsand the notes to the financial statements. Turnover The Group's turnover for the year to 31 December 2006 was £301 (year ended 31December 2005: £1,660). This represents residual revenue from the settlement ofan intellectual property dispute in 2004 and no further revenue is expected fromthat source. Losses The Group's accumulated loss for the year ended 31 December 2006 was £1.8million (year ended 31 December 2005 as restated: £1.9 million). The Group'soperating loss for the year ended 31 December 2006 was £2.1 million (year ended31 December 2005 as restated: £2.4 million) and the operating loss of the solesubsidiary, Futura Medical Developments Limited, for the year ended 31 December2006 was £2.0 million (year ended 31 December 2005 as restated: £2.2 million). Loss per share for the year ended 31 December 2006 was 3.4 pence (year ended 31December 2005 as restated: 4.0 pence). All the restated amounts for the year ended 31 December 2005 relate solely tothe first time adoption of FRS20 as explained in note 1.3 to the financialstatements. Group research and development costs The Group aims to achieve cost effective research and development and to bringproducts to market as soon as practicable. Group research and development costs vary year to year. This reflects both thestage of development reached for the various products under development and theimpact of external factors. Such factors during the year ended 31 December 2006included pending decisions of regulatory bodies and finalisation of jointdevelopment arrangements. The table below shows the trend in our historic research and development costsand other administrative costs over the past five reporting periods (as restatedfor the first time adoption of FRS20 as explained in note 1.3): Year ended Year ended Year ended 11 months ended Year ended 31 December 31 December 31 December 31 December 31 January 2006 2005 2004 2003 2003 As restated As restated As restated £ £ £ £ £ Research anddevelopment costs 1,077,312 1,553,056 971,043 632,062 810,754 Otheradministrativecosts 1,030,360 805,161 954,725 885,888 485,322 Total operatingexpenses 2,107,672 2,358,217 1,725,768 1,517,950 1,296,076 R&D ratio 51% 66% 56% 42% 63% The R&D ratio shown above is the percentage of research and development costsrelative to total operating expenses for each period. The Board is mindful tokeep a sensible balance as reflected in this R&D ratio. Clearly, higher researchand development spend would increase this R&D ratio. Conversely, a reduction inthe Group's research and development expenditure, such as through costefficiencies, would decrease this ratio. Total research and development spend since original formation of the business in1997 totals £6.2 million (55% of total operating costs). During the year, thesole subsidiary Futura Medical Developments Limited has continued to incur thisresearch and development expenditure which has been written off as incurred. The Board considers that this overall total research and development spendrelative to its pipeline of later stage products and emerging new productsdistinguishes the Group's lower funding requirements and risk profile comparedwith more typical businesses in the wider pharmaceutical industry. The Group'sstrategy will continue to focus on medical drugs and devices that offer thepotential for a significant return on the costs of development. As well ascontinuing its existing research and development programme, the Group continuesto seek new opportunities for potential products to add to its portfolio. Research and development costs for the year ended 31 December 2006 fell comparedwith the year ended 31 December 2005. This was mainly as a result of reducedspend on MED2002 development whilst commercialisation arrangements werenegotiated. In addition, the cost of CSD500 development has fallen toapproximately half the level of 2005 following regulatory submission in November2005. These reductions are partially offset by increased costs of new productdevelopment in the areas of pain relief and premature ejaculation. Other administrative costs The Group continues to maintain a focus on tight control of all expenditure. Other administrative costs for the year ended 31 December 2006 were £1,030,360(year ended 31 December 2005 as restated: £805,161). These comprise all otheroperating costs excluding those relating to product development and associatedintellectual property. The main constituents of other administrative costs andtheir relative proportions were: Year ended Year ended 31 December 31 December 2006 2005Wages and salaries 52% 55%Legal and professional advisers 23% 28%Office costs and staff expenses 14% 13%Licensing negotiations 11% 4% 100% 100% The Group has expanded its internal team to support increased activity levels asit moves towards revenue generation and seeks further product developmentopportunities