Half Yearly Report - Part 2

Ark Therapeutics Group plc

Interim Results for the First Half of 2011

Part 2

Condensed consolidated income statement

For the six months ended 30 June 2011 (unaudited)

Condensed consolidated statement of comprehensive income

For the six months ended 30 June 2011 (unaudited)

Condensed consolidated balance sheet

As at 30 June 2011 (unaudited)

Condensed consolidated statement of changes in equity

For the six months ended 30 June 2011 (unaudited)

Condensed consolidated cash flow statement

For the six months ended 30 June 2011 (unaudited)

Notes to the financial information

1 General information

This interim financial information was authorised for issue on 24 August 2011. The information for the year ended 31 December 2010 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 2010 has been delivered to the Registrar of Companies. The Auditor's report on those accounts was not qualified, did not draw attention to any matters by way of emphasis 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 2011 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 are 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 determining the appropriate basis of preparation of the interim statement, the Directors are required to consider whether the Group can 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.

As at 30 June 2011, the Group had net assets of £14.6m including cash and money market investments of £5.4m.

Management prepares detailed cash flow forecasts which are reviewed by the Board on a regular basis. The forecasts include assumptions regarding future income and expenditure together with various scenarios which reflect opportunities, risks and appropriate mitigating actions. These scenarios recognise the current regulatory and commercial status of the Group's product portfolio, and the outcome of the strategic review and restructuring, considering the various options available to the Group at present and resulting actions, taking into account existing cash resources. Whilst there are inherent uncertainties regarding the cash flows associated with product development and commercialisation, the Directors are satisfied that there is sufficient discretion and control as to the timing and quantum of cash outflows to ensure that the Group is able to meet its liabilities as they fall due for the foreseeable future.

Therefore, having made relevant enquiries, including consideration of the Group's current cash resources and the cash flow forecasts, the Board has a reasonable expectation that, at the time of approving the interim statement, the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Board continues to adopt the going concern basis in preparing the interim statement.

The longer term sustainability of the Group will be dependent upon generating cash flows from successful development and commercialisation of the Group's product portfolio and manufacturing assets.

The same accounting policies, presentation and methods of computation have been followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements for the year ended 31 December 2010. Seasonal changes to the Group'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:

Revenue from a single customer within contract manufacturing totalled £382,000 in the six months ended 30 June 2011 (six months ended 30 June 2010: £338,000; year ended 31 December 2010: £636,000).

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 Discontinued operations

On 8 February 2011, the group entered into a formal sale agreement for the sale of certain assets which comprise the majority of its woundcare business. The disposal completed on 1 March 2011.

The results of the discontinued operations, which have been included in the consolidated income statement, were as follows:

The major classes of assets and liabilities comprising the operations classified as held for sale were as follows:

5 Disposal of woundcare business

As referred to in note 4, on 8 February 2011 the Group entered into an agreement to dispose of certain assets which represented its woundcare business.

The fair value of net assets at the effective date of disposal and the gain on the disposal were as follows:

In addition to the consideration recognised above, the Group is due additional contingent consideration depending on the achievement of certain revenue levels by the woundcare business disposed of. Management has decided that it is not appropriate to recognise any element of this contingent amount on the basis that achievement of the necessary revenue targets cannot be considered virtually certain, as per IAS 37 "Provisions, Contingent Liabilities and Contingents Assets".

6 Exceptional items

During the year ended 31 December 2010 exceptional items comprised impairment of goodwill and restructuring costs as follows:

Further information regarding exceptional items was disclosed in the annual report for the year ended 31 December 2010.

7 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. Since the Group is loss making, there is no such dilutive impact.

The calculation of basic and diluted loss per ordinary share is based on the loss of £4,299,000 and the loss from continuing operations of £4,697,000 for the six months ended 30 June 2011 (six months ended 30 June 2010: £9,434,000 and the loss from continuing operations of £9,122,000; year ended 31 December 2010: £16,172,000 and the loss from continuing operations of £15,903,000) and on 209,276,676 ordinary shares (June 2010: 208,805,012; December 2010: 209,017,211) being the weighted average number of ordinary shares in issue.

8 Non-cash investing and financing activities

On 5 January 2010 the Ark Therapeutics Group plc Family Benefit Trust (the "FBT") subscribed for 1,640,000 ordinary shares in the Company at a cost of £263,000. The Company financed the share purchase by way of a contribution, totalling £131,000, and the remainder by way of a loan.

9 Related party transactions

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:

The remuneration of key personnel in the period was in line with the amounts disclosed in the annual report for the year ended 31 December 2010.

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 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 2010, Dr David Bloxham having been appointed to the Board on 1 March 2011.

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

By order of the Board

Martyn Williams

Chief Executive Officer

24 August 2011

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 2011 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement and related notes 1 to 9. 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 the Group 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.

Conclusion

Based on our review, 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 2011 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 Services Authority.

Deloitte LLP

Chartered Accountants and Statutory Auditor

Cambridge, United Kingdom

24 August 2011