Half Yearly Report

Ark Therapeutics Group plc

Interim Results for the First Half of 2013

London, UK, 29 August 2013- Ark Therapeutics Group plc today announces its interim results for the six months ended 30 June 2013.

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This announcement includes "forward-looking statements" which include all statements other than statements of historical facts, including, without limitation, those regarding Ark's financial position, business strategy, plans and objectives of management for future operations, and any statements preceded by, followed by or that include forward-looking terminology such as the words "targets", "believes", "estimates", "expects", "aims", "intends", "will", "can", "may", "anticipates", "would", "should", "could" or similar expressions or the negative thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond Ark's control that could cause the actual results, performance or achievements of Ark to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding Ark's present and future business strategies and the environment in which Ark will operate in the future. These forward-looking statements speak only as at the date of this announcement. Ark expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this announcement to reflect any change in Ark's expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based. As a result of these factors, readers are cautioned not to rely on any forward-looking statement.

INTERIM MANAGEMENT REPORT

Chairman's Review

As detailed in the Company's financial results for the year ended 31 December 2012 published on 30 April 2013 and in the first Interim Management Statement for 2013 issued on 17 May 2013, the key events for the first six months of the reporting year have been as follows:

· On 30 January 2013 the Company announced that having failed to gain sufficient support for an institutional fundraising in late 2012/early 2013 it had appointed WG Partners to assist the Company in reviewing and evaluating a number of strategic options open to the Company to maximise value for Shareholders. These options included a formal sale process, which was initiated on 30 January 2013.

· On 28 February 2013 the Company announced that it had not received any indicative offers pursuant to the formal sale process. In parallel, the Board had attempted at various points to obtain finance from clients, direct competitors, banks and via the disposal of non-core product assets. However, all such steps proved unsuccessful.

· On 7 March 2013 Wölbern Private Equity ("WPE") made a formal offer for the acquisition of the operating subsidiaries of the Company - Ark Therapeutics Limited, Ark Therapeutics Oy and Lymphatix Oy (the "Subsidiaries") (the "Disposal"). This offer was expressly conditional on the UKLA (UK Listing Authority) agreeing to apply a waiver under Listing Rule 10.8 to the Disposal. WPE therefore confirmed to the Board on 10 March 2013 that the transaction had to be completed on or before 15 March 2013 otherwise its offer would lapse.

· On 15 March 2013 the Company made a comprehensive and detailed announcement that it had disposed of the Subsidiaries having been granted a Listing Rule 10.8 waiver. The Company received £1.335m in consideration and recognised a profit of £1.146m.

Post-period end on 9 July 2013 the Company announced that it had amicably negotiated and settled a potential dispute with Crawford Healthcare. As a result, the contract with Crawford Healthcare relating to the sale of the Company's Woundcare Business to Crawford Healthcare in 2011 was terminated and in return for an immediate payment of £300,000, Ark agreed to release Crawford Healthcare from any future obligations under the contract.

Since the date of the Disposal the Board has ensured that the Company has maintained its London Stock Exchange listing and met its financial, fiduciary and reporting obligations.

Board and Management

As a result of the Disposal, Professor Seppo Ylä-Herttuala and David Prince both resigned as Non-Executive Directors on 15 March 2013 and Dr David Venables' employment as Chief Executive Officer and my employment as Executive Chairman were terminated on 31 March 2013. However, both Dr Venables and I, along with Dr David Bloxham and Charles Spicer, continue to serve on the Board as Non-Executive Directors.

Basis of Preparation

Subsequent to the Disposal, there has been an ongoing exercise to finalise the completion accounts of the Subsidiaries, and due to timing and resource limitations this exercise is not yet complete. As such, it has not yet been possible to allocate accurately the March results of the Subsidiaries to the appropriate period - before or after the Disposal. Therefore, at this time, we present the results of Ark Therapeutics Group plc company only for the six months ended 30 June 2013. We expect to complete the exercise to finalise the completion accounts, such that by the year end we will be able to consolidate the formerly owned Subsidiaries up to the date of the Disposal.

Financial Review

Following the Disposal, (as mentioned in the Chairman's review above), the profit before tax from Company operations totalled £1.4m. The Group's loss from operations for the six months ended 30 June 2012 was 6.0m and for the year ended 31 December 2012 was £12.9m.

Other administrative expenses for the period totalled £0.9m. Administrative expenses for the Group were £1.8m for the six months ended 30 June 2012 and £4.3m for year ended 31 December 2012.

The Company share-based compensation charge for the period was £38,000 (for the Group, six months ended 30 June 2012: £46,000 and £95,000 for the year ended 31 December 2012).

Total Company net assets following the Disposal were £1.2m at 30 June 2013. Net assets for the Group were £9.4m at 30 June 2012 and £2.8m at 31 December 2012.