internally and externally. The principal reasons for the increasein other administrative costs relate to wages and salaries, related increases instaff expenses, and license negotiation costs (legal and advisory) in respect ofthe development and licensing of MED2002. Although wages and salaries within other administrative costs fell as aproportion, the overall increase includes the impact of new marketing andsupport staff recruited in 2005 and 2006. Two additional support staff have beenrecruited in April 2007. This completes the current expansion of the centraladministrative functions of the Group as the platform for the next phase of theGroup's growth strategy. Taxation A research and development tax credit of £196,133 (31 December 2005: £286,973)in respect of research and development expenditure incurred has been recognisedin the financial statements. The reduction compared with the prior yearreflects the fluctuating research and development spending year to year. Capital structure and funding The Group remains funded primarily by equity capital. This reflects thedevelopment status of its products. Cash held by the Group is shown below ateach period end: 31 December 31 December 31 December 31 December 31 January 2006 2005 2004 2003 2003 £M £M £M £M £M Cash at bank and inhand 3.8 1.8 3.7 2.4 1.5 The Group did not have any bank borrowings at 31 December 2006 (31 December2005: £nil). The net cash outflow from operating activities during the yearended 31 December 2006 was £2.1 million (year ended 31 December 2005: £2.3million). In July 2006, the Group raised £3.3 million net of costs following a privateplacing at 78 pence and exercise of share options by directors and staff.Exercise of options in January and February 2006, chiefly by former directors,raised a further £0.4 million net of costs for the Group (for the year ended 31December 2005 the total receipts from the issue of share options was £0.1million). This brings the total cash raised by the Group from formation of thebusiness in 1997 until 31 December 2006 to £13.5 million net of costs. Other significant sources of funding for the Group comprise research anddevelopment tax credits from formation of the business in 1997 until 31 December2006 of £1.0 million (of which it has received £0.8 million) and bank interestreceived of £0.6 million. A L Clayden, Finance Director Consolidated Profit and Loss AccountFor the year ended 31 December 2006 Notes Year ended Year ended 31 December 31 December 2006 2005 As restated £ £ Turnover 301 1,660 Research and development costs (1,077,312) (1,553,056)Other administrative costs (1,030,360) (805,161) Administrative expenses (2,107,672) (2,358,217) Operating loss 2 (2,107,371) (2,356,557) Interest receivable 5 136,114 133,467 Loss on ordinary activities before taxation (1,971,257) (2,223,090)Tax on loss on ordinary activities 6 196,133 286,973 Loss on ordinary activities after taxation and retained loss 16 (1,775,124) (1,936,117)for the year Basic and diluted loss per share (pence) 7 (3.4p) (4.0p) All amounts relate to continuing activities. The notes below form part of the financial statements from which this finalresults announcement is derived. Balance SheetAt 31 December 2006 Group Company Notes 31 December 31 December 31 December 31 December 2006 2005 2006 2005 As restated £ £ £ £ Fixed assetsTangible assets 8 20,109 25,370 - -Investments 9 - - 60,724 60,724 20,109 25,370 60,724 60,724 Current assetsStock 10 32,648 31,956 - - Debtors - due within one year 11 352,027 351,079 28,168 17,203Debtors - due after more than one 11 - - 8,455,808 6,716,404year Total debtors 352,027 351,079 8,483,976 6,733,607 Cash at bank and in hand 3,779,798 1,808,913 3,717,204 1,732,998 4,164,473 2,191,948 12,201,180 8,466,605 Creditors: amounts falling due 12 (233,143) (237,147) (6,221) (35,913)within one year Net current assets 3,931,330 1,954,801 12,194,959 8,430,692 Total net assets 3,951,439 1,980,171 12,255,683 8,491,416 Capital and reservesCalled up share capital 14 110,607 97,877 110,607 97,877Share premium account 16 12,251,275 8,560,987 12,251,275 8,560,987Other reserves 16 1,152,165 1,152,165 - -Profit and loss account 16 (9,562,608) (7,830,858) (106,199) (167,448) Equity shareholders' funds 17 3,951,439 1,980,171 12,255,683 8,491,416 The financial statements from which this final results announcement is derivedwere approved and authorised for issue by the Board on 29 May 2007 and weresigned on its behalf by JH Barder, Director. The notes below form part of the financial statements from which this finalresults announcement is derived. Consolidated Cash Flow Statement For the year ended 31 December 2006 Year ended Year ended Year ended Year ended 31 December 31 December 31 December 31 December Notes 2006 2006 2005 2005 As restated As restated £ £ £ £ Net cash outflow from operating A (2,133,455) (2,292,863)activities Returns on investments andservicing of financeInterest received 124,730 139,306 Net cash inflow from returns oninvestments and servicing offinance 124,730 139,306 Corporation taxResearch and development taxcredit received 282,636 167,858 282,636 167,858 Capital expenditurePayments to acquire tangible (6,088) (13,835)fixed assetsProceeds on disposal of fixed 44 -assets Net cash outflow from capitalexpenditure (6,044) (13,835) Net cash outflow before use ofliquid resources and financing (1,732,133) (1,999,534) Management of liquid resources(Increase) / decrease in shortterm deposits (1,979,031) 1,787,913 FinancingIssue of ordinary shares 3,849,150 135,800Expenses paid inconnection with share issues (146,132) - Net cash inflow from financing 3,703,018 135,800 Decrease in cash B (8,146) (75,821) Notes to the Consolidated Cash Flow Statement For the year ended 31 December 2006 1. A Reconciliation of operating loss to net cash outflow from operating activities Year ended Year ended 31 December 31 December 2006 2005 As restated £ £ Operating loss (2,107,371) (2,356,557)Depreciation 10,630 13,203Loss on sale of fixed assets 6 -Share-based payment charge 43,374 31,973Increase in stocks (692) (17,144)(Increase) / decrease in debtors (76,067) 20,408(Decrease) / increase in creditors (3,335) 15,254 Net cash outflow from operating activities (2,133,455) (2,292,863) 2. B Analysis of net funds At Cash flow At 1 January 2006 31 December 2006 £ £ £Cash at bank and in hand 88,913 (8,146) 80,767 Other liquid resources 1,720,000 1,979,031 3,699,031 1,808,913 1,970,885 3,779,798 3. C Reconciliation of net cash flow to movement in net funds Year ended Year ended 31 December 31 December 2006 2005 £ £ Decrease in cash in the year (8,146) (75,821)Cash inflow / (outflow) from changesin liquid resources 1,979,031 (1,787,913) Movement in net funds in the year 1,970,885 1,863,734Net funds at start of year 1,808,913 3,672,647 Net funds at end of year 3,779,798 1,808,913 Notes to the Financial StatementsFor the year ended 31 December 2006 1 Accounting policies 1.1 Basis of preparation The financial information set out in this announcement does not constitute theGroup's full statutory accounts for the year ended 31 December 2006 or for theyear ended 31 December 2005 for the purposes of section 240 of the Companies Act1985, but is derived from those accounts. Statutory accounts for 2005 have been delivered to the Registrar of Companiesand those for 2006 will be delivered in due course. The auditors have reportedon those accounts; their reports were unqualified and did not contain statementsunder Section 237(2) or (3) of the Companies Act 1985. The principle accounting policies of the Group are unchanged from the Group's2005 annual report with the exception of the adoption of FRS20 (Share-basedPayment) as detailed in note 1.3. The financial statements have been preparedunder the historical cost accounting rules and in accordance with applicable UKaccounting standards. The following principle accounting policies have beenapplied. 1.2 Basis of consolidation The consolidated financial statements include the results of the Company and itssubsidiary, Futura Medical Developments Limited, for the year ended 31 December2006. Under the provisions of Financial Reporting Standard 6 (Acquisitions andMergers) these consolidated financial statements are prepared using mergeraccounting. The investment is recorded in the Company's balance sheet at the nominal valueof the shares issued together with the fair value of any additionalconsideration paid. In the consolidated financial statements, merged subsidiary undertakings aretreated as if they had always been a member of the Group. The results of such asubsidiary are included for the whole period in the year it joins the Group.The corresponding figures for the previous year include its results for thatperiod, the assets and liabilities at the previous balance sheet date and theshares issued by the Company as consideration as if they had always been inissue. Any difference between the nominal value of the shares acquired by theCompany and those issued by the Company to acquire them is taken to reserves. As permitted by Section 230 of the Companies Act 1985, the holding company'sprofit and loss account has not been included in this final resultsannouncement. The Company made a profit after tax of £17,875 for the year (yearended 31 December 2005: loss after tax of £14,170). 