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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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Eirx Therap. | LSE:ERX | London | Ordinary Share | GB00B0XQBS97 | ORD 0.001P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 0.015 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
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0 | 0 | N/A | 0 |
RNS Number:0834R EiRx Therapeutics PLC 28 March 2008 EIRX THERAPEUTICS PLC ("EiRx" or "the Company") INTERIM RESULTS - SIX MONTHS ENDED 31 DECEMBER 2007 Cork, Ireland - EiRx Therapeutics plc (AIM: ERX), the drug discovery company developing targeted therapies for cancer, announces its Interim Results for the six months ended 31 December 2007. Highlights: * R&D alliance with the Analytical & Biological Chemistry Research Facility ("ABCRF") at University College Cork, to apply the medicinal chemistry expertise of Professor Anita Maguire and her team to the optimisation of potential new cancer drugs from EiRx's EnPAD(TM)discovery platform. * Euro362,000 grant from Enterprise Ireland's Innovation Partnership programme, to support the collaborative drug development alliance with Professor Maguire and the ABCRF. * two new patent applications covering anticancer compound series isolated from AKT and (beta)-catenin EnPAD(TM)screening models. * major expansion in EnPAD(TM)technology platform extends screening panel to 30 bespoke models of cancer cell signalling pathway anomalies. Post Balance Sheet Highlight * secured financial package totalling approximately £1M in new equity investment and convertible loans, plus an extended credit facility, to support the Company's drug discovery programme over a 12 month period. * operations streamlined by transfer of Aberdeen activities to the Company's Cork facility. The Company reported an unaudited loss of £515,069 for the period, a 42% reduction compared to the equivalent period in the previous financial year. Reporting under IFRS was introduced during the period, and as a result a provision of £1,250,000 against the carrying value of EiRx Therapeutics Limited, which had been reversed based on scientific developments and the medicinal chemistry collaboration with University College Cork, had to be taken back into the figures. For further information, please contact: EiRx Therapeutics plc John Pool, Chairman +44 1260 226 529 Colin Telfer, Chief Executive Officer +353 21 432 0847 Grant Thornton Corporate Finance +44 20 7383 5100 Colin Aaronson Chairman's Statement Introduction The current reporting period and the weeks immediately following it have been turbulent times for EiRx Therapeutics. Adverse conditions in the capital markets and in particular negative sentiment towards biotechnology companies severely delayed the completion of our most recent fundraising round, obliging the Company to operate for three months on an overdraft facility and issue warnings concerning its prospects of continued trading. Happily, the company was able to weather these trials and in February of this year successfully negotiated a funding package worth in excess of £1M. Given the conditions under which it was negotiated, the refinancing package was, of necessity, highly dilutive to existing shareholders, but the Directors believe the terms were fair given the financial strictures currently experienced in capital markets and the biotechnology sector, where potentially high returns are accompanied by high perceived risk. Shortly after the announcement of the placing on February 19th, trading in the Company's shares was suspended as a result of a continued delay in settlement of trades further to the announcement of possible incorrect trades in the shares of the Company. Although, as previously announced, the matters under investigation did not affect the Company and no changes were made to volumes reported, the board was pleased to see the shares restored to trading on 12th March. Thus EiRx has emerged from a difficult period in a much strengthened position, with greater financial stability and an improved route to develop its lead products towards key validation milestones that we believe should drive the prospects of licensing and partnering. Financial Review There was a loss after tax for the six months of £515,069 (2006: £892,868) of which £69,383 (2006: £160,245) related to Auvation Limited, which has been closed down since the end of the period. Operating revenues were £21,759 (2006: £6,495), all earned by Auvation Limited. Rent receivable from the tenants in Cork was £25,203 (2006: £22,944). Depreciation of tangible assets, amortisation of patents and impairment of goodwill amounted to £210,240 (2006: £217,432). At 31 December 2007, cash at bank amounted to £24,042 and there was an overdraft of £115,416 to provide net bank borrowings of £91,374 (2006: £139,909 in hand). Net assets as at 31 December 2007 were £2,300,599 compared with £2,918,322 (on a restated basis) as at 30 June 2007 and £4,851,716 a year earlier. Under IFRS a provision of £1,250,000 against the carrying value of EiRx Therapeutics Limited, which had been reversed based on scientific developments and the medicinal chemistry collaboration with University College Cork, has had to be taken back into the figures. Research and development Products and platform: On 8th November the Company reported the filing of two new patent applications describing novel drug candidates, discovered through application of the Company's proprietary Engineered Pathway