Interim Results
Immediate Release: 07:00hrs Friday 29th September 2006
Nanoscience Inc.
("Nanoscience" or the "Group")
Unaudited Interim Results
for the six month period ended 30 June 2006
Nanoscience Inc, the specialist niche investor in emerging technologies with
strong commercial propositions from within the growing nanotechnology sector,
is pleased to announce its unaudited interim results for the six month period
ended 30 June 2006.
Highlights:
* Encouraging progress towards commercialisation in all investee companies
* Appointment of industry renowned Dr. Ian McWalter as CEO of the Group's
wholly owned subsidiary, Toumaz Technology Ltd (`Toumaz')
* Strengthening of commercial relationship between Toumaz and Oracle
* First commercial orders received by AppliedSensor Sweden AB
* First commercial order received by Futures Waves Pte. Ltd
* Increased investment in Future Waves Pte. Ltd
Post-Balance Sheet Events:
* Appointment of Guy Spelman as Group CEO
* Further investment in gas sensor specialists AppliedSensor Sweden AB
Chairman's Statement
I am pleased to present the Group's unaudited interim results for the six month
period ended 30 June 2006. As announced at the time of the Group's AGM,
progress within the Group and its investee companies has been in line with
management's expectations and the Group has continued to deliver further
progress in all aspects of its business. Throughout the period we have seen
continued growth in the global markets that our investee companies are seeking
to exploit including strong growth in the DAB radio market, mobile TV market,
automotive gas sensor market and the medical sensor markets. Furthermore, we
believe our investments in the period have continued to prove our ability to
identify niche investment opportunities with the potential for substantial
growth through commercialisation to which we can add further value in the form
of managerial guidance.
Throughout the period we witnessed positive maturing and strengthening of our
portfolio companies as they continued to progress towards the commercialisation
of their respective products. In March we provided further support to Future
Waves Pte. Ltd by way of increased investment and subsequently the company
achieved early successes in winning `design-ins' for its Fenix 1 chip in the
Far East, with a positive reception from manufacturers of MP3, GPS and
multimedia systems. Following the progress made in the first half of the year
by Future Waves Pte. Ltd we are confident that volume orders will be received
within the next six months.
Meanwhile our wholly owned subsidiary and Imperial College spin-off company,
Toumaz - which we acquired in October last year - continued to demonstrate
better than expected results in the ongoing testing of its ultra low-power
wireless Sensium chip. During the period, two key milestones were reached with
regards to the commercialisation of Toumaz's Sensium chip. Firstly, a number of
significant global players have taken delivery of proof of concept product from
the company and are presently trialing the ultra low-power wireless
functionality of Sensium's continuous patient monitoring. Secondly, the single
chip Sensium is now entering the fabrication stage and following testing and
trials scheduled for the first quarter of next year, will be ready for
production engineering in advance of mass production by Toumaz's subcontract
manufacturing partner, Infineon Technologies AG. Throughout the period, Toumaz
received a number of significant customer enquiries into its products and of
particular encouragement has been the continued support from Oracle where both
they and Toumaz have progressed towards their mutual commercial goals.
AppliedSensor Sweden AB, the Group's first investment, has successfully
completed product testing within the automotive industry and orders have been
received from two leading manufacturers for integration in their upcoming 2007
production models. A first production order has also been received from a
leading supplier in the indoor air quality control sector.
The aforementioned developments across the Group and its investee companies
typify what was a period of continued and rapid evolution towards
commercialisation within our portfolio. We remain confident of our ability to
deliver enhanced shareholder value through our strategy of making investments
where we can add value in the commercialisation process.
Financially, the Group remains in line with our 2006 budget, and we remain
confident about its future potential.
The hard work, dedication and enthusiasm shown by employees in all our investee
companies is moving our portfolio forwards at the pace we would expect, and we
thank them all for their efforts.
