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Futura Medical PLC Preliminary Results for the year ended 31 Dec 2018

10/04/2019 7:00am

UK Regulatory (RNS & others)


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Futura Medical PLC

10 April 2019

 
 
 

THE INFORMATION CONTAINED IN THIS ANNOUNCEMENT IS DEEMED BY THE COMPANY TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER ARTICLE 7 OF REGULATION (EU) NO 596/2014 OF THE MAR. UPON PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INFORMATION IS CONSIDERED TO BE IN THE PUBLIC DOMAIN

10 April 2019

Futura Medical plc

("Futura" or "the Company")

Preliminary Results for the year ended 31 December 2018

Sustained Progress made in 2018

Futura Medical plc (AIM: FUM), the pharmaceutical company developing a portfolio of innovative products for sexual health and pain, based on its proprietary, transdermal DermaSys(R) drug delivery technology is pleased to announce its preliminary results for the year ended 31 December 2018.

Highlights

Operational highlights

-- Following an extensive strategic review which was announced in September 2018, Futura has focused on maximising value in its development pipeline and product portfolio addressing two large market categories, sexual health and pain. The lead priorities are MED2005, its innovative topical treatment for erectile dysfunction (ED), and its pain portfolio including TPR100, a topical non-steroidal anti-inflammatory drug. Futura's core objectives are to:

   -   complete the development of MED2005, currently in Phase 3 clinical trial, and 
   -   further realise value from the pain portfolio. 

-- In February 2018, Angela Hildreth joined Futura in the role of Finance Director, Chief Operating Officer and Board Director.

MED2005 - Topical glyceryl trinitrate (GTN) formulation for erectile dysfunction

-- Publication of positive Phase 2a, "FM53" data, in peer-reviewed Journal of Sexual Medicine in February 2018.

   --       First Phase 3 study, "FM57", commenced in October 2018. 

-- Positive results from pharmacokinetic ("PK") study presented at the annual scientific meeting of the Sexual Medicine Society of North America (SMSNA) in November 2018, demonstrating safety and dose related absorption.

-- First advisory panel meeting held with US key opinion leaders (KOLs) at the SMSNA meeting in November 2018. KOL reaction to the therapeutic potential for MED2005 in erectile dysfunction and its areas of differentiation as well as the ongoing clinical programme was highly positive.

MED2005 - Post year end

-- Data presented at the European Society of Sexual Medicine (ESSM) congress in February 2019, including:

   -   Positive Phase 2a and Pharmacokinetic data 

- In vitro impedance testing (concluded late 2018) which further supports the safety profile for male patients and their sexual partners.

-- Second advisory panel held at ESSM in February 2019 with prominent European KOLs to discuss data and the on-going development and educational programme. As with US KOL peers, physician reaction was very positive.

-- R&D event held in London in February 2019 including a presentation from Professor David Ralph, a world leading expert in erectile dysfunction and male infertility and Chair of the Futura Medical European Advisory Panel.

TPR100 - Topical non-steroidal anti-inflammatory for the pain and inflammation associated with sprains, strains and bruises and soft tissue rheumatism

-- Marketing authorisation application by UK commercialisation partner, Thornton & Ross (a subsidiary of STADA AG) submitted to the UK Medicines and Healthcare products Regulatory Agency (MHRA) in July 2018.

-- Ongoing commercial discussions with several potential distribution partners for other territories. Any further licensing deals are expected to be after UK regulatory approval.

TPR100 - Post year end

-- Supporting Thornton & Ross on responses to initial MHRA feedback received in February 2019.

Financial highlights

-- GBP5.85 million raised in November 2018 to progress MED2005 through Phase 3 "FM57" study in erectile dysfunction.

   --       GBP5.89 million net loss in the period (31 Dec 2017: net loss GBP3.90 million). 
   --       Cash resources of GBP9.16 million at 31 December 2018 (31 December 2017: GBP8.36 million). 

James Barder, Chief Executive of Futura, commented: "2018 was a significant year of progress for Futura, with the commencement of enrolment of patients into our first Phase 3 trial with MED2005. The trial is progressing as planned, and we look forward to Phase 3 headline data by end 2019. During the year, in parallel to the clinical studies, our team has engaged with a number of eminent experts in the field of erectile dysfunction in both Europe and the US to discuss and gain valuable and positive feedback on the on-going development and educational programme for MED2005.

The funding secured in 2018 ensures that Futura has sufficient resources to complete and deliver the Phase 3 top line data by the end of 2019 - which the Board believes will be a major value inflection point for the Company."

Analyst meeting and webcast

The Executive Team will host a presentation at 10am (BST), 10 April 2019, for analysts at the office of N+1 Singer at 1 Bartholomew Lane, London EC2N 2AX.

Following the results meeting, a webcast of the presentation will also be made available within the Investor Centre section of the Futura company website at www.futuramedical.com.

For further information please contact:

Futura Medical plc

James Barder, Chief Executive

Angela Hildreth, Finance Director and COO

Email: Investor.relations@futuramedical.com

Tel: +44 (0) 1483 685 670

Nominated Adviser and Broker:

N+1 Singer

Aubrey Powell/ Ben Farrow (Corporate Finance)

Mia Gardner / Tom Salvesen (Corporate Broking)

Tel: +44 (0) 20 7496 3000

For media enquiries please contact:

Optimum Strategic Communications

Mary Clark/ Hollie Vile/ Ellie Blackwell

Email: futuramedical@optimumcomms.com

Tel: +44 (0) 203 950 9144

Notes to Editors:

About Futura Medical plc

Futura Medical plc (AIM: FUM), is a pharmaceutical company developing a portfolio of innovative products based on its proprietary, transdermal DermaSys(R) drug delivery technology. These products are optimised for clinical efficacy, safety, administration and patient convenience and are developed for the prescription and consumer healthcare markets as appropriate. Current therapeutic areas are sexual health, including erectile dysfunction, and pain relief. Development and commercialisation strategies are designed to maximise product differentiation and value creation whilst minimising risk.

Futura is based in Guildford, Surrey, and its shares trade on the AIM market of the London Stock Exchange. www.futuramedical.com

Chairman's Statement

2018 - a significant year for Futura Medical

Following an extensive strategic review which was announced in September 2018, Futura's strategy as an innovative R&D company, is to leverage its Dermasys(R) transdermal delivery technology to bring innovative products to market in sexual health and pain, bringing new treatment options to patients particularly in areas of significant unmet need. Erectile dysfunction (ED) is one such underserved area. It disrupts the lives of at least 1 in 5 men globally, affecting the sexual and emotional health of around 27 million men and their partners in the USA alone. There has been little innovation in ED treatments for over ten years and many patients continue to suffer dissatisfaction from existing treatments especially those looking for a fast acting treatment that can form part of sexual foreplay or those patients that are contraindicated from using existing therapies. Many patients do not just suffer from ED itself. They also suffer the debilitating toll it takes on quality of life, relationships and overall wellbeing for both themselves and their partners. Futura is therefore excited to be taking MED2005, its topical gel for ED through late stage clinical trials in order to make a significant difference in helping ED patients and their partners worldwide. With an independently assessed market potential of over $1 billion as a prescription treatment and subsequently over the counter (OTC) treatment, MED2005 is Futura's lead asset and a key value creation opportunity.

2018 was a busy year for execution. I would like to thank Futura's shareholders for their support and Futura's employees for their unstinting efforts in driving forward the progress of the Company, particularly the extensive preclinical and clinical development programme for MED2005, which requires an immense amount of detailed science, logistical and regulatory work, together with the outsourcing partners used as part of Futura's lean operating model. Futura has had dialogue with and taken the advice of industry stakeholders including potential licensing partners, US and EU regulators and leading experts in the field of sexual medicine, in designing the MED2005 clinical programme and we look forward to headline clinical data from the first Phase 3 "FM57" study by the end of 2019.

Finally, in February 2018, Derek Martin resigned from Futura and Angela Hildreth joined the Company as Finance Director and Chief Operating Officer. On behalf of the Board, I would like to reiterate our thanks to Derek for his contribution to the development of the Company during almost 10 years as Finance Director and to welcome Angela.

