24th Sep 2007 07:02
Futura Medical PLC24 September 2007 For immediate release 24 September 2007 Futura Medical Plc Interim Results for the six months ended 30 June 2007 Futura Medical plc (AIM: FUM), the pharmaceutical and medical device group, ispleased to announce its Interim Results for the six months ended 30 June 2007. Highlights in the year to date • Substantial progress across the Company as it moves close to the commercial launch of its lead product, CSD500 • CSD500 - statistically significant trial results from the user study, reinforcing the product's commercial potential • MED2002 - Global development and licensing agreements signed with SSL International plc for the Company's topically applied gel for erectile dysfunction • TPR100 - Exclusivity agreement signed with GlaxoSmithKline Consumer Healthcare to negotiate for global rights • South East England Development Agency ("SEEDA") grant awarded of up to £200k for product development • Pre-tax loss of £1.2 million for the six months ended 30 June 2007 (six months ended 30 June 2006: pre-tax loss of £1.0 million - as restated) • Cash of £2.7 million at 30 June 2007 (31 December 2006: £3.8 million) Commenting on the results James Barder, Futura's Chief Executive, said: "Thepositive trial results from the CSD500 user study have set the scene for thesuccessful commercial launch by SSL International plc of the product as a Durex(R) branded condom, once EU marketing approval has been received. We weredelighted to achieve another major milestone for the Company earlier this monthwhen SSL acquired the global rights to MED2002, our topically applied gel forthe treatment of erectile dysfunction." For further information:Futura Medical plc Tel: +44 (0) 1483 685 670James Barder, Chief Executiveemail to: [email protected] www.futuramedical.co.uk Canaccord Adams Tel: +44 (0) 20 7050 6500Mark Ashurst / Erin Needra Media enquiries:Buchanan Communications Tel: +44 (0) 20 7466 5000Mark Court / Rebecca Skye Dietrich CHAIRMAN'S AND CHIEF EXECUTIVE'S JOINT REVIEW The six months to 30 June 2007 was another period of substantial progress atFutura. Momentum has continued post the period end and we expect to receive EUmarketing approval in the next three months for our first product, CSD500, aninnovative condom to help healthy men maintain a firm erection whilst wearing acondom. This heralds the most exciting phase so far in the Group's evolution byplacing Futura on track to becoming a revenue generating business with arecurring royalty income stream. Positive trial results reported post the periodend underline the significant commercial potential of the CSD500 condom, whichwill be marketed under the Durex(R) brand by our marketing and distributionpartner SSL International plc (SSL). We are delighted to have strengthened ourrelationship with SSL through the recent signing of a global development,marketing and distribution agreement for MED2002, our topically applied gel forthe treatment of erectile dysfunction. We believe SSL, which now holdsdistribution rights to a total of three of Futura's products, is an idealpartner for MED2002, which is expected to become the world's firstnon-prescription treatment for erectile dysfunction. CSD500 Condom safety device Working closely with SSL, the manufacturer of Durex(R) condoms, we madeconsiderable progress with CSD500, our condom product that helps healthy menmaintain a full erection whilst wearing a condom. Much of our effort during theperiod was in the successful completion of a user study comprising 108 couples,the positive results from which were announced on 9 August 2007. The study,which was equally funded by SSL and Futura, successfully met its primaryendpoint of demonstrating a firmer erection. The study's secondary endpoints ofincreased penile size and a longer-lasting sexual experience also revealedpositive, statistically significant data. The quality of the study results hasreinforced our confidence that CSD500 has significant commercial potential. Prior to the commercial launch of CSD500, we have protected the product's uniqueintellectual property position with patents now granted, or proceeding to grant,in 36 countries throughout the world including the principal consumer marketswithin Europe, the US and Canada. Futura will receive royalty based paymentsfrom all future sales of the condom. SSL is currently carrying out the detailed preparatory work for CSD500'smarketing launch pending EU regulatory approval, including the selection of theproduct's brand name within the Durex(R) portfolio and the product's logo andpackaging. We have been delighted by the commitment and enthusiasm for CSD500from SSL, which provides further endorsement of the commercial potential of theproduct. MED2002 Treatment for erectile dysfunction MED2002 is our topically applied gel for the treatment of men with erectiledysfunction. This product was initially licensed to GlaxoSmithKline ConsumerHealthcare (GSK) but, during the period, GSK returned the rights to Futura owingto current priorities within GSK. Given the commercial potential of MED2002 wewere confident of securing a new agreement on favourable commercial terms andwere delighted to announce, on 17 