Futura Medical plc
Annual Report and Accounts
For the year ended 31 December 2013
Stock Code: FUM
23187-04 28 March 2014 11:27 AM
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About Futura Medical
What we do
Futura’s innovation strategy applies advanced
science to develop products with compelling
commercial potential using our advanced proprietary
transdermal technology.
Our key strengths
Technological strengths
We have strong IP on all products under development.
Our expertise is in transdermal delivery.
Commercial strengths
We are focused on products for which there are substantial
market opportunities. We currently have agreements with
a number of key industry players. We specialise within the
growing consumer healthcare sector.
Financial strengths
We maintain a high ratio of research and development
spend relative to administrative cost and a ‘virtual’
organisational structure.
Contents
About Futura Medical
About Futura Medical
Our Strategy
Highlights
Our Business Model
Our Expertise
Our Pipeline
Governance
Chairman’s and Chief Executive’s Review
Board of Directors
Remuneration Report
Corporate Governance
Directors’ Report
Strategic Report
Independent Auditor’s Report
Financial Statements
Group Statement of Comprehensive Income
Group Statement of Changes in Equity
Group Statement of Financial Position
Group Statement of Cash Flows
Notes to the Group Financial Statements
Parent Company Balance Sheet
Notes to the Parent Company Financial Statements
Company Information
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www.futuramedical.com
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Futura Medical plcAnnual Report and Accounts for the year ended 31 December 2013
www.futuramedical.com
Stock Code: FUM
01
Our Strategy
Futura’s innovation strategy applies advanced science to develop products with
compelling commercial potential and is driven by the following four criteria.
ADVANCED
TRANSDERMAL
TECHNOLOGY
1
Offering innovative delivery
of proven compounds
through the skin to improve
their performance or to
address new indications
CONTROLLED
DEVELOPMENT
RISK
2
3
STRONG
INTELLECTUAL
PROPERTY
COMMERCIALISATION
4
Using only approved
compounds to control the
risk profi le
Developing products where
the group can secure
strong patent protection
Out-licensing products
to leading healthcare
companies which offer
the optimum potential
fi nancial return
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INCORPORATING EXISTING
CHEMICAL ENTITIES
Reduces investment
and risk
Reduces
development costs
Increases chances
of regulatory
approval
N
N
N
SIO
SIO
SIO
U
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DIF
DIF
DIF
THE ACTIVE STARTS
THE ACTIVE STARTS
THE ACTIVE STATAT RTS
WORKING RAPIDLYLYL
WORKING RAPIDLY
WORKING RAPIDLY
TARGETED DELIVERY
TARGETED DELIVERY
ETED DELIVERYRYR
TARGTARGT
SEXUAL HEALTH
CSD500
CSD500
PET500
MED2002
PAIN RELIEF
TPR100
TIB200
TIB200
SPR300
SPR300
Licensing partners include
Church and Dwight,
Ansell, Saudi Pharmacy
Group and RFSU
PET500
Launched in the USA by
Ansell
INNOVATIVE DRUG
DELIVERY PLATFORM
Highly effi cient and
proprietary transdermal
delivery technology
1
Application
of gel with
active
2
Seconds
later*
3
Minutes
later*
SKIN SURFACE
SKIN SURFACE
SKIN SURFAFAF CE
DERMIS
DERMIS
DERMIS
TARGET AREA
TARGET AREA
ET AREA
TARGTARGT
N
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O
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TECHNOLOGIES
TECHNOLOGIES
TECHNOLOGIES
WITHIN DERMASYS®
WITHIN DERMASYS
WITHIN DERMASYS
DRIVE THE ACTIVE
DRIVE THE ACTIVE
DRIVE THE ACTIVE
THROUGH THE SKIN
THROUGH THE SKIN
THROUGH THE SKIN
I
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G
G
G
N
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AAAA
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For more information on
For more information on
Our Delivery Technology go to page 4
Our Delivery Technology go to page 4
*These are estimates and will vary according to the therapeutic indication
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02
Highlights
●● CSD500 – Significant commercial, technical and regulatory progress:
Multiple licensing deals signed, covering key geographic areas including North America, key
European countries, Middle East and North Africa, the Nordic region and China
Formal award of CE mark from EU regulators
Formal award of ISO 13485 certification of quality management system
Major product and supply chain improvements to increase shelf life and reduce cost of
goods
●● PET500 – Launched in the USA by Ansell under the brand name EPIC®
●● Pain Relief – Two new products added to the portfolio
●● Net loss of £2.21 million (2012: net loss of £2.18 million) with net cash outflow in year of
£1.83 million (2012: net cash inflow of £0.23 million)
●● Cash resources of £0.99 million at 31 December 2013 (31 December 2012: £2.82 million);
tax credit receivable £0.31 million at 31 December 2013 (31 December 2012: £0.26 million)
●● Successful post year end fundraising of £12.0 million (before expenses) to provide additional
working capital and build greater value in our product pipeline
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Futura Medical plcAnnual Report and Accounts for the year ended 31 December 2013 www.futuramedical.com
Stock Code: FUM
03
Our Business Model
Develop
Protect
Licence
Commercial potential
Our product development strategy
is focused on creating products
with a predicted high rate of return
on investment and a low cost of
development. We focus exclusively
on topically applied pharmaceutical
drugs and medical devices. We
only incorporate existing well-
characterised chemical entities into
our products.
Robust patent protection
Strong IP underpins all our product
development and commercialisation
strategies.
We develop and retain our intellectual
property including manufacturing
rights, patents, know-how and
trademarks to protect the commercial
position and competitiveness of our
products and our partners.
Strong partners
Our products, once approved by the
relevant regulatory authorities, will be
brought to market through licensing
agreements with partners that
already have significant distribution
networks. In return we receive
upfront payments, milestones and
royalty payments based on the sales
of our products via these distribution
partners.
Licensing partnerships
CSD500 – Futura has an exclusive licensing agreement with Church & Dwight Co. Inc. (“Church & Dwight”) for the
distribution rights to CSD500 in North America and in a number of key European territories. Church & Dwight’s
condom brand Trojan® is the number one condom brand in North America and the world’s second biggest condom
brand by product sales.
In June we licensed the rights to CSD500 to Saudi Pharmacy Group, a Middle Eastern healthcare company for 15
countries in the Middle East and North Africa region (“MENA”). In December we licensed the rights to CSD500 to
Ansell Limited (“Ansell”) for China and to RFSU AB (“RFSU”), the market leader for condoms in Scandinavia, for four
countries in the Nordic region.
PET500 – Futura has an exclusive worldwide agreement with Ansell, one of the world’s major sexual health
companies, for the commercialisation of PET500, our product for enhanced sexual control. PET500 is a topical spray
that combines our DermaSys® AquaFree delivery system with a well-known mild topical anaesthetic to delay male
ejaculation. PET500 has now been launched in the USA under the brand name EPIC®.
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About Futura MedicalGovernanceFinancial Statements 04
Futura Medical plc
Annual Report and Accounts for the year ended 31 December 2013
Our Expertise
DermaSys® is Futura’s advanced
transdermal technology platform.
Futura has developed a highly effi cient and proprietary transdermal delivery technology,
DermaSys®, for the absorption of active molecules through the skin. DermaSys® is a versatile
technology that can be tailored to suit the specifi c active compound being used and the
therapeutic indication. Such targeted delivery offers an optimised profi le in terms of dose, onset
time and duration of effect, as well as an improved safety profi le through lower systemic uptake
and the reduced risk of side effects. Whilst developing PET500, our product for enhanced sexual
control, we also expanded the DermaSys® delivery technology platform by producing a new and
unique delivery system, DermaSys® AquaFree, which does not contain water.
MED2002
Topical gel for the
treatment of erectile
dysfunction
PET500
Performance
enhancement spray
for men
TPR100
Topical diclofenac
pain relief gel
TIB200
Topical ibuprofen
pain relief gel
SPR300
Topical methyl salicylate
pain relief gel
1
Application
of gel with
of gel with
active
active
2
Seconds
later*
later*
3
Minutes
later*
later*
SKIN SURFACE
SKIN SURFACE
SKIN SURFAFAF CE
DERMIS
DERMIS
DERMIS
TARGET AREA
TARGET AREA
ET AREA
TARGTARGT
N
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N
N
O
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AAAA
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TECHNOLOGIES
TECHNOLOGIES
TECHNOLOGIES
WITHIN DERMASYS®
WITHIN DERMASYS
WITHIN DERMASYS
DRIVE THE ACTIVE
DRIVE THE ACTIVE
DRIVE THE ACTIVE
THROUGH THE SKIN
THROUGH THE SKIN
THROUGH THE SKIN
I
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N
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AAAA
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P
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N
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SIO
SIO
SIO
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DIF
DIF
DIF
THE ACTIVE STARTS
THE ACTIVE STARTS
THE ACTIVE STATAT RTS
WORKING RAPIDLY
WORKING RAPIDLY
WORKING RAPIDLYLYL
TARGETED DELIVERY
TARGETED DELIVERY
ETED DELIVERYRYR
TARGTARGT
DermaSys® AquaFree enables drugs that are water sensitive (hydrolytically unstable or which have
only limited hydrolytic stability) to be developed into potentially commercially attractive products
with the additional benefi t of rapid transdermal delivery.
*These are estimates and will vary according to the therapeutic indication
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www.futuramedical.com
Stock Code: FUM
05
05
Our Pipeline
Sexual Healthcare
Concept
Development
Commercialisation
PET500
Description: Performance enhancement spray for men
Status: Available throughout the USA
CSD500
Description: Condom containing an erectogenic gel
Status: Initial launches commencing in H2 2014 in EU and MENA
MED2002
Description: Topical gel for erectile dysfunction
Status: In phase II/III, evaluating commercialisation options
Pain Relief
Concept
SPR300
Development
Commercialisation
Description: Topical methyl salicylate pain relief gel
Status: In phase III, advisors retained to assist with out-licensing
TIB200
Description: Topical ibuprofen pain relief gel
Status: In phase III, advisors retained to assist with out-licensing
TPR100
Description: Topical diclofenac pain relief gel
Status: In phase III, advisors retained to assist with out-licensing
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www.futuramedical.comStock Code: FUMAbout Futura MedicalGovernanceFinancial Statements 06
Chairman’s and Chief Executive’s Review
2013 was a year of significant progress in the
development of the business.
We made major progress in the commercialisation of our
lead product, the novel condom CSD500. In the first quarter
of 2013, we licensed marketing rights to the major US
consumer products group Church & Dwight, whose condom
brand Trojan® is the market leader in the USA. This licensing
deal covers North America and key European countries
and is in line with a strategy we implemented last year of
licensing the product on a territorial basis to leading brands
in geographic territories worldwide. During the year, we also
licensed CSD500 to commercial partners with leading brands
and strong distribution capabilities in territories including
Scandinavia, Middle East and North Africa, and China.
As a further evolution of our strategy we intend, as
announced in March 2014, to launch CSD500 in at least
one European country under a Futura owned brand name.
Distribution will be outsourced to an established European
condom distributor thereby maintaining Futura’s outsourced
strategy. This approach where appropriate will add a further
route to market for CSD500 and will broaden our experience,
and options, as we continue to commercialise our product
pipeline.
We expect the initial launches of CSD500 to take place in
the second half of 2014 in MENA and at least one European
country followed by further launches in 2015. We are
continuing in negotiations for the licensing of CSD500 in a
number of territories, including South America, creating the
possibility of further launches during the current year.
2013 was an important year for PET500, our innovative spray
for enhanced sexual control, licensed worldwide to Ansell.
The launch of PET500 is being carefully managed by Ansell
and, following the early distribution in some trade channels of
the product under the LifeStyles® range during 2013, PET500
is now being made available in stores and online throughout
the USA under the brand name EPIC®.
We also made considerable progress during 2013 in our
earlier stage pain relief portfolio which has been expanded
to three products that have generated considerable interest
from potential licensees and commercial partners.
As a vindication of the increasing momentum in our business,
we were successful in raising £12.0 million (before expenses)
in an equity fundraising announced on 7 March 2014.
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Futura Medical plcAnnual Report and Accounts for the year ended 31 December 2013 07
This fundraising will enable us to build greater value in our
product pipeline by allowing us to fund clinical and regulatory
work and then to out-license products at a later stage in their
development. This optimises the speed of development,
reduces clinical and regulatory risk for potential distributors
and should enhance shareholder value.
The considerable progress made with CSD500 since
regaining the rights has highlighted the benefits of retaining
greater control of our products as we advance them through
the development and commercialisation process.