Robust governance and strategy

Governance and compliance continues to be a key focus for the Board. Board responsibilities, tasks and achievements for 2018 are described in detail in the Corporate Governance report of the 2018 Annual Report. The Board is focused on optimising Futura's strategies to capitalise on the Dermasys(R) transdermal technology product portfolio in sexual health and pain, in particular the opportunity for MED2005 in ED. The Board concentrates on ensuring management has the right resources and capabilities to succeed both now and in the future. Futura aims to be a source of new products for the consumer-oriented pharmaceutical and medical industries, in areas under-served by current treatment options and where innovation has stagnated to date. We are confident that Futura will sustain the entrepreneurial and innovative culture it has created, as it moves its Dermasys(R) based products forward in development and commercialisation.

John Clarke

Chairman

Chief Executive's Review

As an innovative, specialist, R&D company it is our strategy to improve the lives of patients, particularly where they are dissatisfied with existing treatments. Meeting this objective goes hand in hand with value creation, which we seek to maximise by partnering at key inflection points. Our current focus is on sexual health and pain where we have found opportunities to leverage our Dermasys(R) technology to develop new products that solve clinically meaningful problems for patients.

This year has been an important 12 months of progress for Futura. 2018 saw the Company undertake an extensive review of its pipeline and product portfolio and it was determined by the Board that a more concentrated R&D focus on MED2005, as well as its pain relief gels, will best enable us to achieve our aims.

MED2005 - topical glyceryl trinitrate (GTN) formulation for erectile dysfunction

Supportive pharmacokinetic clinical data

Throughout 2018, Futura has continued to generate additional, positive results from pharmacokinetic ("PK") studies with MED2005. Data, which was also presented in November at the annual scientific meeting of the Sexual Medicine Society of North America (SMSNA), give the Company confidence in the safety and potential efficacy of MED2005, including at the higher doses now being studied in Phase 3. They will add to and strengthen the data packages Futura intends to file with regulators when seeking approval.

In the recent PK study we demonstrated a dose related absorption profile and good bioavailability of glyceryl trinitrate (GTN) when administered at doses 0.2%, 0.4%, and 0.6% GTN. This supports the Company's strong belief that higher doses of MED2005 should improve efficacy. The acceptable tolerance profile of all dose forms of MED2005 tested also allowed inclusion of these three higher doses within the Phase 3 study.

MED2005 was shown to lead to a rapid rate of GTN absorption with first detection in blood plasma in 4-5 minutes, reaching peak levels in the bloodstream within 10-12 minutes for all doses. These findings are consistent with a product that has shown a rapid onset of action in the Phase 2a "FM53" study. It was shown that there is a low GTN residue on the penis at 5 minutes even with a high, 0.6% GTN MED2005 dose. This provides reassurance that there is likely to be minimal risk in transference of GTN to the sexual partner during intercourse, even at the higher doses. This finding also supports the side effect profile seen in the Phase 2a "FM53" study where only four, mild side effects were seen in sexual partners out of 1,003 sexual intercourse attempts.

In February 2018, a peer reviewed paper was published in the Journal of Sexual Medicine detailing the Phase 2a, "FM53" study of MED2005 in ED. The study achieved its primary clinical endpoint and demonstrated efficacy, safety and a rapid speed of onset in a 0.2% GTN dose with MED2005. Positive outcomes were particularly promising in patients with mild and mild to moderate ED at this lowest dose of MED2005. We have confidence that the higher doses of 0.4% and 0.6% being studied in addition to the 0.2% dose in the first Phase 3 will show improved efficacy across patients with mild, mild to moderate and moderate ED. This represents the large majority of ED sufferers throughout the world and the largest commercial opportunity. Severe ED patients, who often have the most medical complications as well as being the oldest men, are a difficult patient cohort to treat. This is further evidenced by the limited success of the existing ED treatments. We therefore remain cautious over the potential benefit MED2005 will bring to severe patients. The first Phase 3 study will include patients of all ED severities as was the case in the Phase 2a study FM53, the analysis of the primary endpoints will pool data across mild, moderate and severe ED. Therefore if reduced efficacy in severe ED patients occurs, it is not expected to compromise the overall success of the study.

The publication of the Phase 2a clinical data in the leading, peer-reviewed scientific Journal of Sexual Medicine underlines the robustness of our previously reported study and demonstrates the level of scientific interest in MED2005.

MED2005 Phase 3 clinical programme underway

MED2005's first Phase 3 study, "FM57" commenced in October 2018. The study protocol has incorporated the Company's learnings from FM53, feedback received from potential commercial partners and also US and European regulatory agencies to optimise the commercial value as well as maximise the chances of clinical success and thereby regulatory approval.

This 1,000 patient study for the treatment of mild, moderate or severe ED includes approximately 60 centres across Central and Eastern Europe to ensure patients are recruited as quickly and efficiently as possible. Regulatory and ethics clearance to conduct FM57 has been received across all nine countries and the target of headline data by the end of 2019 remains on track.

Planning for a second, confirmatory Phase 3 study for MED2005 has been undertaken, again after extensive dialogue with regulators and our KOLs in the field of ED. This study will incorporate a US patient cohort which is expected to enable regulatory filing in the USA. This study is expected to be informed by the first Phase 3 and therefore start after end of the first Phase 3 study. We believe MED2005 has the required efficacy, speed of onset and favourable safety profile consistent with use as a prescription therapy as well as the potential to be an over-the-counter therapy as well.

Discussions continue with a number of interested commercial partners for the out-licensing of MED2005 although the Company's main focus is to deliver Phase 3 headline data by the end of 2019 to facilitate these ongoing discussions.

MED2005 safety profile in female partners

At the European Society of Sexual Medicine (ESSM) congress in Slovenia, 14-16 February 2019, Futura presented data which indicates that MED2005 will have a favourable safety profile in female partners. These data included observational data from the Phase 2a study where only four adverse events were noted in females out of over 1,000 intercourse events; penile swabbing data obtained from the PK Study which indicated that very low amounts of MED2005 remain on the penis after five minutes; and supporting evidence regarding the topical safety of MED2005, based on in vitro impedance testing concluded in late 2018. Results from the latter showed no significant difference in impedance between MED2005 and two commercially available lubricants used for sexual intercourse. These data is strongly suggestive that there is likely to be no increased risk of sexually transmitted infections being transferred to sexual partners, as a result of disruption to local tissue, when using MED2005 compared to the two lubricants also tested.

Education and outreach on erectile dysfunction and MED2005

Futura held its first advisory panel meeting with US experts at the SMSNA meeting in November 2018. The advisory panel were unanimous in their view that there has been little recent credible innovation in the treatment of ED and were therefore excited by the PK and Phase 2a "FM53" findings presented, which demonstrate the potential of MED2005 as both a topical and fast-acting erectile dysfunction treatment, key differentiators to other ED products on the market.

On 11 February 2019, Futura held a Research & Development Day in London for analysts and institutional investors. The event was well received with positive feedback and provided an opportunity to hear first-hand from Professor David Ralph, a prominent world leading expert in erectile dysfunction and male infertility and Chair of the Futura Medical European advisory panel, on the significant negative effect ED has on the quality of life, relationships and overall wellbeing of ED patients and their partners. The event also provided an opportunity for the Futura team to describe the Company's R&D strategy with a focus on its DermaSys(R) drug delivery technology and lead product MED2005's robust and extensive development programme. A webcast of the event is available on the Futura website.

Following the successful US advisory panel meeting at SMSNA in November 2018, a second advisory panel was held at ESSM in February 2019 to discuss MED2005 data and the on-going development and educational programme for MED2005 with prominent European KOLs. We were delighted that the feedback of this second EU advisory meeting very much echoed the sentiment and excitement seen at the first US advisory meeting. Further meetings are planned to update and increase awareness of the potential innovation that MED2005 brings within the treatment arena of ED.

TPR100 - topical non-steroidal anti-inflammatory for the pain and inflammation associated with sprains, strains and bruises and soft tissue rheumatism

In July 2018, Thornton & Ross, a subsidiary of STADA AG, Futura's UK commercialisation partner for TPR100, filed a marketing authorisation application for the product with the UK Medicines and Healthcare products Regulatory Agency (MHRA). In February 2019, the MHRA responded with some questions requiring some additional laboratory studies which are in the process of being conducted in order to address the MHRA's questions and allow the submission to progress and complete the review process. Futura has ongoing commercial discussions with several potential distribution partners for territories outside of the UK. Finalisation of such regional licensing deals is expected to be after UK regulatory approval.