September 2007, that a global development,marketing and distribution agreement had been signed with SSL. Under the terms of this agreement, Futura will receive an undisclosed royalty onMED2002's future sales along with milestone payments of up to £18 millionsubject to regulatory approvals and the achievement of sales targets. SSL andFutura will jointly manage the completion of the clinical development ofMED2002, which is currently expected to cost up to £3.65 million of which SSLwill contribute 65 per cent and Futura 35 per cent. Once launched, MED2002 is expected to become the world's first non-prescriptionpharmaceutical treatment for men with erectile dysfunction, a condition thataffects, to some degree, 50 per cent of men aged 45 or over(1). This would be animportant step forward as it is estimated that only 15 per cent of men witherectile dysfunction seek treatment(2) due to the embarrassment of having toconsult a doctor to be prescribed one of the current treatments. Now that the commercial arrangements have been finalised, preparations aremoving ahead rapidly, in conjunction with SSL, regarding the commencement of thepivotal study. FLD500 Female lubrication device FLD500 is our condom product designed to improve natural female lubricationduring sexual intercourse. In common with CSD500, it is licensed to SSL and usesthe same active compound. In FLD500 the active compound is on the outside of thecondom and is used at a much lower dose level than in CSD500, where it is insidethe condom. We have previously reported positive clinical data from FLD500 andhave since been working on achieving a commercially acceptable shelf life forthe product and optimising the manufacturing process. We have developed a newprototype of the product which is easier to manufacture and in tests to date hasshown a significant improvement in shelf life. If these improvements aremaintained we would expect to submit an initial dossier in the first half of2008 as the first step to gaining EU regulatory approval. Our previously reported clinical data in healthy female volunteers showed thatFLD500 was safe, well tolerated and had the potential to promote the vascularchanges seen in women during clitoral stimulation and sexual arousal. This datawill form part of the regulatory submission for FLD500, although our experiencewith CSD500 has demonstrated how the value of further clinical work can reduceregulatory risk and support strong marketing claims. In due course, but not before both CSD500 and FLD500 gain regulatory approval,there is the potential for a combination product embracing CSD500 and FLD500.Such a product could potentially improve natural lubrication for the femalepartner whilst ensuring the firmness and size of the male partner's erectionwhilst wearing a condom. TPR100 Topical pain relief One of Futura's key proprietary assets is its highly efficient, trans-dermaldelivery system, DermaSys(R), which is used in the Group's sexual healthcareportfolio but which has the potential to have much broader utility across othertherapeutic areas. DermaSys(R), owing to its ability to provide rapid transferof active ingredients through the skin, has shown significant potential in theprovision of pain relief through our product TPR100. In April 2007, we enteredinto an exclusivity agreement with GSK for the negotiation of globaldistribution rights for TPR100 to be agreed no later than 31 March 2008. Aspart of this exclusivity agreement we agreed to conduct a clinical study, whichis ongoing. PET500 Premature ejaculation treatment We continue to make progress on our early stage portfolio, particularly with ourpotential treatment for premature ejaculation, PET500. The formulation of theproduct, which also uses our DermaSys(R) delivery system, is in the final stagesof in vitro testing to optimise the product's delivery profile and aestheticqualities. People In preparation for the Group becoming revenue generating we have made someadditions to our infrastructure, specifically in adding personnel to our financeand marketing functions. It is our intention to continue to run Futura on aprudent basis with a small core team of employees. Total staff numbers(including our non-executive directors) have increased from 12 to 14 during theperiod. Finance This is the first report by the Group presented under International FinancialReporting Standards, (IFRS). The interim financial information has been preparedon the basis of the accounting policies that will be adopted in the annualreport for the year ending 31 December 2007 in accordance with IFRS. Thecomparative figures have also been restated to reflect this. There has been nosignificant impact on either the current period results or the restated historicresults. An explanation, including the impact of transition to IFRS, is includedin the notes to the interim financial information. In accordance with our revenue accounting policy, the £150,000 already receivedfrom GSK in respect of the TPR100 exclusivity agreement is recognised asdeferred income in the balance sheet and will be recognised as revenue when therelevant conditions of the agreement are met. Our retained loss for the six months ended 30 June 2007 was £1,119,444. Researchand development costs of £707,433 have increased over the previous six months,largely due to the user study cost for CSD500. Overall the cumulative researchand development spend since formation of the business has reduced slightly to54% of total operating costs. Other administrative costs of £638,615 reflect anincrease compared with the six months ended 31 December 2006 of £89,864 due tocommercial and negotiation costs for MED2002 and the expansion of our core team. We continue to maintain tight control over expenditure and cash includingsterling fixed rate deposits at 30 June 2007 was £2.7 million. In accordancewith IAS 7 'Cash Flow Statements', cash held on deposit for more than threemonths which is not needed to meet short-term cash commitments has beenrecognised in the balance sheet as an investment. Futura is aware of the attractiveness of raising funds without recourse toshareholders and we were therefore delighted to announce, on 27 July 2007, thatwe were awarded an R&D grant of up to £200,000 from the South East EnglandDevelopment Agency (SEEDA) to support the development of a pipeline product thatuses the Group's DermaSys(R) delivery technology. The award of the grantfollowed a thorough review by SEEDA, the Regional Development Agency responsiblefor the sustainable economic development of the South East of England. The awardof the grant is a significant endorsement of a pipeline product, which met theaward criterion of having the potential to achieve a technological advance in anew product or process. Outlook The positive trial results from the CSD500 user study have set the scene for thesuccessful commercial launch of the product as a Durex(R) branded condom, onceEU marketing approval has been received. We are now poised to become revenuegenerating with a recurring royalty income stream from the sales of the CSD500condom, which will transform Futura. We will continue to keep our shareholdersand other stakeholders informed of our progress and look forward to the futurewith increasing confidence. Dr W D Potter J H BarderChairman Chief Executive Note (1) Massachusetts Male Ageing Study (MMAS), J Urol 1994 Jan; ISI (1) : pages54-61 (2) Prog Urol February 2003, vol 13 part 1, pages 85-91 CONSOLIDATED INCOME STATEMENT Unaudited Unaudited Unaudited 6 months 6 months year ended ended ended 30 June 30 June 31 December 2007 2006 2006 As restated As restated Note £ £ £Revenue - 492 301Grant income 21,885 - -Research and development costs (707,433) (591,934) (1,079,986)Administrative costs (638,615) (480,324) (1,029,075)Operating loss (1,324,163) (1,071,766) (2,108,760)Finance income 87,997 37,592 136,114Loss before tax (1,236,166) (1,034,174) (1,972,646)Taxation 116,722 109,228 196,133Loss for the period attributable toequity holders of the company (1,119,444) (924,946) (1,776,513) Basic and diluted loss per share (pence) 3 (2.0p) (1.9p) (3.4p)All amounts relate to continuing activities. There is no difference between the loss for the period and the total recognisedincome and expense for the period attributable to equity holders of the Company,therefore a separate statement of recognised income and expense has not beenprepared. CONSOLIDATED BALANCE SHEET Unaudited Unaudited Unaudited 30 June 30 June 31 December 2007 2006 2006 As restated As restated Notes £ £ £AssetsNon-current assetsPlant and equipment 30,821 24,989 20,109Total non-current assets 30,821 24,989 20,109 Current assetsInventories 24,580 31,956 32,648Trade and other receivables 304,443 64,448 156,993Current tax asset 311,756 108,128 195,034Investments 4 1,080,000 - 1,039,031Cash and cash equivalents 5 1,579,849 1,448,665 2,740,767Total current assets 3,300,628 1,653,197 4,164,473 Total assets 3,331,449 1,678,186 4,184,582 LiabilitiesCurrent liabilitiesTrade and other payables (460,698) (245,526) (236,066)Total liabilities (460,698) (245,526) (236,066) Total net assets 2,870,751 1,432,660 3,948,516 Capital and reserves attributable to equityholders of the companyShare capital 110,707 99,337 110,607 Share premium reserve 6 12,267,675 8,925,420 12,251,275 Other reserve 1,152,165 1,152,165 1,152,165 Retained earnings 7 (10,659,796) (8,744,262) (9,565,531)Total equity 2,870,751 1,432,660 3,948,516 CONSOLIDATED CASH FLOW STATEMENT Unaudited Unaudited Unaudited 6 months 6 months year ended ended ended 30 June 30 June 31 December 2007 2006 2006 As restated As restated £ £ £Cash flows from operating activitiesLoss before tax (1,236,166) (1,034,174) (1,972,646)Adjustments for:Depreciation 6,705 5,195 10,630Finance income (87,997) (37,592) (136,114)(Gain)/loss on sale of plant and equipment - (43) 6Share-based payment charge 25,179 13,076 43,374Operating loss before changes in working capital (1,292,279) (1,053,538) (2,054,750) Decrease/(increase) in inventories 8,068 - (692)(Increase)/decrease in trade and other receivables (144,967) 805 (76,067)Increase/(decrease) in trade and other payables 224,632 6,447 (1,946)Cash used in operations (1,204,546) (1,046,286) (2,133,455) Income tax received - 282,636 282,636Net cash used in operating activities (1,204,546) (763,650) (1,850,819) Cash flows from investing activitiesPurchase of plant and equipment (17,417) (4,414) (6,088)Sale of plant and equipment - 43 44Net change in sterling fixed rate deposits (40,969) - (1,039,031)Interest received 85,514 41,880 124,730Cash generated by / (used in) investing activities 27,128 37,509 (920,345) Cash flows from financing activitiesIssue of ordinary shares 16,500 365,893 3,703,018Cash generated by financing activities 16,500 365,893 3,703,018 (Decrease)/increase in cash and cash equivalents (1,160,918) (360,248) 931,854Cash and cash equivalents at beginning of period 2,740,767 1,808,913 1,808,913Cash and cash equivalents at end of period 1,579,849 1,448,665 2,740,767 1. Basis of preparation The unaudited Interim Report was approved by the Board of Directors on 21September 2007. The financial information for the six months ended 30 June 2007 and for the sixmonths ended 30 June 2006 is unaudited. The financial information presented for the Group does not constitute "statutoryaccounts" within the meaning of Section 240 of the Companies Act 1985. The information for the year ended 31 December 2006 has been extracted from thefinancial statements of the statutory accounts of Futura Medical plc which wereprepared under UK Generally Accepted Accounting Principles ("UK GAAP") and havebeen delivered to the Registrar of Companies. The auditors have reported onthose financial statements; their report was unqualified, did not include anyreferences to which the auditors drew attention by way of emphasis withoutqualifying their report and did not contain any statements under either Section237(2) or Section 237(3) of the Companies Act 1985. This audited information hasbeen restated, as necessary, for the adoption of International FinancialReporting Standards (IFRS). The restatements have not been audited. 2. Basis of accounting The financial information presented in this report has been prepared usingaccounting policies that will be used in the preparation of the financialstatements for the year ending 31 December 2007. The policies are set out below.These policies are in accordance with International Financial ReportingStandards (IFRS) as endorsed for use in the European Union and InternationalFinancial Reporting Interpretations Committee (IFRIC) interpretations that areexpected to be applicable for the year ending 31 December 2007. The disclosuresrequired by IFRS 1 'First-time Adoption of International Financial ReportingStandards' concerning the transition from UK GAAP to IFRS are given in note 9. The Group has elected to make use of the exemptions available in IFRS 1 asfollows: • IFRS 2 'Share-based Payment' has been applied to all grants of equityinstruments after 7 November 2002 that were unvested at 1 January 2006. • IFRS 3 'Business Combinations' has not been applied retrospectively tobusiness combinations that occurred before 1 January 2006. • IAS 32 'Financial Instruments: Presentation' and IAS 39 'FinancialInstruments: Recognition and Measurement' is being applied from 1 January 2007. The following new standards, amendments to standards and interpretations havebeen issued, are not effective for the financial year ending 31 December 2007and have not been adopted early as the Directors do not expect theseinterpretations to be relevant to the Group: • IFRS 8 'Operating Segments' effective for annual periods beginning onor after 1 January 2009. • IFRIC 11 'IFRS 2 - Group and Treasury Share Transactions' effectivefor annual periods beginning on or after 1 January 2008. • IFRIC 13 'Customer Loyalty Programmes' effective for annual periodsbeginning on or after 1 July 2008. • IFRIC 14 'IAS 19 - The Limit on a Defined Benefit Asset, MinimumFunding Requirements and their Interaction' effective for annual periodsbeginning on or after 1 January 2008. • IAS 23 'Borrowing Costs' effective for annual periods beginning on orafter 1 January 2008. The interim financial information has been prepared on the historical cost basisor fair value as appropriate. 2.1 Basis of consolidation Where the Company has the power, either directly or indirectly, to govern thefinancial and operating policies of another entity or business so as to obtainbenefits from its activities, it is classified as a subsidiary. The consolidatedfinancial information presents the results of the Company and its solesubsidiary Futura Medical Developments Limited as if they formed a single entity("the Group"). Inter company transactions and balances between the Groupcompanies are therefore eliminated in full. 2.2 Revenue Revenue comprises the fair value received or receivable for exclusivityarrangements, royalties and milestone income, and the sale of rights to futureroyalties, net of value added tax. The accounting policies for the principal revenue streams of the Group are asfollows: (a) Exclusivity arrangements and related services are recognised as revenuein the accounting period in which the related services are rendered, oractivities performed, by reference to completion of the specific transaction. (b) Royalty and milestone income comprise revenue generated from productout-licensing and research and development collaboration agreements. Wherelicensing agreements include non-refundable milestone income, revenue isrecognised on achieving the milestones. If any milestone income is creditableagainst royalty payments then it is deferred and released to the incomestatement over the period in which the royalties would otherwise be receivable.Royalty income relating to the sale by a licensee of licensed product isrecognised on an accruals basis in accordance with the substance of the relevantagreement and based on the receipt from the licensee of the relevant informationto enable calculation of the royalty due. (c) Sales of the rights to future royalties are recognised as revenue on thedate on which the revenue becomes receivable. 