Source - LSE Regulatory
RNS Number : 3721V
Futura Medical PLC
14 April 2021
 

Full Year Results for the year ended 31 December 2020

 

Futura Medical plc (AIM: FUM) ("Futura" or the "Company"), a pharmaceutical company developing a portfolio of innovative products based on its proprietary, transdermal DermaSys® technology and currently focused on sexual health and pain, is pleased to announce its audited results for the year ended 31 December 2020.

 

Key highlights

 

Operational highlights

 

MED3000 - Topical fast acting treatment for erectile dysfunction ("ED")

  • Significant progress made with recent recommendation by EU Notified Body1 for approval of MED3000 as a breakthrough, fast acting, clinically proven treatment for erectile dysfunction:
    • In February 2020 formal proceedings commenced for approval as a medical device available throughout EU without the need of a doctor's prescription ("OTC").
    • In July 2020, Futura submitted the Technical Dossier for MED3000 for marketing approval.
    • In August 2020 positive audit opinion received for Futura's Quality Management Systems ("QMS").
    • EU certificate expected before the end of May 2021 under Medical Device Regulation.

 

  • De Novo medical device status for MED3000 confirmed by US Food and Drug Administration ("FDA") in February 2020 pre-submission meeting.
    • Four pre-submission meetings held to determine design of small supplemental clinical trial (known as "FM71") and Human Factors study required by FDA for OTC marketing approval in USA.
    • Detailed planning and preparatory activities for FM71 following receipt of final minutes from FDA.

 

  • Specialist corporate advisors retained in July 2020 to progress commercialisation of MED3000:
    • Joint collaboration agreement for China and South East Asia with 50/50 share of profits signed in March 2021 with expected additional R&D costs of up to £4 million being fully met by Asian partner.
    • Discussions progressing with a number of other parties for licensing rights for MED3000 in other countries.

 

CBD100 - Futura's advanced proprietary transdermal technology, DermaSys® for transdermal delivery of Cannabidiol

  • Initial laboratory and optimisation work on a cannabidiol gel under the joint venture collaboration agreement with CBDerma Technology Limited completed in August 2020.
  • In vitro studies supporting a stable formulation with enhanced permeation through the skin of cannabidiol.
  • An intellectual property application filed in August 2020 covering a novel and inventive formulation with recent progression to PCT2 patent application.
  • Advisors recently retained to explore commercial opportunities.

 

TPR100 - Futura's advanced proprietary transdermal technology, DermaSys® for transdermal delivery of diclofenac for the pain and inflammation associated with sprains, strains and bruises and soft tissue rheumatism

  • Completion of additional laboratory work required by the UK Medicines and Healthcare Products Regulatory Agency ("MHRA") to support the UK submission made by partner Thornton & Ross supporting improved skin permeation of TPR100 compared to market leading products.
  • Scientific advisory meeting held with MHRA confirming the need of a Phase 3 study to support the improved skin permeation and potential potency of TPR100 including potential superior efficacy claims.
  • Futura is exploring the feasibility of a clinical study that would satisfy the Phase 3 requirements for both UK and USA marketing approval.

 

Financial highlights

  • £2.41 million net loss in the period (2019: net loss £8.92 million).
  • R&D tax credit receipt for 2020 year of £0.52 million expected mid-2021.
  • Cash resources of £1.02 million at 31 December 2020 (2019: £2.51 million).
  • Futura received £1.50 million through the issuance of convertible loan notes to Atlantis via HT Riverwood Fund, with a three year conversion period at a premium price of 20 pence.
  • Futura also received £0.50 million following the exercise of warrants by Atlantis via HT Riverwood Fund, issuing 2,272,727 shares at an exercise price of 22 pence per warrant.

 

John Clarke, Chairman of Futura Medical, commented: "This year against the backdrop of the turbulence and challenges posed by the COVID-19 pandemic, the team at Futura has been resolutely focused on gaining regulatory approval for MED3000 in Europe and the USA.  We look forward to receiving the EU certificate to enable MED3000 to be marketed as a breakthrough, fast acting, clinically proven OTC treatment for ED shortly as well as commencing the remaining clinical work we believe will also deliver a similar approval for MED3000 in the USA."

 

James Barder, Chief Executive of Futura Medical, commented: "Futura has achieved major milestones in terms of securing partnering for the development and commercialisation of MED3000 in China and South East Asia in a deal structured to capture significant long-term value, as well as the EU Notified Body's recommendation to certificate MED3000 for Class 2B approval as a medical device for ED treatment under the European Medical Device Regulations."

 

"The Company is well positioned to deliver further positive news through 2021 especially around commercialisation of MED3000 and our objective to deliver a long term and sustainable revenue for shareholders."

 

Webcast

The Executive Team will host a webcast of the presentation which will be available within the Investor Centre section of the Futura company website at www.futuramedical.com at 10am BST on 14 April 2021.

 

1.   Notified Bodies are organisations designated by EU countries to oversee the approval of medical devices within the EU and the UK.

2.   Patent Cooperation Treaty.

 

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

www.futuramedical.com

 

Nominated Adviser and Sole Broker:

Liberum

Richard Lindley/ Euan Brown/ Kane Collings

Tel: +44 (0) 20 3100 2000

 

For media enquiries please contact:

 

Optimum Strategic Communications

Mary Clark/ Eva Haas/ Hollie Vile

Email: futuramedical@optimumcomms.com

Tel: +44 (0) 203 922 0891

 

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® technology. Each DermaSys® formulation is separately patented and specifically tailored for the selected indication and application, as well as being optimised for clinical efficacy, safety, administration and patient convenience. The products 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.

 

MED3000 is Futura's topical gel formulation that is a breakthrough treatment for erectile dysfunction (ED) through a unique evaporative mode of action. Futura has conducted a Phase 3 study using MED3000 in ED, referred to as "FM57". This was a 1,000 patient, dose-ranging, multi-centre, randomised, double blind, placebo-controlled, home use, parallel group study delivering highly statistically significant results compared to pre-treatment baseline, consistently meeting all co-primary endpoints of IIEF, SEP2 and SEP3 (internationally accepted clinical trial endpoints in ED) with over 60% of patients experiencing a clinically meaningful improvement in their ED.  MED3000 also begins to work immediately in some patients, with 60% of patients seeing onset of their erection within 10 minutes of application.

 

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

Chairman and Chief Executive's Review

 

Futura is an innovative R&D company with a strategy to develop a pipeline of late stage, novel products borne out of its proprietary patented transdermal technology platform, DermaSys®. The Company is currently focused on sexual health and pain. It seeks to develop products with high tolerability, safety and convenience of administration that solve clinically meaningful problems, including dissatisfaction with existing treatments, to improve health, quality of life and well-being for patients worldwide. Whilst we apply strict pharmaceutical principles and discipline to both the R&D and manufacturing process to all our product candidates, we also aim to ease access to our treatments for patients, for example through the registration and ultimately availability as over-the counter ("OTC"), non-prescription, products.

 

This year against the backdrop of the turbulence and challenges posed by the COVID-19 pandemic across the world, the team at Futura has been resolutely focused on execution, particularly the regulatory submission for MED3000 in Europe (completed H2 2020) and the USA (an ongoing iterative consultation and review process), as well as advancing activities for its commercialisation. At the same time, we also progressed additional pipeline product candidates, such as our CBD100 cannabidiol formulation, that will address attractive and substantial markets.

 

These efforts are now starting to bear fruit, most recently culminating in the March 2021 recommendation for approval of MED3000 from the EU Notified Body, a transformational milestone for the Company. Once EU certification and the resultant CE mark is granted, expected before the end of May 2021, Futura's breakthrough, fast acting topical gel formulation MED3000, will become the first clinically proven, pan-European topical OTC treatment for erectile dysfunction ("ED") available without a doctor's prescription (i.e. OTC).