CSD500 - condom containing the erectogenic Zanifil(R) gel

In September 2018, Futura received approval for a two-year shelf life for CSD500 for its European contract condom manufacturer. This milestone provides the company with an opportunity to focus its R&D resource fully on the far greater potential of its leading asset, MED2005.

As an innovative specialist R&D company, Futura does not have the marketing or regulatory medical device resource available to support the day-to-day requirements in a growing compliance-driven market and is in discussions with potential partners to assume these obligations. Futura expects to still benefit from the Intellectual Property of CSD500 through potential royalties, but the immediate potential for substantial royalties is low in the absence of a large global brand 'carrier' to take the product forward as previously advised. The Company will continue to explore national, multi-territory and regional agreements where the opportunities arise. The Company is expected to benefit from annual cost savings of approximately GBP400k in the event that it no longer maintains regulatory clearance itself for CSD500 as a medical device.

Corporate & Financial

In February 2018, Angela Hildreth joined Futura in the role of Finance Director, Chief Operating Officer and Board Director adding further experience to the executive team gained in financial, operational and strategic roles in healthcare and other industries and including the AIM market and development-stage companies.

The GBP5.85 million fundraising in November provided a new foundation to deliver additional value to our shareholders by progressing the development of MED2005 through the first Phase 3 study, maximising the commercial opportunity.

Outlook

Futura is now in a position to build value by progressing the development of MED2005 through its planned Phase 3 studies and we look forward to headline data towards the end of 2019 after which we will examine the possibility of an accelerated European filing strategy depending on the strength of the data, including at the higher GTN doses for MED2005. We are excited to be moving closer to bringing an innovative, highly differentiated ED product to market that could help the many ED patients whose needs are not met by current treatments.

James Barder

Chief Executive

Financial Review

As outlined in the Chief Executive Officer's Statement, during the year, we continued to focus our financial resources on the development programme for our lead asset MED2005. Spend on research and development activities continued to grow with other central and administration costs remaining broadly the same as the prior year. November 2018 also saw gross funds raised of GBP5.85 million through the combination of subscription for shares through PrimaryBid and the Open Offer; and institutional placing.

Research and development expenditure

In July 2018 we commenced the first MED2005 "FM57" Phase 3 study across approximately 60 centres in Central and Eastern Europe with patients commencing recruitment in October 2018. FM57 costs together with additional costs relating to completion of the FM58 PK Study earlier in the year, and expected manufacturing stability and validation activities resulted in research and development expenses increasing by GBP1.9 million to GBP6.0 million for 2018 (2017: GBP4.1 million) which were in line with expectations.

Following the strategic review in the year, there has also been a focus on the reduction in costs relating to CSD500, an erectogenic condom, with limited costs relating to CSD500 expected in 2019.

There was no capitalisation of any Research and Development costs in 2018.

Administrative expenses

General and administration expenses increased slightly to GBP1.23 million (2017: GBP1.12 million). This reflects the continued focus on tight control of central costs with research and development activities out-sourced when required.

Revenue

No revenue was recorded in the year. The Company resolved to focus its financial and human resources on late stage clinical development of its lead asset MED2005 to accelerate progress towards achieving a significant, continuous revenue stream within a few years.

Tax

It is expected that an R&D Tax Credit of GBP1.36 million will be claimed in respect of 2018 and the cash refund is expected to be received in the second half of 2019 from HMRC.

Loss per share

The basic loss per share for 2018 was GBP4.46 (2017: GBP3.23). Details of the loss per share calculations are provided in Note 11 to the accounts.

Cash Balance

Cash balance at the end of 2018 was GBP9.16 million (2017: GBP8.36 million). Cash burn during the year was GBP5.63 million (2017: GBP5.02 million) primarily in relation to MED2005 research and development activities. Net funding of GBP5.48 million was raised in the year, resulting in a net cash inflow of GBP0.80 million. Futura is fully funded to deliver the top line data from the first Phase 3 study and will manage its funding strategy appropriately to what is expected to be a material inflection point for the Company.

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2018

 
                                                                    Year ended              Year ended 
                                                                   31 December             31 December 
                                                                          2018                    2017 
                                                 Notes                     GBP                     GBP 
 Revenue                                         2,5                         -               362,727 
 Research and development costs                                    (6,038,941)             (4,100,453) 
 Administrative costs                                              (1,227,547)             (1,118,218) 
 Operating loss                                   6                (7,266,488)             (4,855,944) 
 Finance income                                   9                     27,576                19,316 
 Loss before tax                                                   (7,238,912)             (4,836,628) 
 Taxation recoverable                             10                 1,358,336               936,344 
---------------------------------------------  -------  ----------------------  ---------------------- 
 Loss for the year being total comprehensive 
  loss attributable to owners of the 
  parent company                                                   (5,880,576)             (3,900,284) 
---------------------------------------------  -------  ----------------------  ---------------------- 
 
 Basic and diluted loss per share (pence)         11              (4.46 pence)            (3.23 pence) 
---------------------------------------------  -------  ----------------------  ---------------------- 
 

Consolidated Statement of Changes in Equity

For the year ended 31 December 2018

 
                                    Share                   Share             Merger              Retained                Total 
                                  Capital                 Premium            Reserve                Losses               Equity 
                Notes                 GBP                     GBP                GBP                   GBP                  GBP 
--------------  ----- 
At 1 January 
 2017                             240,290              44,451,745          1,152,165          (33,260,172)           12,584,028 
--------------  -----  ------------------  ----------------------  -----------------  --------------------  ------------------- 
Total 
 comprehensive 
 loss for the 
 year                                   -                       -                  -       (3,900,284)              (3,900,284) 
Share-based 
 payment         19                     -                       -                  -               201,261              201,261 
Shares issued 
 during 
 the year        18                 1,102                 219,651                  -                     -              220,753 
At 31 December 
 2017                             241,392              44,671,396          1,152,165       (36,959,195)               9,105,758 
--------------  -----  ------------------  ----------------------  -----------------  --------------------  ------------------- 
Total 
 comprehensive 
 loss for the 
 year                                   -                       -                  -           (5,880,576)          (5,880,576) 
Share-based 
 payment         19                     -                       -                  -               146,833              146,833 
Shares issued 
 during 
 the year        18               167,775               5,312,464                  -                     -            5,480,239 
At 31 December 
 2018                             409,167              49,983,860          1,152,165       (42,692,938)               8,852,254 
--------------  -----  ------------------  ----------------------  -----------------  --------------------  ------------------- 
 

Merger reserve represents the reserve arising on the acquisition of Futura Medical Developments Limited in 2001 via a share for share exchange accounted for as a group reconstruction previously using merger accounting under UK GAAP.

Retained losses represent all other net gains and losses not recognised elsewhere.

Share premium represents amounts subscribed for share capital in excess of nominal value, less the related costs of share issues.