Richard Rose
Chairman
29th September 2006
Further Information:
Richard Rose Nanoscience Inc. 07836 250 474
Andrew Tan Hansard Communications 020 7245 1100
NANOSCIENCE INC
CONSOLIDATED INCOME STATEMENT
FOR THE PERIOD ENDED 30 JUNE 2006
Note Unaudited Unaudited Unaudited
six months period from period from
ended 30 14 February 14 February
June 2006 2005 to 30 2005 to 31
June 2005 December
2005
£000 £000 £000
Revenue 51 - 72
Cost of sales (225) - (283)
Gross profit (174) - (211)
Amortisation (266) - (95)
Administrative expenses (1,864) (41) (489)
Operating loss (2,304) (41) (795)
Result from equity accounted (270) - (53)
investment
Finance cost 98 3 50
Loss before taxation (2,476) (38) (798)
Taxation - - -
Loss for the period 5 (2,476) (38) (798)
Basic and diluted loss per ordinary 5 (1.35)p (0.13)p (1.30)p
share
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD 30 JUNE 2006
Share Share Share Retained Total
deficit equity
capital premium based
payment
reserve
£'000 £'000 £'000 £'000 £'000
At 14 February 2005 - - - - -
Issue of share capital 100 988 - 1,088
Cost of issue of share - (135) - - (135)
capital
Loss for the period - - - (38) (38)
At 30 June 2005 Unaudited 100 853 - (38) 915
Issue of share capital 359 22,395 - - 22,754
Cost of issue of share - (420) - - (420)
capital
Loss for the period - - - (760) (760)
Share based payments - (20) 169 - 149
At 31 December 2005 459 22,808 169 (798) 22,638
Unaudited
Net loss for the period - - - (2,476) (2,476)
Share based payments - - 363 - 363
reserve
At 30 June 2006 Unaudited 459 22,808 532 (3,274) 20,525
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2006
Unaudited Unaudited Unaudited
30 June 30 June 31 December
2006 2005 2005
£000 £000 £000
ASSETS
Non-current assets
Intangible assets 14,237 - 14,503
Property, plant and equipment 104 - 87
Investments 2,837 221 2,652
17,178 221 17,242
Current assets
Trade and other receivables 298 - 322
Cash and cash equivalents 4,053 707 6,087
Total current assets 4,351 707 6,409
Total assets 21,529 928 23,651
EQUITY AND LIABILITIES
Current liabilities
Trade and other payables 395 13 404
Total current liabilities 395 13 404
Non-current liabilities 609 - 609
Total liabilities 1,004 13 1,013
Equity
Share capital 459 100 459
Share premium 22,808 853 22,808
Share based payment reserve 532 - 169
Retained deficit (3,274) (38) (798)
Equity shareholders' funds 20,525 915 22,638
Total equity and liabilities 21,529 928 23,651
CONSOLIDATED CASH FLOW STATEMENT
FOR THE PERIOD 30 JUNE 2006
Unaudited Unaudited Unaudited
six months period from period from
ended 30 14 February 14 February
June 2006 2005 to 30 2005 to 31
June 2005 December
2005
£000 £000 £000
Cash flows from operating activities
Loss before taxation (2,304) (41) (795)
Amortisation 266 - 95
Depreciation 35 - 3
Share based payments 363 - 149
Interest received 98 3 50
Decrease in trade and other 23 - 17
receivables
(Decrease)/increase in trade and (9) 13 (294)
other payables
Net cash outflow from operating (1,528) (25) (775)
activities
Cash flows from investing activities
Purchase of investments (506) (221) (323)
Acquisition of subsidiary - net of - - (447)
cash acquired
Net cash used in investing activities (506) (221) (770)
Cash flows from financing activities
Proceeds from issue of share capital - 1,088 8,187
Share issue costs - (135) (555)
Net cash inflow from financing - 953 7,632
activities
- -
Net change in cash and cash (2,034) 707 6,087
equivalents
Cash and cash equivalents at 6,087 - -
beginning of period
Cash and cash equivalents at end of 4,053 707 6,087
period
NOTES TO THE INTERIM REPORT
FOR THE PERIOD ENDED 30 JUNE 2006
1 GENERAL INFORMATION
The information for the period ended 30 June 2006 does not constitute statutory
accounts as defined in Section 240 of the Companies Act 1985. The figures for
the period ended 31 December 2005 have been extracted from the 2005 statutory
financial statements prepared under UK GAAP and adjusted where necessary in
order to comply with International Financial Reporting Standards (IFRS) as
shown in note 3. The auditors' report on those accounts was unqualified and did
not contain a statement under section 237(2) of the Companies Act 1985.