Cash and cash equivalents attributable to the Company were £0.8m as at 30 June 2013 (for the Group, at 30 June 2012: £4.9m and £2.1m at 31 December 2012).

Net cash outflow from operating activities for the period was £1.7m (Group: six months ended 30 June 2012: cash inflow of £4.6m and year ended 31 December 2012: £7.4m).

Risks and Uncertainties

Following the Disposal, the key risk facing the Company is the non-completion of the currently planned, or an equivalent, transaction as this would impact on the Company's ability to continue in operational existence. The financial risks identified and outlined in the Annual Report and Accounts 2012 in the Directors' Report on page 25, which does not form part of this interim statement, remain pertinent and relevant for the remaining six months of 2013.

Summary and Outlook

During the period the Company has received a number of approaches from third parties interested in possible transactions with the Company. As of the time of writing we are progressing discussions with a specific third party which may or may not lead to a transaction. The Company will make further announcements as appropriate.

Iain Ross, Non-Executive Chairman

29 August 2013

Condensed consolidated income statement

For the six months ended 30 June 2013 (unaudited)

Condensed consolidated statement of comprehensive income

For the six months ended 30 June 2013 (unaudited)

All results for the six months ended 30 June 2013 relate wholly to continuing activities. All results are attributable to equity holders of the parent.

Condensed consolidated balance sheet

As at 30 June 2013 (unaudited)

Condensed Company statement of changes in equity

For the six months ended 30 June 2013 (unaudited)

Condensed consolidated statement of changes in equity

For the six months ended 30 June 2013 (unaudited)

Condensed consolidated cash flow statement

For the six months ended 30 June 2013 (unaudited)

Notes to the financial information

1 General information

This interim financial information was authorised for issue on 29 August 2013. The information for the year ended 31 December 2012 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for the year ended 31 December 2012 has been delivered to the Registrar of Companies. Although the Auditor's report on those accounts was not qualified, it drew attention to a matter by way of emphasis relating to the preparation of those financial statements other than on a going concern basis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

A copy of the interim results for the six months ended 30 June 2013 can be found on the Company's website at www.arktherapeutics.com.

2 Basis of preparation

The annual financial statements of Ark Therapeutics Group plc were prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The condensed set of financial statements included in this half-yearly report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting', as adopted by the European Union.

In line with the last annual report, the interim statement has been prepared on a basis other than going concern, following the disposal of the trading subsidiaries in March 2013. However, when preparing the interim statement for the period ending 30 June 2013, the Directors have considered the cash needs of the remaining company, to ensure that it has sufficient resources to continue in operational existence for the foreseeable future, being a period of not less than twelve months from the date of the approval of the interim statement.

Subsequent to the Disposal, there has been an ongoing exercise to finalise the completion accounts of the Subsidiaries, and due to timing and resource limitations this exercise is not yet complete. As such, it has not yet been possible to allocate accurately the March results of the Subsidiaries to the appropriate period - before or after the Disposal. Therefore, at this time, we present the results of Ark Therapeutics Group plc company only for the six months ended 30 June 2013. We expect to complete the exercise to finalise the completion accounts, such that by the year end we will be able to consolidate the formerly owned Subsidiaries up to the date of the Disposal.

At 30 June 2013, the Company had net assets of £1.2m (31 December 2012: £2.8m) and cash and cash equivalents of £0.8m (31 December 2012: £2.1m).

Following consideration of cash flow forecasts for the Company, the Directors are satisfied that the Company has sufficient liquid resources to continue in operational existence for the foreseeable future. However, they are currently in negotiations with a third party to complete a transaction within the next 6 months, and should these negotiations not conclude satisfactorily or a suitable alternative transaction does not arise in the meantime, it is likely that the Directors will seek to commence winding up of the Company within the next 6-9 months. As such, the Company may not continue in existence for the foreseeable future.

The same accounting policies, presentation and methods of computation have been followed in the condensed set of financial statements as applied in the Company's latest annual audited financial statements for the year ended 31 December 2012. Seasonal changes to the Company's operations are not material. 

3 Business and geographical segments

In accordance with IFRS 8, the Group is required to define its operating segments based on, inter alia, the internal reports presented to its chief operating decision maker in order to allocate resources and assess performance. These reports focus on the Group's only business activity, being the discovery, development and commercialisation of products in areas of specialist medicine, with particular focus on vascular disease and cancer, and therefore no segmental information has been shown.

The principal sources of revenue for the Group are as follows:

Information on major customers

Revenues from transactions with a single customer of contract manufacturing, represents £68,000 (58% of the Group's total revenues).

An analysis of the Group's geographical non-current assets is shown below:

Non-current assets comprise goodwill, property, plant and equipment, other intangible assets and inter-company loans and are attributed to the location where they are situated.