Consolidated Statement of Financial Position

As at 31 December 2018

 
                                                         As at             As at 
                                                   31 December       31 December 
                                                          2018              2017 
                                       Notes               GBP               GBP 
Assets 
Non-current assets 
Plant and equipment                     12              47,473            63,517 
Total non-current assets                                47,473            63,517 
-------------------------------------  -----  ----------------  ---------------- 
 
Current assets 
Inventories                             13               7,780            70,413 
Trade and other receivables             15             306,408           181,076 
Taxation Recoverable                    10           1,358,192           927,247 
Cash and cash equivalents               16           9,157,916         8,362,646 
-------------------------------------  -----  ----------------  ---------------- 
Total current assets                                10,830,296         9,541,382 
-------------------------------------  -----  ----------------  ---------------- 
 
Liabilities 
Current liabilities 
Trade and other payables                17         (2,025,515)         (499,141) 
-------------------------------------  -----  ----------------  ---------------- 
Total liabilities                                  (2,025,515)         (499,141) 
-------------------------------------  -----  ----------------  ---------------- 
Total net assets/(liabilities)                       8,852,254         9,105,758 
-------------------------------------  -----  ----------------  ---------------- 
 
Capital and reserves attributable to 
 owners of the parent company 
Share capital                           18             409,167           241,392 
Share premium                                       49,983,860        44,671,396 
Merger reserve                                       1,152,165         1,152,165 
Retained losses                                   (42,692,938)      (36,959,195) 
-------------------------------------  -----  ----------------  ---------------- 
Total equity                                         8,852,254         9,105,758 
-------------------------------------  -----  ----------------  ---------------- 
 

Consolidated Statement of Cash Flows

For the year ended 31 December 2018

 
                                                        Notes          Year ended           Year ended 
                                                                      31 December          31 December 
                                                                             2018                 2017 
                                                                              GBP                  GBP 
Cash flows from operating activities 
Loss before tax                                                       (7,238,912)          (4,836,628) 
Adjustments for: 
Depreciation                                             12                19,850               13,428 
Loss on disposal of fixed assets                                              703                    - 
Finance income                                             9             (27,576)             (19,316) 
Share-based payment charge                               19               146,833              201,261 
-----------------------------------------------------  ------  ------------------  ------------------- 
Cash flows from operating activities before changes 
 in working capital                                                   (7,099,102)          (4,641,255) 
-----------------------------------------------------  ------  ------------------  ------------------- 
 
Decrease in inventories                                  13                62,633               13,228 
(Increase) / decrease in trade and other receivables                    (125,332)             (42,087) 
(Decrease) / increase in trade and other payables        17             1,526,375            (356,036) 
-----------------------------------------------------  ------  ------------------  ------------------- 
Cash used in operations                                               (5,635,426)          (5,026,150) 
-----------------------------------------------------  ------  ------------------  ------------------- 
 
Income tax received                                                       927,391              851,343 
-----------------------------------------------------  ------  ------------------  ------------------- 
Net cash used in operating activities                                 (4,708,035)          (4,174,807) 
-----------------------------------------------------  ------  ------------------  ------------------- 
 
Cash flows from investing activities 
Purchase of plant and equipment                          12               (4,510)             (55,594) 
Interest received                                                          27,576               19,316 
Cash generated by/(used in) investing activities                           23,066             (36,278) 
-----------------------------------------------------  ------  ------------------  ------------------- 
 
Cash flows from financing activities 
Issue of ordinary shares                                  18            5,943,421              220,753 
Expenses paid in connection with share issue                            (463,182)                    - 
Cash generated by financing activities                                  5,480,239              220,753 
-----------------------------------------------------  ------  ------------------  ------------------- 
 
(Decrease) / increase in cash and cash equivalents                        795,270          (3,990,332) 
Cash and cash equivalents at beginning of year                          8,362,646           12,352,978 
-----------------------------------------------------  ------  ------------------  ------------------- 
Cash and cash equivalents at end of year                 16             9,157,916            8,362,646 
-----------------------------------------------------  ------  ------------------  ------------------- 
 

Notes (continued)

For the year ended 31 December 2018

1. Corporate Information

Futura Medical plc (the "Company") is a public limited company incorporated and domiciled in the United Kingdom and whose shares are publicly traded on the AIM Market of the London Stock Exchange. The registered office is located at Surrey Technology Centre, 40 Occam Road, Guildford, Surrey, GU2 7YG.

These Group financial statements consolidate those of the Company and its subsidiaries (together referred to as "the Group" and individually as "Group entities") for the year ended 31 December 2018.

The consolidated financial statements of the Company and the Group for the year ended 31 December 2018 were authorised for issue by the Board of Directors on 09 April 2019.

The Group is principally engaged in the development of pharmaceutical and healthcare products.

2. Accounting policies

2.1 Basis of preparation

The Group's statutory accounts have been audited for the year ended 31 December 2018 and though the audit opinion was unmodified the auditor drew attention to a material uncertainty related to going concern. This material uncertainty was in relation to the Group's ability to access additional sources of finance which may be dependent upon the outcome of the MED2005 trial.

The consolidated financial statements have been prepared on a going concern basis and under the historical cost convention and have been prepared and approved by the Directors in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union. The principal accounting policies applied in the preparation of the consolidated financial information are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.

The consolidated financial statements are presented in sterling.

2.2 Going Concern

The financial statements have been prepared on a going concern basis after considering the year end cash position and reviewing budgets and cash flow forecasts for the foreseeable future which covers a period of at least 12 months from the date of approval of these financial statements. The Group has reported a loss after tax for the year of GBP5,880,576 (2017: GBP3,900.284). The Group has net current assets at 31 December 2018 of GBP8,804,780 (2017: GBP9,042,241).

The Directors have prepared a detailed forecast for a period of three years from 31 December 2018 based on current plans. The forecast assumes both committed costs and future planned discretionary

2. Accounting policies (continued)

spend and the Directors consider that they will have sufficient cash resources to settle all committed costs and discretionary costs for at least 12 months from the date of approval of these financial statements. The forecasts also assume that the group will be able to raise additional sources of finance to fund future expenditure if the results of the MED2005 trial are positive.

It should be noted that the forecasts do not include any cash receipts from future MED2005 out-licensing agreements or other forms of funding that the Directors are actively considering, and which the Directors believe, from previous and ongoing discussions will result in material cashflow into the business during the detailed forecast period of three years from 31 December 2018.

The Directors continue to monitor the levels of discretionary spend and have the ability to delay certain costs, such as Research and Development expenditure, in the event of unforeseen cash constraints or delayed cash receipts.

The Directors have also considered a scenario where the phase 3 results of the MED2005 trial are not successful, although this scenario is considered to be highly unlikely. In this scenario the Directors will have sufficient cash to meet and settle all the committed expenditure and have sufficient cash to re-align their business strategy and continue investment in other products within their pipeline. The cash balances will be sufficient to cover at least 12 months from the date of signing the financial statements.

The Directors, having reviewed the Group's and Company's budgets and plans, taking account of reasonably possible changes in trading performance, have a reasonable expectation that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future (being at least 12 months from the date of approval of these financial statements) and that it is therefore appropriate to continue to adopt the going concern basis in preparing the financial statements.

Based on the above, the Directors believe that it remains appropriate to prepare the financial statements on a going concern basis. However, they acknowledge there exists a material uncertainty over the Group's ability to access additional sources of finance which may be dependent upon the outcome of the MED2005 trial - that may cast significant doubt on the Group's and Company's ability to continue as a going concern and, therefore, to continue realising its assets and discharging its liabilities in the normal course of business. The financial statements do not include any adjustments that would result from the basis of preparation being inappropriate.

2.3 Standards, amendments and interpretation to existing standards

The Directors have considered all new standards, amendments to standards and interpretations which are mandatory for the first time for the financial year beginning 1 January 2018. From 1 January 2018 the Group adopted IFRS 15 Revenue from Contracts with Customers. The Group has also adopted

2. Accounting policies (continued)

IFRS 9 Financial Instruments. There are no other new or amended standards which impact the Group in the period.

The Group is continuing to assess the impact of IFRS 16 Leases. The Group has currently only engaged in short term leases which are outside the scope of IFRS 16 and therefore the Directors do not expect the adoption of IFRS 16 to have a material impact on the Group's consolidated statements.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 Revenue from contracts with customers deals with revenue recognition and establishes principles for reporting useful information to users of financial statements. The standard replaces IAS 18 Revenue.

Given the limited revenue in the periods prior to the transition and therefore minimal impact on the adoption of the standard on the accounts and, therefore on the users of the financial statements, the Group has elected to use the cumulative method meaning if applicable, comparative prior years would not be restated rather the cumulative effect of applying the new standard prior to periods to 31 December 2017 is recognised in the opening balance of retained earnings as at 1 January 2018. No adjustments have been required as a consequence of these standards' adoption, as the impact is immaterial.

IFRS 9 Financial Instruments

In the current period the Group has applied IFRS 9 Financial Instruments and no adjustments have been required as a consequence of these standards' adoption, as the impact is immaterial.

2.4 Revenue

IFRS 15 had no material impact on the financial statements of the group in the period as no revenue was generated. In the prior year, revenue was generated from non-refundable milestone payments and royalty income.