Dependence (EnPADTM) technology, that have potential value as treatments for a range of cancers including colorectal and breast tumours. The first patent application aims to protect chemical compounds that inhibit activation of the PI3K/AKT pathway, an intracellular signal transduction mechanism which is overactive in more than 60% of all cancers. The second patent describes compounds identified in an EnPAD(TM)assay that models overactivity in the Wnt / (beta)-catenin signal pathway, which is known to be occur in >85% of late-stage colorectal cancers as well as in breast cancers, and is now though to play a role in both melanoma and leukaemia. These successes further demonstrate the EnPAD(TM)technology's ability to deliberately focus the selection of biologically active compounds against a chosen aspect of tumour cell biology. Compounds from chemical series covered by the new patent applications will be advanced into optimisation studies under our collaborative programme with the ABCRF (see below), and these developments are expected to have a major impact on the Company's prospects of developing value-enhancing licensing and collaborative relationships with Pharmaceutical companies. Encouraged by the success of these first screening programmes, the EiRx scientific team has in recent months instigated a rapid expansion of the EnPADTM technology. This platform currently comprises more than 30 engineered screening assays in development or active use, and collectively this panel models many of the most important mutations underlying signal pathway overactivity and resistance to apoptosis in major cancer indications. The Company knows of no reason why the success rate enjoyed to date cannot be repeated across the entire EnPAD(TM)assay battery, delivering an extensive set of active and biologically targeted hit compound series which can be cherry-picked for product candidates and advanced into lead optimisation and preclinical studies. The EiRx management team believes the EnPAD(TM)screening effort underpins the future success of the Company, and is the central feature of our strategic realignment from a research licensing and services model to a drug development enterprise. Medicinal chemistry alliance: In August '07, EiRx announced that Enterprise Ireland had agreed to fund the Company's development of new cancer medicines through a collaboration with Professor Anita Maguire, Chair of Pharmaceutical Chemistry at University College Cork ("UCC"), Ireland. The collaboration will establish a medicinal chemistry team in Cork, under the supervision of Prof Maguire, to optimise compounds emerging from our EnPAD(TM)drug discovery platform and advance them towards clinical trials. The tie-up with Professor Maguire, who is Director of UCC's prestigious Analytical & Biological Chemistry Research Facility ("ABCRF"), attracted grant support of Euro362,600 from Enterprise Ireland's Innovation Partnership scheme, payable over the course of a two year work programme. As a result of the collaboration, EiRx gains access to medicinal chemistry skills and facilities through the employment of two postdoctoral chemists who will work within the supportive and well-appointed environment of Professor Maguire's research group at the ABCRF. With the benefit of our recent fundraising we are now able to proceed with this work programme, and at the time of writing are advertising the chemistry posts. Novel intellectual property generated by the collaboration will be jointly held by the partners, and EiRx will assume responsibility for product development beyond the lead optimisation stage, under the terms of an exclusive, worldwide license agreed with UCC over its stake in the jointly held IP. Closure of Aberdeen site: As part of our ongoing efforts to streamline the group and focus expenditure on critical activities necessary for value enhancement, EiRx closed its Aberdeen facility in March '08 and relocated the operations of its Auvation subsidiary to Cork. These activities include the cancer biomarker effort undertaken in collaboration with bioMerieux SA, and revenue generation from licensing of laboratory research reagents. The ACCRI-BANK tissue specimen collection remains housed within the Pathology Department at the University of Aberdeen Medical School, and the conditions of the Company's access to this resource are unchanged. Thus the relocation is expected to deliver cost savings without interrupting the collaborative research and revenue generating licensing activities previously conducted in Scotland. February 2008 financing Your board believes that the funding package secured on 19th February of this year is sufficient to fund the Company and advance its drug development programme over the next twelve months, and demonstrates considerable investor support for the Company under challenging market conditions. The package of measures includes a placing of shares amounting to £429,875 in cash and £170,125 as a debt for equity swap, the issue of £300,000 in Zero Coupon Non-Redeemable Convertible Loan stock to our highly supportive investor Billam AG, and an increase in the Company's bank credit facility secured by a guarantee from Billam AG. The placing exhausted the Directors' current authorities to issue shares, and an EGM will shortly be convened to seek shareholder consent for additional issues to cover outstanding convertible loans, potential further cash funding (including a further minimum of £100,000 from the Directors and Billam AG), and the grant of warrants