To date, we have licensed rights to CSD500 as follows:
The fundraising also allows us to actively progress the
development of MED2002, our treatment for erectile
dysfunction. MED2002 is a topical gel that shares the same
active ingredient as CSD500, and we believe it presents
a substantial commercial opportunity. Futura retains the
worldwide rights to the product and intends to begin a
pivotal clinical study later this year. We also intend to adopt a
similar strategy for our pain relief portfolio by completing the
remaining clinical work to build greater value in the products
prior to a licensing decision.
Whilst the recent fundraising has improved our cash position
we will maintain our tight fiscal strategy. We intend to
increase clinical development spend but will continue to run
our business prudently and to manage our cash resources
accordingly.
Portfolio updates – Sexual healthcare
CSD500: Condom containing an erectogenic gel
CSD500 benefits from three marketing claims, clinically
proven and approved by the regulatory authorities: the
maintenance of a firmer erection, maximised penile size
and a longer lasting sexual experience for women. These
claims were established in a statistically significant user study
involving 108 couples.
The product’s unique intellectual property position has
been protected throughout the world including the principal
consumer markets within Europe, the USA and Canada
through patents now granted in 37 countries.
In August 2012, we announced that we had regained
the worldwide rights to CSD500 from Reckitt Benckiser.
Regaining the rights allowed us to relicense the product at
a more advanced stage in its development. It also gave us
the opportunity to license the product on a territorial basis to
strong brands in different geographic regions.
Licensee
Church & Dwight
Saudi Pharmacy Group
RFSU
Ansell
Territorial Licensing Rights
North America & key
European countries
Key countries in the Middle
East and North Africa
The Nordic region
China
Discussions are ongoing in connection with further territories.
In addition to re-licensing the product, we also took control of
the manufacturing process by appointing a contract condom
manufacturer in Europe and seeking European Union (“EU”)
regulatory approval. On 17 October 2013 we announced the
award of the CE mark, which granted marketing authorisation
to the product in all EU territories and also in a number of
non-EU territories that recognise the CE mark process. We
also expect a further contract condom manufacturer to gain
regulatory approval later this year, adding greater flexibility and
robustness to the supply chain for our licensing partners.
Our manufacturing strategy is designed to enable licensees
to get CSD500 to market in the shortest time possible,
although licensees might decide to transfer manufacture to
their own facilities, which would be subject to a supplementary
application to add a new manufacturing site under the exisiting
CE mark approval, depending on their requirements.
During the year, we also improved the technical and
commercial specifications of CSD500. These improvements
are expected to extend the shelf life of the product and
significantly reduce the cost of goods for the shared benefit
of Futura and its licensing partners. A patent relating to these
changes was filed in March 2013, giving us the potential to
extend CSD500’s patent protection beyond the current patent
expiry date in 2023.
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www.futuramedical.comStock Code: FUMAbout Futura MedicalFinancial StatementsGovernance 08
Chairman’s and Chief Executive’s Review (continued)
In addition to this intellectual property protection, Futura is also
seeking to develop the global brand awareness of the novel
erectogenic gel in CSD500 by giving it the brand name Zanifil®
and stipulating that the Zanifil® logo appears on the outer
packaging of all condoms produced by our licensing partners.
During 2014 we expect to announce further distribution
agreements as we build the global distribution platform
for CSD500. Precise launch timings and brand positioning
remain commercially sensitive to our respective licensees
and we therefore ask shareholders to be mindful of the
restrictions we have to comply with in connection with launch
information.
MED2002: Treatment for erectile dysfunction
MED2002, which uses our DermaSys® drug delivery system,
is our topical gel for the treatment of men with erectile
dysfunction (“ED”). We regained worldwide rights to the
product at the same time as regaining the rights to CSD500,
with which it shares the same active ingredient.
ED is a condition that affects, to some degree, as many as
52% of men aged 40 or over1. During the year, we received
the results of market research we commissioned into the
potential opportunity that MED2002 represents in ED.
This market research highlighted the potential benefits of
MED2002 when compared with PDE5 inhibitors, the class
of drugs that includes Viagra®. The potential benefits of
MED2002 were shown to include: a faster onset of action, a
favourable safety profile, a 30 minute duration of action and
the product’s suitability for all men, including the estimated
7.5% of ED sufferers who would not be prescribed any
of the PDE5 inhibitors due to contra-indications of other
medications taken by them. The research found that up to
68% of men are dissatisfied with their PDE5 inhibitors and
that MED2002 could potentially capture as much as a 30%
share of ED patients.
The fundraising allows us to actively progress the
development of MED2002 which we believe presents a
substantial commercial opportunity. There is considerable
clinical overlap between MED2002 and CSD500 as both
products share the same active ingredient. This will be of
benefit as we progress the product’s clinical development.
Futura intends to begin a pivotal clinical study later this year.
PET500: Enhanced sexual control
PET500 is a topical spray that combines our highly efficient
DermaSys® AquaFree delivery system with a well-known mild
topical anaesthetic. PET500 is licensed to Ansell, one of the
world’s major sexual health companies, who have worldwide
rights to the product and have launched the product in the
USA under the name EPIC®, as part of their well-known
LifeStyles® brand. Under the terms of the licensing agreement
Futura will receive a significant royalty rate on sales.
EPIC® is designed to take effect rapidly and to delay male
ejaculation, thereby offering enhanced sexual control. Ansell
distributed the product early in some trade channels during
2013 and EPIC® is now available in stores throughout the
USA and online.
Ansell is also developing a combination product, called
UPHORIATM, in which EPIC® will be packaged with an
existing product, LifeStyles EXCITE™, a personal lubricant
designed to promote enhanced stimulation and sensitivity for
women.
2014 is the first year during which Futura will receive
revenues from EPIC®. It is therefore an exciting year for the
Company, and we look forward to providing updates on the
product’s sales growth in due course. In conjunction with
Ansell we are also beginning to explore the commercialisation
of the product in other countries worldwide.
Note1: Massachusetts Male Aging Study (MMAS), J Urol. 1994 Jan; 151 (1): 54-61
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Futura Medical plcAnnual Report and Accounts for the year ended 31 December 2013 www.futuramedical.com
Stock Code: FUM
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PET500 – EPIC® Advertisement (USA)
Ansell has now launched PET500 under the brand name EPIC® in stores and online in the USA.
The advertisement below ran in a magazine for adult channels distributors.
MALE PERFORMANCE ENHANCER
EPIC:
Extending beyond the usual or
ordinary, especially in size or scope
• GOOD FOR UP TO 25 LEGENDARY
LONG-LASTING EXPERIENCES
• WON’T TRANSFER TO PARTNER
BE EPIC. LIVE THE LIFESTYLE.
Manufactured by Ansell and Distributed by Paradise Marketing,
Vista, CA 92081. FDA Compliant.
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10
Chairman’s and Chief Executive’s Review (continued)
Portfolio updates – Pain relief management
During the year we made significant progress with our
pain relief portfolio, culminating in the addition of two
new compounds to complement TPR100. The two new
compounds, TIB200 and SPR300, use ibuprofen and methyl
salicylate respectively as their active ingredients.
In vitro studies have shown that very high levels of skin
permeation were achieved with each of ibuprofen and methyl
salicylate when using Futura’s transdermal delivery system,
DermaSys®. This rapid skin permeation offers potential
benefits including: improved speed of onset, greater depth of
penetration and longer duration of pain relief.
The two new programmes complement TPR100, which uses
DermaSys® with the non-steroidal anti-inflammatory drug
(“NSAID”) diclofenac as its active ingredient.
Together the three programmes present a portfolio
opportunity for a potential licensing partner and an advisory
firm was appointed in the year to assist in exploiting the
commercial potential of this product group. To date at least
15 companies have expressed interest in the portfolio and
elements of the portfolio for various territories worldwide.
Our recent fundraising has strengthened our position for
the remaining Phase III clinical development of our pain
relief portfolio. It is our intention to build greater value in the
portfolio prior to making a licensing decision.
The pain relief portfolio comprises:
TPR100: Topical pain relief
A topical gel combining the NSAID diclofenac with the
DermaSys® delivery system. TPR100 has been shown to
achieve in excess of eight times higher permeation through
human skin and 35 times greater bioavailability than that
achieved by the UK’s best-selling topically applied diclofenac-
based pain relief product, Voltarol® Emulgel.
Graphs showing the superior skin penetration of TPR100,
and the two new pain relief programmes are available by
following the link:
www.futuramedical.com/archive/painreliefclinicalgraphs.pdf.
TIB200: Topical ibuprofen
A topical gel combining the well-known analgesic ibuprofen
with the DermaSys® delivery system. TIB200 has been
shown to achieve in excess of twenty times higher
permeation through isolated human skin compared with the
UK’s best-selling topically applied ibuprofen-based topical
pain relief product, Nurofen® gel.
SPR300: Sensory pain relief
A topical gel combining methyl salicylate and menthol with
the DermaSys® delivery system. SPR300 has been shown
to achieve in excess of four times higher permeation through
isolated human skin compared with the UK’s best-selling
topically applied methyl salicylate/menthol-based topical pain
relief product, Deep Heat®.
In addition SPR300 was directly compared with the best-
selling over-the-counter topically applied gels sold in the
USA, Icy Hot® and Bengay®, and showed similarly improved
permeation rates.
No further clinical work is required to obtain regulatory
approval for SPR300 in the USA or Canada. We are currently
in discussions with potential commercial partners for these
major territories and will update shareholders in due course.
In the meantime we are completing the development work
required in order to obtain regulatory clearances and prepare
the product for launch in the USA and Canada.
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Futura Medical plcAnnual Report and Accounts for the year ended 31 December 2013 11
Early Stage Product Development
Futura’s highly efficient DermaSys® delivery system is a
versatile asset and we are currently working on a number
of potential products at various stages. We look forward to
providing further updates as appropriate.
People
We would like to offer our sincere thanks to all of our
staff, scientific advisers and commercial partners for their
contribution to the development of the Company throughout
the year.
Outlook
After a year of solid progress across our product portfolio,
2014 will be a landmark year for Futura during which we will
receive our first recurring revenues. We already have our first
product PET500 (brand name EPIC®) on the market in the
USA and expect the launch of CSD500 on a multi-country
basis later this year. Following our recent fundraising, we
are ideally positioned to drive value for the Company and to
generate returns for shareholders.
John Clarke
Chairman
James Barder
Chief Executive
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www.futuramedical.comStock Code: FUMAbout Futura MedicalFinancial StatementsGovernance 12
Board of Directors
The Board of Directors has overall
responsibility for the Group.
The Board of Directors (“the Board”) comprises a Non-Executive Chairman, a Chief Executive, two independent Non-
Executive Directors and two further Executive Directors. The Board retains full control of the Group with day-to-day operational
control delegated to the Executive Directors. The full Board meets bi-monthly and on any other occasions it considers
necessary. The Board is responsible for approving interim and annual financial statements, formulating and monitoring Group
strategy, approving financial plans and reviewing performance, as well as complying with legal, regulatory and corporate
governance matters.
The Chairman provides strategic and operational guidance bringing to bear his extensive experience of the healthcare sector.
He also oversees the duties performed by the Chief Executive and ensures that they are in line with Board expectations with a
particular emphasis on monitoring product development. The Chief Executive manages the day to day running and strategic
direction of the Group in line with the policy decisions given by the Board and shareholder expectations with particular
emphasis on the commercial direction of the Group.
John Clarke
Non-Executive Chairman
James Barder
Chief Executive
Current roles
John Clarke became Chairman of Futura Medical plc in February 2012.
He is a member of the Nominations Committee and the Remuneration
Committee. He is also a Director of the US-based Consumer Healthcare
Products Association and Non-Executive Chairman of Science in
Sport plc.
Past roles
Appointed President of GSK Consumer Healthcare in 2006, a position
from which he stepped down in October 2011. Under his leadership, GSK
Consumer Healthcare became one of the fastest-growing companies in its
industry. Director of Provexis plc.
Brings to the Board
Extensive experience of the healthcare sector, having worked at GSK for
more than 35 years.
Current roles
James Barder joined the Group as Chief Executive in June 2001. He assists
the Remuneration Committee and the Nominations Committee (but is not
a member of and does not vote on either). He has overall responsibility for
all activities of the Group, is a principal contact for shareholder and investor
relations matters and leads licensing and distribution negotiations. He
first became involved with the Group in 1997. He is also a Non-Executive
Director of Lorega Limited.
Past roles
Managing Director of Aon Capital Markets Limited. He has predominantly
worked in the field of insurance and finance including firms he founded.
Brings to the Board
Over 25 years of experience in setting up, managing and running companies.
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Futura Medical plcAnnual Report and Accounts for the year ended 31 December 2013 13
David Davies,
BSc (Hons), MBA
Chief Development Officer
Derek Martin, BSc
(Hons), ACA
Finance Director and
Company Secretary
Current roles
David Davies joined the Board in September 2001. He is responsible for
all product development and quality management programmes for the
Group. He is also Company Secretary of a registered charity Ordinary 2
Extraordinary Limited.