Non-refundable milestone payments from right-to-use licences is usually recognised at the point in time that the performance condition is satisfied which is when the licence agreement is signed by both parties as this is the date the customer can begin to use and benefit from the licence unless there is an expectation that the IP licensed requires further substantial work and whether the customer would benefit from and have access to such further work. If the licence allows the customer to be provided with access to IP which is expected to change over time, this implies control is transferred over time and therefore revenue would be recognised over time. If the IP is not expected to significantly change then control is transferred at a point in time and revenue will be recognised at the point the IP is transferred to the customer. The milestone payments received in the prior year were recognised when the licence was signed by both parties as there were no further performance conditions to satisfy and the IP was not expected to change.

2. Accounting policies (continued)

Royalty income relating to the sale by a licencee of licenced product is recognised in revenue when the title of goods is transferred to the licencee.

2.5 Leased assets

Leases, which contain terms whereby the Group does not assume substantially all the risks and rewards incidental to ownership of the leased item are classified as operating leases. Operating lease rentals are charged to the Consolidated Statement of Comprehensive Income on a straight-line basis over the lease term. The Group does not hold any assets under finance leases.

2.6 Intangible assets

Research and development ("R&D")

Expenditure incurred on the development of internally generated products is capitalised if it can be demonstrated that:

   --     it is technically feasible to develop the product for it to be sold; 
   --     adequate resources are available to complete the development; 
   --     there is an intention to complete and sell the product; 
   --     the Group is able to out-license or sell the product; 
   --     sale of the product will generate future economic benefits; and 
   --     expenditure on the project can be measured reliably. 

Capitalised development costs, including patents and trademarks, are amortised over the periods in which the Group expects to benefit from selling the products developed but not exceeding five years. The amortisation expense is included in R&D costs recognised in the Consolidated Statement of Comprehensive Income. The useful life and the value of the capitalised development cost are assessed for indicators of impairment at least annually. The value is written down immediately if impairment has occurred and the unimpaired cost amortised over the reduced useful life.

The Directors consider that the criteria to capitalise development expenditure are not yet met for CSD500 as the product has not yet commercially launched in at least one major market therefore commercial feasibility of the product is not yet certain. Currently no other products in development have been approved.

Development expenditure, not satisfying the above criteria, and expenditure on the research phase of internal projects are included in R&D costs recognised in the Consolidated Statement of Comprehensive Income as incurred.

2. Accounting policies (continued)

2.7 Plant and equipment

Plant and equipment is initially recognised at cost, and subsequently at cost less accumulated depreciation and any accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is charged to the Consolidated Statement of Comprehensive Income at rates calculated to write off the cost, less estimated residual value, of each asset on a straight-line basis over their estimated useful lives.

   Computer equipment                             2 - 5 years straight line 
                  Fixtures and fittings                               3 - 10 years straight line 

The assets' residual values and useful lives are determined by the Directors and reviewed and adjusted, if appropriate, at each Consolidated Statement of Financial Position date.

2.8 Impairment of non-financial assets

An impairment review is carried out for assets being amortised or depreciated when a change in market conditions and other circumstances indicate that the carrying value may not be recoverable. The recoverable amount is the higher of an asset's fair value less costs to sell and value-in-use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which they are separately identifiable cashflows.

2.9 Inventories

Inventories are consumable materials to be used in development and are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost includes materials, related contract manufacturing costs and other direct costs. Cost is calculated using the first in, first out method. Net realisable value is based on estimated selling price, less further costs expected to be incurred to completion and disposal.

A provision is recognised immediately in the Consolidated Statement of Comprehensive Income in respect of obsolete or defective items, where appropriate.

2.10 Financial instruments

IFRS 9 sets out requirements for measuring and recognising financial assets, financial liabilities and some contracts to buy or sell non-financial items. This standard replaces IAS 39 Financial Instruments and Measurement and has not had a material impact on the consolidated financial statements. Financial instruments comprise trade and other receivables, cash at bank and in hand, restricted cash, loans and borrowings, and trade and other payables.

Trade and Other receivables

Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method, less any impairment losses.

2. Accounting policies (continued)

Trade payables, other payables and other liabilities

Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method, less any impairment losses. The Group de-recognises financial liabilities when the Group's obligations are discharged, cancelled or expired.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances in the bank and short-term money market fund deposits.

2.11 Taxation

Income tax is recognised or provided at amounts expected to be recovered or to be paid using the tax rates and tax laws that have been enacted or substantively enacted at the Consolidated Statement of Financial Position date. R&D tax credits are recognised on an accruals basis and are included as an income tax credit under current assets.

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability on the Consolidated Statement of Financial Position date differs from its tax base, except for differences arising on:

-- the initial recognition of an asset or liability in a transaction which is not a business combination and which at the time of the transaction affects neither accounting profit nor taxable profit; and

-- investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profits will be available against which the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the Consolidated Statement of Financial Position date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered). Deferred tax balances are not discounted.

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:

   --      the same taxable group company; or 

2. Accounting policies (continued)

-- different group entities which intend to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, on each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

2.12 Foreign currency translation

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Consolidated Statement of Comprehensive Income in the period in which they arise.

2.13 Employee benefits

Defined contribution plans

The Group provides retirement benefits to all employees who wish to participate in defined contribution pension schemes. The assets of these schemes are held separately from those of the Group in independently administered funds. Contributions made by the Group are charged to the Consolidated Statement of Comprehensive Income in the period in which they become payable.

Accrued holiday pay

Provision is made at each Consolidated Statement of Financial Position date for holidays accrued but not taken, at applicable rates of salary. The expected cost of compensated short-term absence (holidays) is charged to the Consolidated Statement of Comprehensive Income on an accruals basis.

Share-based payment transactions

The Group operates an equity-settled share-based compensation plan. For all share options awarded to employees, and others providing similar services, the fair value of the share options at the date of grant is charged to the Consolidated Statement of Comprehensive Income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each Consolidated Statement of Financial Position date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of share options that eventually vest. There are no market vesting conditions. If the terms and conditions of share options are modified before they vest, the change in the fair value of the share options, measured immediately before and after the modification, is also charged to the Consolidated Statement of Comprehensive Income over the remaining vesting period. The proceeds received when share options are exercised, net of any directly attributable transaction costs, are credited to share capital (nominal value) and the remaining balance to share premium. All employee share option holders enter into an HM Revenue & Customs joint election to transfer the employers' national insurance contribution potential liability to the employee, therefore no Group asset or liability arises.

2. Accounting policies (continued)

Long-term incentive plan

The Group operates a long-term incentive plan for all staff and Directors. The quantum of any awards receivable will depend on the Group achieving set milestones and the share price at the time relative to targets set in advance. The Group can exercise discretion in settling any award in equity or in cash.

2.14 Finance income

Interest income is recognised on a time-proportion basis using the effective interest rate method.

3. Critical accounting judgements, assumptions and estimates

The preparation of the consolidated financial statements in conformity with IFRS requires management to make certain estimates, assumptions and judgements that affect the application of accounting policies and the reported amounts of assets and liabilities and the reported amounts of income and expenses in the year.

Critical accounting estimates, assumptions and judgements are continually evaluated by the Directors based on available information and experience. As the use of estimates is inherent in financial reporting actual results could differ from these estimates. No significant estimates were identified during the year. Other estimates are disclosed below.

3.1 Estimates and assumptions

Share-based payments

The Group operates an equity-settled share-based compensation plan for employee (and consultant) services to be received and the corresponding increases in equity are measured by reference to the fair value of the equity instruments as at the date of grant. The fair value determination is based on the principles of the Black-Scholes Model which uses an input of volatility based on historical data. Historical volatility may not be indicative of future volatility, yet the Directors judge this to be the most appropriate method of calculation. Given the share option expense of GBP146,833 (2017: GBP201,261), the volatility methodology used is not expected to have a material impact on these financial statements. Details of the fair value calculation for options granted during the year, including other inputs into the Black Scholes model, are disclosed in Note 19.

3.2 Judgements

Deferred tax recognition

The determination of probable future profits, against which the Group's deferred tax profits can be offset, requires judgement. To date no deferred tax assets have been recognised.