to subscribers under the 19th February placing, at a rate of one warrant for every three shares subscribed, convertible at the same price as the February placing. Further detail on the EGM arrangements and proposals will shortly be provided to shareholders. Prospects We believe that our goal of value enhancement is best served by concentrating on developing our own cancer drug candidates at least as far as readiness for clinical evaluation, and that a major obstacle standing in the way of our achieving this goal was securing access to world-class medicinal chemistry capabilities. Our alliance with Professor Maguire and the ABCRF delivers this key requirement, and with a year's funding in place we can now embark on our transition from the biology-driven research and discovery phase to the higher value, chemistry-driven drug development phase. Your board believes the EnPAD(TM)platform gives us a significant competitive advantage in the race to develop new cancer medicines, and we are now considering multiple mechanisms for funding of our product development programmes over the medium to long term, and for acquisition of the new technical and commercial competencies that we need to assemble as we advance. Options under consideration and review include partnering with larger businesses, and M&A opportunities. Finally, I would again like to thank my colleagues in the EiRx management and scientific teams for their loyalty and committed efforts, and to our investors for their continued and valued support. We look to the future with renewed confidence and determination to make strides in the ongoing development of our promising, next-generation cancer drug candidates. EiRx Therapeutics PLC - Interim Results for the six months ended 31 December 2007 These condensed consolidated interim financial statements are for the six months ended 31 December 2007, and have been prepared with regard to the requirements of IFRS 1 "First Time Adoption of International Financial Reporting Standards" relevant to interim reports because they are part of the period covered by the Group's first IFRS financial statements for the year ending 30 June 2008. They do not include all of the information required for full financial statements, and should be read in conjunction with the consolidated financial statements (under UK GAAP) of the Group for the year ended 30 June 2007. These condensed consolidated interim financial statements (the interim financial statements) have been prepared in accordance with the accounting policies set out below which are based on the recognition and measurement principles of IFRS in issue as adopted by the European Union (EU) and effective at 30 June 2008 or are expected to be adopted and effective at 30 June 2008, our first annual reporting date at which we are required to use IFRS accounting standards adopted by the EU. They were approved for issue by the Board of Directors on 28 March 2008. EiRx Therapeutics Plc's consolidated financial statements were prepared in accordance with United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) until 30 June 2007. The date of transition to IFRS was 1 July 2006. The comparative figures in respect of 2006-7 have been restated to reflect changes in accounting policies as a result of the adoption of IFRS. The disclosures required by IFRS 1 concerning the transition from UK GAAP to IFRS are given in the reconciliation schedules included within this report. The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these condensed consolidated interim financial statements. The financial information for the six months ended 31 December 2007 and the comparative figures for the six months ended 31 December 2006 and the twelve months ended 30 June 2007 are unaudited and have been prepared on the basis of the accounting policies set out in the notes to this financial information. This financial information does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The financial statements for the year ended 30 June 2007, prepared under UK GAAP, received an unqualified audit report which drew attention to the group's ability to continue as a going concern, did not contain statements under sections 237(2) and 237(3) of the Companies Act 1985 and have been delivered to the Registrar of Companies. Loss per share has been calculated on the basis of the result for the period after tax, divided by the weighted average number of ordinary shares in issue in the period of 2,975,742,760. The comparatives are calculated by reference to the weighted average number of ordinary shares in issue which were 2,606,951,293 for the period to 31 December 2006 and 2,787,776,650 for the year ended 30 June 2007. There was a loss after tax for the six months of £515,069 (2006: £892,868) of which £69,383 (2006: £160,245) related to Auvation Limited, which has been closed down since the end of the period. Operating revenues were £21,759 (2006: £6,495), all earned by Auvation Limited. Rent receivable from the tenants in Cork was £25,203 (2006: £22,944). Depreciation of tangible assets and amortisation of goodwill and patents amounted to £210,240 (2006: £217,432). At 31 December 2007, cash at bank amounted to £24,042 and there was an overdraft of £115,416 to provide net bank borrowings of £91,374 (2006: £139,909 in hand). Net assets as at 31 December 2007 were £2,300,599 compared with £2,918,322 (on a restated basis) as at 30 June 2007 and £4,851,716 a year earlier. Under IFRS a provision of £1,250,000 against the carrying value of EiRx