Past roles
Porton Down, Glaxo Group Research, Wellcome Research, Zambon
Limited, PPD Pharmaco Limited and Clintrials Research Limited.
Brings to the Board
Over 25 years of experience in pharmaceutical and healthcare product
development.
Current roles
Derek Martin joined the Board in September 2008. He oversees the
Group’s finance function, its compliance procedures and is a principal
contact for shareholder and investor relations matters.
Past roles
Senior financial roles in a diverse range of industries including retail,
software, telecoms and advertising, media and sales promotion.
Brings to the Board
Over 25 years of experience in finance.
Jonathan Freeman,
BA (Hons), MBA
Senior Independent Non-
Executive Director and
Chairman of Remuneration
Committee and Audit
Committee
Lisa Arnold
Independent Non-Executive
Director and Chair of
Nominations Committee
Current roles
Jonathan Freeman joined the Board in July 2003 and was appointed
Senior Independent Non-Executive Director in November 2003. He
chairs the Audit Committee and the Remuneration Committee and is
also a member of the Nominations Committee. He is also a Director of
PhotonStar LED Group plc and Hume Securities plc.
Past roles
Director of Beeson Gregory, Chief Executive Officer of Syndicate Asset
Management plc.
Brings to the Board
Over 20 years of experience in the financial services sector, guidance on
City regulatory matters, corporate finance and investor relations.
Current roles
Lisa Arnold joined the Board in March 2008. She chairs the Nominations
Committee and is also a member of the Remuneration Committee and the
Audit Committee. She also has a number of appointments on the boards
of pension funds including Allied Domecq, Whitbread and Tate & Lyle.
Past roles
Senior investment banking analyst positions at NatWest Markets, UBS and
Commerzbank. She has also worked in consultancy and Non-Executive
roles in the pensions, healthcare and technology sectors and was most
recently a Non-Executive Director of the UK’s Medicines and Healthcare
products Regulatory Agency (“MHRA”), for nine years where she also
chaired the Risk & Audit Committee.
Brings to the Board
Over 20 years of experience of financial markets and healthcare sectors
and associated governance frameworks.
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Remuneration Report
Remuneration Committee: composition and terms
of reference
The Remuneration Committee comprises the three
independent Non-Executive Directors and is chaired by
Jonathan Freeman.
The purpose of the Remuneration Committee is to ensure
that the Executive Directors and other employees are fairly
rewarded for their individual contribution to the overall
performance of the Group. The Committee considers and
recommends to the Board the remuneration of the Executive
Directors and is kept informed of the remuneration packages
of senior staff and invited to comment on these. There were
four Remuneration Committee meetings during 2013.
The Board retains responsibility for overall remuneration
policy. The terms of reference of the Remuneration
Committee are set out in the Governance pages of
the Investors section on the Group’s website at
www.futuramedical.com.
Policy on Executive Directors’ remuneration
Executive remuneration packages are designed to attract
and retain executives of the necessary skill and calibre
to run the Group. Direct benchmarking of remuneration
is difficult given the specialised nature and size of the
Group. The Remuneration Committee recommends to the
Board remuneration packages by reference to individual
performance and uses the knowledge and experience of
the Committee members, published surveys relating to AIM
companies, the pharmaceutical industry and market changes
generally. The Remuneration Committee has responsibility for
recommending any long-term incentive schemes.
The Board determines whether or not Executive Directors
are permitted to serve in roles with other companies. Such
permission is only granted where a role is on a strictly limited
basis, where there are no conflicts of interest or competing
activities and providing there is not an adverse impact on
the commitments required to the Group. Earnings from such
roles are not disclosed to the Group.
There are four main elements of the remuneration package
for Executive Directors and staff:
(i) Basic salaries and benefits in kind
Basic salaries are recommended to the Board by the
Remuneration Committee, taking into account the
performance of the individual and the rates for similar
positions in comparable companies. Benefits in kind
comprising death in service cover and private medical
insurance are available to all staff and Executive Directors.
Benefits in kind are non-pensionable.
(ii) Share options and other share-based incentives
The Group operates approved and unapproved share option
schemes for the Executive Directors and other employees
to motivate those individuals through equity participation.
Unapproved share options are occasionally granted to key
consultants. Exercise of share options under the schemes is
subject to specified exercise periods and compliance with the
AIM Rules.
The schemes are overseen by the Remuneration Committee
which recommends to the Board all grants of share options
based on the Remuneration Committee’s assessment of
personal performance and specifying the terms under which
eligible individuals may be invited to participate.
The UK Corporate Governance Code (“the Code”) refers
to the requirement for the performance related elements
of remuneration to form a significant proportion of the
total remuneration package of Executive Directors and
should be designed to align their interests with those of
the shareholders. In the development phase of the Group
and during the early stages of revenue generation, the
Remuneration Committee currently considers that the best
alignment of these interests is through the continued use
of incentives for performance through the award of share
options or other share-based arrangements.
The Group operates a long-term incentive plan (“LTIP”). The
quantum of any awards receivable by the staff, Executive
Directors and the Chairman will depend on achieving set
Group performance milestones and the share price at the
time relative to targets set in advance. As a guide, if all of
the approved milestones are achieved at the share price
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Futura Medical plcAnnual Report and Accounts for the year ended 31 December 2013 15
targets over the next 48 months and if the Group exercised
its discretion to settle the awards in equity then the additional
shares issued in after tax settlement would be equivalent to
approximately 6.11% of the issued share capital.
The Board encourages the ownership of Futura shares by
Executive and Non-Executive Directors alike and in normal
circumstances does not expect Directors to undertake
dealings of a short-term nature.
The Non-Executive Directors receive a proportion of their
remuneration in the form of shares. The quantum of shares
is determined at the start of each calendar year based on
the average closing mid-price of the last ten trading days
prior to the year end. The award for 2013 was settled on
31 December 2013 by the issue of 52,092 shares at 58.15
pence per share. The 2014 award has been determined at
63.25 pence per share and the Non-Executive Directors
accrue these shares over 2014 and receive them on
31 December 2014.
The Board considers ownership of Futura shares by Non-
Executive Directors as a positive alignment of their interest
with shareholders. The Board will periodically review the
shareholdings of the Non-Executive Directors and will seek
guidance from its advisers if, at any time, it is concerned
that a shareholding may, or could appear to, conflict with
their duties as an independent Non-Executive Director of the
Group.
(iii) Bonus scheme
The Group has a discretionary bonus scheme for staff and
Executive Directors.
(iv) Pension contributions
The Group pays a defined contribution to the pension
scheme of Executive Directors and other employees. The
individual pension schemes are private and their assets are
held separately from those of the Group.
Salaries and benefits were reviewed in December 2012
to cover the 2013 calendar year. The timing of the review
enables the Group’s performance over the preceding
financial year and the strategy for the forthcoming year to be
considered.
Service contracts
The Executive Directors are employed under service
contracts requiring six months’ notice by either party. Non-
Executive Directors and the Chairman receive payments
under appointment letters which are terminable by three
months’ notice by either party. The service contracts of the
Non-Executive Directors are made available for inspection at
the AGM.
All Directors are also Directors of the subsidiary company,
Futura Medical Developments Limited.
Policy on Non-Executive Directors’ remuneration
The Non-Executive Directors and the Chairman each receive
a fee for their services as a director, which is approved by the
Board, mindful of the time commitment and responsibilities
of their roles and of current market rates for comparable
organisations and appointments. Non-Executive Directors
and the Chairman are reimbursed for travelling and other
incidental expenses incurred on Group business.
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Remuneration Report (continued)
Directors’ emoluments
The emoluments of the Directors, who represent the key management personnel, were as follows:
Salary &
Directors’
Fees
£
199,842
165,119
129,680
–
Year ended 31 December 2013
Share
Awards
£
Benefits
In Kind
£
Pension
£
Total
£
Year ended
31 December
2012
Total
£
Executive Directors
James Barder
David Davies
Derek Martin
Bill Potter
Non-Executive Directors
John Clarke
Jonathan Freeman
Lisa Arnold
Totals
–
–
–
–
5,388
3,265
3,987
26,318
25,564
12,948
–
–
–
–
–
–
–
–
231,548
193,948
146,615
–
223,349
188,963
149,677
2,625
74,100
37,029
37,029
66,000
35,316
35,316
49,400
28,800
28,800
24,700
8,229
8,229
601,641
41,158
12,640
64,830
720,269
701,246
Bill Potter resigned as a Director on 31 January 2012 but continues to provide consulting services to Futura Medical
Developments Limited through the consulting company Stapleford Scientific Services Limited.
The above fees and emoluments exclude reimbursed expenditure incurred in the conduct of Group business.
There were no cash bonuses or settlements under the LTIP in 2013 (2012: £nil).
Directors’ interests in shares
John Clarke
James Barder
David Davies
Derek Martin
Jonathan Freeman
Lisa Arnold
Totals
31 December 2013
Beneficial
Interests
Non-beneficial
Interests
31 December 2012
Beneficial
Interests
Non-beneficial
Interests
53,537
616,330
751,306
280,000
14,920
17,500
–
392,500
–
–
–
–
20,405
616,330
751,306
280,000
6,802
6,658
–
309,000
–
–
–
–
1,733,593
392,500
1,681,501
309,000
Other than as shown in the table no Director had any interest in the shares of the Company or in the subsidiary company,
Futura Medical Developments Limited, at 31 December 2013 or at 31 December 2012.
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Futura Medical plcAnnual Report and Accounts for the year ended 31 December 2013 17
Directors’ interests in share options
The Board uses share options to align Directors’ and employees’ interests with those of shareholders in order to provide
incentives and reward them based on improvements in Group performance.
James Barder
David Davies
Derek Martin
Totals
31 December 2013
31 December 2012
Options
Held
1,000,000
780,000
589,279
Share-based
Payment
Expense
34,879
27,902
17,282
Options
Held
750,000
600,000
559,279
2,369,279
80,063
1,909,279
Share-based
Payment
Expense
33,949
27,161
17,319
78,429
All share options were granted with an exercise price at or above market value on the date of grant. The main vesting
condition of the share options is that the Director remains employed with the Group as at the date of exercise or continues to
provide consultancy services as at the date of exercise.
The share options of the Directors under the Futura Medical plc Enterprise Management Incentive Scheme (included in totals
on page 52) are set out below:
Grant Date
Number
Awarded
Exercise
Price/Share
Earliest
Exercise Date
Expiry Date
James Barder
6 July 2010
176,543
40.50 pence
1 August 2012
31 July 2017
James Barder
14 September 2012
250,000
61.50 pence
1 October 2014 30 September 2019
James Barder
23 September 2013
34,615
71.50 pence
1 October 2015 30 September 2020
David Davies
6 July 2010
156,543
40.50 pence
1 August 2012
31 July 2017
David Davies
14 September 2012
200,000
61.50 pence
1 October 2014 30 September 2019
David Davies
23 September 2013
Derek Martin
28 September 2011
77,622
73,894
71.50 pence
1 October 2015 30 September 2020
56.50 pence
1 October 2013 30 September 2018
Derek Martin
14 September 2012
100,000
61.50 pence
1 October 2014 30 September 2019
Derek Martin
23 September 2013
130,000
71.50 pence
1 October 2015 30 September 2020
Totals
1,199,217
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Remuneration Report (continued)
Directors’ interests in long-term incentive plan
Assuming that each remaining Group performance milestone is met, at the target share price and before the next target
date ends, and if the awards were to be equity-settled then the number of shares that could be awarded before tax to the
participants are:
James Barder
David Davies
Derek Martin
John Clarke
2014
2015
2016
2017
198,138
198,138
198,138
198,138
198,138
198,138
198,138
198,138
148,724
148,724
148,724
148,724
32,500
32,500
32,500
32,500
At discretion of Remuneration Committee
262,500
262,500
262,500
262,500
Totals
840,000
840,000
840,000
840,000
The Directors consider that until a milestone has been met it is not appropriate to recognise any share-based remuneration
charge in the Group Statement of Comprehensive Income in respect of the LTIP.
Jonathan Freeman
Chairman of the Remuneration Committee
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Futura Medical plcAnnual Report and Accounts for the year ended 31 December 2013 19
Corporate Governance
Board of Directors
The Board comprises a Non-Executive Chairman (“Chairman”),
a Chief Executive, two independent Non-Executive Directors
and two further Executive Directors. The Chairman and the
Non-Executive Directors receive part of their remuneration in the
form of shares but this does not constitute a material business
relationship with the Group and is not considered to impair the
independence of the Non-Executive Directors. The Board is
satisfied that it has an appropriate mix of experience in its Non-
Executive Directors. The roles of Chairman and Chief Executive
are intended to remain separate.