R&D Tax Credits

The current tax receivable as disclosed in Note 9, represents an R&D tax credit based on an advance claim with HMRC. The final receivable is subject to the correct application of complex R&D rules and HMRC approval. Historically, claims have been successful and the Group expects the current year to be successful too.

   4.     Financial Risk 

4.1 Financial risk factors

The Group's activities expose it to a variety of financial risks: market risk (including foreign exchange rate risk, cash flow interest rate risk and fair value interest rate risk); credit risk and liquidity risk.

It is Group policy not to enter into speculative positions using complex financial instruments.

(i) Market risk

Foreign exchange rate risk

The Group primarily enters into supplier contracts which are to be settled in sterling. However, some contracts involve other currencies including the US dollar and the euro. The Group may use forward exchange contracts as an economic hedge against currency risk, where cashflow can be judged with reasonable certainty. There were no open forward contracts as at 31 December 2018 or at 31 December 2017 and the Group did not enter into any such contracts during 2018 nor 2017.

At 31 December 2018 the Group had trade payables denominated in a foreign currency totalling GBP931,532 (31 December 2017: GBP11,582).

Cash flow interest rate risk and fair value interest rate risk

The Group's interest rate risk arises from short-term money market deposits.

(ii) Credit risk

Credit risk arises from cash and cash equivalents and money market deposits as well as credit exposure in relation to outstanding receivables. The exposure relating to outstanding receivables is immaterial and the carrying amount of cash balances is as follows:

 
                                              31 December       31 December 
                                                     2018              2017 
                                                      GBP               GBP 
 Cash at bank and in hand                       5,706,519           168,825 
Sterling short-term money market funds          3,451,397         8,193,821 
                                                9,157,916         8,362,646 
---------------------------------------  ----------------  ---------------- 
 

The Directors consider the Group's exposure to credit risk to be acceptable and normal for a similar entity at its stage in development.

   4.    Financial Risk (continued) 

(iii) Liquidity risk

The Group's approach to managing liquidity is to ensure that, as far as possible, it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring losses or risking damage to the Group's reputation.

The Group manages all of its external bank accounts centrally and in accordance with defined treasury policies. The policies include a minimum acceptable credit rating of relationship bank accounts and financial transaction authority limits. Any material change to the Group's principal bank facility requires Board approval.

4.2 Capital risk management

The Group's policy is to maintain a strong capital base. The Group does not yet have significant recurring revenues and has mainly financed its operations through the issue of new shares and management of working capital. The Group's capital resources are managed to ensure it has resources available to invest in operational activities designed to generate future income. These resources were represented by GBP9,158,000 of cash and fixed term deposits as at 31 December 2018 (2017: GBP8,363,000)

   5.     Revenue reporting 

The Group is organised and operates as one segment. The Group's revenue analysed by geographical location of the Group's customers is:

 
                                     Year ended                Year ended 
                                     31 December               31 December 
                                        2018                       2017 
                                                GBP                        GBP 
Middle East / ROW                                 -                  12,727 
United States of America                          -                         - 
Europe                                     -                        350,000 
                                                   -               362,727 
 ---------------------------------------------------  ------------------------ 
 
   6.     Operating loss 
 
                                                       Year ended            Year ended 
                                                      31 December           31 December 
                                                             2018                  2017 
Operating loss is stated after charging:                      GBP                   GBP 
Depreciation of plant and equipment (note 
 12)                                                       19,850                13,248 
Loss on disposal of plant and equipment                       703                     - 
Inventories consumed in R&D                                62,633                22,978 
Operating lease costs: property                          114,142                116,076 
Loss on foreign exchange                                  12,606              9,701 
 
   6.    Operating loss (continued) 

The fees of the Group's auditor KPMG LLP for services provided are analysed below:

 
                               Year ended     Year ended 
                              31 December    31 December 
                                     2018           2017 
Audit services                        GBP            GBP 
Parent company                     33,000         26,000 
Subsidiaries                        9,000          7,500 
Tax services 
Parent company                    4,000            2,500 
Subsidiaries                            -          1,000 
Total fees                         46,000         37,000 
---------------  ------------------------  ------------- 
 
   7.     Staff numbers and costs 

The average number of persons (including all Executive and excluding Non-Executive Directors) employed by the Group during the year, analysed by category, was as follows:

 
                                           Year ended        Year ended 
                                          31 December       31 December 
                                                 2018              2017 
R&D staff                                          10                 8 
  Finance and Administration staff                  2                 3 
Executive Directors                                 3                 3 
                                                   15                14 
-----------------------------------  ----------------  ---------------- 
 

The aggregate payroll costs of these persons were as follows:

 
                                                       Year ended              Year ended 
                                                      31 December             31 December 
                                                             2018                    2017 
                                                              GBP                     GBP 
Wages and salaries                                    1,603,513                 1,584,122 
  Social security costs                                 172,805                   200,623 
Other pension and insurance benefits 
 costs                                                  182,282                   168,131 
Total cash-settled emoluments                         1,958,600                 1,952,876 
Share-based payment remuneration charge                 146,833                   201,261 
----------------------------------------  -----------------------  ---------------------- 
Total emoluments                                      2,105,433                 2,154,137 
----------------------------------------  -----------------------  ---------------------- 
 

All employees of the Group are employed by Futura Medical Developments Limited.

   8.     Directors' emoluments 
 
                                               Year ended            Year ended 
                                              31 December           31 December 
                                                     2018                  2017 
                                                      GBP                   GBP 
Aggregate emoluments                              929,608               698,837 
Other pension and insurance benefit costs          19,748                21,875 
Subtotal per remuneration report                  949,356               720,712 
Share-based payment remuneration charge            74,647                97,967 
Employer's national insurance charge               86,991                96,038 
Total emoluments                                1,110,994               914,717 
------------------------------------------  -------------  -------------------- 
 

In 2018 one Director exercised share options under the Group share option schemes and realised a gain of GBP6,000 (2017: GBP28,768). In respect of the highest paid Director the realised gain was GBPnil (2017: GBP14,263).

In 2018 there were no Directors (2017: one Director) who participated in a private money purchase defined contribution pension scheme. Emoluments for individual Directors are disclosed within the Remuneration Report.

Emoluments above include the following amounts in respect of the highest paid Director:

 
                                        Year ended              Year ended 
                                       31 December             31 December 
                                              2018                    2017 
                                               GBP                     GBP 
Aggregate emoluments                       273,855                 235,002 
Employer pension contributions                   -                       - 
Subtotal per remuneration report           273,855                 235,002 
Share-based payment remuneration charge     28,711                  40,608 
Employer's national insurance charge        36,284                  32,176 
Total emoluments                           338,850                 307,786 
----------------------------------------  --------  ---------------------- 
 
 
   9.     Finance income 

Interest receivable in 2018 on treasury funds was GBP27,576 (2017: GBP19,316).

   10.   Taxation 

10.1 Current tax

 
                                                      Year ended               Year ended 
                                                     31 December              31 December 
                                                            2018                     2017 
                                                             GBP                      GBP 
UK corporation tax credit on loss on 
 ordinary activities                                   1,358,336               936,344 
-------------------------------------  -------------------------  ----------------------- 
 

The tax assessed for the year was lower than the UK corporation tax rate (2017: higher). The differences are explained below:

 
 
                                              Year ended            Year ended 
                                             31 December           31 December 
                                                    2018                  2017 
                                                     GBP                   GBP 
Loss on ordinary activities before tax         7,238,912             4,836,628 
------------------------------------------  ------------  -------------------- 
Loss on ordinary activities at an average 
 standard rate of corporation tax in the 
 UK of 19.00% (2017: 19.25%)                   1,375,393               931,051 
Expenses not deductible for tax purposes           (215)                 (249) 
Unrecognised deferred tax                       (29,578)              (30,523) 
Unutilised tax losses                          (581,892)             (381,446) 
Share scheme deduction                             5,529                11,235 
R&D expenditure credit                           (3,296)                     - 
Loss surrendered for refund                    (417,236)                     - 
Additional relief for R&D claims                 995,722               381,880 
------------------------------------------  ------------  -------------------- 
UK corporation tax credit                      1,344,427               911,948 
Adjustment to tax charge relating to 
 prior period                                      (144)                     - 
R&D expenditure credit re 2016                                           9,098 
R&D expenditure credit re 2017                                          15,298 
R&D expenditure credit re 2018                    14,053                     - 
------------------------------------------  ------------  -------------------- 
UK corporation tax credit reported in 
 the 
 Consolidated Statement of Comprehensive 
 Income                                        1,358,336               936,344 
------------------------------------------  ------------  -------------------- 
 
 

The Group has tax losses of approximately GBP26,834,483 (2017: GBP24,300,530) available for offset against future taxable profits.