1.3 Change in accounting policy The Group has applied the requirements of Financial Reporting Standard 20(Share-based Payment) which it has adopted for the first time with effect from 1January 2006 as its application is obligatory for accounting periods commencingon or after that date. In accordance with the transitional provisions, FinancialReporting Standard 20 has been applied to all grants of equity instruments after7 November 2002 that were unvested at 1 January 2006. The Group issues equity-settled share-based payments, i.e. share options, tocertain Directors, employees and consultants. Equity-settled share-basedpayments are measured at fair value (excluding the effect of non-market-basedvesting conditions) at the date of grant using an appropriate valuation model. The fair value determined at the grant date of the equity-settled share-basedpayments is expensed to the profit and loss account on a straight-line basisover the vesting period, based on the Group's estimate of shares that willeventually vest and adjusted for the effect of non market-based vestingconditions. At each balance sheet date the cumulative charge in respect of eachoption plan is adjusted to reflect expected and actual levels of optionsvesting. Prior to the adoption of Financial Reporting Standard 20,equity-settled share-based payments were not expensed to the profit and lossaccount. The effect of this is to increase costs for the year ended 31 December 2006 by£43,374. The prior year comparatives have been restated resulting in an increasein cost for the year ended 31 December 2005 of £31,973. The cumulative effecton the Group's opening reserves at 1 January 2005 is a charge of £29,835 and acorresponding credit of £29,835 resulting in £nil net change. This has resultedin an increase in loss per ordinary share for the year ended 31 December 2006 of0.08 pence per share (year ended 31 December 2005: increase of 0.07 pence pershare). The cumulative effect on the Company's opening reserves at 1 January2005 is a credit of £29,835 and a corresponding increase in the amounts owed bythe subsidiary. 1.4 Turnover Turnover comprises royalty fees and the sale of rights to future royalty feesand excludes value added tax. Royalty fees that are receivable are recognised as turnover in the year to whichthey relate. Sales of the rights to future royalty fees are recognised asturnover on the date on which they become receivable. 1.5 Research and development Research and development expenditure is charged to the profit and loss accountin the year in which it is incurred. 1.6 Tangible fixed assets and depreciation Tangible fixed assets are stated at cost less depreciation. Depreciation isprovided at rates calculated to write off the cost less estimated residual valueof each asset over its expected useful life, as follows: Plant and machinery 25% Straight lineFixtures, fittings and equipment 25% Straight line 1.7 Deferred taxation Deferred tax balances are recognised in respect of all timing differences thathave originated but not reversed by the balance sheet date, except that therecognition of deferred tax assets is limited to the extent that the Groupanticipates making sufficient taxable profits in the future to absorb thereversal of the underlying timing differences. Deferred tax balances are notdiscounted. 1.8 Foreign currency translation Monetary assets and liabilities denominated in foreign currencies are translatedinto sterling at the rates of exchange ruling at the balance sheet date.Transactions in foreign currencies are recorded at the rate ruling at the dateof the transaction. All differences are taken to the profit and loss account. 1.9 Pension costs The Group provides retirement benefits to all employees and Executive Directors(except the Chairman) who wish to participate by defined contribution pensionschemes. The assets of these schemes are held separately from those of the Groupin independently administered funds. Contributions made by the Group are chargedto the profit and loss account in the year in which they become payable. 1.10 Leased assets Operating lease rentals are charged to the profit and loss account on a straightline basis over the term of the lease. 1.11 Share-based payments Where share options are awarded to employees and others providing similarservices on or after 7 November 2002, the fair value of the options at the dateof grant is expensed to the profit and loss account over the vesting period.Non-market vesting conditions are taken into account by adjusting the number ofequity instruments expected to vest at each balance sheet date so that,ultimately, the cumulative amount recognised over the vesting period is based onthe number of options that eventually vest. Market vesting conditions arefactored into the fair value of the options granted. As long as all othervesting conditions are satisfied, a charge is made irrespective of whether themarket vesting conditions are satisfied. The cumulative expense is not adjustedfor failure to achieve a market vesting condition. Where the terms and conditions of options are modified before they vest, theincrease in the fair value of the options, measured immediately before and afterthe modification, is also expensed to the profit and loss account over theremaining vesting period. Where equity instruments are granted to persons other than employees and othersproviding similar services, the profit and loss account is charged with the fairvalue of goods and services received. 