The Board retains full control of the Group with day-to-day
operational control delegated to the Executive Directors. The
full Board meets bi-monthly and on any other occasions it
considers necessary. During 2013, there were 16 meetings
of the full Board, four of the Remuneration Committee, two
of the Audit Committee and one meeting of the Nominations
Committee. All meetings were fully attended by their constituent
Directors.
Board responsibility
The Board is responsible for approving interim and annual
financial statements, formulating and monitoring Group strategy,
approving financial plans and reviewing performance, as well
as complying with legal, regulatory and corporate governance
matters. There is a schedule of matters reserved for the Board.
The Board is committed to maintaining appropriate standards of
corporate governance.
The Board has sought to comply with a number of provisions of
the Code in so far as it considers them to be appropriate to the
Group’s size and nature. This is considered by the Board to be
reasonable and does not compromise the overall principles of
corporate governance which the Board strongly supports.
There have been no material changes to our corporate
governance processes following our annual review.
The Board considers that the remuneration of Executive
Directors should include a performance related element which
is almost entirely based on the award of share options or other
share-based incentives as recommended by the Remuneration
Committee and set out in the Remuneration Report on pages
14 to 18.
Audit Committee
The Audit Committee comprises the Non-Executive Directors,
Jonathan Freeman and Lisa Arnold, and is chaired by Jonathan
Freeman as Senior Independent Non-Executive Director.
It meets as required and specifically to review the Interim
Report and Annual Report and to consider the suitability and
monitor the effectiveness of the internal control processes.
There were two Audit Committee meetings during 2013. The
Audit Committee reviews the findings of the external auditors
and reviews accounting policies and material accounting
judgements.
The independence and effectiveness of the external auditor
is reviewed annually and audit partners are rotated every five
years. The possibility of undertaking an audit tender process is
considered on a regular basis. The Audit Committee (with no
Executive Director present) meets at least once per calendar
year with the auditors to discuss their independence and
objectivity, the Annual Report, any audit issues arising, internal
control processes, appointment and fee levels and any other
appropriate matters. As well as providing audit related services,
the auditors also provide taxation advice. The fees in respect
of audit and tax services are disclosed in Note 4 of the Notes
to the Group Financial Statements. Fees for non-audit services
paid to the auditors are not deemed to be of such significance
to them as to impair their independence and therefore the Audit
Committee considers that the objectivity and independence of
the auditors is safeguarded.
The terms of reference of the Audit Committee are set out in
the Investors/Governance section on the Group’s website at
www.futuramedical.com.
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Corporate Governance (continued)
Internal control
The Board is responsible for establishing and maintaining
the Group’s system of internal control and for reviewing its
effectiveness. The system of internal control is designed
to manage, rather than eliminate, the risk of failure of the
achievement of business objectives and can only provide
reasonable but not absolute assurance against material
misstatement or loss.
The Audit Committee continues to monitor and review the
effectiveness of the system of internal control and report to the
Board when appropriate with recommendations.
The annual review of internal control and financial reporting
procedures did not highlight any issues warranting the
introduction of an internal audit function. It was concluded,
given the current size and transparency of the operations of the
Group, that an internal audit function was not required.
The main features of the internal control system are outlined
below:
• A control environment exists through the close
management of the business by the Executive Directors.
The Group has a defined organisational structure with
delineated approval limits. Controls are implemented and
monitored by the Executive Directors.
• The Board has a schedule of matters expressly
reserved for its consideration and this schedule includes
acquisitions and disposals, major capital projects,
treasury and risk management policies and approval of
budgets.
• The Group utilises a detailed budgeting and forecasting
system. Detailed budgets are prepared annually by the
Executive Directors before submission to the Board for
approval. Forecasts are updated at least quarterly to
reflect changes in the business and are monitored by
the Board including future cash flow projections. Actual
results are monitored against annual budgets in detail on
a monthly basis, with variances highlighted to the Board.
• Financial risks are identified and evaluated for each major
transaction for consideration by the Board and senior
management.
• Standard financial control procedures are operated
throughout the Group to ensure that the assets of the
Group are safeguarded and that proper accounting
records are maintained.
• A risk review process is in operation whereby the Chief
Executive and Finance Director present a report to the
Board each year on the key business risks.
Going concern
As disclosed in the Strategic Report on page 28 the Group
financial statements have been prepared on the going concern
basis as the Directors have a reasonable expectation that
the Group has adequate resources to continue in operational
existence for the foreseeable future.
Nominations Committee
The Nominations Committee comprises the two independent
Non-Executive Directors and the Chairman and is chaired by
Lisa Arnold.
The Nominations Committee monitors the requirements of the
Group in respect of Board composition as the Group evolves
and with regard to succession planning. There was one meeting
during 2013. The terms of reference of the Nominations
Committee are set out in the Investors/Governance section on
the Group’s website at www.futuramedical.com.
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Futura Medical plcAnnual Report and Accounts for the year ended 31 December 2013 21
Employees
At 31 December 2013, the Group’s employees comprised:
three Executive Directors and three full-time and one part-time
members of staff, all of whom are employed by the subsidiary.
The Executive Directors keep staff informed of the progress and
development of the Group regularly through formal and informal
meetings and employee feedback is encouraged. The Group
has a policy of offering share options or other share-based
incentives to all eligible employees with due consideration to the
level of dilution to shareholders.
The Group does not discriminate between employees and
prospective employees on the grounds of age, race, disability,
religion or gender.
The Board recognises its obligation towards its employees to
provide a safe and healthy working environment. The Group
complies with health and safety legislation including conducting
regular inspections and risk assessments.
Environmental, social and community matters
As a result of the size and nature of our operations, the impact
of the Group’s operations on the local community and the
environment is not considered to be significant. Recycling
of office supplies is undertaken where possible. The Group
operates in a highly regulated industry and clinical trials are
conducted in compliance with regulatory requirements.
The Group undertakes regular reviews of corporate social
responsibility matters with policy updates and implements
improvements to its operations where identified.
Relationship with shareholders
The Directors seek to build a mutual understanding of objectives
between the Group and its shareholders. The Group reports
formally to shareholders in its Interim Report and Annual Report
setting out details of its activities. In addition, the Group keeps
shareholders informed of events and progress through the
issue of regulatory news in accordance with the AIM Rules for
Companies (“AIM Rules”) of the London Stock Exchange. The
Chief Executive and Finance Director meet with institutional
shareholders following interim and final results. The Group
also maintains investor relations pages and other information
regarding the business, its products and activities on its website
at www.futuramedical.com.
The Annual Report is made available to shareholders at least
20 working days before the Annual General Meeting (“AGM”)
along with notice of the AGM. Directors are required to attend
the AGM, unless unable to do so for personal reasons or due to
pressing commercial commitments, and shareholders are given
the opportunity to vote on each separate resolution proposed
at the AGM. The Group counts all proxy votes and will indicate
the level of proxies lodged for each resolution, after it has first
been dealt with by a show of hands.
Derek Martin
Secretary
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Directors’ Report
Directors
The Directors during the year were:
John Clarke
James Barder
David Davies
Derek Martin
Jonathan Freeman
Lisa Arnold
Dividends
No dividends were paid and none are proposed (2012: £nil).
Group research and development costs
The main area of R&D continues to be in the field of
innovative pharmaceutical drugs and medical devices for the
consumer healthcare market with the focus being on sexual
healthcare and pain relief management. The Group aims to
achieve cost-effective research and development (“R&D”) and
to bring products to market through licensing partners as
soon as is practicable.
Post balance sheet events
On 27 January 2014 share options over 120,000 new
ordinary shares were exercised generating additional funds of
£67,500 for the Group.
The Group raised £12.0 million (before expenses) following
a placing of 21,052,632 shares at 57 pence per share on
7 March 2014 and approved by shareholders in a general
meeting on 25 March 2014.
Directors’ qualifying third party indemnity provisions
The Group has made qualifying third party indemnity
provisions in favour of the Directors against liability in respect
of proceedings brought by third parties and these remain in
force at the date of this Directors’ Report.
Adequacy of information supplied to auditors
Each Director has taken all reasonable steps to make
themself aware of any information needed by the Group’s
auditors for the purpose of their audit and to establish that
the auditors are aware of that information. The Directors
are not aware of any relevant audit information of which the
auditors are unaware.
Directors’ responsibilities
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors are required to prepare the Group financial
statements in accordance with International Financial
Reporting Standards (“IFRSs”) as adopted by the European
Union and have elected to prepare the Company financial
statements in accordance with applicable law and United
Kingdom Accounting Standards (United Kingdom Generally
Accepted Accounting Practice (“UK GAAP”)). Under
company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and
fair view of the state of affairs of the Group and Company
and of the total comprehensive profit or loss for the Group
for that period. The Directors are also required to prepare
the financial statements in accordance with the rules of the
London Stock Exchange for companies trading securities on
the Alternative Investment Market.
In preparing these financial statements, the Directors are
required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and accounting estimates that are
reasonable and prudent;
• state whether they have been prepared in accordance
with IFRSs as adopted by the European Union, subject
to any material departures disclosed and explained in the
financial statements;
• prepare a Directors’ Report and Strategic Report which
comply with the requirements of the Companies Act
2006.
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Futura Medical plcAnnual Report and Accounts for the year ended 31 December 2013 23
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company
and enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the Group and
the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring that the Annual
Report and the financial statements are made available
on a website. Financial statements are published on the
Company’s website, www.futuramedical.com, in accordance
with legislation in the United Kingdom governing the
preparation and dissemination of financial statements,
which may vary from legislation in other jurisdictions. The
maintenance and integrity of the Company’s website is the
responsibility of the Directors. The Directors’ responsibility
also extends to the ongoing integrity of the financial
statements contained therein.
By order of the Board
Derek Martin
Secretary
27 March 2014
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Strategic Report
Our strategy is to develop innovative products with
compelling commercial potential in the consumer
healthcare market, leveraging our core skills in
transdermal drug delivery.
The Group’s innovation strategy applies advanced science to
develop products with compelling commercial potential and
is driven by the following four criteria:
• Advanced transdermal technology: offering innovative
delivery of proven compounds through the skin to
improve their performance or to address new indications.
• Controlled development risk: using only approved
compounds to control the risk profile.
• Strong intellectual property: developing products where
the Group can secure strong patent protection.
• Commercialisation: out-licensing products to leading
healthcare companies which offer the optimum potential
financial returns.
Our products CSD500 and MED2002 involve the application
of the same active pharmaceutical ingredient, in each case
in the sexual healthcare field. The development of our
proprietary transdermal delivery technology, DermaSys®,
has enabled the expansion of our product pipeline to include
other new active pharmaceutical ingredients. PET500,
and our portfolio of pain relief products represent the next
applications of our DermaSys® delivery technology.
Long lead times for product development characterise
the pharmaceutical industry. However, the Board seeks to
drive the business through to revenue generation as soon
as is practicable with due regard to regulatory standards
and an appropriate commercial approach. This is achieved
through swift decision-making, highly capable staff and the
involvement of external expertise.
The Strategic Report should be read in conjunction with the
Chairman’s and Chief Executive’s Review on pages 6 to 11,
the Group financial statements and the Notes to the Group
Financial Statements set out on pages 31 to 54.
The Annual Report and Accounts (“Annual Report”) for the Group
is presented under International Financial Reporting Standards
(“IFRSs”) as adopted by the European Union. The financial
statements of the Company are prepared in accordance with
United Kingdom Generally Accepted Accounting Practice (“UK
GAAP”) and are set out on pages 55 to 58.
Group strategy
The Group strategy is to focus on developing innovative
products for the consumer healthcare market. This strategy
is aligned with the well-publicised demographic change of an
ageing population, increasing prosperity, Government initiatives
to increase self-medication, the natural desire for improved
quality of life and the Directors’ expectations that consumer
healthcare spending will increase as a result. The objective
is to develop products such that each on its own has the
potential to generate significant annual revenues.
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Futura Medical plcAnnual Report and Accounts for the year ended 31 December 2013 25
At the same time, the Board remains committed to keeping
regular and fixed costs restricted to an appropriate level
through the continued and judicious use of external
consultants and professional advisers. Clearly, the lower the
Group’s regular and fixed costs, the earlier that on-going
revenue generation would lead to a key future financial
milestone of monthly break-even and profitability.
The consumer healthcare market and
competitive environment
The Group develops products that address the needs of the
consumer healthcare market. The Group considers there to
be two distinct categories in which it operates.