 

Due to post-Brexit arrangements, the EU CE mark can be used to market the product in Great Britain1 until 30 June 2023 by which time a specific UKCA mark has to be obtained. This will be a streamlined process since it is understood the UK application can bridge to the EU approval.

 

We look forward to further MED3000 marketing approvals in multiple regions across the world, including the USA and Asia. Expedited Medical Device Registrations may be possible in most Middle East, Far East, African and Latin American countries based on the EU CE mark and we will be targeting both further regulatory approvals as well as commercial launch in a number of countries.

 

Futura retained specialised corporate advisers in Q3 2020 to facilitate active commercial discussions for MED3000 with potential licensing and marketing partners. In early March 2021 we announced a joint collaboration and investment to commercialise MED3000 in China and South East Asia, a significant market for ED. Our new partners have extensive experience, resource, and strong pharmaceutical connections in the Asia Region which we are confident will maximise the market reach and opportunities for MED3000 in those geographies, creating significant long term value. Key components of this partnership mean that Futura shares 50% of MED3000 profits from the Region without further R&D spend (from Futura).  In addition, the Company has received £2 million cash from partner investment in Futura. This partnership is an example of Futura's strategy to maximise value creation by partnering or out licensing its products at key inflection points with agreements that look to capture long term and sustainable returns for the Company.

 

As a small innovative company Futura is adaptable and nimble, allowing us to take advantage of new opportunities and strategies as those opportunities arise as well as evolve to meet challenges. We would like to thank all Futura's employees for their tremendous efforts and focus during the year and shareholders for their ongoing support. We have been able to leverage the lean, semi-virtual working processes at Futura to adapt to the pandemic efficiently and safely, whilst making significant progress for our products. Post-pandemic, Futura will be adopting a partly remote working model moving forward.

 

Operational Review

 

DermaSys® - Our proprietary patented transdermal technology platform

 

Futura's unique patented technology DermaSys® is designed to deliver clinically proven effective medical treatments via the skin.

 

DermaSys® is a versatile and bespoke technology. Each product gel is uniquely formulated using the DermaSys® platform with partition and diffusion component formulations tailored for each product to suit the specific therapeutic indication and desired speed of onset and duration of action. Such targeted delivery offers an optimised profile in terms of dose, onset time and duration of effect as well as an improved safety profile reducing the risk of side effects. Each product is formulated to maximise its benefits for patients and consumers. Each new unique formulation offers the opportunity for additional patent applications and potential patent protection.

 

A transformational year with EU recommendation for approval of MED3000 - Topical gel for erectile dysfunction ("ED")

 

MED3000 is a formulation of the proprietary technology DermaSys®, developed specifically for the treatment of ED. Data from a Phase 3 clinical study "FM57" has supported the regulatory submission for MED3000 as a medical device in Europe with clinically proven claims for the treatment of ED. The studies have demonstrated that MED3000 has the potential to be a highly differentiated product by addressing significant unmet needs, across all patient severities in the $5.6 billion ED market2, thanks to its rapid 10 minute speed of onset enabling spontaneity for both partners, significant clinical benefits alongside low side effects and no interactions with alcohol or food, as well as providing a potential treatment option for around 20% of ED3 patients contra-indicated from using existing ED therapies. Futura also believe MED3000 data approaches the efficacy of current first line therapy but with significantly lower adverse events and will be of high interest to the medical community for those patients who are seeking a treatment that provides them and their partners spontaneity through MED3000's very rapid onset of action along with a very low side-effect profile. Its excellent safety profile makes it ideally suited to become a unique topical formulation available without a doctor's prescription.

 

ED disrupts the lives of at least 1 in 5 men globally4, affecting the sexual and emotional health of around 23 million men and their partners in the USA, and 20 million men in the UK, France, Italy and Germany alone. The prevalence of ED amongst adult males5 is estimated to be 340 million worldwide, with China ranked first and USA ranked fourth. Of note, the prevalence of ED in young men is increasing; now as high as 30%6. There has been little innovation in ED treatments for over ten years and many patients continue to suffer dissatisfaction with existing treatments, a statement frequently made by Key Opinion Leaders in the field of sexual medicine.

 

FM57 Study

 

FM57, the Phase 3 study conducted with MED3000 was a 1,000-patient study including approximately 60 centres across nine Central and Eastern European countries. FM57 was a dose ranging, randomised, double blind, home use, parallel group clinical trial.  Patients being enrolled into FM57 for the initial four weeks had to attempt intercourse on at least four occasions to establish the severity of their ED, known as the pre-treatment 'baseline'.

 

FM57 Results - MED3000 shown to be an extremely effective treatment for ED with an excellent safety profile

 

In study FM57 all three co-primary endpoints (IIEF-EF, SEP2 and SEP3; internationally accepted clinical trial endpoints in ED) were statistically significantly achieved against baseline (pre-treatment) data in addition to important, supporting secondary endpoints in terms of efficacy, speed of onset, duration of action and clinically meaningful differences in patient benefit.

 

FM57 demonstrated that MED3000 has the potential to be a highly effective, clinically proven, topical treatment for ED. MED3000 has a unique evaporative mode of action which the Company believe stimulates nerve endings in the glans penis to cause an erection.

 

MED3000 results demonstrated a highly statistically significant improvement (p<0.001) in erectile function across 'pooled' patient severities (mild, moderate, and severe) as well as being statistically significantly superior within the separate mild, moderate and severe patient groups, compared to before treatment baseline, along with an excellent safety profile.

 

Importantly, MED3000 had a significant clinically meaningful effect in 60% of patients as calculated using the Rosen and Araujo statistical method, a standard assessment technique for measuring Patient Reported Outcomes recognised and accepted by leading ED experts. Such Patient Reported Outcomes in ED are key evaluation criteria for regulators as well as physicians and their patients. MED3000 begins to work immediately in some patients, with 60% of patients seeing onset of their erection within 10 minutes of application, substantially faster than PDE5i's (oral tablets) with significant benefits for spontaneous rather than pre-planned sexual intercourse.

 

Overall, the level of efficacy was broadly equivalent to lower doses of current oral ED treatments. Safety and tolerability data were also highly positive, with no serious adverse events recorded in any patient, or their female partners.

 

MED3000 - Medical device regulatory pathway

 

During 2020 the Company navigated the complex formal regulatory proceedings for MED3000 in both Europe and the USA. Regulatory procedures, timelines and approaches differ by region.

 

Europe: In March 2021, Futura announced that the EU Notified Body had successfully completed its review of the Company's Technical Dossier for MED3000 with a recommendation to approve MED3000 for the medical device class and indication as applied for in July 2020. A Class 2B approval is by definition an approval allowing marketing of MED3000 as a non-prescription treatment across the European Union.  European approval for MED3000 will be final upon issuance of a Medical Device Regulation certificate by the panel, which is expected before the end of May 2021.

 

In order to obtain pre-marketing clearance within the EU under the new Medical Device Regulations, two requirements have to be met: Submission of Technical Documentation which includes sufficient efficacy, safety and quality data and demonstration that the Company can operate to a high standard of quality through a Quality Management System ("QMS").

 

In July 2020, Futura submitted the Technical Dossier for MED3000 for treatment of ED under the European Medical Device Regulation for marketing approval in Europe by an EU Notified Body as a Class 2B medical device. The Technical Dossier included data in support of quality, safety and efficacy of MED3000.

 

Once EU certification and the resultant CE mark is granted, MED3000 will become the first pan-European topical OTC treatment for ED. This paves the way for approval in many countries around the world, including in the Middle East, Africa, the Far East and Latin American regions which allow "fast-track" review based on recognition of the EU CE mark. The CE mark will also be recognised in Great Britain until 30 June 2023 and in the period leading up to this Futura will secure the new post-Brexit UKCA mark. This will be a streamlined process since it is understood the UK application can bridge to the EU approval.