2.3 Leased assets Operating lease rentals are charged to the income statement on a straight linebasis over the lease term. 2.4 Intangible assets Research and development Certain Group products are in the research phase and others are in thedevelopment phase. Expenditure on internally developed products is capitalised if it can bedemonstrated that: • It is technically feasible to develop the product for it to be sold;• Adequate resources are available to complete the development;• There is an intention to complete and sell the product;• The Group is able to sell the product;• Sale of the product will generate future economic benefits; and• Expenditure on the project can be measured reliably. Capitalised development costs are amortised over the periods in which the Groupexpects to benefit from selling the products developed. The amortisationexpense is included within the cost of sales line in the income statement. Development expenditure not satisfying the above criteria and expenditure on theresearch phase of internal projects are recognised in the income statement asincurred. 2.4 Intangible assets (continued) Research and development (continued) The useful life and value of the capitalised development cost is assessed forimpairment at least annually. The value is written down immediately ifimpairment has occurred and the remaining cost is amortised over its reduceduseful life. The Directors consider that the criteria to capitalise development expenditureare not met for a product prior to receiving regulatory approval for sale in atleast one country. Patents and trademarks Patents and trademarks are either expensed or capitalised in accordance with thecorresponding treatment of the development expenditure for the product to whichthey relate. 2.5 Plant and equipment Plant and equipment are stated at historical cost less accumulated depreciationand any accumulated impairment losses. Historical cost includes expenditure thatis directly attributable to the acquisition of the items. Depreciation ischarged to the income statement on all plant and equipment at rates calculatedto write off the cost or valuation, less estimated residual value, of each asseton a straight line basis over their estimated useful lives, which is between 2and 5 years for plant and equipment and between 3 and 10 years for furniture andfittings. The assets' residual values and useful lives are determined by the Directors andreviewed and adjusted if appropriate at each balance sheet date in accordancewith Group policy for impairment of assets (note 2.6). 2.6 Impairment of assets Assets that have a finite useful life and are not yet in use and are not subjectto amortisation or depreciation are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment annually andwhen events or circumstances suggest that the carrying amount may not berecoverable. An impairment loss is recognised for the amount by which theasset's carrying amount exceeds its recoverable amount. Recoverable amount is the higher of fair value less costs to sell and value inuse. In assessing value in use, the estimated future cash flows are discountedto their present value using a pre-tax discount rate that reflects currentmarket assessments of the time value of money and the risks specific to theasset. For the purpose of assessing impairment, assets are grouped at the lowest levelsfor which there are separately identifiable cash flows (cash generating units). If the recoverable amount of an asset is estimated to be less than its carryingamount, the carrying amount of the asset is reduced to its recoverable amount.An impairment loss is recognised immediately in the income statement, unless therelevant asset is carried at a revalued amount, in which case the impairmentloss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the assetis increased to the revised estimate of its recoverable amount, but so that theincreased carrying amount does not exceed the carrying amount that would havebeen determined had no impairment loss been recognised for the asset in priorperiods. A reversal of an impairment loss is recognised immediately in theincome statement, unless the relevant asset is carried at a revalued amount, inwhich case the reversal of the impairment loss is treated as a revaluationincrease. 2.7 Inventories Inventories are materials and supplies to be consumed in the course of researchand development and are stated at the lower of cost and net realisable value.Cost includes materials, related contract manufacturing costs and other directcosts. Cost is calculated using the first-in first-out method. Net realisablevalue is based on estimated selling price, less further costs expected to beincurred to completion and disposal. Provision is made for obsolete,slow-moving or defective items where appropriate. 