The first category is the global transdermal delivery market,
valued at US$21.5 billion in 2010.¹ Although the Group
develops transdermal products for prescription and over
the counter (“OTC”) use, its focus is on developing non-
prescription drugs. These comprise the sexual healthcare
products PET500 and MED2002 and the pain relief products
TPR100, TIB200 and SPR300. The global topical OTC
analgesics market is valued at US$4.1 billion in 20112 and
the market leader for topical OTC analgesics has annual
sales of US$406 million3. As PET500 and MED2002 could
form new categories within the OTC market, no published
data is available on the OTC sexual healthcare market to
substantiate market size estimates. The prescription market
for erectile dysfunction treatments was estimated to be in
excess of US$4.4 billion4 in 2012.
The second category is the global consumer medical devices
market. The Directors estimate that the market for consumer
medical devices is worth between US$23 billion and US$26
billion. The consumer medical device being developed by the
Group is the condom product CSD500, which addresses the
global condom market estimated to be worth US$3.5 billion5.
These consumer healthcare markets are dominated by
global pharmaceutical and consumer healthcare groups with
established distribution networks. Smaller R&D companies,
such as Futura, seek to out-license their innovative products
to these larger entities.
Futura offers its licensing partners its ability to identify
commercially attractive consumer healthcare product
opportunities coupled with a lower cost, expert and fast
development model, backed by strong patent protection.
In return for this, Futura seeks significant royalties from
future sales of these products through its partners and their
established distribution networks.
Financial Review
The Group ended the year with costs firmly under control and
with a more advanced and diverse development portfolio.
Revenue
Group revenue for the year ended 31 December 2013 was
£371k (2012: £75k).
Losses
The Group continues to maintain a focus on tight control of
all expenditure. The Group’s operating loss for the year
ended 31 December 2013 was £2.53 million (2012: £2.46
million). The Group’s loss after taxation for the year ended
31 December 2013 was £2.21 million (2012: £2.18 million).
Loss per share for the year ended 31 December 2013 was
2.85 pence (2012: 2.91 pence).
No dividends were paid and none are proposed (2012: £nil).
Notes
1
2
3
4
5
Transdermal Medicine Review and Outlook 2011, Pharmalive.
2011 calendar year. Source: OTC Yearbook 2012 (MSP), Nicholas Hall & Company DB6 database.
2011 calendar year. Source: (MSP), Nicholas Hall & Company.
Futura estimate based on erectile dysfunction product sales data from 2012 Annual Reports for Pfizer, Lilly and Bayer.
Source: “Condoms: A Global Strategic Business Report”, Oct. 2012, Global Industry Analysts, Inc.
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Strategic Report (continued)
Group research and development costs
Group R&D costs each year reflect the number of products being developed, the stage of development reached for each and
the impact on their progress of external factors.
R&D costs of £1,976,322 were higher (2012: £1,435,731) due to the costs of transfer of technology associated with obtaining
the CE mark authorisation for CSD500.
The table below shows the trend in R&D costs and other administrative costs over the past five years ended 31 December:
2013
£
2012
£
2011
£
2010
£
2009
£
R&D costs
1,976,322
1,435,731
1,480,774
760,637
810,188
Other administrative costs
926,123
1,095,197
776,154
700,399
796,186
Total operating costs
2,902,445
2,530,928
2,256,928
1,461,036
1,606,374
R&D ratio
67%
57%
66%
52%
50%
The R&D ratio is the percentage of R&D costs relative to total operating costs. The Board monitors this ratio closely. Total
R&D spend since the formation of the business in 1997 totals £15.6 million (57% of total cumulative operating costs). During
the year, the sole subsidiary, Futura Medical Developments Limited continued to incur this R&D expenditure which has been
accounted for as explained in accounting policy note 1.7 of the Notes to the Group Financial Statements and has been written
off as incurred for all reporting periods prior to and including the year ended 31 December 2013.
The Board considers that this overall total R&D spend relative to its pipeline of later stage products and emerging new
products distinguishes the Group’s lower funding requirements and risk profile from more typical businesses in the wider
pharmaceutical industry. The Group’s strategy is to focus on medical devices and pharmaceutical drugs that offer the potential
for a significant return on the costs of development. As well as progressing its existing R&D programme, the Group continues
to seek new opportunities for potential products to add to its portfolio.
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Futura Medical plcAnnual Report and Accounts for the year ended 31 December 2013
27
Other administrative costs
Other administrative costs for the year ended 31 December 2013 were £926,123 (2012: £1,095,197). These comprised all
other operating costs excluding those relating to product development and associated intellectual property. The proportion of
senior management time spent on administration, in particular licensing negotiations, was significantly higher in 2013 relative
to management time spent on R&D. The main constituents of other administrative costs and their relative proportions were:
Wages and salaries
Legal and professional advisers
Office costs and staff expenses
Licensing negotiations
Year ended
31 December
2013
£
Year ended
31 December
2012
£
58%
13%
9%
20%
67%
13%
9%
11%
100%
100%
Taxation
A tax credit of £313,677 (2012: £260,791) in respect of R&D expenditure incurred has been recognised in the Group financial
statements.
Capital structure and funding
The Group remains funded primarily by equity share capital. Equity funding (net of expenses) received since the formation of
the business until 31 December 2013 totalled £22.82 million.
During the year additional funds were raised following the issue of shares under the employee share option scheme,
as follows:
Date
10 April
10 April
1 May
16 September
16 September
17 October
Capital
Raised
£
12,150
8,438
39,300
Number of
Shares
Issued
Cost
per
Share
30,000
40.50 pence
15,000
56.25 pence
97,038
40.50 pence
64,688
115,000
56.25 pence
8,100
20,000
40.50 pence
18,362
32,500
56.50 pence
£151,038
309,538
On 31 December 2013 the Group raised £30,291 following the issue of 52,092 shares at 58.15 pence per share under the
policy on Non-Executive Directors’ remuneration.
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Strategic Report (continued)
Cash held by the Group at 31 December 2013 totalled £0.99 million comprising cash and cash equivalents shown below at
each year ended 31 December:
Cash and cash equivalents
2013
£
0.99
2012
£
2.82
2011
£
2.58
2010
£
0.82
2009
£
1.79
The Group had no bank borrowings at 31 December 2013
(2012: £nil).
Other significant sources of funding received for the Group
since formation of the business until 31 December 2013
comprised: R&D tax credits £2.25 million, interest £0.93
million and grants £0.28 million.
Equity funding of £12.0 million (before expenses) was
obtained in March 2014 and as a result of this the Directors
have a reasonable expectation that the Group and the
Company have adequate resources to continue in operational
existence for the foreseeable future. For these reasons the
Directors continue to adopt the going concern basis in
preparing the financial statements.
Key performance indicators
The Directors consider the successful achievement of
development, licensing and commercialisation milestones
and the number of products under development (beyond
the evaluation stage) to be the major drivers of value
creation for the Group. These are measures of the progress
of the business towards its revenue generation goal and
are considered by the Directors to be the key non-financial
performance indicators used to determine achievement of
Group strategy. The Group’s performance with regard to
such milestones is discussed in the Chairman’s and Chief
Executive’s Review on pages 6 to 11.
Principal risks and uncertainties
The development of pharmaceutical drugs and medical
devices requires the necessary safety, stability and efficacy
to be demonstrated in clinical programmes in order to meet
the requirements of the appropriate regulatory bodies. These
clinical programmes may not achieve their endpoints. The
Directors consider that the key risks of the Group are:
Clinical development and regulatory risk
There can be no guarantee that any of the Group’s products
will be able to obtain or maintain the necessary regulatory
approvals in any or all of the territories in respect of which
applications for such approvals are made. Where regulatory
approvals are obtained, there can be no guarantee that the
conditions attached to such approvals will not be considered
too onerous by the Group or its distribution partners in order
to be able to market its products effectively.
The Group seeks to reduce this risk by developing products using
safe, well-characterised active compounds, by seeking advice
from regulatory advisers, consultations with regulatory approval
bodies and by working with experienced distribution partners.
Commercial risk
There can be no guarantee that the Group will succeed
in establishing and maintaining the necessary contractual
relationships with licensing partners for the Group’s products
under development.
The Directors consider Group cash and the absolute
values of, and the ratio between, R&D costs and other
administrative overhead costs as being the Group’s key
financial performance indicators. The cost related indicators
assist in monitoring financial control to reduce the hurdle to
achieving a key future financial milestone of monthly break-
even and profitability. The monitoring of cash gives due
consideration to anticipated future spend required to prioritise
development opportunities and to plan the resources
required to achieve the goals of the business.
Even if the Group’s products are successfully developed and
approved by the appropriate regulatory bodies, they may not
be successfully launched by the Group’s licensing partners
or enjoy commercial acceptance. The Group is reliant on
commercial partners to carry out their contractual obligations
and the degree to which these can be enforced by the Group
is limited. The Group seeks to reduce this risk by selecting
experienced licensing partners, maintaining and developing
these relationships and seeking to develop new products of
commercial interest to these and other partners.
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29
The Group seeks to reduce this risk by securing patent
registration protection for its products, maintaining
confidentiality agreements regarding Group know-how and
technology, monitoring technological developments and
by selecting leading businesses in their respective fields
as licensing partners capable of addressing significant
competition, should it arise.
Intellectual property risk
The commercial success of the Group and its ability to
compete effectively with other companies depend, amongst
other things, on its ability to obtain and maintain patents
sufficiently broad in scope to provide protection for the
Group’s intellectual property rights against third parties and to
exploit its pharmaceutical products. The absence of any such
patents may have a material adverse effect on the Group’s
ability to develop its business. The Group seeks to reduce
this risk by only developing products where legal advice
indicates patent protection would be available, seeking
patent protection for the Group’s products, maintaining
confidentiality agreements regarding Group know-how and
technology and monitoring technological developments and
the registration of patents by other parties.
The commercial success of the Group also depends
upon not infringing patents granted, now or in the future,
to third parties who may have filed applications or who
have obtained, or may obtain, patents relating to business
processes which might inhibit the Group’s ability to develop
and exploit its own products.
Derek Martin
Secretary
Funding risk
The Group continues to incur substantial operating expenses.
Until the Group generates positive net cash inflows from
the commercialisation of its products it remains dependent
upon additional funding through the injection of equity capital
from share issues. The Group may not be able to generate
positive net cash inflows in the future or to attract such
additional required funding at all, or on suitable terms. In
such circumstances the development programmes may be
delayed or cancelled and business operations cut back.
The Group seeks to reduce this risk by keeping a tight
control on expenditure, avoiding long-term supplier contracts
(other than clinical trials), prioritising development spend on
products closest to potential revenue generation, obtaining
government grants (where applicable), maintaining a focused
portfolio of products under development and keeping
shareholders informed of progress.
Treasury and financial risk
Treasury and financial risk management policy is concerned
with financial instruments and management of interest
rate risk and foreign exchange rate risk. Financial risks are
quantified in note 2 of the Notes to the Group Financial
Statements and were not considered significant at the Group
Statement of Financial Position date.
The financial instruments held by the Group are disclosed in
note 12 of the Notes to the Group Financial Statements. The
Group policy on exposure to financial risk is disclosed in
note 2 of the Notes to the Group Financial Statements.
Competition risk
The Group’s current and future potential competitors include,
amongst others, major multinational pharmaceutical and
healthcare companies with substantially greater resources
than those of the Group. There can be no assurance that
competitors will not succeed in developing systems and
products that are more effective or economic than any of
those developed by the Group, with its distribution partners,
or which would render the Group’s products obsolete or
otherwise non-competitive.
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Independent Auditor’s Report
Independent auditor’s report to the members of
Futura Medical plc
We have audited the financial statements of Futura
Medical plc for the year ended 31 December 2013, which
comprise: Group Statement of Comprehensive Income,
Group Statement of Changes in Equity, Group Statement
of Financial Position, Group Statement of Cash Flows,
Parent Company Balance Sheet and the related notes. The
financial reporting framework that has been applied in the
preparation of the Group financial statements is applicable
law and International Financial Reporting Standards (“IFRSs”)
as adopted by the European Union. The financial reporting
framework that has been applied in preparation of the parent
company financial statements is applicable law and United
Kingdom Accounting Standards (United Kingdom Generally
Accepted Accounting Practice).
This report is made solely to the Company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken
so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members as a
body, for our audit work, for this report, or for the opinions we
have formed.
Respective responsibilities of Directors and auditors
As explained more fully in the Statement of Responsibilities,
the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair
view. Our responsibility is to audit and express an opinion on
the financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Financial Reporting
Council’s (“FRC’s”) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements
is provided on the FRC’s website at
www.frc.org.uk/auditscopeprivate.
Opinion on financial statements
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the
state of the Group’s and the parent company’s affairs
as at 31 December 2013 and of the Group’s total
comprehensive loss for the year then ended;
the Group financial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union;
the parent company financial statements have been
properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies
Act 2006
In our opinion the information given in the Directors’ Report
and the Strategic Report for the financial year for which
the financial statements are prepared is consistent with the
financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you
if, in our opinion:
• adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
•
the parent company financial statements are not in
agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by
law are not made; or
• we have not received all the information and explanations
we require for our audit.