 

USA: FDA's guidance documents indicate that their preference is to adopt an interactive and iterative approach to data requirements through pre-submission meetings with sponsors. According to FDA, careful considerations of their feedback may improve the quality of subsequent submissions, shorten total review times and facilitate the development process for new devices. Thus, our productive and positive pre-submission meetings were held during 2020 and early 2021 to discuss existing FM57 Phase 3 clinical data, pathway to OTC status and any additional clinical and non-clinical requirements.

 

Summarising activity to date: it has been established that an application may be made for MED3000 as a medical device for ED treatment, with a De Novo Classification. FDA requires an additional 6-month confirmatory clinical study, known as "FM71", with MED3000 taking a "least burdensome approach" with detailed design now agreed. A short, non-clinical, Human Factors Study, testing ease of patient understanding of an OTC label and product administration and use is also requested to support the regulatory submission and facilitate OTC status as well as a finalised OTC product label.

 

A 5th pre-submission meeting with FDA is planned for H2 2021 to define and confirm the detail of the work required for OTC application and Futura is targeting completion of the FM71 study and Human Factors study for Q2 2022.

 

US confirmatory clinical study, FM71

 

FM71 is a confirmatory clinical study with MED3000 designed to provide supplementary 6-month efficacy data with a "least burdensome" approach and modest cost.

 

FM71 will be of a 6-month duration (24 weeks) versus three month duration for FM57 to reassure the FDA that efficacy does not diminish over a longer period of time, although it is Futura's belief that this is unlikely as in the FM57 study efficacy improved from the first to third month of patient use.

 

Approximately 100 patients in total will be recruited including a mix of mild, moderate and severe ED sufferers. Recruited patient population will include 20 African American patients (from a leading US medical centre) and 80 patients recruited from Eastern Europe where sites include some of the same centres used in the FM57 trial. No placebo is required hence the study is relatively small in size compared to FM57 where the Company recruited in excess of 1000 patients. The primary endpoints are a significant change from baseline and exceeding a minimal clinically important difference calculated using the Rosen et al statistical method, a standard assessment technique for measuring Patient Reported Outcomes. Both endpoints were previously met for MED3000 over the 12-week duration of study FM57. Additional statistical study design has been agreed to support a fast speed of onset claim of 5, 10 or 15 minutes (10 minutes was achieved in FM57).

 

A Tadalafil 5mg (the active in Cialis®) comparator arm is included for informational purposes only to assess relative safety, speed of onset and overall efficacy; non-inferiority of MED3000 against Tadalafil is not required to be shown. This will more accurately enable FDA to determine the relative benefit/risk ratio of MED3000 versus a commercially available comparator.

 

MED3000 commercialisation plans

 

As regulatory processes continue Futura has been working with retained specialised corporate advisers on active commercial discussions with potential licensing and marketing partners in line with an agreed process being managed by the advisers.

 

Futura announced in late-October 2020 that it had given priority to certain negotiations for one specific region for the exclusive marketing rights for MED3000, with certain parties. These discussions were formalised in early March 2021 with the announcement of investment and joint collaboration with Co-High Investment Management and certain subsidiaries of Atlantis Group to commercialise MED3000 in China and South East Asia.

 

Futura is making steady progress on commercial discussions for MED3000 marketing rights in multiple other regions. Partnering discussions generally follow the path of interested parties submitting a non-binding offer which is followed by an invitation for due diligence of full MED3000-related data under a Confidential Disclosure Agreement and thereafter a formal offer which if accepted contractually by Futura would be binding. Currently a number of interested parties have made submissions at the non-binding offer stage with further offers expected although there can be no guarantee of deal completion at this stage. The Company look forward to providing further updates in the coming months. Futura is committed to prioritising commercial deals that will deliver long term and sustainable value to the Company allowing a long-lasting growth franchise to be built around the pipeline of DermaSys® formulated products and in particular MED3000.

 

An initial UK patent was filed in December 2019 around MED3000's clinically significant and novel findings shown in FM57. This was supplemented with a further UK patent filing in August 2020 following a complete analysis of all the data sets provided by FM57 and a head-to-toe strategic review conducted by independent pharmaceutical patent specialists retained by Futura. An initial examination report conducted by the UK patent office, requested at the time of the first UK filing by the Company, supports the patentability of the application which is an important first step in the patent approval process.  In October 2020 further patent filings were made and in particular a Patent Cooperation Treaty ("PCT") application taking priority from the two earlier UK applications.  The PCT currently has 153 contracting countries where the Company can seek patent protection claiming priority from an original application made in any one of the countries that are signatories to the PCT, such as the UK. In Q2 2022 national applications will need to be made and the Company, in consultation with its commercial partners, will decide those countries in which to file applications and considered necessary to protect the commercial interests of MED3000. If national applications are successful this will provide patent protection until 2040.

 

Co-High licensing agreement - China and South East Asia

 

In March 2021 Futura entered into £1.5 million convertible debt and £0.5 million of warrants financing transactions with HT Riverwood Multi-Growth Fund ("Riverwood"), a fund managed by Atlantis Investment Management Limited ("Atlantis"), a leading asset manager, which has provided the Company with £2 million in cash.

 

Atlantis is a 100% owned subsidiary of the Atlantis Group and Co-High is a 60% owned subsidiary of the Atlantis Group. Ms Yang Liu, now Atlantis' Chairperson and Chief Investment Officer, acquired the Atlantis group in 2009.

 

Additionally, Futura entered into a licensing agreement with Pride Century Ventures, a special purpose vehicle owned by Co-High Investment Management Limited ("Co-High") for the rights to exclusively develop and commercialise the Company's topical, gel-based ED treatment MED3000, in China and South East Asia. Co-High will provide funding currently estimated to be up to £4 million for the expected remaining R&D work required to gain approval of MED3000 throughout the region. Futura will be entitled to 50% of regional profits from the commercialisation of MED3000 (the "Joint Collaboration") including any profits derived from local partner agreements within the Region.

 

Atlantis is a leading international asset management company with a focus in the Greater China Region and South East Asia. Co-High is a specialist private equity company in the Greater China region and invests into and collaborates with some of the world's most promising companies which are believed to be poised to enter a hypergrowth phase. Healthcare investment and collaboration is targeted at companies with a clear scientific edge who are working to solve the major unmet medical needs of the Greater China region.

 

Under the terms of the agreement, Futura and Co-High will work together to develop and commercialise MED3000 as a clinically proven OTC treatment for ED throughout South East Asia.

 

TPR100 - Futura's advanced proprietary transdermal technology, DermaSys® for transdermal delivery of diclofenac for the pain and inflammation associated with sprains, strains and bruises and soft tissue rheumatism

 

TPR100 is a proprietary DermaSys® product formulation engineered to achieve targeted and controlled permeation of diclofenac through the skin for local relief of pain and inflammation associated with soft tissue damage caused by sprains, strains, bruises and rheumatism. It is partnered for manufacturing and distribution in the UK with Thornton & Ross, one of the UK's largest consumer healthcare companies and a subsidiary of STADA AG.

 

Futura has completed additional laboratory formulation adjustment and work specifically around the skin permeation characteristics of TPR100 in response to the UK MHRA's questions after Thornton & Ross' initial filing of a UK marketing authorisation application.

 

At a recent scientific advisory meeting with MHRA by Futura in conjunction with its commercial partner, the regulator recognised the improved skin permeation characteristics of TPR100 compared to market-leading diclofenac formulations. In vitro studies demonstrated that a 20% TPR100 dose relative to certain market-leading diclofenac formulations delivered the same permeation of active pharmaceutical ingredient through the skin. Due to this increased potency, a key differentiating characteristic for TPR100, MHRA now require data from a patient efficacy study with TPR100 in support of a marketing authorisation and are willing to consider superiority claims if the study is successful.

Since Voltaren® 1% has recently gained OTC status in the USA a new and attractive potential market opportunity has arisen in that geography for TPR100. Futura is therefore exploring designs, funds permitting, for a clinical study to achieve approval for a superior product without a prescription in the USA as well as fulfilling data requirements for UK and EU regulatory submissions as a topical pain relief and anti-inflammatory treatment.