Therapeutics Limited, which had been reversed based on scientific developments and the medicinal chemistry collaboration with University College Cork, has had to be taken back into the figures. CONSOLIDATED PROFIT AND LOSS ACCOUNT 1 July to 1 July to Year ended Unaudited 31-Dec-07 31-Dec-06 30-Jun-07 Restated Restated £ £ £ Revenues 21,759 6,495 79,146 Administrative expenses - 546,045 - 916,560 - 3,898,227 Other operating income - rent 25,203 22,944 48,148 Operating loss - 499,083 - 887,121 - 3,770,933 Net interest - 15,824 - 5,154 -5 ,904 Loss on ordinary activities before tax - 514,907 - 892,275 - 3,776,837 Taxation - 162 - 593 69,780 Loss on ordinary activities after tax - 515,069 - 892,868 - 3,707,057 Dividends - - - Loss retained - 515,069 - 892,868 - 3,707,057 Basic & diluted loss per share (pence) - 0.0173 - 0.0336 - 0.1330 CONSOLIDATED BALANCE SHEET 31-Dec-07 31-Dec-06 30-Jun-07 Unaudited Restated Restated £ £ £ Non-current assets Intangible assets Goodwill 2,481,884 4,928,645 2,667,024 Patents 113,852 154,972 106,405 2,595,736 5,083,617 2,773,429 Tangible assets 175,319 177,241 170,429 2,771,055 5,260,858 2,943,858 Current assets Inventories 18,059 20,965 16,563 Trade and other receivables 41,182 140,000 98,362 Cash and cash equivalents 24,042 139,909 188,474 83,283 300,874 303,399 Trade and other payables - 553,739 - 452,333 - 328,945 Net current (liabilities) - 470,456 - 151,459 - 25,546 Total assets less current liabilities 2,300,599 5,109,399 2,918,312 Non-current liabilities - -433 - Net assets 2,300,599 5,108,966 2,918,312 Equity Called up share capital 5,951,486 5,451,486 5,951,486 Convertible debt 306,000 257,250 306,000 Share based compensation reserve 123,615 118,649 123,615 Share premium account 1,587,542 1,612,542 1,587,542 Merger reserve 1,206,967 2,896,501 1,310,186 Exchange translation reserve - 38,828 - 31,003 63,816 Profit and loss account - 6,836,183 -5,196,459 -6,424,333 Total equity 2,300,599 5,108,966 2,918,312 CONDENSED CONSOLIDATED INTERIM CASH FLOW STATEMENT 1 July to 1 July to Year ended Unaudited 31-Dec-07 31-Dec-06 30-Jun-07 £ £ £ Cash flows from operating activities Loss after tax - 515,069 - 892,868 - 3,707,057 Adjustment for exchange difference - 119,105 - 154,709 78,832 Depreciation and amortisation 25,100 32,292 32,178 Impairment of goodwill 185,141 185,141 2,513,643 Share based compensation - 17,724 22,690 Change in inventories 1,436 2,906 4,402 Change in receivables 57,180 126,638 68,799 Change in payables 94,244 - 68,420 - 181,058 Net interest 15,824 5,154 5,904 Income taxes charge / credit 162 593 - 69,780 Cash generated from operations - 255,088 - 745,550 - 1,231,447 Interest paid - 15,833 - 9,236 - 17,517 Income taxes paid - 162 - - 2,875 Income taxes received - - 71,698 Net cash flow from operating activities - 271,083 - 745,786 - 1,180,141 Cash flows from investing activities Purchase of intangible assets - 11,716 - 4,531 -9,800 Purchase of property, plant and equipment - - 354 - 1,103 Interest received 4,081 4,081 11,613 Net cash flow from investing activities - 7,635 - 804 620 Cash flows from financing activities Proceeds from issue of shares 581,138 1,081,138 Share issue costs - 25,000 - 50,000 Proceeds from long-term borrowings 48,750 48,750 Payment of financial lease liabilities - 565 - 4,358 - 6,863 Net cash flow from financing activities - 565 600,530 1,073,025 Net decrease in cash equivalents at end of period - 279,283 - 155,060 - 106,496 Cash and cash equivalents at start of period 187,909 294,969 294,405 Cash and cash equivalents at end of period - 91,374 139,909 187,909 CONSOLIDATED STATEMENT OF TOTAL INCOME AND EXPENSE 1 July to 1 July to Year ended Unaudited 31-Dec-07 31-Dec-06 30-Jun-07 £ £ £ Loss for the financial period - 515,069 - 892,868 - 3,707,057 Currency differences on foreign currency net investments - 102,644 - 11,300 83,519 - 617,713 - 904,168 - 3,623,538 Principal accounting policies Basis of consolidation The Group financial statements consolidate those of the Company and all of its subsidiary undertakings. Subsidiaries are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from its activities. The Group obtains and exercises control through voting rights. Unrealised gains on transactions between the Group and its subsidiaries are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. First time adoption The following optional exemption has been adopted, in accordance with IFRS 1 ' First time adoption of IFRS': (a) The Group has elected not to apply IFRS 3 Business Combinations retrospectively to business combinations prior to 1 July 2007. Accordingly the classification of the combination (acquisition, reverse acquisition or merger) remains unchanged from that used under UK GAAP. Assets and liabilities are recognised at date of transition if they would be recognised under IFRS, and are measured using their UK GAAP carrying amount immediately post acquisition as deemed cost under IFRS, unless IFRS requires fair value measurement. Goodwill Goodwill, representing the excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired, is capitalised and is amortised over twenty years with annual impairment reviews. Goodwill written off to reserves prior to the date of transition to IFRS remains in reserves. There is no re-instatement of goodwill that was amortised prior to transition to IFRS. Goodwill previously written off to reserves is not written back to profit or loss on subsequent disposal. Revenue Revenue is measured by reference to the fair value of consideration