1.12 National insurance on share options Where possible, all employee option holders enter into an Inland Revenue jointelection to transfer the employers' national insurance contribution potentialliability to the employee. To the extent that such an election has not beenentered into and where the share price at the balance sheet date is greater thanthe exercise price on options granted after 19 May 2000, provision for anyemployers' national insurance contribution has been made based on the prevailingrate of national insurance. However, under the terms of all option rules anyliability which may arise is recoverable from each option holder and acorresponding debtor is also included. 1.13 Stocks Stocks are stated at the lower of cost and net realisable value using the FIFOmethod. Cost includes all direct expenditure in bringing the stock to itscurrent location and condition. 1.14 Government grants Government grants relating to research and development expenditure are creditedto the profit and loss account as the related expenditure is incurred. 1.15 Liquid resources For the purpose of the cash flow statement liquid resources are defined as shortterm money market deposits and notice accounts of up to six month's duration. 2 Operating loss Year ended Year ended 31 December 2006 31 December 2005 £ £Operating loss is stated after charging:Depreciation of tangible assets 10,630 13,203Loss on sale of fixed assets 6 -Hire of other assets - operating leases 70,752 70,752Auditors' remuneration - Audit services 23,660 23,120 - Tax services 13,017 10,700 - Other services 5,720 10,000 The audit fee for Futura Medical plc and its sole subsidiary, Futura MedicalDevelopments Limited, is £29,380 (for the year ended 31 December 2005, theactual total fee charged was £28,250). The audit fee relating to the audit ofthe Company is £23,660 (for the year ended 31 December 2005, the actual feerelating to the Company was £23,120). Included in other services is the audit fee apportioned to Futura MedicalDevelopments Limited of £5,720 (for the year ended 31 December 2005 the actualfee apportioned was £5,500). The agreed corporation tax compliance fee for Futura Medical DevelopmentsLimited, is £4,150 (for the year ended 31 December 2005, the actual corporationtax compliance fee charged by the auditors was £4,025). The loss before tax is £1,971,257 (for the year ended 31 December 2005 asrestated: £2,223,090) and total net assets are £3,951,439 (as at 31 December2005: £1,980,171) and they are both derived from one class of business and onegeographical market. Operating leases are cancellable on one month's notice. 5 Interest receivable Year ended Year ended 31 December 2006 31 December 2005 £ £ Bank interest receivable 136,114 133,467 6 Taxation Year ended Year ended 31 December 31 December 2006 2005 As restated £ £ Current taxUK corporation tax on loss for the year (195,033) (281,536)Under-provision in prior year (1,100) (5,437) Tax credit on loss on ordinary activities (196,133) (286,973) The tax assessed for the year is different from the standard rate of corporationtax in the UK. The differences are explained below: Year ended Year ended 31-December 2006 31 December 2005 As restated £ £ Loss on ordinary activities before tax (1,971,257) (2,223,090) Loss on ordinary activities at the standard rate ofcorporation tax in the UK of 19% (31 December 2005: 19%) (374,539) (422,387)Expenses not deductible for tax purposes 2,370 1,751Difference between depreciation and capital allowances 2,264 602Other short-term timing differences 8,626 56Unutilised tax losses 400,704 220,604Schedule 23 deduction for share options (176,501) -Additional relief attaching to tax credit claims (57,957) (82,162)Under-provision in prior year (1,100) (5,437) Current tax credit for the year (196,133) (286,973) The Group has tax losses of approximately £7,289,771 (31 December 2005:£5,152,600) available for offset against future taxable profits. Deferred tax assets amounting to £1,404,565 (31 December 2005 as restated:£996,020) have not been recognised on the basis that their future economicbenefit is not certain. Assuming a prevailing tax rate of 19% when the timingdifferences reverse, the deferred tax asset comprises: Year ended Year ended 31 December 2006 31 December 2005 As restated £ £ Accelerated capital allowances 1,575 (1,202)Other short term timing differences 20,774 18,223Unutilised tax losses 1,382,216 978,999 1,404,565 996,020 7 Loss per share Basic loss per share has been calculated in accordance with FRS22. Basic lossper share has been calculated by dividing the loss on continuing ordinaryactivities after taxation by the weighted average number of ordinary shares inissue during the year. The weighted average number of ordinary shares in issuewas 52,299,053 (year ended 31 December 2005: 48,686,327 shares) and the loss forthe year was £1,775,124 (year ended 31 December 2005 as restated: £1,936,117).The effect of all potential ordinary shares is antidilutive. 