The corporation tax credit for the year represents research and development tax credits of GBP1,344,427, arising from the surrender of losses (rather than carrying forward to future years) of GBP9,271,916 at 14.5%, under HMRC's small and medium size enterprise scheme. The taxable loss for the year is in excess of the accounting loss for various reasons, principally the additional deductions given for tax purposes on research and development expenditure.

10. Taxation (continued)

In addition a small claim under the large company Research and Development Expenditure Credit (RDEC) scheme resulted in a refund of GBP14,053.

10.2 Deferred tax

Deferred tax assets amounting to GBP4,881,640 (2017: GBP4,133,675) have not been recognised due to it not being probable that taxable profits will be available, against which these deductible temporary differences can be utilised. Reductions in the UK corporation tax rate from 20% to 19% (effective from 1 April 2017) and to 18% (effective from 1 April 2020) were substantively enacted on 26 October 2015, and an additional reduction to 17% (effective from 1 April 2020) was substantively enacted on 6 September 2016. The unrecognised deferred tax asset at 31 December 2018 has been calculated assuming a prevailing tax rate when the timing differences reverse of 17% (2017: 17%) and comprises:

 
                                                         Year ended                Year ended 
                                                        31 December               31 December 
                                                               2018                      2017 
                                                                GBP                       GBP 
Depreciation differential versus capital 
 allowances                                                   2,108                     (348) 
Other short-term timing differences                         317,670                     2,932 
Unutilised tax losses                                     4,561,862                 4,131,091 
-----------------------------------------  ------------------------  ------------------------ 
                                                          4,881,640                 4,133,675 
-----------------------------------------  ------------------------  ------------------------ 
 
   11.   Loss per share 

The calculation of basic and diluted earnings per share ("EPS") is based on the following data:

 
                                                       2018    2017 
Earnings for the purposes of basic EPS 
 and diluted EPS (GBP)                            5,880,576      3,900,284 
Weighted average of ordinary shares for 
 purposes of basic and diluted EPS (number)     131,936,761    120,631,242 
Loss per share basic and diluted (pence)               4.46           3.23 
--------------------------------------------  -------------  ------------- 
 
 
 

Diluted EPS is calculated in the same way as basic EPS but also with reference to reflect the dilutive effect of share options in existence at the year end which were 5,700,000 (2017: 6,507,000). The diluted loss per share is identical to the basic loss per share, as potential dilutive shares are not treated as dilutive since they would reduce the loss per share.

   12.   Plant and equipment 
 
                                Computer Equipment            Furniture 
                                                           and Fittings                Total 
  Cost                                         GBP                  GBP                  GBP 
 At 1 January 2018                          91,243               63,285              154,528 
 Additions                                  4,510                     -                4,510 
 Disposals                                (9,151)                     -              (9,151) 
 At 31 December 2018                      86,602                 63,285              149,887 
-------------------------  -----------------------  -------------------  ------------------- 
 Depreciation 
 At 1 January 2018                         37,915                53,096               91,011 
 Eliminated on disposals                  (8,447)                     -              (8,447) 
 Charge for year                          18,027                  1,823               19,850 
 At 31 December 2018                      47,495                 54,919              102,414 
-------------------------  -----------------------  -------------------  ------------------- 
 Net book value 
 At 31 December 2018                       39,107                 8,366               47,473 
-------------------------  -----------------------  -------------------  ------------------- 
 At 31 December 2017                       53,328                10,189               63,517 
-------------------------  -----------------------  -------------------  ------------------- 
 
 
                                 Computer Equipment             Furniture 
                                                             and Fittings                 Total 
  Cost                                          GBP                   GBP                   GBP 
 At 1 January 2017                           49.694              60,787               110,481 
 Additions                                   51,345               4,249                 55,594 
 Disposals                                  (9,796)              (1,751)               (11,547) 
 At 31 December 2017                        91,243               63,285               154,528 
-------------------------  ------------------------  --------------------  -------------------- 
 Depreciation 
 At 1 January 2017                          35,970                53,160                89,130 
 Eliminated on disposals                   (9,796)                (1,751)             (11,547) 
 Charge for year                            11,741                 1,687                13,428 
 At 31 December 2017                        37,915                53,096               91,011 
-------------------------  ------------------------  --------------------  -------------------- 
 Net book value 
 At 31 December 2017                        53,328                10,189               63,517 
-------------------------  ------------------------  --------------------  -------------------- 
 At 31 December 2016                         13,724                7,627                21,351 
-------------------------  ------------------------  --------------------  -------------------- 
 

All fixed assets of the Group are held in Futura Medical Developments Limited.

   13.   Inventories 
 
                                                 31 December       31 December 
                                                        2018              2017 
                                                         GBP               GBP 
Consumable materials used for development              7,780            70,413 
------------------------------------------  ----------------  ---------------- 
 
   14.   Financial instruments by category 

The accounting policies for financial instruments have been applied to the line items below:

 
Assets as per Consolidated Statement of Financial               31 December              31 December 
 Position                                                              2018                     2017 
 Loans and receivables at amortised cost                                GBP                      GBP 
Trade and other receivables (note 15)                               248,426                   39,520 
Cash and cash equivalents (note 16)                               9,157,916                8,362,646 
Total receivables                                                 9,406,342                8,402,166 
--------------------------------------------------  -----------------------  ----------------------- 
 
 
                                                         31 December               31 December 
                                                                2018                      2017 
Liabilities as per Consolidated Statement                        GBP                       GBP 
 of Financial Position at amortised cost 
Trade and other payables (note 17)                         1,246,247                   131,430 
 Total Payables                                            1,246,247                   131,430 
------------------------------------------  ------------------------  ------------------------ 
 

The Directors consider that there is no material difference between the carrying values of financial assets and liabilities, and their fair value.

   15.   Trade and other receivables 
 
                                           31 December       31 December 
                                                  2018              2017 
Amounts receivable within one year:                GBP               GBP 
Trade receivables                                  627             6,299 
Other receivables                              247,799            33,221 
------------------------------------  ----------------  ---------------- 
Financial assets (note 14)                     248,426            39,520 
Prepayments                                     57,982           141,556 
                                               306,408           181,076 
------------------------------------  ----------------  ---------------- 
 

Trade and other receivables do not contain any impaired assets. The Group does not hold any collateral as security and the maximum exposure to credit risk at the Consolidated Statement of Financial Position date is the fair value of each class of receivable.

   16.   Cash and cash equivalents 
 
                                              31 December       31 December 
                                                     2018              2017 
                                                      GBP               GBP 
 Cash at bank and in hand                       5,706,519           168,825 
Sterling short-term money market funds          3,451,397         8,193,821 
                                                9,157,916         8,362,646 
---------------------------------------  ----------------  ---------------- 
 
   17.   Trade and other payables 
 
                                       31 December       31 December 
                                              2018              2017 
                                               GBP               GBP 
 Trade payables                          1,246,247           131,430 
--------------------------------  ----------------  ---------------- 
Social security and other taxes             42,684           131,771 
Deferred Income                                  -            12,503 
Accrued expenses                           736,584           223,437 
--------------------------------  ----------------  ---------------- 
                                         2,025,515           499,141 
--------------------------------  ----------------  ---------------- 
 

The increase in payables is reflective of the increase in research and development activities relating to the Phase 3 study commencement in the year.