received or receivable by the Group for goods supplied and services provided, excluding VAT, sales between Group companies and trade discounts, as follows: (a) Supply of services and goods: Revenue from the supply of services and goods is recognised when the significant risks and benefits of provision of the services or goods have transferred to the buyer, which may be on receipt of the goods by the customer or upon part completion or completion of the service based on specific contract terms. (b) License fees and milestone payments: License revenues, in respect of upfront payments for access by third parties to the Group's technology, and milestone payments are recognised once the Group's obligations for each milestone have been met and the Group has achieved a right to be paid in return for their contractual performance. (c) Royalty revenues: Royalty revenues are recognised as earned in accordance with third parties' sales of the underlying products. Government grants / assistance Government grants in respect of capital expenditure are credited to a deferred income account and are released to the income statement on a diminishing value basis over the expected useful lives of the relevant assets. As such, a proportion of deferred income is shown on the balance sheet as a non current liability. Government grants which are income in nature are credited to the income statement in the same period as the related expenditure so as to match them with the related costs which they are intended to compensate, on a systematic basis. Interest Interest income is the interest earned on cash or cash equivalents held with the Group's bankers and recognised within the period earned, accrued on a time basis by reference to the principal outstanding and at the effective rate applicable. Employee benefits Defined contribution pension scheme: The pension costs charged against profits are the contributions payable to the scheme in respect of the accounting period. Intangible assets (a) Patents and trademarks (intellectual property): Patents and trademarks (intellectual property) are included at cost less estimated residual amount and are amortised on a straight line basis over their estimated useful economic lives, which the directors estimate to be seven years. (b) Research and development: Research costs are expensed as incurred. An intangible asset arising from development expenditure on an individual project is recognised only when the Group can demonstrate all of the following: * the technical feasibility of the intangible asset so that it will be available for use or sale. In practice this will be when the Group is satisfied that the appropriate regulatory hurdles have been or will be achieved. * its intention to complete and its ability to use or sell the asset * how the asset will generate future economic benefits. * the availability of economic resources to complete the asset. * the ability to measure the expenditure during development. The Group does not currently have any such internal or external development costs that qualify for capitalisation as intangible assets. Following the initial recognition of the development expenditure, the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset is available for use. It is amortised over the period of expected future sales. Assets are tested for impairment on an annual basis. Careful judgement by the Directors is applied when deciding whether the recognition requirements for development costs have been met. This is necessary as the economic success of any product development is uncertain and may be subject to future technical problems at the time of recognition. Judgements are based on the information available at each balance sheet date. In addition, all internal activities related to the research and development of new software products are continuously monitored by the Directors. Property, plant and equipment Property, plant and equipment is stated at cost, including any incidental costs of acquisition, net of accumulated depreciation and any accumulated provision for impairment. No depreciation is charged until the asset is brought into use. Disposal of assets The gain or loss arising on the disposal of an asset is determined as the difference between the disposal proceeds and the carrying amount of the asset and is recognised in the income statement. The gain or loss arising from the sale or revaluation of assets held for sale is included in "other income" or "other expense" in the income statement. Any revaluation surplus remaining in equity on disposal of the asset is transferred to the profit and loss account reserve. Depreciation Depreciation is calculated to write off the cost of all property, plant and equipment less estimated residual value by the reducing balance method where it reflects the basis of consumption of the asset over their estimated useful economic lives. The periods generally applicable are: Leasehold property improvements: Period of lease Laboratory equipment 5 years Office equipment 3 years Material residual value estimates are updated as required, but at least annually. Impairment testing of goodwill, other intangible assets and property, plant and equipment For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at a cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which management monitors the related cash flows. Goodwill and those intangible assets not yet available for use are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation. Impairment losses recognised for