 

Commercial discussions with several potential distribution partners for other countries continue however any further licensing deals are expected to be after a regulatory approval is achieved.

 

CBD100 - Futura's advanced proprietary transdermal technology, DermaSys® for the delivery of Cannabidiol

 

CBD100 is part of Futura's joint venture collaboration with CBDerma Technology Limited to explore the application of Futura's advanced proprietary transdermal technology, DermaSys® for the delivery of Cannabidiol.

 

CBDerma Technology is a company that has been established and funded to specifically exploit the therapeutic potential of cannabis. The company's management, backers and advisors have extensive knowledge, expertise and investments in plant derived product manufacturing.

 

Completion of initial laboratory and optimisation work on CBD100 was announced in August 2020.

 

As part of a robust formulation process using strict pharmaceutical development principles, Futura carried out extensive DermaSys® cannabidiol formulation work and initial in vitro tests on human epidermis during 2020. The studies demonstrated highly efficient penetration of cannabidiol into and through the skin, superior to an established, marketed, comparator product. Additionally, cannabidiol is known to be unstable with many common excipients used in gels and other topically applied forms. CBD100 was specifically formulated to minimise this issue and has shown encouraging early stability work, which is expected to ensure potency is retained during shelf-life.

 

The Futura R&D team's development work on CBD100 is further evidence of the broad utility and power of the DermaSys® system for effective and controlled transdermal delivery of a wide range of active pharmaceutical ingredients.

 

An intellectual property application was made in August 2020 covering various unique aspects of the CBD100 gel formulation. Initial patent office examination has suggested that CBD100 is a novel and inventive formulation and the patent application is expected to progress into the international Patent Cooperation Treaty (PCT) stage in Summer 2021.

 

Cannabidiol is a major component of the cannabis plant and is generally regarded as non-addictive and non-psychoactive, making it ideal for consideration as a topically delivered molecule for local or regional (non-systemic) use. The market for cannabidiol products is growing rapidly. A report by Reports and Data estimates that the market for cannabidiol products is forecast to grow from $1bn in 2018 to $16bn by 2026, at a CAGR of 27.7%, during the forecast period. The market is primarily driven by the increase in the usage of cannabidiol in medical applications, supplements, beverages and skin care.

 

In conjunction with its joint venture partner Futura is exploring the potential of CBD100 from both a development and commercial standpoint. External advisors with a strong commercial track record, experience and credentials in the cannabis-derived active ingredients market have been appointed. A structured process is ongoing for validating and understanding CBD100's market potential, where the best commercial opportunity lies and then development requirements prior to planning and execution of further work. The finalisation of plans will be defined by ongoing regulatory changes that are occurring with respect to marketing authorisation requirements for cannabidiol. For example, the EU is set to provide a regulatory update for cannabidiol use in cosmetics during Q1 2021. Futura plans to update shareholders in due course.

 

In light of increasing regulation, a gel that has been formulated using strict pharmaceutical development principles with strong delivery characteristics, stability and high quality could be a very attractive commercial proposition when compared to current market incumbents in either cosmetic or more traditional pharmaceutical markets for cannabidiol such as pain and inflammation. Both options are being examined however it is likely that a "cosmeceutical" will be developed first.

 

The route to an approved cosmetic product is expected to be fastest where there is a large existing market opportunity but with lower barriers to entry where quality and differentiated brand attributes are important. Whilst a pharmaceutical development route for an effective cannabidiol gel remains of significant potential, it also involves higher risk and cost until the clinically proven benefits of cannabidiol and specific indications to which it is applicable are better understood.

 

Financial Review

 

The £2 million cash investment arising from the MED3000 collaboration agreement for China and South East Asia post year end in March and April 2021, in addition to a year end cash balance of £1.02 million and usual refund of R&D tax credits of £0.5 million, will fund the Company's working capital through to Q1 2022, with a focus on formalising further MED3000 partnering and license agreements in additional regions, particularly where marketing approval is near-to-medium term.

 

Outlook

 

Futura has achieved major milestones in terms of securing partnering for the development and commercialisation of MED3000 in China and South East Asia in a deal structured to capture significant long-term value, as well as the EU Notified Body's recommendation to certificate MED3000 for Class 2B approval as a medical device for ED treatment under the European Medical Device Regulations.

 

The Company is well positioned to deliver further positive news through 2021. Futura expect the final certificate of EU CE mark approval for MED3000 by the end of May and the team is focused on preparation and execution of the confirmatory clinical study and non-clinical studies to finalise an OTC label for the regulatory submission for MED3000 in the USA which the Company aims to achieve in 2022. Furthermore, given the potential for expedited Medical Device Registrations possible in most Middle East, Far East, African and Latin American countries based on EU CE Mark Futura look forward to achieving additional progress in a worldwide roll out of registrations followed by commercialisation of MED3000 as a fast-acting topical ED treatment without the need for a physician prescription. The rapidly solidifying potential of MED3000's value also means that the Company look forward to being able to update shareholders on the progress of commercial licensing discussions in the coming months.

 

John Clarke                        James Barder

Chairman                           Chief Executive

 

 

References

 

1.                Under Brexit terms Northern Ireland is exempt.

2.                Manufacturers' Selling Prices 2018: Data available for 75 countries, IQVIA IMS Health.

3.                Cello Health Consulting research conducted in the US, France and Germany, commissioned by Futura Medical.

4.                EMA, Withdrawal assessment report for Viagra, 2008.

5.                Global Data Epidemiological Analysis 2020

6.                Nguyen Sex Med Rev. 2017 Oct, vol 5, 508-520

 

 

Financial Review

 

As outlined in the Chairman and Chief Executive's Review, during the year Futura focused its financial resources towards approval and commercialisation of its fast-acting topical treatment for ED.  As the FM57 study was concluded, activities shifted toward Regulatory and Manufacturing.  With the majority of the work conducted or overseen by in-house personnel already in place, external 3rd party costs were significantly lower than in the prior year.

 

A fundraise was completed in January 2020 resulting in gross funds of £3.25 million through the combination of subscription for shares through PrimaryBid and institutional placing to allow the Company to proceed with MED3000 regulatory approval as a medical device in the EU and US.

 

In March 2021 the Company was notified that MED3000 had been recommended for approval as a Class 2B medical device in Europe and the FDA confirmed that a further, smaller, supplementary study was required for approval in the USA.

 

In addition, in March 2021, the Company concluded a further funding transaction which resulted in £1.5 million received upon the issuance of convertible loan notes and in April 2021 the Company received an additional £0.5 million following the exercise of warrants by HT Riverwood Fund.

 

Revenue

 

The Company continued to focus its financial and human resources on late stage clinical development of its fast-acting topical treatment for ED and accelerate progress towards achieving a significant, continuous revenue stream within a few years. No revenue was recognised in the period.

 

Research and Development Costs

 

Research and Development costs for the period ended 31 December 2020 were £1.93 million, compared to £10.05 million for the period ended 31 December 2019. The decrease of £8.12 million is reflective of the focus towards regulatory and manufacturing activities, which were conducted in-house by existing personnel and significantly reducing the cost of external 3rd party providers. There was no capitalisation of R&D costs in 2020.

 

Administrative Costs

 

Administrative costs were £1 million for the period ended 31 December 2020 compared to £1.14 million for the period ended 31 December 2019 and were reflective of the Company's strategy to keep central costs lean and focus cash resources on delivering the R&D programme.

 

Tax

 

It is expected that an R&D Tax Credit of £0.52 million will be claimed in respect of 2020 and the cash refund is expected to be received mid-2021 from HMRC.

 

Loss Per Share

 

The basic loss per share for 2020 was 0.99p (2019: 4.36p). Details of the loss per share calculations are provided in Note 10 to the consolidated financial statements.