Christopher Pooles (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
Reading
United Kingdom
27 March 2014
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127).
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Futura Medical plcAnnual Report and Accounts for the year ended 31 December 2013 31
Group Statement of Comprehensive Income
For the year ended 31 December 2013
Revenue
Research and development costs
Administrative costs
Operating loss
Finance income
Loss before tax
Taxation
Total comprehensive loss for the year attributable to
owners of the parent company
Year ended
31 December
2013
£
Year ended
31 December
2012
£
370,902
75,000
(1,976,322)
(1,435,731)
(926,123)
(1,095,197)
(2,531,543)
(2,455,928)
9,534
18,488
(2,522,009)
(2,437,440)
313,677
260,791
Notes
1.5
4
7
8
(2,208,332)
(2,176,649)
Basic and diluted loss per share (pence)
9
(2.85 pence)
(2.91 pence)
All amounts relate to continuing activities.
The notes on pages 35 to 54 form part of these Group financial statements.
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Group Statement of Changes in Equity
For the year ended 31 December 2013
Share
Capital
£
Share
Premium
£
Merger
Reserve
£
Retained
Losses
£
Total
Equity
£
Notes
At 1 January 2012
146,447
19,180,860
1,152,165
(17,721,923)
2,757,549
Total comprehensive loss for the year
Share-based payment
Shares issued during the year
Cost of share issues
At 1 January 2013
Total comprehensive loss for the year
Share-based payment
Shares issued during the year
17
16
17
16
–
–
–
–
8,449
2,238,151
–
(83,333)
–
–
–
–
(2,176,649)
(2,176,649)
129,109
129,109
–
–
2,246,600
(83,333)
154,896
21,335,678
1,152,165
(19,769,463)
2,873,276
–
–
–
–
723
180,606
–
–
–
(2,208,332)
(2,208,332)
141,499
141,499
–
181,329
At 31 December 2013
155,619
21,516,284
1,152,165
(21,836,296)
987,772
Share premium represents amounts subscribed for share capital in excess of nominal value, less the related costs of share issues.
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 using merger accounting under UK GAAP.
Retained losses represent cumulative net losses recognised in the Group Statement of Comprehensive Income. The total
comprehensive loss for the year represents the total recognised income and expense for the year.
The notes on pages 35 to 54 form part of these Group financial statements.
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Futura Medical plcAnnual Report and Accounts for the year ended 31 December 2013 33
Group Statement of Financial Position
As at 31 December 2013
Assets
Non-current assets
Plant and equipment
Total non-current assets
Current assets
Inventories
Trade and other receivables
Taxation
Cash and cash equivalents
Total current assets
Liabilities
Current liabilities
Trade and other payables
Total liabilities
Total net assets
Capital and reserves attributable
to owners of the parent company
Share capital
Share premium
Merger reserve
Retained losses
Total equity
As at
31 December
2013
£
As at
31 December
2012
£
Notes
10
11
13
8
14
7,849
7,849
6,584
6,584
35,007
118,670
313,677
7,224
116,603
260,791
990,567
2,817,027
1,457,921
3,201,645
15
(477,998)
(334,953)
(477,998)
(334,953)
987,772
2,873,276
16
155,619
154,896
21,516,284
21,335,678
1,152,165
1,152,165
(21,836,296)
(19,769,463)
987,772
2,873,276
The Group financial statements were approved and authorised for issue by the Board on 27 March 2014.
The notes on pages 35 to 54 form part of these Group financial statements.
By order of the Board
James Barder
Chief Executive
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Group Statement of Cash Flows
For the year ended 31 December 2013
Cash flows from operating activities
Loss before tax
Adjustments for:
Depreciation
Finance income
Share-based payment charge
Year ended
31 December
2013
£
Year ended
31 December
2012
£
Notes
(2,522,009)
(2,437,440)
10
7
17
3,783
(9,534)
2,182
(18,488)
141,499
129,109
Cash flows from operating activities before changes in working capital
(2,386,261)
(2,324,637)
(Increase)/decrease in inventories
Increase in trade and other receivables
Increase in trade and other payables
Cash used in operations
Income tax received
Net cash used in operating activities
Cash flows from investing activities
Purchase of plant and equipment
Interest received
Cash generated by investing activities
Cash flows from financing activities
Issue of ordinary shares
Expenses paid in connection with share issues
Cash generated by financing activities
(Decease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
11
(27,783)
1,176
(3,750)
(17,688)
15
143,045
140,637
(2,274,749)
(2,200,512)
260,791
259,704
(2,013,958)
(1,940,808)
10
(5,048)
(4,246)
11,217
16,205
6,169
11,959
16
181,329
2,246,600
–
(83,333)
181,329
2,163,267
(1,826,460)
234,418
2,817,027
2,582,609
Cash and cash equivalents at end of year
14
990,567
2,817,027
The notes on pages 35 to 54 form part of these Group financial statements.
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35
Notes to the Group Financial Statements
For the year ended 31 December 2013
1.
Accounting policies
1.1 Basis of preparation
The Group financial statements have been prepared and approved by the Directors in accordance with International
Financial Reporting Standards (“IFRSs”) as adopted by the European Union.
The accounting policies set out below have been applied to all periods presented in these Group financial statements
and are in accordance with IFRSs as adopted by the European Union, and International Financial Reporting
Interpretations Committee (“IFRIC”) interpretations that were applicable for the year ended 31 December 2013.
1.2 Going concern
The Group had cash balances of £0.99 million at 31 December 2013, with a net cash outflow of £1.83 million in
the year.
The Group raised £12.0 million (before expenses) following a placing of 21,052,632 shares at 57 pence per share
with existing and new institutional investors, approved by shareholders in a general meeting held on 25 March 2014,
demonstrating that the Group has access to finance. The Directors have considered the cash flow requirements for
the Group for a period including 12 months from the date of approval of these financial statements which includes an
assessment of research and development expenditure. Based on these projections, the Directors consider that both
the Company and the Group will have sufficient cash resources during this period to pay all of its liabilities as they fall
due and therefore consider it appropriate to continue to prepare the accounts on a going concern basis.
The Group financial statements have been prepared on the going concern basis which assumes that the Group
will continue in operational existence for the foreseeable future. The Group financial statements do not reflect any
adjustments that would be required if they were to be prepared on a basis other than the going concern basis.
1.3 Accounting developments
The following new standards, amendments to standards or interpretations have been issued and are effective for the
year ended 31 December 2013, however, the Directors do not expect them to have a material effect on the Group
financial statements:
•
IFRS 10 ‘Consolidated Financial Statements’
•
IAS 1 (Amended) ‘Presentation of Financial Statements’
•
IAS 19 (Amended) ‘Employee Benefits’
•
IAS 24 ‘Related Party Disclosures’ (revised)
•
IAS 27 ‘Separate Financial Statements’ (revised)
•
IFRS 12 ‘Disclosure of Interests in Other Entities’
•
IFRS 13 ‘Fair Value Measurement’
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Notes to the Group Financial Statements (continued)
1.
Accounting policies (continued)
The following new standard, which is not yet effective and has not been adopted early in these financial statements,
will or may have an effect on the Group’s future financial statements:
•
IFRS 9 ‘Financial Instruments’
1.4 Basis of consolidation
Where the Company has the power, either directly or indirectly, to govern the financial and operating policies of
another entity or business, so as to obtain benefits from its activities, it is classified as a subsidiary. The Group financial
statements present the results of the Company and its sole subsidiary Futura Medical Developments Limited as if
they formed a single entity (“the Group”). Intra-group transactions and balances are eliminated in preparing the Group
financial statements.
1.5 Revenue
Revenue comprises the fair value received or receivable for: exclusivity arrangements, consultancy fees, milestone
income or royalties, net of value added tax.
The accounting policies for the principal revenue streams of the Group are as follows:
(i) Exclusivity arrangements and similar agreements are recognised as revenue in the accounting period in which the
related services, or required activities, are performed or specified conditions are fulfilled in accordance with the
terms of completion of the specific transaction.
(ii) Consultancy fees are recognised as revenue in the accounting period in which the revenue becomes receivable.
(iii) Non-refundable milestone income is recognised as revenue in the accounting period in which the milestones are
achieved. If any milestone income is creditable against royalty payments then it is deferred and released to the
Group Statement of Comprehensive Income over the accounting periods in which the royalties would otherwise be
receivable.
(iv) Royalty income relating to the sale by a licensee of licensed product is recognised on an accruals basis in
accordance with the substance of the relevant agreement and based on the receipt from the licensee of the
relevant information to enable calculation of the royalty due.
1.6 Leased assets
Leases, which contain terms whereby the Group does not assume substantially all the risks and rewards incidental
to ownership of the leased item are classified as operating leases. Operating lease rentals are charged to the Group
Statement of Comprehensive Income on a straight-line basis over the lease term. The Group does not hold any assets
under finance leases.
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1.
Accounting policies (continued)
1.7 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 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 Group Statement of Comprehensive Income. The useful life and the value of the capitalised development cost
are assessed for 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 met for a product prior to that product being commercially launched in at least one
country.
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 Group Statement of Comprehensive Income as incurred.
Patents and trademarks
The costs incurred in establishing patents and trademarks are either expensed or capitalised in accordance with the
corresponding treatment of the development expenditure for the product to which they relate.
1.8 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 Group 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.
The assets’ residual values and useful lives are determined by the Directors and reviewed and adjusted if appropriate
at each Group Statement of Financial Position date.
1.9 Impairment of non-financial assets
Assets that are subject to depreciation are reviewed for impairment on a half-yearly basis and when events or
circumstances suggest that the carrying amount may not be recoverable. For the purpose of assessing impairment,
assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). An
impairment loss is recognised immediately in the Group Statement of Comprehensive Income for the amount by which
the asset’s carrying amount exceeds its recoverable amount.
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Notes to the Group Financial Statements (continued)
1.
Accounting policies (continued)
Recoverable amount is the higher of fair value, less disposal costs, and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate
of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised for the asset in prior periods. A reversal of an
impairment loss is recognised immediately in the Group Statement of Comprehensive Income.
1.10 Inventories
Inventories are materials and supplies to be consumed in the course of R&D 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 Group Statement of Comprehensive Income in respect of obsolete, slow-
moving or defective items, where appropriate.
1.11 Financial instruments
Financial assets
The Group classifies its financial assets in the category of loans and receivables, comprising ‘trade and other
receivables’ and ‘cash and cash equivalents’. They are recognised initially at fair value and subsequently at amortised
cost using the effective interest rate method.
Trade and other receivables are recognised initially at fair value and are subsequently measured at amortised cost using
the effective interest rate method, less an estimate made for impairment based on a review of all past due amounts at
the year end. A provision for impairment of trade and other receivables is established when there is objective evidence
that the Group will not be able to collect all amounts due. If an impairment loss is required the carrying amount of the
trade or other receivable is reduced through the use of an allowance account and the amount of the loss recognised
immediately in the Group Statement of Comprehensive Income in administrative costs.
Medium-term deposits, comprising sterling fixed rate deposits, with original maturities of more than three months are
included in trade and other receivables.
Cash and cash equivalents are financial assets and comprise cash in hand and sterling fixed rate short-term deposits
with original maturities of three months or less which are held by the Group so as to be available to meet short-term
cash commitments.
The Group assesses at each Statement of Financial Position date whether there is objective evidence that a financial
asset is impaired.
Financial liabilities
The Group’s financial liabilities comprise ‘trade and other payables’ recognised initially at fair value and subsequently at
amortised cost using the effective interest rate method.
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1.
Accounting policies (continued)
1.12 Government grants
Government grants are recognised at fair value where there is a reasonable assurance that the grant will be received
and the Group will comply with all attached conditions. Government grants relating to costs defrayed are accrued and
recognised in the Group Statement of Comprehensive Income over the period required to match them with the costs
which they reimburse.
1.13 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 Group 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 Group
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 Group 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.
1.14 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 Group Statement of Comprehensive Income in the period in which they arise.
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Notes to the Group Financial Statements (continued)
1.
Accounting policies (continued)
1.15 Employee benefits
(i) Defined contribution plans
The Group provides retirement benefits to all employees and Executive Directors 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 Group Statement of
Comprehensive Income in the period in which they become payable.
(ii) Accrued holiday pay
Provision is made at each Group Statement of Financial Position date for holidays accrued but not taken at the salary
of the relevant employee at that date. The expected cost of compensated short-term absence (i.e. holidays) is charged
to the Group Statement of Comprehensive Income on an accruals basis.
(iii) 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 Group
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 Group 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 Group 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.