2 ACCOUNTING POLICIES
BASIS OF PREPARATION
The Company was incorporated in the Cayman Islands which do not prescribe the
adoption of any particular accounting framework. The Board had previously
resolved that the Company would follow UK Accounting Standards and apply the
Companies Act 1985 when preparing its annual financial statements.
The Board have now resolved that Nanoscience Inc. will adopt IFRS for the first
time in its financial statements for the year ending 31 December 2006. This
interim financial report has therefore been prepared under the historical cost
convention and in accordance with International Accounting Standard 34 "Interim
Financial Reporting" and the requirements of International Financial Reporting
Standard 1 "First Time Adoption of International Reporting Standards" relevant
to interim reports.
The transition to IFRS reporting has resulted in a number of changes in the
reported financial statements, notes thereto and accounting policies compared
to the previous annual report. Note 3 provides further details on the
transition from UK GAAP to IFRS.
The principal accounting policies of the Group are set out below.
BASIS OF CONSOLIDATION
The group financial statements consolidate those of the Company and all of its
subsidiary undertaking(s) drawn up to the balance sheet date. Subsidiaries are
entities over which the group has the power to control the financial and
operating policies so as to obtain benefits from their activities. The group
obtains and exercises control through voting rights.
Unrealised gains on transactions between the group and its subsidiaries are
eliminated. Unrealised losses are also eliminated unless the transaction
provides evidence of an impairment of the asset transferred. Amounts reported
in the financial statements of subsidiaries have been adjusted where necessary
to ensure consistency with the accounting policies adopted by the group.
Acquisitions of subsidiaries are dealt with by the purchase method. The
purchase method involves the recognition at fair value of all identifiable
assets and liabilities, including contingent liabilities of the subsidiary, at
the acquisition date, regardless of whether or not they were recorded in the
financial statements of the subsidiary prior to acquisition. On initial
recognition, the assets and liabilities of the subsidiary are included in the
consolidated balance sheet at their fair values, which are also used as the
bases for subsequent measurement in accordance with the group accounting
policies. Goodwill is stated after separating out identifiable intangible
assets. Goodwill represents the excess of acquisition cost over the fair value
of the group's share of the identifiable net assets of the acquired subsidiary
at the date of acquisition.
REVENUE
The Group follows the principles of IAS18, Revenue, in determining the
appropriate revenue recognition policies. In principle, therefore revenue is
recognised to the extent that the Group has obtained the right to consideration
through its performance.
Revenue excluding VAT comprises revenue arising from development contracts.
Development contracts are designed to meet the specific requirements of each
customer. Revenue on such contracts is recognised on a percentage to completion
basis over the period from signing the agreement to customer acceptance that
the contract deliverables have been fulfilled.
When invoicing milestones on development contracts are such that the proportion
of work performed is greater than the proportion of total contract value, the
Company evaluates whether it has obtained , through its performance to date,
the right to the uninvoiced consideration and therefore whether revenue should
be recognised.
ASSOCIATES
Entities whose economic activities are controlled jointly by the group and by
other ventures independent of the group are accounted for using the equity
method.
Associates are those entities over which the group has significant influence
but which are neither subsidiaries nor interests in joint ventures. Investments
in associates are recognised initially at cost and subsequently accounted for
using the equity method. Acquired investments in associates are also subject to
purchase method accounting. However, any goodwill or fair value adjustment
attributable to the share in the associate is included in the amount recognised
as investment in associates.
All subsequent changes to the share of interest in the equity of the associate
are recognised in the group's carrying amount of the investment. Changes
resulting from the profit or loss generated by the associate are reported in
"results from equity associated investments" in the consolidated income
statement and therefore affect net results of the group. These changes include
subsequent depreciation, amortisation or impairment of the fair value
adjustments of assets and liabilities.
Items that have been recognised directly in the associate's equity are
recognised in the consolidated equity of the group. However, when the group's
share of losses in an associate equals or exceeds its interest in the
associate, including any unsecured receivables, the group does not recognise
further losses, unless it has incurred obligations or made payments on behalf
of the associate. If the associate subsequently reports profits, the investor
resumes recognising its share of those profits only after its share of the
profits equals the share of losses not recognised.
Unrealised gains on transactions between the group and its associates are
eliminated to the extent of the group's interest in the associates. Unrealised
losses are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred. Amounts reported in the financial
statements of associates have been adjusted where necessary to ensure
consistency with the accounting policies adopted by the group.