4 Disposal of subsidiaries

On 15 March 2013 the Company announced the sale of the entire issued share capital of each of Ark Therapeutics Limited (including its wholly owned subsidiary Ark Therapeutics Oy) and Lymphatix Oy (together, the "Subsidiaries") to WKD Holding Oy, a nominee of Wölbern Private Equity (the "Disposal"). The principal business of the Subsidiaries was viral product focused contract development and manufacturing services with development and GMP manufacturing operations in Finland. The Company received £1.335m in consideration and recognised a profit of £1.146m.

Principal Group investments prior to the Disposal

The Company and the Group had investments in the following subsidiary undertakings which principally affected the profits or net assets of the Group. On 15 March 2013 the Group disposed of the entire issued share capital of Ark Therapeutics Limited, Ark Therapeutics Oy and Lymphatix Oy.

At 31 December 2012 and as at 30 June 2012

* Held directly by Ark Therapeutics Group plc

The Company controls the operations of the Ark Therapeutics Family Benefit Trust ("FBT") and, therefore, it has been accounted for as if it were a subsidiary.

5 Profit/(loss) per share

International Accounting Standards require presentation of diluted earnings per share when a company could be called upon to issue shares that would decrease net profit or increase net loss per share.

The calculation of basic earnings per ordinary share for the Company is based on the profit of £1,397,000 for the six months ended 30 June 2013 and on 209,276,676 ordinary shares being the weighted average number of ordinary shares in issue.

The calculation of diluted earnings per ordinary share for the Company is based on the profit of £1,397,000 for the six months ended 30 June 2013 and on 221,151,248 ordinary shares being the weighted average number of ordinary shares in issue.

The calculation of basic and diluted loss per ordinary share for the Group is based on the loss of £6,022,000 for the six months ended 30 June 2012 (year ended 31 December 2012: loss of £12,734,000 and on 209,276,676 ordinary shares (June 2012: 209,276,676) being the weighted average number of ordinary shares in issue.

6 Related party transactions

Up to the 15 March 2013 the Company provided working capital loans to subsidiary companies. Interest on these loans was charged at market related rates. As at the date of the Disposal the loans were capitalised and therefore forgiven.

The Company also provided loans to the FBT for the purchase of shares in the Company. No interest was charged on these loans. Details of interest income for the year and outstanding balances at year end are shown below:

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

The following transactions with Company Directors took place during the period at arm's length:

Professor S Ylä-Herttuala is a director and shareholder of the Finnish registered company FKD Therapies OY ("FKD").

Statement of Directors' responsibilities

We confirm to the best of our knowledge:

(a) the condensed set of financial statements which has been prepared in accordance with IAS 34 "Interim Financial Reporting" gives a true and fair view of the assets, liabilities, financial position and profit/(loss) for the period;

(b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

(c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

The Directors of Ark Therapeutics Group plc are listed in the Ark Therapeutics Group plc annual report for the year ended 31 December 2012.

A list of current Directors is maintained on the Company's website: www.arktherapeutics.com.

By order of the Board

Dr David Venables

Non-Executive Director

29 August 2013

Independent review report to Ark Therapeutics Group plc

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2013 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed Company and consolidated statements of changes in equity, condensedconsolidated statement of changes in equity, the condensed consolidated cash flow statement and related notes 1 to 6. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 2, the annual financial statements of Ark Therapeutics Group plc are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Basis for qualified opinion on interim financial statements

As explained in note 2, the Company's subsidiary undertakings, Ark Therapeutics Limited, Ark Therapeutics Oy and Lymphatix Oy, have been excluded from consolidation on the basis that the Company disposed of its interests in these subsidiary undertakings on 15 March 2013 and is unable to assess the financial performance of the subsidiary undertakings until to the date of disposal. The results of the subsidiary undertakings had previously been included in the consolidated financial statements. In our opinion, these subsidiary undertakings should be consolidated in the Group accounts as required by section 399 of the Companies Act 2006 and International Accounting Standard No. 2, "Consolidated and Separate Financial Statements". It is not possible to determine with reasonable certainty the impact of the non-consolidation of the subsidiary undertakings up to the date of disposal as the Company has not been able to obtain the financial records for the subsidiary undertakings. In these circumstances, we are unable therefore, to quantify the effect of the departure from the accounting standard.

Emphasis of matter - interim financial statements prepared other than on a going concern basis

In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure made in note 2 to the financial statements, which explains that the financial statements have been prepared on a basis other than that of a going concern.

The Company is currently in negotiations to complete a transaction within the next 6 months. However the Directors acknowledge that, in the event that these negotiations are unsuccessful, they are likely to make the decision to commence the winding up of the Company. As such, the Company may not continue in existence for the foreseeable future.

Conclusion

Based on our review, except for the effects of the matter described in the Basis for qualified opinion paragraph, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2013 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Deloitte LLP

Chartered Accountants and Statutory Auditor

Cambridge, United Kingdom

29 August 2013