(iv) Long-term incentive plan
The Group operates a long-term incentive plan for staff, the Executive Directors and the Chairman. The quantum of
any awards receivable will depend on the Group achieving set milestones and the share price at the time relative to
targets set in advance. The Group can exercise discretion in settling any award in equity or in cash.
1.16 Finance income
Interest income is recognised on a time-proportion basis using the effective interest rate method.
1.17 Critical accounting estimates and judgements
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.
Judgements
(i) Revenue recognition
Fees invoiced in respect of non-refundable milestones have been recognised as revenue in the Group Statement of
Comprehensive Income in the period as all criteria for revenue recognition have been met.
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1.
Accounting policies (continued)
(ii) Intangible asset recognition
The Directors consider that the criteria to capitalise development expenditure are not met for a product prior to that
product being commercially launched in at least one country.
(iii) Deferred tax recognition
The Directors consider that, given the current stage of development of the business, deferred tax assets should not be
recognised before the Group is generating recurring royalty revenue.
Estimates and assumptions
(iv) Useful lives of plant and equipment
Plant and equipment is amortised or depreciated over its useful life. Useful lives are based on the Directors’ estimates
of the periods over which the assets will be used in developing revenue generating products and the estimates are
reviewed annually for continued appropriateness. The estimated useful lives are between two and five years for
computer equipment and between three and ten years for furniture and fittings. Changes to estimates can result in
significant variations in the carrying value and amounts charged to the Group Statement of Comprehensive Income in
specific periods.
(v) Fair value of financial instruments
The Group determines the fair value of financial instruments using valuation techniques which can be significantly
affected by the assumptions used, including interest and discount rates and estimates of future cash flows.
(vi) Inventories
The Group reviews the net realisable value of its inventories on a half-yearly basis to provide assurance that recorded
inventories are stated at the lower of cost or net realisable value. Factors that could impact realisable value include: the
timing and success of future technological innovations in relation to product R&D, competitor and Government actions,
supplier prices and economic trends.
(vii) Share-based payments
The Group operates an equity-settled share-based compensation plan as detailed in note 17. Employee (and similar)
services received and the corresponding increase in equity are measured by reference to the fair value of the equity
instruments as at the date of grant.
2.
Financial risk management
2.1 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. The Group’s primary
treasury objective is to minimise exposure to potential capital losses whilst at the same time securing favourable
market rates of interest on Group cash deposits using money market deposits with banks. Cash balances used to
settle the liabilities from operating activities are also maintained in current accounts which earn interest at variable
rates.
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Notes to the Group Financial Statements (continued)
2.
Financial risk management (continued)
(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. Where supplier contracts of more than £100,000 total value are
to be settled in foreign currencies consideration is given to settling the sums to be paid through conversion of sterling
deposits to the appropriate foreign currency holdings at the outset of the contract to minimise the risk of adverse
currency fluctuations.
For contracts with smaller values the foreign exchange rate risk is not considered sufficient to require the establishment
of foreign currency accounts unless specific circumstances are identified which warrant this.
At 31 December 2013 the Group had trade payables of £40,215 denominated in a foreign currency (31 December
2012: £36,294).
Cash flow interest rate risk and fair value interest rate risk
The Group’s interest rate risk arises from short-term money market deposits. Deposits which earn variable rates of
interest expose the Group to cash flow interest rate risk. Deposits at fixed rates expose the Group to fair value interest
rate risk. The Group analyses its interest rate exposure on a dynamic basis.
The impact in the year ended 2013, of a defined interest rate shift of a 1% higher rate of interest earned per annum
applied to the term deposits over the period of the deposit, on the post-tax loss for the year and net assets would have
been £21,608 reduction/increase (2012: £19,898 reduction/increase).
The impact in the year ended 2013, of a defined interest rate shift of a 1% lower rate of interest earned per annum
applied to the term deposits over the period of the deposit, on the post-tax loss for the year and net assets would have
been £11,149 increase/reduction (2012: £14,813 increase/reduction).
(ii) Credit risk
Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions as well as credit
exposure in relation to outstanding receivables. The Group policy is to spread deposits over at least two institutions
with investment grade A1 or better (Standard & Poor’s credit rating) and deposits are made in sterling only. The Group
does not expect any losses from non-performance by these institutions.
(iii) Liquidity risk
Liquidity risk arises from the Group’s management of working capital. It is the risk that the Group will encounter
difficulty in meeting its financial obligations as they fall due. Prudent liquidity risk management involves maintaining
sufficient cash and cash equivalents and the monitoring of rolling forecasts of the Group’s liquidity reserve on the basis
of expected cash flow.
The Group had trade and other payables at the Group Statement of Financial Position date of £477,998
(2012: £334,953) as disclosed in note 15, which fall due within one year.
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2.
Financial risk management (continued)
2.2 Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern
in order to provide returns for equity holders of the Company and benefits for other stakeholders and to maintain an
optimal capital structure to minimise the cost of capital.
2.3 Fair value estimation
The Group uses amortised cost, using the effective interest rate method, to determine subsequent fair value, after initial
recognition, for its financial instruments.
3.
Segment reporting
The Group is organised and operates as one business segment. The main area of R&D continues to be in the field of
innovative products for consumer healthcare using the Group’s advanced proprietary transdermal technology.
The Group manages any overseas R&D from the UK, the primary business segment. Segment revenue is based on
the geographical location of the Group’s customers. Since there is currently only one business segment and one
geographical segment, no separate segment reporting has been prepared.
4.
Operating loss
Operating loss is stated after charging
Depreciation of plant and equipment (note 10)
Inventories consumed in R&D
Wages and salaries (note 5)
Operating lease costs: Property
Loss on foreign exchange
Year ended
31 December
2013
£
Year ended
31 December
2012
£
3,783
6,868
2,182
1,176
1,229,672
1,135,843
68,151
68,151
5,398
–
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Notes to the Group Financial Statements (continued)
4.
Operating loss (continued)
The fees of the Group’s auditor, BDO LLP, for services provided are analysed below:
Audit services
Parent company
Subsidiary
Tax compliance services
Parent company
Subsidiary
Total fees
5. Wages and salaries
Year ended
31 December
2013
£
Year ended
31 December
2012
£
26,000
4,000
900
4,350
25,500
3,700
900
4,200
35,250
34,300
The average monthly number of persons (including all Directors) employed by the Group during the year was 10 (by
category: R&D 4, administration 6), (2012:10, by category: R&D 4, administration 6) and their aggregate emoluments
were:
Wages and salaries
Social security costs
Other pension and insurance benefits costs
Total cash-settled emoluments
Accrued holiday pay
Share-based payment remuneration charge (note 17)
Total emoluments
All employees of the Group are employed by Futura Medical Developments Limited.
Year ended
31 December
2013
£
Year ended
31 December
2012
£
867,551
787,825
109,035
99,596
107,100
125,041
1,083,686
1,012,462
4,487
(5,728)
141,499
129,109
1,229,672
1,135,843
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Futura Medical plcAnnual Report and Accounts for the year ended 31 December 2013 45
6.
Directors’ emoluments
Aggregate emoluments
Employer pension contributions
Sub-totals per remuneration report (page 16)
Share-based payment remuneration charge
Employer’s national insurance charge
Total emoluments
Year ended
31 December
2013
£
Year ended
31 December
2012
£
655,439
620,428
64,830
80,818
720,269
701,246
80,063
89,861
78,429
78,037
890,193
857,712
Emoluments disclosed above include the following amounts in respect of the highest paid Director:
Aggregate emoluments
Employer pension contributions
Sub-totals per remuneration report (page 16)
Share-based payment remuneration charge
Employer’s national insurance charge
Total emoluments
Year ended
31 December
2013
£
Year ended
31 December
2012
£
205,230
197,631
26,318
25,718
231,548
223,349
34,879
28,044
33,949
25,612
294,471
282,910
During the year, two Directors exercised share options under the Group share option scheme and realised a combined
gain of £19,182 (2012: three Directors, realised gain £128,380). In respect of the highest paid Director the realised gain
was £nil (2012: £52,475).
During the year, three Directors (2012: three Directors) participated in a private money purchase defined contribution
pension scheme.
Emoluments for individual Directors are disclosed within the Remuneration Report on page 16.
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Notes to the Group Financial Statements (continued)
7.
Finance income
Interest receivable on fixed rate short-term deposits
8.
Taxation
Current tax
UK corporation tax credit reported in the
Group Statement of Comprehensive Income
Year ended
31 December
2013
£
Year ended
31 December
2012
£
9,534
18,488
Year ended
31 December
2013
£
Year ended
31 December
2012
£
313,677
260,791
The tax assessed for the year is different from the standard rate of corporation tax in the UK.
The differences are explained below:
Loss on ordinary activities before tax
Loss on ordinary activities at an average standard rate of
corporation tax in the UK of 20% (2012: 20%)
Expenses not deductible for tax purposes
Difference between depreciation and capital allowances
Other short-term timing differences
Unutilised tax losses
Tax relief on share options exercised
Additional relief attaching to R&D tax credit claims
UK corporation tax credit reported in the
Group Statement of Comprehensive Income
Year ended
31 December
2013
£
Year ended
31 December
2012
£
2,522,009
2,437,440
504,402
487,487
(36)
253
(10)
413
(28,925)
(24,799)
(236,813)
(319,220)
12,384
66,326
62,412
50,594
313,677
260,791
The Group has tax losses of £15,500,889 (2012: £14,304,768) available for offset against future taxable profits.
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Futura Medical plcAnnual Report and Accounts for the year ended 31 December 2013 47
8.
Taxation (continued)
Deferred tax
Deferred tax assets amounting to £3,249,939 (2012: £2,926,896) have not been recognised on the basis that their
future economic benefit is not certain. Assuming a prevailing tax rate of 20% (2012: 20%) when the timing differences
reverse, the unrecognised deferred tax asset comprises:
Depreciation in excess of capital allowances
Tax relief on unexercised share options
Other short-term timing differences
Unutilised tax losses
Year ended
31 December
2013
£
Year ended
31 December
2012
£
10,724
136,567
2,470
10,977
53,120
1,845
3,100,178
2,860,954
3,249,939
2,926,896
9.
Loss per share (pence)
The calculation of the loss per share is based on a loss of £2,208,332 (2012: loss of £2,176,649) and on a weighted
average number of shares in issue of 77,591,370 (2012: 74,746,320).
The loss attributable to equity holders of the Company for the purpose of calculating the fully diluted loss per share
is identical to that used for calculating the basic loss per share. The exercise of share options, disclosed in note 17,
or the issue of shares under the long-term incentive plan, would have the effect of reducing the loss per share and is
therefore anti-dilutive under the terms of IAS 33 ‘Earnings per Share’.
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Notes to the Group Financial Statements (continued)
10.
Plant and equipment
Cost
At 1 January 2013
Additions
At 31 December 2013
Depreciation
At 1 January 2013
Charge for year
At 31 December 2013
Net book value
At 31 December 2013
At 31 December 2012
Cost
At 1 January 2012
Additions
At 31 December 2012
Depreciation
At 1 January 2012
Charge for year
At 31 December 2012
Net book value
At 31 December 2012
At 31 December 2011
Computer
Equipment
£
Furniture
and Fittings
£
Total
£
54,910
52,146
107,056
5,048
–
5,048
59,958
52,146
112,104
48,821
51,651
100,472
3,679
104
3,783
52,500
51,755
104,255
7,458
6,089
391
495
Computer
Equipment
£
Furniture
and Fittings
£
7,849
6,584
Total
£
50,664
52,146
102,810
4,246
–
4,246
54,910
52,146
107,056
46,744
51,546
98,290
2,077
105
2,182
48,821
51,651
100,472
6,089
3,920
495
600
6,584
4,520
All fixed assets of the Group are held in Futura Medical Developments Limited.
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Futura Medical plcAnnual Report and Accounts for the year ended 31 December 2013 49
11.
Inventories
Raw materials and consumables
31 December
2013
£
31 December
2012
£
35,007
7,224
12.
Financial instruments by category
The accounting policies for financial instruments have been applied to the line items below:
Assets as per Group Statement of Financial Position
Loans and receivables
Trade receivables
Cash and cash equivalents
Total loans and receivables
Liabilities as per Group Statement of Financial Position
Total trade and other payables
13.
Trade and other receivables
Amounts receivable within one year:
Trade debtors
Other receivables
Prepayments and accrued income
31 December
2013
£
31 December
2012
£
Notes
13
14
12,000
990,567
2,817,027
1,002,567
2,817,027
31 December
2013
£
31 December
2012
£
477,998
334,953
31 December
2013
£
31 December
2012
£
12,000
27,307
79,363
–
30,634
85,969
118,670
116,603
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 Group Statement of Financial Position date is the fair value of each
class of receivable.