cash-generating units, to which goodwill has been allocated, are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. Leased assets Assets held under finance leases and hire purchase contracts are capitalised in the balance sheet and depreciated over their estimated useful economic lives. The interest element of leasing payments represents a constant proportion of the capital balance outstanding and is charged to profit & loss account over the period of the lease. All other leases are regarded as operating leases and the payments made under them are charged to profit & loss account on a straight line basis over the lease term. Investments Investments are included at cost less amounts written-off. Stocks Stocks are stated at the lower of cost and net realisable value. Cost includes materials, direct labour and an attributable amount of manufacturing overheads based on normal levels of activity. Financial assets Financial assets are divided into the following categories: Trade and other receivables; and cash and cash equivalents. All financial assets are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets other than those categorised as at fair value through profit or loss are recognised at fair value plus transaction costs. Trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Trade and other receivables are stated at cost, less provision for impairment. Any change in their value through impairment or reversal of impairment is recognised in the income statement. Provision against trade receivables is made when there is objective evidence that the Group will not be able to collect all amounts due to it in accordance with the original terms of those receivables. The amount of the write-down is determined as the difference between the asset's carrying amount and the present value of estimated future cash flows. An assessment for impairment is undertaken at least at each balance sheet date. Cash and cash equivalents comprise cash on hand and demand deposits together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. Financial liabilities Financial liabilities are divided into the following categories: Trade and other payables; and other non current liabilities. Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a party to the contractual provisions of the instrument. All financial liabilities are recorded initially at fair value, net of direct issue costs. All financial liabilities are recorded at cost, with interest related charges recognised as an expense in finance cost in the income statement. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are charged to the income statement on an accruals basis using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged or cancelled or expires. Taxation Current tax is the tax currently payable or repayable, based on taxable profit or research and development tax credit respectively, for the accounting period. Deferred tax is recognised on all timing differences where the transactions or events that give the group an obligation to pay more tax in the future, or a right to pay less tax in the future, have occurred at the balance sheet date. Deferred tax assets are recognised when it is more likely than not that they will be recovered. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date. Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement, except where they relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity. Equity Equity comprises the following: * "Share capital" represents the nominal value of equity shares. * "Convertible debt" represents loans advanced to the Company under convertible loan notes where the loan note holder has indicated that it intends to convert the debt into shares in the capital of the Company. * "Share based compensation reserve" represents the amount charged to profit & loss account in respect of share based compensation of employees and directors. * "Share premium" represents the excess over nominal value of the fair cash value of consideration received for equity shares, net of expenses of the share issue. * "Merger reserve" represents the excess over nominal value of the fair consideration given, by way of issue of equity shares, for investment in subsidiary companies. * "Exchange translation reserve" represents the differences arising from translation of investments in overseas subsidiaries. * "Profit and loss account" represents retained profits and losses. Foreign currencies Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the balance sheet date. Non-monetary items that are measured at historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Any exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were initially recorded are recognised in the profit & loss account in the period in which they arise. Exchange differences on non-monetary items are recognised in the statement of total recognised gains and losses and are taken to the exchange translation reserve, otherwise such gains and losses are recognised in the income statement. The assets and liabilities in the financial statements of foreign subsidiaries and related goodwill are translated at the rate of exchange ruling at the balance sheet date. Income and expenses are translated at the average of exchange rates in force at the end of each month of the reporting period. On disposal of a foreign operation the cumulative translation differences (including, if applicable, gains and losses on related hedges) are transferred to the income statement as part of the gain or loss on disposal. The