2.8 Trade and other receivables Trade and other receivables are measured at initial recognition at fair valueand are subsequently measured at amortised cost using the effective interestrate method. 2.9 Investments Cash held in sterling fixed rate deposits with original maturities of more thanthree months are treated as investments. 2.10 Cash and cash equivalents Cash and cash equivalents comprise cash in hand, bank overdrafts and sterlingfixed rate deposits with original maturities of three months or less which areheld by the Group so as to be available to meet short term cash commitments. 2.11 Trade and other payables Trade and other payables are initially measured at fair value and subsequentlymeasured at amortised cost using the effective interest rate method. 2.12 Government grants Government grants are recognised at their fair value where there is a reasonableassurance that the grant will be received and the Group will comply with allattached conditions. Government grants relating to costs are deferred andrecognised in the income statement over the period required to match them withthe costs that they are intended to compensate. 2.13 Taxation Deferred tax assets and liabilities are recognised where the carrying amount ofan asset or liability in the balance sheet differs to its tax base, except fordifferences arising on: • The initial recognition of goodwill; • Goodwill for which amortisation is not tax deductible; • The initial recognition of an asset or liability in a transaction whichis not a business combination and at the time of the transaction affects neitheraccounting or taxable profit; and • Investments in subsidiaries and jointly controlled entities where thegroup is able to control the timing of the reversal of the difference and it isprobable that the difference will not reverse in the foreseeable future. Recognition of deferred tax assets is restricted to those instances where it isprobable that taxable profit will be available against which the difference canbe utilised. The amount of the asset or liability is determined using tax rates that havebeen enacted or substantially enacted by the balance sheet date and are expectedto apply when the deferred tax liabilities / (assets) are settled / (recovered).Deferred tax balances are not discounted. 2.13 Taxation (continued) Deferred tax assets and liabilities are offset when the Group has a legallyenforceable right to offset current tax assets and liabilities and the deferredtax assets and liabilities relate to taxes levied by the same tax authority oneither: • The same taxable group company; or • Different group entities which intend to settle current tax assets andliabilities on a net basis, or to realise the assets and settle the liabilitiessimultaneously, on each future period in which significant amounts of deferredtax assets or liabilities are expected to be settled or recovered. Current tax is provided at amounts expected to be recovered or to be paid usingthe tax rates and tax laws that have been enacted or substantially enacted atthe balance sheet date. When research and development tax credits are claimedthey are recognised on an accruals basis and are included as a taxation credit. 2.14 Foreign currency translation The financial statements for each of the Group's entities are measured using thecurrency of the primary economic environment in which the entity operates (thefunctional currency). The consolidated financial information is presented insterling, which is the Group's functional currency and presentation currency.All the Group's entities have the same functional currency and presentationcurrency. Foreign currency transactions are translated into the functional currency usingthe exchange rates prevailing at the dates of the transactions. Foreign exchangegains and losses resulting from the settlement of such transactions and from thetranslation at period end exchange rates of monetary assets and liabilitiesdenominated in foreign currencies are recognised in the income statement. 2.15 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 Group pays fixed contributions and has no legal or constructiveobligations to pay further contributions. The assets of these schemes are heldseparately from those of the Group in independently administered funds.Contributions made by the Group are charged to the income statement in theperiod in which they become payable. 