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Notes to the Group Financial Statements (continued)
14. Cash and cash equivalents
Cash at bank and in hand
31 December
2013
£
31 December
2012
£
63,835
60,307
Sterling fixed rate short-term deposits of up to three months maturity
926,732
2,756,720
15.
Trade and other payables
Trade payables
Social security and other taxes
Accrued expenses and deferred income
990,567
2,817,027
31 December
2013
£
31 December
2012
£
186,503
164,500
48,973
29,844
242,522
140,609
477,998
334,953
16.
Share capital
Authorised
31 December
2013
Number
31 December
2012
Number
31 December
2013
£
31 December
2012
£
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
2013
Number
31 December
2012
Number
31 December
2013
£
31 December
2012
£
Ordinary shares of 0.2 pence each
77,809,576
77,447,946
155,619
154,896
The number of issued ordinary shares as at 1 January 2012 was 73,223,391.
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16.
Share capital (continued)
During the year ended 31 December 2012, the Company issued shares of 0.2 pence each as follows:
Month
Reason for issue
Gross
Consideration
£
Shares
Issued
Number
January 2012
Share option exercise at 24.25 pence per share
119,000
490,721
September 2012
Placing at 57.00 pence per share
2,083,332
3,654,969
October 2012
Share option exercise at 24.25 pence per share
October 2012
Share option exercise at 40.50 pence per share
December 2012
Non-Executive Director award at 84.10 pence per share
3,638
12,150
28,480
15,000
30,000
33,865
2,246,600
4,224,555
The number of issued ordinary shares as at 1 January 2013 was 77,447,946.
During the year ended 31 December 2013, the Company issued shares of 0.2 pence each as follows:
Month
Reason for issue
April 2013
April 2013
May 2013
Share option exercise at 40.50 pence per share
Share option exercise at 56.25 pence per share
Share option exercise at 40.50 pence per share
September 2013
Share option exercise at 56.25 pence per share
September 2013
Share option exercise at 40.50 pence per share
October 2013
Share option exercise at 56.50 pence per share
December 2013
Non-Executive Director award at 58.15 pence per share
Gross
Consideration
£
12,150
8,438
39,300
64,688
8,100
18,362
30,291
Shares
Issued
Number
30,000
15,000
97,038
115,000
20,000
32,500
52,092
181,329
361,630
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Notes to the Group Financial Statements (continued)
17.
Share options
At 31 December 2013, 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 Period
Exercise
Price per
Share
Pence
At
1 January
2013
Number
Grants
During
Year
Number
Options
Lapsed
Number
Options
Exercised
Number
At
31 December
2013
Number
1 February 2008 – 31 January 2013
74.50
100,000
1 February 2009 – 31 January 2014
56.25
250,000
1 August 2011 – 31 July 2016
24.25
314,279
1 August 2012 – 31 July 2017
40.50
810,000
1 October 2013 – 30 September 2018
56.50
890,000
1 October 2014 – 30 September 2019
61.50
890,000
–
–
–
–
–
–
(100,000)
–
–
–
–
–
(130,000)
120,000
–
314,279
(147,038)
662,962
(30,000)
(32,500)
827,500
(30,000)
–
–
860,000
950,000
1 October 2015 – 30 September 2020
71.50
–
950,000
–
3,254,279
950,000
(160,000)
(309,538)
3,734,741
On 23 September 2013 share options over 950,000 new ordinary shares were granted to employees and a consultant
(including Directors).
Details of share options exercised by employees in 2013, given in note 16, generated additional funds of £151,038 for
the Group.
The share options outstanding at 31 December 2013 represented 4.8% of the issued share capital as at that date
(2012: 4.2%) and would generate additional funds of £2,087,900 (2012: £1,669,588) if fully exercised. The weighted
average remaining life of the share options was 59 months (2012: 60 months), with a weighted average remaining
exercise price of 55.90 pence (2012: 51.30 pence).
The share options exercisable at 31 December 2013 totalled 1,924,741 (2012: 2,364,279) with an average exercise
price of 45.71 pence (2012: 47.47 pence) and would have generated additional funds of £879,750 (2012: £1,122,238)
if fully exercised.
The Group’s share option scheme rules apply to 3,029,741 of the share options outstanding at 31 December 2013
(31 December 2012: 2,679,279) and include a rule regarding forfeiture of unexercised share options by a Director or
employee upon the cessation of their employment (except in specific circumstances).
There were no market vesting conditions within the terms of the grant of the share options.
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Futura Medical plcAnnual Report and Accounts for the year ended 31 December 2013 53
17.
Share options (continued)
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.
Inputs to share option pricing model
Grant date
Number of shares under option
Share price as at date of grant
Option exercise price
Expected life of options: based on previous exercise history
Expected volatility: based on 50 day median fluctuations over 3 years
Dividend yield: no dividends assumed
31 December
2013
31 December
2012
23 September
17 September
950,000
890,000
71.50 pence
61.50 pence
71.50 pence
61.50 pence
3 years
42.72%
0%
3 years
40.25%
0%
Risk-free rate: yield on 3 year treasury stock as at date of grant
0.95% p.a.
0.45% p.a.
Outputs generated from share option pricing model
Fair value per share under option
Total expected charge over the vesting period
Recognised in the Group Statement of Comprehensive Income
The share-based remuneration charge (note 5) comprises:
31 December
2013
31 December
2012
21.37 pence
15.15 pence
£203,015
£134,827
31 December
2013
31 December
2012
Share-based payments
£141,499
£129,109
18.
Pension costs
The pension charge represents contributions payable by the Group to independently administered funds which during
the year ended 31 December 2013 amounted to £86,746 (2012: £106,714). Pension contributions payable one month
in arrears at 31 December 2013 included in accrued expenses at the relevant Group Statement of Financial Position
date totalled £2,748 (2012: £4,109).
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Notes to the Group Financial Statements (continued)
19. Commitments
At 31 December 2013 the Group had operating lease commitments in respect of property leases cancellable on one
month’s notice of £5,714 (2012: £5,714).
20.
Related party transactions
Related parties, as defined by IAS 24 ‘Related Party Disclosures’, are the wholly owned subsidiary company, Futura
Medical Developments Limited, and the Board. Transactions between the Company and the wholly owned subsidiary
company 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 6 and within the Remuneration Report on pages 14 to 18.
21.
Events after statement of financial position date
On 27 January 2014 share options over 120,000 new ordinary shares were exercised generating additional funds of
£67,500 for the Group.
The Group raised £12.0 million (before expenses) following a placing of 21,052,632 shares at 57 pence per share on
7 March 2014 and approved by shareholders in a general meeting on 25 March 2014.
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Futura Medical plcAnnual Report and Accounts for the year ended 31 December 2013 55
Parent Company Balance Sheet
For the year ended 31 December 2013
Company No. 04206001
Fixed assets
Investment
Current assets
Debtors – due within one year
Debtors – due after more than one year
Total debtors
Cash at bank and in hand
Total current assets
Creditors: amounts falling due within one year
Net current assets
Total net assets
Capital and reserves
Called up share capital
Share premium account
Profit and loss account
Equity shareholders’ funds
As at
31 December
2013
£
As at
31 December
2012
£
Notes
3
4
4
5
6
7
7
767,977
626,478
4,257
14,879
20,648,739
18,479,636
20,652,996
18,494,515
926,732
2,781,098
21,579,728
21,275,613
(41,043)
(45,368)
21,538,685
21,230,245
22,306,662
21,856,723
155,619
154,896
21,516,284
21,335,678
634,759
366,149
22,306,662
21,856,723
These financial statements were approved and authorised for issue by the Board on 27 March 2014.
The notes on pages 56 to 58 form part of these parent company financial statements.
By order of the Board
James Barder
Chief Executive
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56
Notes to the Parent Company Financial Statements
For the year ended 31 December 2013
1.
Accounting policies
The parent company financial statements have been prepared under the historical cost convention and in accordance
with UK GAAP.
Share-based employee remuneration
The Company has no employees but does issue shares to satisfy share option awards made by its subsidiary
company. The Company has applied Financial Reporting Standard 20 ‘Share-based Payment’ to all share options
granted to employees of the subsidiary. The Company’s investment in the subsidiary is increased by the capital
contribution equivalent to the fair value of the share-based payment charge incurred by the subsidiary.
Taxation
Current tax, including UK corporation tax is provided at amounts expected to be paid (or recovered) using the tax rates
and laws that have been enacted or substantively enacted by the balance sheet date.
There are no unutilised tax losses in 2013 (2012: £nil). A deferred tax asset in respect of unutilised tax losses has not
been recognised on the basis that the future economic benefit was not certain.
2.
Profit attributable to shareholders
As permitted by section 408 of the Companies Act 2006 no separate Company profit and loss account has been
included in these financial statements. The Group loss for the year includes a profit after tax of £127,111 (2012:
£101,992) which is dealt with in the financial statements of the Company. The total fees of the Company’s and Group’s
auditor, BDO LLP, for services provided are analysed in note 4 to the Group financial statements.
3.
Investment
The investment represents 100% of the issued ordinary shares in the subsidiary undertaking Futura Medical
Developments Limited, a company incorporated in England and Wales, and is stated at cost plus capital contribution
to the subsidiary in respect of share-based payment charge, less any provision for impairment. The principal activity
of the subsidary company is the research and development of pharmaceutical drugs and medical devices and their
commercial exploitation. The results of the subsidiary company are included in the Group financial statements on
pages 31 to 54.
Cost
The addition in the year represents the share-based payment charge.
31 December
2013
£
31 December
2012
£
767,977
626,478
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Futura Medical plcAnnual Report and Accounts for the year ended 31 December 2013
57
4.
Debtors
Amounts receivable within one year: prepayments
Amounts receivable after more than one year:
31 December
2013
£
31 December
2012
£
4,257
14,879
Amounts owed by subsidiary
20,648,739
18,479,636
5.
Creditors: amounts falling due within one year
Trade creditors
Accruals and deferred income
6.
Called up share capital
Authorised
31 December
2013
£
31 December
2012
£
5,038
36,005
41,043
15,000
30,368
45,368
31 December
2013
Number
31 December
2012
Number
31 December
2013
£
31 December
2012
£
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
2013
Number
31 December
2012
Number
31 December
2013
£
31 December
2012
£
Ordinary shares of 0.2 pence each
77,809,576
77,447,946
155,619
154,896
Details of shares issued by the Company in the year are given in note 16 to the Group financial statements and details
of share options outstanding are given in note 17 to the Group financial statements.
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Notes to the Parent Company Financial Statements (continued)
7.
Reserves
At 1 January 2012
Retained profit for the year
Share-based payment
Shares issued during the year
Costs of share issues
At 1 January 2013
Retained profit for the year
Share-based payment
Shares issued during the year
At 31 December 2013
8.
Related party transactions
Details are given in note 20 to the Group financial statements.
9.
Events after balance sheet date
Details are given in note 21 to the Group financial statements.
Share
Premium
Account
£
Profit
and Loss
Account
£
19,180,860
135,048
–
–
101,992
129,109
2,238,151
(83,333)
–
–
21,335,678
366,149
–
–
180,606
127,111
141,499
–
21,516,284
634,759
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Futura Medical plcAnnual Report and Accounts for the year ended 31 December 2013
59
Company Information
Non-Executive Chairman
Chief Executive
Chief Development Officer
Finance Director
Non-Executive Director
Non-Executive Director
Company number
04206001
Directors
John Clarke
James Barder
David Davies
Derek Martin
Jonathan Freeman
Lisa Arnold
Audit committee
Jonathan Freeman
Lisa Arnold
Secretary and registered office
Derek Martin
Futura Medical plc
Surrey Technology Centre
40 Occam Road
Guildford
Surrey
GU2 7YG
Nominated adviser and broker
Nplus1 Singer
One Bartholomew Lane
London
EC2N 2AX
Principal solicitors
Memery Crystal LLP
44 Southampton Buildings
London
WC2A 1AP
Remuneration committee
Jonathan Freeman
Lisa Arnold
John Clarke
Auditors
BDO LLP
Kings Wharf
20–30 Kings Road
Reading
Berkshire
RG1 3EX
Patent attorneys
Withers & Rogers LLP
4 More London Riverside
London
SE1 2AU
Principal bankers
Butterfield Private Bank
99 Gresham Street
London
EC2V 7NG
Nominations committee
Lisa Arnold
Jonathan Freeman
John Clarke
Registrars
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Public relations advisers
Buchanan Communications Limited
107 Cheapside
London
EC2V 6DN
Investment managers
Royal London Cash Management
55 Gracechurch Street
London
EC3V 0UF
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Proof 7
Surrey Technology Centre
40 Occam Road, Guildford,
Surrey, GU2 7YG
Telephone: +44 (0) 1483 685 670
Fax: +44 (0) 1483 685 671
Email: info@futuramedical.com
Web: www.futuramedical.com
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