 

Cash Balance

 

The cash balance at the end of 2020 was £1.02 million (2019: £2.51 million). Gross proceeds of £3.25 million were received in January 2020 and the usual refund of R&D tax credits of £2.22 million was also received in May 2020. Cash burn during the year was £6.77 million (2019: £8.01 million) primarily in relation to the concluding FM57 clinical study and, regulatory and manufacturing activities associated with MED3000. Cash burn in relation to R&D activities for 2021 is expected to increase as clinical study costs relating to FM71 are incurred during H2 2021.

 

Post Period Events

 

The Company concluded funding of £2 million in March and April 2021. The COVID-19 pandemic has continued through 2021 and Futura expect the pandemic to have continued limited impact on operations in 2021. Further information in relation to COVID-19 is available in the Risks and mitigation section of the 2020 Annual Report.

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2020

 

 

Year ended

31 December

             2020

Year ended

31 December

             2019

 

Notes

                  £

                  £

Revenue

2.4

-         

31,778

Research and development costs

 

(1,927,658)

(10,051,148)

Administrative costs

 

(1,000,736)

(1,144,397)

Operating loss

6

(2,928,394)

(11,163,767)

Finance income

8

         924

         22,283

Loss before tax

 

(2,927,470)

(11,141,484)

Taxation recoverable         

9

519,093

2,222,194

Loss for the year being total comprehensive loss attributable to owners of the Parent Company

 

 

 

(2,408,377)

 

(8,919,290)

 

 

 

 

Basic and diluted loss per share (pence)

10

(0.99)

(4.36 pence)

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

For the year ended 31 December 2020

 

 

 

Share

 Capital

Share  Premium

Merger

 Reserve

Warrant Reserve

          Retained

Losses

Total

Equity

 

Notes

                £

                 £

               £

£

 £

£

At 1 January 2019

 

    409,167

      49,983,860

   1,152,165

  -

   (42,692,938)

       8,852,254

Total comprehensive loss for the year

 

 

               -

 

                    -

 

               -

 

               -

 

       (8,919,290)

 

   (8,919,290)

Share-based payment

18

         -

                      -

                -

                -

         101,404

           101,404

Shares issued during the year

17

     154

        19,130

                -

                -

                    -

        19,284

Transactions with owners

 

154

19,130

-

-

101,404

120,688

At 31 December 2019

 

    409,321

      50,002,990

   1,152,165

       -    -

 (51,510,824)

53,652

Total comprehensive loss for the year

 

 

               -

 

                    -

 

               -

 

               -

 

       (2,408,377)

 

   (2,408,377)

Share-based payment

18

         -

                      -

                -

                -

         149,364

           149,364

Shares issued during the year

17

    81,933

        2,811,100

                -

      165,868

                    -

       3,058,901

Transactions with owners

 

81,933

2,811,100

-

165,868

149,364

3,208,265

At 31 December 2020

 

    491,254

      52,814,090

   1,152,165

165,868

 (53,769,837)

853,540

 

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.

 

Warrants issued are held as a separate 'warrant reserve' within equity. The warrant reserve will be transferred to retained earnings on exercise or lapse, as it's treated as distributable profit from the point of issue.

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

As at 31 December 2020

 

 

 

 

 

As at

31 December

         2020

As at

31 December

         2019

 

Notes

              £

              £

Assets

 

 

 

Non-current assets

 

 

 

Plant and equipment

11

42,869

59,505

Total non-current assets

 

42,869

59,505

 

 

 

 

Current assets

 

 

 

Inventories

12

-

7,780

Trade and other receivables

14

39,790

101,192

Taxation recoverable

9

518,805

2,222,194

Cash and cash equivalents

15

1,018,601

2,510,501

Total current assets

 

1,577,196

4,841,667

 

 

 

 

Liabilities

 

 

 

Current liabilities

 

 

 

Trade and other payables

16

(766,525)

(4,847,520)

Total liabilities

 

(766,525)

(4,847,520)

Total net assets

 

853,540

53,652

 

 

 

 

Capital and reserves attributable to

owners of the Parent Company

 

 

 

Share capital

17

491,254

409,321

Share premium

 

52,814,090

50,002,990

Merger reserve

 

1,152,165

1,152,165

Warrant Reserve

 

165,868

-

Retained losses

 

        (53,769,837)

        (51,510,824)

Total equity

 

853,540

53,652

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

 

For the year ended 31 December 2020

 

 

 

Notes

 Year ended

   31 December

              2020

 Year ended

   31 December

              2019

 

 

 

£

£

 

Cash flows from operating activities

 

 

 

 

Loss before tax

 

       (2,927,470)

       (11,141,484)

 

Adjustments for:

 

 

 

 

Depreciation

  11

            25,008

            20,704

 

Finance income

    8

           (924)

           (22,283)

 

Share-based payment charge

  18

            149,364

            101,404

 

Cash flows used in operating activities before changes in working capital

 

       (2,754,022)

       (11,041,659)

 

 

 

 

 

 

Decrease in inventories

  12

             7,780

              -

 

Decrease in trade and other receivables

 

                     61,401

204,928 

 

(Decrease) / increase in trade and other payables

  16

       (4,080,996) 

          2,822,004

 

Cash used in operations

 

       (6,765,837)

       (8,014,727)

 

 

 

 

 

 

Income tax received

 

           2,222,482

           1,358,480

 

Net cash used in operating activities

 

(4,543,355)

(6,656,247)

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

Purchase of plant and equipment

 11

            (8,371)

(32,736)

 

Interest received

 

             924

             22,283

 

Cash used in investing activities

 

             (7,447)

             (10,453)

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Issue of ordinary shares

    17

3,270,534

      19,284

 

Expenses paid in connection with share issue

 

       (211,632)

       -

 

Cash generated by financing activities

 

       3,058,902

       19,284

 

 

 

 

 

 

Decrease in cash and cash equivalents

 

    (1,491,900)

             (6,647,415)

 

Cash and cash equivalents at beginning of year

 

  2,510,501

    9,157,916

 

Cash and cash equivalents at end of year

15

 1,018,601  

   2,510,501 

 

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

For the year ended 31 December 2020

 

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 2020.

 

The consolidated financial statements of the Company and the Group for the year ended 31 December 2020 were authorised for issue by the Board of Directors on 13 April 2021.

 

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

 

2.    Accounting policies

 

            2.1 Basis of preparation

 

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 International accounting standards in conformity with the requirements of the Companies Act 2006. 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

 

For the year ended 31 December 2020, the Group made an operating loss of £2.92 million.  Cash and cash equivalents at 31 December 2020 were £1.02 million. The Board has considered the applicability of the going concern basis in the preparation of the financial statements. This included the review of internal budgets and financial results and a review of cash flow forecasts for the 12 months' period following the date of signing the financial statements. Under current business plans, the Group's cash resources will extend to Q1 2022. Based on this, additional funding is expected to be required to support the Group's and the Company's going concern status. Dependent upon the funds raised and the level of income generated from licensing activities, further funding may be required to reach profitability. The Group completed a £2.0 million fundraise which comprised of £1.5 million convertible loan notes, £0.5 million warrants and a Collaboration Agreement to commercialise MED3000 in Chia and SE Asia, £1.5 million was received in March 2021 and £0.5 million in April 2021.  The Directors have a reasonable expectation that the Group will be able to raise further financing, which could come from a variety of dilutive and non-dilutive sources, to support its ongoing activities, following the anticipated granting of the CE Mark for MED3000 in Europe, expected in May 2021 following a recommendation in March 2021. The Directors also have a reasonable expectation that the Group will be able to generate significant funding through entering into strategic collaborations for the commercialisation of MED3000 and its other products in the US and Europe.

 

However, there can be no guarantee that the Group will be able to raise sufficient funding from existing and new investors, nor that the Group will be able to secure further strategic collaborations for its product pipeline. In the event that the Group does not successfully raise new financing, the Directors consider that the Group would be able to reduce expenditure, potentially extending the Group's cash resources to more than 12 months from the date of signing the financial statements.