2.16 Share-based payments The Group operates an equity-settled, share-based compensation plan. Where shareoptions are awarded to employees and others providing similar services on orafter 7 November 2002, the fair value of the options at the date of grant ischarged to the income statement over the vesting period. Non-market vestingconditions are taken into account by adjusting the number of equity instrumentsexpected to vest at each balance sheet date so that, ultimately, the cumulativeamount recognised over the vesting period is based on the number of options thateventually vest. Market vesting conditions are factored into the fair value ofthe options granted. As long as all other vesting conditions are satisfied, acharge is made irrespective of whether the market vesting conditions aresatisfied. The cumulative charge is not adjusted for failure to achieve a marketvesting condition. If the terms and conditions of options are modified beforethey vest, the change in the fair value of the options, measured immediatelybefore and after the modification, is also charged to the income statement overthe remaining vesting period. Where equity instruments are granted to personsother than employees and others providing similar services, the income statementis charged with the fair value of goods and services received. 2.17 National insurance on share options Where possible, all employee option holders enter into an HM Revenue & Customsjoint election to transfer the employers' national insurance contributionpotential liability to the employee. To the extent that such an election has notbeen entered into and where the share price at the balance sheet date is greaterthan the 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. 2.18 Segment reporting The Group is organised and operates as one business unit being pharmaceuticaldrugs and medical devices. The principal activity of the Group is the researchand development of drugs and medical devices and their commercial exploitation.The main area of research and development continues to be in the field ofinnovative products for the consumer healthcare market with the main focus beingon sexual health. The Group operates in and manages any overseas research and development from theUK. Segment revenue is based on the geographical location of the Group'scustomers which at this stage is solely the UK. Since there is currently onlyone primary segment and one geographical segment, no separate segment reportinghas been prepared. 2.19 Interest income Interest income is recognised on a time-proportion basis using the effectiveinterest rate method. 3. Loss per share The loss attributable to shareholders and weighted average number of shares forthe purpose of calculating the diluted loss per share are identical to thoseused for calculating the basic loss per share. This is because the exercise ofshare options would have the effect of reducing the loss per share and istherefore anti-dilutive under the terms of IAS 33 'Earnings per Share'. The calculation of the loss per share is based on a loss of £1,119,444 (sixmonths ended 30 June 2006: loss of £924,946 as restated; year ended 31 December2006: loss of £1,776,513 as restated) and on a weighted average number of sharesin issue of 55,343,656 (six months ended 30 June 2006: 49,556,032; year ended 31December 2006: 52,299,053). 50,000 shares were issued in the period in relation to an exercise of shareoptions for a gross consideration of £16,500 (six months ended 30 June 2006:730,000 shares for a gross consideration of £365,900; year ended 31 December2006: 6,365,000 shares for a gross consideration of £3,849,150). 4. Investments Unaudited Unaudited Unaudited 30 June 30 June 31 December 2007 2006 2006 £ £ £Sterling fixed rate deposits of greater than three 1,080,000 - 1,039,031months maturity 5. Cash and cash equivalents Unaudited Unaudited Unaudited 30 June 30 June 31 December 2007 2006 2006 £ £ £ Cash in hand 18,363 122,726 80,767Sterling fixed rate deposits of up to three 1,636,466 1,325,939 2,660,000months maturityBank overdrafts (74,980) - -Cash and cash equivalents 1,579,849 1,448,665 2,740,767 6. Share premium reserve Unaudited Unaudited Unaudited 30 June 30 June 31 December 2007 2006 2006 £ £ £Opening share premium reserve 12,251,275 8,560,987 8,560,987Premium on shares issued 16,400 364,433 3,690,288Closing share premium reserve 12,267,675 8,925,420 12,251,275 7. Retained earnings Unaudited Unaudited Unaudited 30 June 30 June 31 December 2007 2006 2006 As restated As restated £ £ £Opening retained earnings (9,565,531) (7,832,392) (7,832,392)Retained loss for the period (1,119,444) (924,946) (1,776,513)Share-based payment 25,179 13,076 43,374Closing retained earnings (10,659,796) (8,744,262) (9,565,531) 8. Post balance sheet events On 9 July 2007, 350,000 options over new ordinary shares were granted toemployees (not Directors) and a consultant. On 31 July 2007, 410,000 optionsover new ordinary shares granted to Directors, employees and a consultantexpired unexercised. Following these changes, there were 1,275,000 options overnew ordinary shares outstanding. On 27 July 2007, it was announced that the Group had been awarded a grant forresearch and development of up to £200,000 from the South East EnglandDevelopment Agency ("SEEDA") to support the development of a pipeline productthat uses the Group's novel DermaSys(R) trans-dermal technology. Under the termsof the SEEDA grant, contributions to development costs are receivable witheffect from 26 April 2007. Accordingly, grant income of £21,885 has beenrecognised in the income statement in the period and a corresponding amountincluded in trade and other receivables at 30 June 2007 in respect of theaccrued grant receivable. On 17 September 2007 our subsidiary, Futura Medical Developments Limited ("FMDL"), signed global development and marketing and distribution agreements with LRCProducts Limited, a subsidiary of SSL International plc (together "SSL") forworldwide rights to MED2002. Under the terms of the agreement an undisclosedroyalty will be paid to FMDL with milestone payments of up to £18 million,subject to regulatory approval and sales targets being achieved. SSL and FMDLwill jointly manage the completion of the clinical development programme ofMED2002 currently expected to cost up to £3.65 million, with SSL contributing65% of the costs which would result in SSL paying £2.4 million and FMDL paying£1.2 million over the period of the development programme. 