8 Tangible fixed assets Plant and Fixtures, machinery fittings Cost and equipment Total £ £ £At 1 January 2006 31,192 42,353 73,545Additions 2,604 2,814 5,418Disposals - (130) (130)At 31 December 2006 33,796 45,037 78,833 DepreciationAt 1 January 2006 13,275 34,900 48,175Disposals - (81) (81)Charge for year 7,298 3,332 10,630 At 31 December 2006 20,573 38,151 58,724Net 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. 9 Fixed asset investments Shares in subsidiary undertaking Company £Cost and net book value at 1 January 2006 and 31 December 2006 60,724 Interests in group undertakingsSubsidiary undertaking Description of Proportion of shares held nominal value of issued shares held and voting rights Futura Medical Developments Ordinary £1 shares 100%Limited The above company is incorporated in England and Wales, and is included in theconsolidated financial statements. Futura Medical Developments Limitedundertakes research, development, production and sale of pharmaceuticalproducts. 10 Stock Group Company 31-December 31 December 31December 31 December 2006 2005 2006 2005 £ £ £ £ Raw materials and consumables 32,648 31,956 - - There is no material difference between the replacement cost of stock and theamounts stated above. 11 Debtors Group Company 31 December 31 December 31 December 31 December 2006 2005 2006 2005 As restated £ £ £ £Amounts receivable within oneyear: Trade debtors 1,939 - - -Corporation tax repayable 195,034 281,536 - -Other debtors 32,880 27,847 - -Prepayments and accrued income 122,174 41,696 28,168 17,203 352,027 351,079 28,168 17,203 Amounts receivable after morethan one year: Amounts owed by subsidiary - - 8,455,808 6,716,404 12 Creditors: amounts falling due within one year Group Company 31 December 31 December 31 December 31 December 2006 2005 2006 2005 £ £ £ £ Trade creditors 123,070 114,586 5,521 6,571Taxation and social security 36685 30780 - -Accruals and deferred income 73,388 91,781 700 29,342 233,143 237,147 6,221 35,913 14 Share capital Authorised 31 December 31 December 31 December 31 December 2006 2005 2006 2005 No. No. £ £ Ordinary shares of 0.2 pence each 500,000,000 500,000,000 1,000,000 1,000,000 Allotted, called up and fully paid 31 December 31 December 31 December 31 December 2006 2005 2006 2005 No. No. £ £ Ordinary shares of 0.2 pence each 55,303,601 48,938,601 110,607 97,877 During the year ending 31 December 2006, the Company issued ordinary shares of0.2 pence each as follows: Month Purpose Gross Shares consideration issued £ No. January 2006 Exercise of share options 165,500 350,000February 2006 Exercise of share options 200,400 380,000July 2006 Private placing at 78 pence per share 2,652,000 3,400,000July 2006 Exercise of share options 831,250 2,235,000 3,849,150 6,365,000 16 Reserves Share premium Other Profit and loss account reserves account £ £ £GroupAt 1 January 2006 8,560,987 1,152,165 (7,830,858)Retained loss for the year - - (1,775,124)Share-based payments - - 43,374Shares issued during the year 3,836,420 - -Cost of share issues (146,132) - - At 31 December 2006 12,251,275 1,152,165 (9,562,608) CompanyAt 1 January 2006 as previously stated 8,560,987 - (229,256)Prior year adjustment (see note 1.3) - - 61,808 At 1 January 2006 (as restated) 8,560,987 - (167,448)Retained profit for the year - - 17,875Share-based payments - - 43,374Shares issued during the year 3,836,420 - -Cost of share issues (146,132) - - At 31 December 2006 12,251,275 - (106,199) Other reserves represents the reserve arising on the acquisition of FuturaMedical Developments Limited on 6 June 2001 via a share for share exchangeaccounted for as a group reconstruction using merger accounting. 17 Reconciliation of movements in shareholders' funds Group Company 31 December 31 December 31 December 31 December 2006 2005 2006 2005 As restated As restated £ £ £ £ Profit / (loss) for the financial year (1,775,124) (1,936,117) 17,875 (14,170)Share-based payments 43,374 31,973 43,374 31,973Net proceeds from issue of shares 3,703,018 135,800 3,703,018 135,800 Net addition / (reduction) toshareholders' funds 1,971,268 (1,768,344) 3,764,267 153,603 Opening shareholders' funds aspreviously stated 1,980,171 3,748,515 8,429,608 8,307,978Prior year adjustment (see note 1.3) - - 61,808 29,835 Opening shareholders' fundsas restated 1,980,171 3,748,515 8,491,416 8,337,813 Closing shareholders' funds 3,951,439 1,980,171 12,255,683 8,491,416 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Futura Medical