 

Based on the above factors the Directors believe that it remains appropriate to prepare the financial statements on a going concern basis. However, the above factors give rise to a material uncertainty which may cast significant doubt on the Group's and the 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

 

At the date of authorisation of these consolidated financial statements, several new, but not yet effective, Standards and amendments to existing Standards, and Interpretations have been published by the IASB.  None of these Standards or amendments to existing Standards have been adopted early by the Group.

Management anticipates that all relevant pronouncements will be adopted for the first period beginning on or after the effective date of the pronouncement.  New Standards, amendments and Interpretations not adopted in the current year have not been disclosed as they are not expected to have a material impact on the Group's financial statements

 

2.4 Revenue

To determine whether to recognise revenue, the Group follows a five-step process:

1 Identifying the contract with a customer

2 Identifying the performance obligations

3 Determining the transaction price

4 Allocating the transaction price to the performance obligations

5 Recognising revenue when/as performance obligation(s) are satisfied.

 

Revenue recognised in the prior year related to a collaboration agreement.  In accordance with IFRS 15, revenue is calculated based on the consideration to which the Group expects to be entitled and is recognised over the length of services provided under the contract and once performance obligations have been met. The transaction fee is allocated over the length of the service being provided in accordance with the project plan. It is recognised as a contract liability at the time of the initial transaction and is released over the expected period of service on the basis of work completed and performance obligations delivered. The progress is re-evaluated by management at each reporting date and the revenue recognised is re-measured accordingly.  During the year, no revenue was recognised. 

 

2.5 Leased assets

For any new contracts entered into on or after 1 January 2019, the Group considers whether a contract is, or contains a lease.  A lease is defined as a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration.  To apply this definition, the Group assesses whether the contract meets three key evaluations which are whether:

  • The contract contains an identified asset, which is either explicitly in the contract or implicitly specified by being identified at the time the asset is made available to the Group.
  • The Group has the right to obtain substantially all of the economic benefits from the use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract.
  • The Group has the right to direct the use of the identified asset throughout the period of use.  The Group assess whether it has the right to direct "how and for what purpose" the asset is used throughout the period of use.

 

The Group makes the use of leasing arrangements principally for the provision of the main office space and IT equipment.  The rental contracts for offices are typically negotiated on a short term rolling basis with one months' notice.  Lease terms for IT equipment have lease terms of 3 years without any extension terms. The Group does not enter into sale and leaseback arrangements. All the leases are negotiated on an individual basis and contain a wide variety of different terms and conditions such as purchase options and escalation clauses.

 

The Group assesses whether a contract is or contains a lease at inception of the contract. A lease conveys the right to direct the use and obtain substantially all of the economic benefits of an identified asset for a period of time in exchange for consideration.

 

The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients. These leases relate to items of certain IT equipment.  Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term. 

 

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 any of its products as they have either not yet been approved or commercially launched in at least one major market therefore commercial feasibility of the product is not yet certain. 

 

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.

 

2.7 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 cash flows.

 

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 Classification of financial instruments issued by the Group

In accordance with the requirements of IAS 32, financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions:

• they include no contractual obligations upon the Company to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Company; and

• where the instrument will or may be settled in the Company's own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the Company's own equity instruments or is a derivative that will be settled by the Company's exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments

 

2.11 Financial instruments

i) Recognition and initial measurement

At the year-end, the Group had no financial assets or liabilities designated at fair value through the Consolidated Statement of Comprehensive Income (2019: £nil). Trade receivables and debt securities are initially recognised when they are originated. All other financial assets and liabilities are initially recognised when the Group becomes a party to the contractual provisions in the instrument. A financial asset (unless it is a trade receivable without a significant financing component) or a financial liability is initially measured at fair value plus, for items not measured at fair value through profit and loss ("FVTPL"), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is measured at the transaction price.

 

ii) Classification and subsequent measurement

Financial assets

On initial recognition a financial instrument is classified as measured at: amortised cost, fair value through other comprehensive income ("FVOCI") or FVTPL. Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets.

A financial asset is measured at amortised cost if it meets both the following conditions and is not designated as FVTPL:

  • it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
  • its contractual terms give rise on a specified date to cash flows that are solely the payment of principal and interest on the principal outstanding.

 

A debt investment is measured at FVOCI if it meets both the following conditions and is not designated as FVTPL:

  • it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
  • its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

On initial recognition of an equity investment that is not held for trading the Group may irrevocably elect to present subsequent changes in the investment's fair value in OCI. This election is made on an investment by investment basis.

Financial assets at amortised cost are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses.

 

Financial liabilities

Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as FVTPL if it is held for trading, it is a derivative or it is designated as such on initial recognition. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense is recognised in profit or loss. At the year-end, the Group had no financial assets or liabilities designated at FVOCI (2019: £nil).

 

iii) Derecognition

Financial assets

The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

 

Financial liabilities

The Group de-recognises a financial liability when the contractual obligations are discharged or cancelled, or expire. The Group also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value. On de-recognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid is recognised in profit or loss.

 

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
  • 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.

 

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 plan is intended to be settled in equity with cash settlement possible at the discretion of the Board.  There was no charge recognised in the year as the milestones and targets were not met.

 

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 £149,364 (2019: £101,404), 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 18.

 

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.

 

R&D costs

Management are required to make a judgement about certainty of commercial success of their products.  No Research and Development costs have been capitalised in the current or prior period and further details can be found in Note 2.6.

 

Fair value of derivative instruments

Where the fair value of derivative instruments recorded in the statement of financial position cannot be derived from active markets, their fair value is determined using valuation techniques. The inputs to these models are taken from observable markets where possible.  Where this is not feasible, a degree of judgment is required in establishing fair values. The judgments include considerations of inputs such as volatility. Details of the fair value calculation for warrants granted during the year, including other inputs into the Black-Scholes model, are disclosed in Note 19

 

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 cash flow can be judged with reasonable certainty.  There were no open forward contracts as at 31 December 2020 or at 31 December 2019.

           

At 31 December 2020 the Group had trade payables denominated in a foreign currency totalling £34,217 (31 December 2019: £101,899).

 

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

         2020

31 December

         2019

 

              £

              £

Cash at bank and in hand

644,729

2,137,599

Sterling short-term money market funds

373,872

372,902

 

1,018,601

2,510,501

 

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

 

(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 £1,018,601 of cash and fixed-term deposits as at 31 December 2020 (31 December 2019: £2,510,501).

 

5.      Segment Reporting

The Group is focussed on the development and commercialisation of MED3000 and therefore operates as one segment.

 

6.      Operating loss

   

  Year ended

   31 December

              2020

  Year ended

   31 December

              2019

Operating loss is stated after charging:

 

£

£

Depreciation of plant and equipment (Note 11)

                25,008

                20,704

Loss on disposal of plant and equipment

-

-

Inventories consumed in R&D

                -

                -

Short-term leases: property

              116,714

            117,275

Gain/(loss) on foreign exchange

                  18,840

                  8,468

 

 

The fees of the Group's Auditor Grant Thornton UK LLP for services provided are analysed below:

 

  Year ended

   31 December

              2020

  Year ended

   31 December

              2019

Audit services

£

£

Parent Company

43,500

35,000

Subsidiaries

7,500

7,000

Tax Services

 

 

Parent company

Subsidiaries                                                                                                                           

-

-

-

-

Other Non-audit services

 

 

iXBRL Tagging

1,000

1,000

Total fees

52,000

43,000

 

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

    31 December

                  2020

     Year ended

    31 December

                  2019

R&D staff

           8

8

Finance and Administration staff

              2

              2

Executive Directors

               3

               3

 

13

13

 

The aggregate payroll costs of these persons were as follows:

 

 

 

     Year ended

    31 December

                  2020

          Year ended

      31 December

                   2019

 

                     £

                    £

Wages and salaries

           1,598,473

           1,315,760

Social security costs

              154,829

              181,544

 

 

 

Other pension and insurance benefits costs

163,910

180,342

Total cash-settled emoluments

1,917,212

1,677,646

Share-based payment remuneration charge

149,364

101,404

Total emoluments

2,066,576

1,779,050

 

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

Directors' emoluments

 

 Year ended

   31 December

              2020

 Year ended

   31 December

              2019

 

£

£

Aggregate emoluments

912,209

693,353

Other pension and other benefit costs

22,968

22,506

Subtotal per remuneration report

935,177

715,859

Share-based payment remuneration charge

47,866

47,866

Employer's national insurance charge

77,222

73,811

Total emoluments

1,060,265

837,536

 

In 2020 there were no Directors whose share options were exercised under the Group share option schemes and no gain was realised (2019: £nil). In respect of the highest paid Director the realised gain was £nil (2019: £nil).

