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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| 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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.015 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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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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