Group has taken advantage of the exemption in IFRS 1 and has deemed cumulative translation differences for all foreign operations to be nil at the date of transition to IFRS. The gain or loss on disposal of these operations excludes translation differences that arose before the date of transition to IFRS and includes later translation differences. Use of accounting estimates and judgements Many of the amounts included in the financial statements involve the use of judgement and/or estimation. These judgements and estimates are based on management's best knowledge of the relevant facts and circumstances, having regard to prior experience, but actual results may differ from the amounts included in the financial statements. Information about such judgements and estimation is contained in the accounting policies and/or the notes to the financial statements and the key areas are summarised below: Judgements in applying accounting policies: a) Capitalisation of development costs requires analysis of the technical feasibility and commercial viability of the project. b) Assessment of the impairment of assets is a judgement based on analysis of the likely future cash flows from the relevant income generating unit and an estimate of value in use. c) The Directors must judge whether future profitability is likely in making the decision whether or not to create a deferred tax asset. d) Identification of functional currencies requires analysis of the economic environments of the subsidiaries of the Group and the selection of the presentational currency must reflect the requirements of the users of those statements. Sources of estimation uncertainty: a) Depreciation rates are based on estimates of the useful lives and residual values of the assets involved. b) Estimates of future profitability are required for the decision whether or not to create a deferred tax asset. c) Estimates are required as to asset carrying values and impairment charges. CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY Called up Share based Share Exchange Profit share Convertible compensation premium Merger translation & Loss Total capital debt reserve account reserve Reserve Account equity Balances as at 30/06/2006 4,970,348 257,250 100,925 1,537,542 2,999,768 - 19,703 -4,406,858 5,439,272 Changes in equity in first half 2006/07 Loss for year and differences on foreign currency investments - 11,300 - 892,868 - 904,168 Share based compensation 17,724 - 17,724 Issue of shares and related costs 481,138 75,000 556,138 Reserve transfers - 103,269 103,269 - Balances as at 31/12/2006 5,451,486 257,250 118,649 1,612,542 2,896,499 - 31,003 - 5,196,457 5,108,966 Changes in equity in second half 2006/07 Loss for year and differences 94,819 - 2,814,189 - 2,719,370 on foreign currency investments - Issue of convertible debt 48,750 48,750 Share based compensation 4,966 4,966 Issue of shares and related costs 500,000 - 25,000 475,000 Reserve transfers - 1,586,313 1,586,313 - Balances as at 30/06/2007 5,951,486 306,000 123,615 1,587,542 1,310,186 63,816 - 6,424,333 2,918,312 Changes in equity in first half 2007/08 Loss for year and differences on foreign currency investments - 102,644 - 515,069 - 617,713 Issue of convertible debt - Reserve transfers - 103,219 103,219 - Balances as at 30/06/2007 5,951,486 306,000 123,615 1,587,542 1,206,967 - 38,828 - 6,836,183 2,300,599 RECONCILIATION OF INCOME STATEMENT FOR THE SIX MONTHS ENDED 31 DECEMBER 2006 Unaudited IFRS UK GAAP Adjustment IFRS £ £ £ Revenues 6,495 - 6,495 Admin expenses - 898,836 - 17,724 - 916,560 Rent 22,944 22,944 Operating loss - 869,397 - 17,724 - 887,121 Net interest - 5,154 - 5,154 Loss before tax - 874,551 - 17,724 - 892,275 Tax - 593 - 593 Loss after tax - 875,144 - 17,724 - 892,868 RECONCILIATION OF INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2007 Unaudited IFRS UK GAAP Adjustment IFRS £ £ £ Revenues 79,146 79,146 Admin expenses - 2,648,227 - 1,250,000 - 3,898,227 Rent 48,148 48,148 Operating loss - 2,520,933 - 1,250,000 - 3,770,933 Net interest - 5,904 - 5,904 Loss before tax - 2,526,837 - 1,250,000 - 3,776,837 Tax 69,780 69,780 Loss after tax - 2,457,057 - 1,250,000 - 3,707,057 RECONCILIATION OF EQUITY AS AT 1 JULY 2006 Unaudited IFRS UK GAAP Adjustment IFRS £ £ £ Non-current assets Intangible assets Goodwill 5,113,786 5,113,786 Patents 167,576 167,576 5,281,362 - 5,281,362 Tangible assets 192,637 192,637 5,473,999 - 5,473,999 Current assets Inventories 20,965 20,965 Trade and other receivables 167,820 167,820 Cash and cash equivalents 297,674 297,674 486,459 - 486,459 Trade and other payables - 520,753 - 520,753 Net current (liabilities) - 34,294 - - 34,294 Total assets less current liabilities 5,439,705 - 5,439,705 Non-current liabilities - 433 - 433 Net assets 5,439,272 - 5,439,272 Equity Called up share capital 4,970,348 4,970,348 Convertible debt 257,250 257,250 Share based compensation reserve 100,925 - 100,925 Share premium account 1,537,542 1,537,542 Merger reserve 2,999,768 2,999,768 Exchange translation reserve - 19,703 -19,703 Profit and loss account - 4,406,858 - - 4,406,858 Total equity 5,439,272 - 5,439,272 RECONCILIATION OF EQUITY AS AT 31 DECEMBER 2006 IFRS Unaudited UK GAAP Adjustment IFRS £ £ £ Non-current assets Intangible assets Goodwill 4,928,645 4,928,645 Patents 154,972 154,972 5,083,617 - 5,083,617 Tangible assets 177,241 177,241 5,260,858 - 5,260,858 Current assets Inventories 20,965 20,965 Trade and other receivables 140,000 140,000 Cash and cash equivalents 139,909 139,909 300,874 - 300,874 Trade and other payables - 452,333 - 452,333 Net current (liabilities) - 151,459 - - 151,459 Total assets less current liabilities 5,109,399 - 5,109,399 Non-current liabilities - 433 - 433 Net assets 5,108,966 - 5,108,966 Equity Called up share capital 5,451,486 5,451,486 Convertible debt 257,250 257,250 Share based compensation reserve 100,925 17,724 118,649 Share premium account 1,612,542 1,612,542 Merger reserve 2,896,499 2,896,499 Exchange translation reserve - 31,003 - 31,003 Profit and loss account - 5,178,733 - 17,724 - 5,196,457 Total equity 5,108,966 - 5,108,966 RECONCILIATION OF EQUITY AS AT 30 JUNE 2007 IFRS Unaudited UK GAAP Adjustment IFRS £ £ £ Non-current assets Intangible assets Goodwill 3,917,024 - 1,250,000 2,667,024 Patents 106,405 106,405 4,023,429 - 1,250,000 2,773,429 Tangible assets 170,429 170,429 4,193,858 - 1,250,000 2,943,858 Current assets Inventories 16,563 16,563 Trade and other receivables 98,362 98,362 Cash and cash equivalents 188,474 188,474 303,399 - 303,399 Trade and other payables - 328,945 - 328,945 Net current (liabilities) - 25,546 - - 25,546 Total assets less current liabilities 4,168,312 - 1,250,000 2,918,312 Non-current liabilities - - Net assets 4,168,312 - 1,250,000 2,918,312 Equity Called up share capital 5,951,486 5,951,486 Convertible debt 306,000 306,000 Share based compensation reserve 123,615 - 123,615 Share premium account 1,587,542 1,587,542 Merger reserve 2,999,768 - 1,689,562 1,310,206 Exchange translation reserve 63,816 63,816 Profit and loss account - 6,863,915 439,562 - 6,424,353 Total equity 4,168,312 - 1,250,000 2,918,312 RECONCILIATION OF CONDENSED CONSOLIDATED INTERIM CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 31 DECEMBER 2006 Unaudited IFRS UK GAAP Adjustment IFRS £ £ £ Cash flows from operating activities Loss after tax - 875,144 - 17,724 - 892,868 Adjustment for exchange difference - 154,709 - 154,709 Depreciation and amortisation 32,292 32,292 Impairment of goodwill 185,141 185,141 Share based compensation 17,724 17,724 Change in inventories 2,906 2,906 Change in receivables 126,638 126,638 Change in payables - 68,420 - 68,420 Net interest 5,154 5,154 Income taxes charge / credit 593 593 Cash generated from operations - 745,550 - - 745,550 Interest paid - 9,236 - 9,236 Income taxes paid - - Income taxes received - - Net cash flow from operating activities - 754,786 - - 754,786 Cash flows from investing activities Purchase of intangible assets - 4,531 - 4,531 Purchase of property, plant and equipment - 354 - 354 Interest received 4,081 4,081 Net cash flow from investing activities - 804 - - 804 Cash flows from financing activities Proceeds from issue of shares 581,138 581,138 Share issue costs - 25,000 - 25,000 Proceeds from long-term borrowings 48,750 48,750 Payment of financial lease liabilities - 4,358 - 4,358 Net cash flow from financing activities 600,530 - 600,530 Net decrease in cash equivalents at end of period - 155,060 - - 155,060 Cash and cash equivalents at start of period 294,969 294,969 Cash and cash equivalents at end of period 139,909 - 139,909 RECONCILIATION OF CONDENSED CONSOLIDATED INTERIM CASH FLOW STATEMENT FOR THE TWELVE MONTHS ENDED 30 JUNE 2007 Unaudited IFRS UK GAAP Adjustment IFRS £ £ £ Cash flows from operating activities Loss after tax - 2,457,057 - 1,250,000 -3,707,057 Adjustment for exchange difference 78,832 78,832 Depreciation and amortisation 32,178 32,178 Impairment of goodwill 1,263,643 1,250,000 2,513,643 Share based compensation 22,690 - 22,690 Change in inventories 4,402 4,402 Change in receivables 68,799 68,799 Change in payables - 181,058 - 181,058 Net interest 5,904 5,904 Income taxes charge / credit - 69,780 - 69,780 Cash generated from operations - 1,231,447 - - 1, 231,447 Interest paid - 17,517 - 17,517 Income taxes paid - 2,875 - 2,875 Income taxes received 71,698 71,698 Net cash flow from operating activities - 1,180,141 - - 1,180,141 Cash flows from investing activities Purchase of intangible assets - 9,890 - 9,890 Purchase of property, plant and equipment - 1,103 - 1,103 Interest received 11,613 11,613 Net cash flow from investing activities 620 - 620 Cash flows from financing activities Proceeds from issue of shares 1,081,138 1,081,138 Share issue costs - 50,000 - 50,000 Proceeds from long-term borrowings 48,750 - 48,750 Payment of financial lease liabilities - 6,863 - 6,863 Net cash flow from financing activities 1,073,025 - 1,073,025 Net decrease in cash equivalents at end of period - 106,496 - - 106,496 Cash and cash equivalents at start of period 294,405 294,405 Cash and cash equivalents at end of period 187,909 187,909 Corporate information and advisers Directors John Kingston Pool Non-Executive Chairman Dr Colin Telfer Chief Executive Officer Prof Thomas Cotter Chief Scientific Officer Nicholas George Strong Finance Director Company Secretary Nicholas George Strong Registered Office 50 Broadway Westminster LONDON SW1H 0BL web: www.eirx.com email: info@eirx.com Nominated Adviser and Broker Grant Thornton UK LLP Registrars Capita Registrars Auditors Grant Thornton UK LLP Registered in England, Company No.4927339 Interim results will be circulated to Shareholders and copies of the announcement will be made available from the Company's registered office. Dealings permitted on Alternative Investment Market (AIM) of the London Stock Exchange. This information is provided by RNS The company news service from the London Stock Exchange END IR QVLFLVXBZBBZ
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