9. Explanation of transition to IFRS This is the first year that the Group has presented its full financialinformation under IFRS. The requirements of Financial Reporting Standard 20 'Share-based Payment' were applied for the first time for the year ended 31December 2006. The last financial statements under UK GAAP were for the yearended 31 December 2006 and the date of full transition to IFRS was therefore 1January 2006. The following disclosures are required in the year of transition. Reconciliation of Group equity at 1 January 2006 (date of transition to IFRS) Note Audited Effect of Unaudited UK GAAP IFRS IFRS Restatement As restated £ £ £Plant and equipment 25,370 - 25,370Inventories 31,956 - 31,956Trade and other receivables 69,543 - 69,543Current tax asset 281,536 - 281,536Cash and cash equivalents 1,808,913 - 1,808,913Total assets 2,217,318 - 2,217,318Trade and other payables (i) (237,147) (1,534) (238,681)Total net assets 1,980,171 (1,534) 1,978,637 Share capital 97,877 - 97,877 Share premium reserve 8,560,987 - 8,560,987 Other reserve 1,152,165 - 1,152,165 Retained earnings (ii) (7,830,858) (1,534) (7,832,392)Total equity 1,980,171 (1,534) 1,978,637 Note (i): Holiday pay provision IAS 19 'Employee Benefits' requires the creation of an accrued holiday payprovision. This was not required under UK GAAP. Note (ii): Retained earnings The impact of (i) is a charge to retained earnings of £1,534 at the date oftransition. Reconciliation of Group equity at 30 June 2006 Note Unaudited Effect of Unaudited UK GAAP IFRS IFRS Restatement As restated £ £ £Plant and equipment 24,989 - 24,989Inventories 31,956 - 31,956Trade and other receivables 64,448 - 64,448Current tax asset 108,128 - 108,128Cash and cash equivalents 1,448,665 - 1,448,665Total assets 1,678,186 - 1,678,186Trade and other payables (i) (242,266) (3,260) (245,526)Total net assets 1,435,920 (3,260) 1,432,660 Share capital 99,337 - 99,337 Share premium reserve 8,925,420 - 8,925,420 Other reserve 1,152,165 - 1,152,165 Retained earnings (ii) (8,741,002) (3,260) (8,744,262)Total equity 1,435,920 (3,260) 1,432,660 Reconciliation of Group equity at 31 December 2006 Note Audited Effect of Unaudited UK GAAP IFRS IFRS Restatement As restated £ £ £Plant and equipment 20,109 - 20,109Inventories 32,648 - 32,648Trade and other receivables 156,993 - 156,993Current tax asset 195,034 - 195,034Cash, cash equivalents and investments 3,779,798 - 3,779,798Total assets 4,184,582 - 4,184,582Trade and other payables (i) (233,143) (2,923) (236,066)Total net assets 3,951,439 (2,923) 3,948,516 Share capital 110,607 - 110,607 Share premium reserve 12,251,275 - 12,251,275 Other reserve 1,152,165 - 1,152,165 Retained earnings (ii) (9,562,608) (2,923) (9,565,531)Total equity 3,951,439 (2,923) 3,948,516 Note (i): Holiday pay provision IAS 19 'Employee Benefits' requires the creation of an accrued holiday payprovision. This was not required under UK GAAP. Note (ii): Retained earnings The impact of (i) is a charge to retained earnings (ii) of £3,260 at 30 June2006 and £2,923 at 31 December 2006. Reconciliation of consolidated income statement for six months ended 30 June2006 Note Unaudited Effect of Unaudited UK GAAP IFRS IFRS Restatement As restated £ £ £Revenue 492 - 492Research and development costs (i) (588,901) (3,033) (591,934)Administrative costs (i) (481,631) 1,307 (480,324)Operating loss (1,070,040) (1,726) (1,071,766)Finance income 37,592 - 37,592Loss before tax (1,032,448) (1,726) (1,034,174)Taxation 109,228 - 109,228Loss for the period attributable to equityholders of the company (923,220) (1,726) (924,946) Note (i): Holiday pay provision IAS 19 'Employee Benefits' requires the creation of an accrued holiday payprovision. This was not required under UK GAAP. Reconciliation of consolidated income statement for year ended 31 December 2006 Note Audited Effect of Unaudited UK GAAP IFRS IFRS Restatement As restated £ £ £Revenue 301 - 301Research and development costs (i) (1,077,312) (2,674) (1,079,986)Administrative costs (i) (1,030,360) 1,285 (1,029,075)Operating loss (2,107,371) (1,389) (2,108,760)Finance income 136,114 - 136,114Loss before tax (1,971,257) (1,389) (1,972,646)Taxation 196,133 - 196,133Loss for the year attributable to equity holdersof the company (1,775,124) (1,389) (1,776,513) Note (i): Holiday pay provision IAS 19 'Employee Benefits' requires the creation of an accrued holiday payprovision. This was not required under UK GAAP. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Futura Medical