 

In 2020 there were no Directors (2019: no Directors) who participated in a private money purchase defined contribution pension scheme. Emoluments for individual Directors are disclosed within the Remuneration Committee Report.

 

The Directors consider that there are no Key Management Personnel other than the Directors.

 

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

 

Year ended

   31 December

              2020

  Year ended

   31 December

              2019

 

 

£

£

Aggregate emoluments

306,658

235,593

Employer pension contributions and other benefits

2,652

-

Subtotal per remuneration report

309,310

235,593

Share-based payment remuneration charge

18,410

18,410

Employer's national insurance charge

32,266

31,680

Total emoluments

359,986

285,683

 

8.      Finance income

 

Interest receivable in 2020 on treasury funds was £924 (2019: £22,283).

 

9.      Taxation

 

9.1 Current tax

 

     Year ended

   31 December

                 2020

     Year ended

31 December

2019

 

                       £

                       £

UK corporation tax credit on loss on ordinary activities

519,093

           2,222,194

 

 

The tax assessed for the year was lower than the UK corporation tax rate (2019: lower).  The differences are explained below:

 

 

 

 

 

 

Year ended

31 December

2020

     Year ended

   31 December

                2019

 

£

                       £

Loss on ordinary activities before tax

2,927,470

11,141,484

 

Loss on ordinary activities at an average standard rate of corporation tax in the UK of 19% (2019: 19%)

 

 

556,220

 

2,116,882

Expenses not deductible for tax purposes                                                    

(6)

(304)

Unrecognised deferred tax

(37,213)

(15,701)

Unutilised tax losses

(224,744)

(841,959)

R&D expenditure credit

(1,036)

(4,969)

Loss surrendered for refund

(159,728)

(683,072)

Additional relief for R&D claims

381,186

1,630,136

UK corporation tax credit

514,679

2,201,013

Adjustment to tax charge relating to prior period

(288)

-

R&D expenditure credit re 2019

-

21,181

R&D expenditure credit re 2020                     

4,414

-

UK corporation tax credit reported in the

Consolidated Statement of Comprehensive Income

518,805

2,222,194

       

 

The Group has tax losses of approximately £32,448,687 (2019: £31,265,826) available for offset against future taxable profits.

 

The corporation tax credit for the year represents research and development tax credits of £514,679 (2019: £2,201,012), arising from the surrender of losses (rather than carrying forward to future years) of £3,549,507 (2019: £15,179,395) 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.

 

In addition, a small claim under the large company Research and Development Expenditure Credit (RDEC) scheme resulted in a refund of £4,414 (2019: £21,181).

 

9.2 Deferred tax

Deferred tax assets amounting to £6,575,569 (2019: £5,649,021) 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) were substantively enacted on 26 October 2015. The unrecognised deferred tax asset at 31 December 2020 has been calculated assuming a prevailing tax rate when the timing differences reverse of 19% (2019: 17%) and comprises:

 

      Year ended

    31 December

                  2020

      Year ended

    31 December

                  2019

 

                      £

                      £

Depreciation differential versus capital allowances

(496)

(1,770)

Other short-term timing differences

410,814

            335,600

Unutilised tax losses

6,165,251

        5,315,191

 

6,575,569

        5,649,021

The UK corporation tax rate is expected to increase from 19% to 25% from 1 April 2023. The legislation containing this provision has not yet been substantively enacted. The unrecognised deferred tax asset at 31 December 2020 has been calculated at the rate substantively enacted at the time of preparation of the financial statements.

 

10.   Loss per share

 

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

              2020

               2019

 

Loss for the purposes of basic EPS and diluted EPS (£)

2,408,376

8,919,290

Weighted average of ordinary shares for purposes of basic and diluted EPS (number)

243,721,303

204,657,741

 

Loss per share basic and diluted (pence)

0.99

4.36

 

 

 

         

 

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 7,295,000 (2019: 7,255,000).  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.

11.   Plant and equipment

 

 

Computer Equipment   

Furniture

 and Fittings

 

  Total

Cost

£

£

£

At 1 January 2020

    119,338

           63,285

182,623

Additions

                8,371

           -

              8,371

At 31 December 2020

             127,709

        63,285

         190,994

Depreciation

 

 

 

At 1 January 2020

                66,745

            56,373

123,118

Charge for year

23,594

              1,414

           25,008

At 31 December 2020

90,339

         57,787

          148,126

Net book value

 

 

 

At 31 December 2020

               37,370

5,498

          42,868

At 31 December 2019

               52,593

           6,912

          59,505

 

 

 

 

 

Computer Equipment   

 

Furniture

 and Fittings

 

Total

Cost

£

£

£

At 1 January 2019

                 86,602

           63,285

149,887

Additions

                32,736

           -

             32,736

At 31 December 2019

             119,338

        63,285

         182,623

Depreciation

 

 

 

At 1 January 2019

                47,495

            54,919

           102,414

Charge for year

19,250

              1,454

           20,704

At 31 December 2019

                 66,745

         56,373

          123,118

Net book value

 

 

 

At 31 December 2019

               52,593

           6,912

          59,505

At 31 December 2018

39,107

8,366

47,473

 

 

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

12.   Inventories

 

31 December

         2020

31 December

         2019

 

              £

              £

Consumable materials used for development

-

7,780

 

 

13.    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 Position

31 December

         2020

31 December

         2019

Loans and receivables at amortised cost

                     £

                     £

Trade and other receivables (Note 14)

16,067

59,968

Cash and cash equivalents (Note 15)

1,018,601

2,510,501

Total receivables

1,034,668

2,570,469

 

 

  31 December

          2020

  31 December

        2019

Liabilities as per Consolidated Statement of Financial Position at amortised cost

                      £

                      £

Trade and other payables (Note 16)

766,525

4,847,520

Total payables

   766,525

4,847,520

 

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

 

14.   Trade and other receivables

 

 

31 December

         2020

31 December

         2019

Amounts receivable within one year:

              £

              £

Trade receivables

5,627

5,627

Other receivables

10,440

54,341

Financial assets (Note 13)

16,067

59,968

Prepayments

23,723

41,224

 

39,790

101,192

 

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.

 

15.   Cash and cash equivalents

 

31 December

         2020

31 December

         2019

 

              £

              £

Cash at bank and in hand

644,729

2,137,599

Sterling short-term money market funds

373,872

372,902

 

1,018,601

2,510,501

 

 

16.   Trade and other payables

 

 

31 December

         2020

31 December

         2019

 

              £

              £

Trade payables

182,900

2,625,359

Social security and other taxes

64,092

39,970

Deferred Income

-

218,222

Accrued expenses

519,533

1,963,969

 

766,525

4,847,520

 

The decrease in payables is reflective of the reduced activity relating to research and development activities in comparison to the prior year.  Deferred income relating to the prior year was re-classified in the period as accrued expenses and released to the P&L as costs were recognised.