   18.   Share capital 
 
                         31 December  31 December       31 December   31 December 
Authorised                      2018         2017              2018          2017 
                              Number       Number               GBP           GBP 
Ordinary shares of 0.2 
 pence each              500,000,000  500,000,000         1,000,000     1,000,000 
-----------------------  -----------  -----------  ----------------  ------------ 
 
 
Allotted, called up and   31 December  31 December       31 December       31 December 
 fully paid                      2018         2017              2018              2017 
                               Number       Number               GBP               GBP 
Ordinary shares of 0.2 
 pence each               204,583,439  120,696,002           409,167           241,392 
------------------------  -----------  -----------  ----------------  ---------------- 
 

The number of issued ordinary shares as at 1 January 2017 was 120,144,950. During the year ended 31 December 2017, the Company issued shares of 0.2 pence each as follows:

 
                                                                                 Shares 
                                                        Gross Consideration      Issued 
Month            Reason for issue                                       GBP      Number 
                Non-Executive Director award at 28.45 
January 2017     pence per share                                     28,669     100,770 
                Option exercise at 40.50 pence per 
January 2017     share                                              155,100     382,962 
                Option exercise at 51.75 pence per 
May 2017         share                                          15,525           30,000 
                Non-Executive Director award at 57.50 
December 2017    pence per share                                21,459           37,320 
--------------  --------------------------------------  -------------------  ------------ 
 
 
   18.    Share capital (continued) 

The number of issued ordinary shares as at 1 January 2018 was 120,696,002. During the year ended 31 December 2018, the Company issued shares of 0.2 pence with each ordinary share carrying the right to one vote as follows:

 
                                                                                     Shares 
Month            Reason for issue                   Gross Consideration              Issued 
                                                                    GBP              Number 
                Option exercise at 30.00 pence 
January 2018    per share                                        24,000              80,000 
                Option exercise at 30.00 pence 
January 2018    per share                                        24,000              80,000 
                Option exercise at 30.00 pence 
May 2018        per share                                        45,000             150,000 
                Share placing at 7.00 pence 
November 2018    per share                                    5,600,000          80,000,000 
                Open Offer placing at 7.00 
November 2018    pence per share                                250,421           3,577,437 
--------------  ----------------------------------  -------------------  ------------------ 
                                                              5,943,421          83,887,437 
----------------   -------------------------------  -------------------  ------------------ 
 
 

Net proceeds received were GBP5,480,239 after costs of GBP463,182 were settled.

   19.   Share options 

At 31 December 2018, the number of ordinary shares of 0.2 pence each subject to share options granted under the Company's Approved and Unapproved Share Option Schemes were:

 
                                  Exercise       At 1 
                                     Price    January        Options      Options        Options  At 31 December 
                                 per Share       2018      Exercised       Lapsed        Granted            2018 
                                     Pence     Number         Number       Number      Number             Number 
               Exercise Period 
1 October 2013 - 30 September 
 2018                                56.50    627,500              -    (627,500)              -               - 
1 October 2014 - 30 September 
 2019                                61.50    660,000              -    (350,000)              -         310,000 
1 October 2015 - 30 September 
 2020                                71.50    750,000              -    (130,000)              -         620,000 
1 October 2016 - 30 September 
 2021                                51.75    710,000              -    (130,000)              -         580,000 
1 October 2017 - 30 September 
 2022                                30.00  1,060,000      (310,000)            -              -         750,000 
1 October 2018 - 30 September 
 2023                                57.50  1,260,000              -    (300,000)              -         960,000 
1 October 2019 - 30 September 
 2024                                30.50  1,440,000              -    (300,000)              -       1,140,000 
1 October 2020 - 30 September 
 2025                                 7.50          -              -            -      1,340,000       1,340,000 
------------------------------  ----------  ---------  -------------  -----------  -------------  -------------- 
                                            6,507,500      (310,000)  (1,837,500)      1,340,000       5,700,000 
------------------------------  ----------  ---------  -------------  -----------  -------------  -------------- 
 

On 19 November 2018 share options over 1,340,000 new ordinary shares were granted to employees (including Executive Directors) at a price of 7.50. The options have a 2 year vesting period and the exercise period for these options is 1 October 2020 to 30 September 2025.

   19.    Share options (continued) 

The share options outstanding at 31 December 2018 represented 2.78% of the issued share capital as at that date (2017: 5.39%) and would generate additional funds of GBP2,159,300 (2017: GBP3,145,813) if fully exercised. The weighted average remaining life of the share options outstanding at 31 December 2018 was 52 months (2017: 52 months) with a weighted average remaining exercise price of 50.26 pence (2017: 48.34 pence).

The share options exercisable at 31 December 2018 totalled 3,220,200 (2017: 3,707,500) with an average exercise price of 51.28 pence (2017: 51.53 pence) and would have generated additional funds of GBP2,318,200 (2017: GBP1,910,613) if fully exercised.

The Group's share option scheme rules apply to 5,320,000 of the share options outstanding at 31 December 2018 (31 December 2017: 6,027,500) and include a rule regarding forfeiture of unexercised share options upon the cessation of employment (except in specific circumstances).

Options have historically been issued to advisors under the unapproved scheme. Such options generally vest immediately and are exercisable between one and two years after grant, there were 380,000 share options outstanding to advisors at 31 December 2018 (31 December 2017: 480,000).

There were no market vesting conditions within the terms of the grant of the share options.

The Black-Scholes formula is the option pricing model applied to the grants of all share options made in respect of calculating the fair value of the share options.

   19.    Share options (continued) 

Share based payments

 
                                                    31 December         31 December         31 December 
 Inputs to share option pricing model                2018                2017                2017 
 
Grant date                                          19 November         12 September          13 January 
Number of shares under option                            1,340,000            1,440,000          1,260,000 
Share price as at date of grant                        6.95 pence        30.50 pence         57.50 pence 
Option exercise price                                  7.50 pence        30.50 pence         57.50 pence 
Expected life of options: based on previous 
 exercise history                                            3 years             3 years             3 years 
Expected volatility: based on median fluctuations 
 over 3 years                                                82.70%              67.82%              65.74% 
Dividend yield: no dividends assumed                                0%                  0%                  0% 
Risk-free rate: yield on 3 year treasury 
 stock as at date of grant                              0.84% p.a.          0.31% p.a.          0.30% p.a. 
--------------------------------------------------  ------------------  ------------------  ------------------ 
 
 
Outputs generated from share option pricing   31 December      31 December      31 December 
 model                                         2018             2017             2017 
 
Fair value per share under option                       3.57p          11.55p             20.37p 
Total expected charge over the vesting              GBP47,838       GBP166,320     GBP256,662 
 period 
--------------------------------------------  ---------------  ---------------  ---------------- 
 
 
Recognised in Consolidated Statement             31 December             31 December             31 December 
 of Comprehensive Income                          2018                    2017                    2017 
                                                                    GBP                     GBP                    GBP 
The share-based remuneration charge comprises: 
Share-based payments - employees                              3,016              24,648            144,731 
Share-based payments - consultants                                  -            -                       - 
-----------------------------------------------  ----------------------  ----------------------  --------------------- 
Share-based payments                                          3,016          24,648                            144,731 
-----------------------------------------------  ----------------------  ----------------------  --------------------- 
 

The total expense recognised for the year arising from share-based payments is as follows:

 
 
                                                          31 December 2018    31 December 2017 
                                                                       GBP                 GBP 
  Group equity-settled share based payment expense                 146,833             201,261 
------------------------------------------------------  ------------------  ------------------ 
 
   20.   Pension costs 

The pension charge represents contributions payable by the Group to independently administered funds which during the year ended 31 December 2018 amounted to GBP86,990 (2017: GBP141,992). Pension contributions payable in arrears at 31 December 2018, included in accrued expenses at the relevant Consolidated Statement of Financial Position date, totalled GBP6,183 (2017: GBP4,300).

   21.   Commitments 

At 31 December 2018 the Group had operating lease commitments in respect of property leases cancellable on one month's notice of GBP9,767 (2017: GBP9,767).

   22.   Related party transactions 

Related parties, as defined by IAS 24 'Related Party Disclosures', are the wholly owned subsidiary companies, Futura Medical Developments Limited, Futura Consumer Healthcare Limited and the Board. Transactions between the Company and the wholly owned subsidiary companies have been eliminated on consolidation and are not disclosed.

Key management compensation

The Directors represent the key management personnel. Details of their compensation and share options are given in note 8 and within the Remuneration Report.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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April 10, 2019 02:00 ET (06:00 GMT)

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