 

17.    Share capital

 

Authorised

31 December

         2020

31 December

2019

31 December

         2020

 31 December

2019

 

Number

Number

              £

£

Ordinary shares of 0.2 pence each

500,000,000

500,000,000

1,000,000

1,000,000

 

Allotted, called up and fully paid

31 December

         2020

31 December

         2019

31 December

         2020

31 December

         2019

 

Number

Number

              £

              £

Ordinary shares of 0.2 pence each

245,626,926

204,660,267

491,254

409,321

 

The number of issued ordinary shares as at 1 January 2019 was 204,583,439. During the year ended 31 December 2019, the Company issued shares of 0.2 pence with each ordinary share carrying the right to one vote as follows:

Month

Reason for issue

Gross Consideration

   Shares

Issued

 

 

  Number

January 2019

Non-Executive Director Share Award

19,284

76,828

 

 

 

19,284

76,828

                 

 

The number of issued ordinary shares as at 1 January 2020 was 204,660,267. During the year ended 31 December 2020, the Company issued shares of 0.2 pence with each ordinary share carrying the right to one vote as follows:

 

Month

Reason for issue

Gross Consideration

   Shares

Issued

 

 

  Number

January 2020

Non-Executive Director Share Award

20,534

341,659

January 2020

Subscription and Primary bid Offer

3,250,000

40,625,000

 

 

 

3,270,534

40,966,659

                 

 

 

18.   Share options

At 31 December 2020, 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 Price per Share

At 1

January 2020

  Options  Exercised

Options   Lapsed

Options   Granted

At 31 December2020

Exercise Period           

   Pence

    Number

  Number

Number

 Number

    Number

1 October 2015 - 30 September 2020

     71.50

620,000

              -

(620,000)

              -

-

1 October 2016 - 30 September 2021

     51.75

580,000

-                 

(100,000)

              -

480,000

1 October 2017 - 30 September 2022

     30.00

750,000

-

              (150,000)

              -

600,000

1 October 2018 - 30 September 2023

     57.50

960,000

             -

              (150,000)

              -

810,000

1 October 2019 - 30 September 2024

    30.50

1,140,000

             -

  (150,000)

              -

990,000

1 October 2020 - 30 September 2025

7.50

1,390,000

-

(150,000)

-

1,240,000

7 January 2020 - 6 January 2029

7.20

212,500

-

-

-

212,500

31 August 2020 - 6 January 2029

7.20

212,500

-

-

-

212,500

1 October 2021 - 30 September 2026

     31.00

1,400,000

             -

(150,000)

-

1,250,000

1 October 2022 - 30 September 2027

15.5

-

-

-

1,500,000

1,500,000

 

 

7,265.000

   -

(1,470,000)

1,500,000

7,295,000

 

On 21 September 2020 share options over 1,500,000 new ordinary shares were granted to employees (including Executive Directors) at a price of 15.5p. The options have a two-year vesting period and the exercise period for these options is 1 October 2022 to 30 September 2027.

 

The share options outstanding at 31 December 2020 represented 2.97% of the issued share capital as at that date (2019: 3.54%) and would generate additional funds of £1,939,700 (2019: £2,433,900) if fully exercised. The weighted average remaining life of the share options outstanding at 31 December 2020 was 56 months (2019: 51 months) with a weighted average remaining exercise price of 29.04 pence (2019: 33.55 pence).

 

The share options exercisable at 31 December 2020 totalled 4,545,000 (2019: 3,850,000) with an average exercise price of 26.04 pence (2019: 48.48 pence) and would have generated additional funds of £1,319,700 (2019: £1,766,650) if fully exercised.

 

The Group's share option scheme rules apply to 6,720,000 of the share options outstanding at 31 December 2020 (31 December 2019: 6,550,000) 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 advisers under the unapproved scheme. Such options generally vest immediately and are exercisable between one and two years after grant. There were 575,000 share options outstanding to advisers at 31 December 2020 (31 December 2019: 705,000).

 

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.

 

Share-based payments

 

 

Inputs to share option pricing model

31 December

              2020

31 December 2019

 

 

 

Grant date

21 September

17 September

Number of shares under option

      1,500,000

      1,390,000

Share price as at date of grant

14.72 pence

30.70 pence

Option exercise price

     15.5 pence

     31.00 pence

Expected life of options: based on previous exercise history

          3 years

          3 years

Expected volatility: based on median fluctuations over 3 years

          104.96%

          82.70%

Dividend yield: no dividends assumed

                 0%

                 0%

Risk-free rate: yield on 3 year treasury stock as at date of grant

     0.05% p.a.

     0.48% p.a.

 

Outputs generated from share option pricing model

31 December

             2020

31 December 2019

 

 

 

Fair value per share under option

9.24 p

16.19p

Total expected charge over the vesting period

       £138,600

        £225,041

 

Recognised in Consolidated Statement

of Comprehensive Income

31 December

              2020

31 December 2019

 

                    £

£

The share-based remuneration charge comprises:

 

 

Share-based payments - employees

19,104

32,019

Share-based payments - consultants

                    -

                    -

Share-based payments

            19,104

32,019

 

 

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

 

 

 

 

 

 31 December 2020

£

31 December 2019

£

 

 

 

 

Group equity-settled share-based payment expense

 

 

 

149,364

101,404

 

 

19.   Warrant Instrument

On 20 January 2020, Futura Medical plc issued a warrant instrument as part of a wider share issue to raise funds under a subscription agreement.  The Company issued 10,937,500 warrants at a ratio of one warrant for every two Ordinary Shares subscribed in respect of the Subscription.  The warrants are exercisable until the fifth anniversary of their issue at a price of 40 pence per Ordinary Share.  The warrants have been measured using the relative fair value method and fair value has been calculated using the black-scholes method using the following inputs:

 

 

Inputs to warrant pricing model

31 December 2020

31 December 2019

 

 

 

Grant date

21 January

-

Number of warrants

10,937,500

      -

Share price as at date of grant

12.75 pence

-

Warrant conversion price

     40 pence

-

Expected life of warrants:

          5 years

-

Expected volatility: based on median fluctuations over 3 years

          81.56%

-

Dividend yield: no dividends assumed

                 0%

-

Risk-free rate: yield on 3 year treasury stock as at date of grant

     0.44% p.a.

-

 

20.   Pension costs

The pension charge represents contributions payable by the Group to independently administered funds which during the year ended 31 December 2020 amounted to £128,161 (2019: £164,458). Pension contributions payable in arrears at 31 December 2020, included in accrued expenses at the relevant Consolidated Statement of Financial Position date, totalled £18,948.36 (2019: £10,225).

 

21.   Commitments

At 31 December 2020 the Group had operating lease commitments in respect of property leases cancellable on one month's notice of £9,802 (2019: £9,802).

 

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 7 and within the Remuneration Committee Report.

 

23.   Post period events

The group concluded a funding transaction in March 2021.  The transaction comprised of £1.5 million of convertible loan notes priced at 20 pence per ordinary share, £0.5 million of warrants with an exercise price of 22 pence and the Group entered also into a Collaboration Agreement to develop and commercialise MED3000 in China and South East Asia. 

Convertible Loan Notes

£1.5 million cash was received in March 2021 relating to convertible loan notes which expire after 3 years but a mandatory conversion will trigger once EU Approval has been granted and Futura Medical Plc share price remains

at 30 pence or above for at least one month.  Conversion of the loan notes will result in 7,500,000 ordinary shares issued upon conversion.

Warrants

Futura issued warrants to purchase £0.5 million of Futura Medical Plc ordinary shares.  The warrants expire after 4 years from date of issue and they have an exercise price of 22 pence. The warrants were exercised in April 2021 and 2,272,727 ordinary shares will be issued

Collaboration Agreement

The Group also entered into a Collaboration Agreement to develop and commercialise MED3000 in China and SE Asia.  Futura has granted a licence to MED3000 IP and the counter-party will fund the costs of development.  Futura will retain a 50% profit share.

 

 

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