GOODWILL
Goodwill representing the excess of the cost of acquisition over the fair value
of the group's share of the identifiable net assets acquired is capitalised and
reviewed annually for impairment. Goodwill is carried at cost less accumulated
impairment losses. Negative goodwill is recognised immediately after
acquisition in the income statement.
TAXATION
Current income tax assets and/or liabilities comprise those obligations to, or
claims from, fiscal authorities relating to the current or prior reporting
period, that are unpaid at the balance sheet date. They are calculated
according to the tax rates and tax laws applicable to the fiscal periods to
which they relate, based on the taxable result for the year. All changes to
current tax assets or liabilities are recognised as a component of tax expense
in the income statement.
Deferred income taxes are calculated using the liability method on temporary
differences. This involves the comparison of the carrying amounts of assets and
liabilities in the consolidated financial statements with their respective tax
bases. In addition, tax losses available to be carried forward as well as other
income tax credits to the Group are assessed for recognition as deferred tax
assets.
Deferred tax liabilities are always provided for in full. Deferred tax assets
are recognised to the extent that it is probable that they will be able to be
offset against future taxable income. Deferred tax assets and liabilities are
calculated, without discounting, at tax rates that are expected to apply to
their respective period of realisation, provided they are enacted or
substantively enacted at the balance sheet date.
Most changes in deferred tax assets or liabilities are recognised as a
component of tax expense in the income statement. Only changes in deferred tax
assets or liabilities that relate to a change in value of assets or liabilities
that is charged directly to equity are charged or credited directly to equity.
INTANGIBLE ASSETS
Intellectual property rights
The costs of creating and protecting internally generated property, patents and
know-how are written-off to the income statement in the period in which they
are incurred.
The costs of acquiring rights to the use of third party intellectual property
are capitalised and, subject to impairment reviews, amortised over the
estimated economic life of the intellectual property concerned.
Assets acquired as part of a business combination
In accordance with IFRS 3 Business Combinations, an intangible asset acquired
in a business combination is deemed to have a cost to the group of its fair
value at the acquisition date. The fair value of the intangible asset reflects
market expectations about the probability that the future economic benefits
embodied in the asset will flow to the group. Where an intangible asset might
be separable, but only together with a related tangible or intangible asset,
the group of assets is recognised as a single asset separately from goodwill
where the individual fair values of the assets in the group are not reliably
measurable. Where the individual fair value of the complimentary assets are
reliably measurable, the group recognises them as a single asset provided the
individual assets have a similar useful lives.
IMPAIRMENT, TESTING OF GOODWILL, OTHER INTANGIBLE ASSETS AND PROPERTY, PLANT
AND EQUIPMENT
For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows (cash-generating
units). As a result, some assets are tested individually for impairment and
some are tested at cash-generating unit level. Goodwill is allocated to those
cash-generating units that are expected to benefit from synergies of the
related business combination and represent the lowest level within the group at
which management monitors the related cash flows.
Goodwill, other individual assets or cash-generating units that include
goodwill, other intangible assets with an indefinite useful life, and those
intangible assets not yet available for use are tested for impairment at least
annually. All other individual assets or cash-generating units are tested for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset's or
cash-generating unit's carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of fair value, reflecting market conditions
less costs to sell, and value in use based on an internal discounted cash flow
evaluation. Impairment losses recognised for cash-generating units, to which
goodwill has been allocated, are credited initially to the carrying amount of
goodwill. Any remaining impairment loss is charged pro rata to the other assets
in the cash generating unit. With the exception of goodwill, all assets are
subsequently reassessed for indications that an impairment loss previously
recognised may no longer exist.
FINANCIAL ASSETS
The Group's financial assets include cash and trade and other receivables.
All financial assets are recognised on their settlement date. All financial
assets are initially recognised at fair value, plus transaction costs.
Non-compounding interest and other cash flows resulting from holding financial
assets are recognised in profit or loss when received, regardless of how the
related carrying amount of financial assets is measured.
Trade and other receivables are provided against when objective evidence is
received that the Group will not be able to collect all amounts due to it in
accordance with the original terms of the receivables. The amount of the
write-down is determined as the difference between the asset's carrying amount
and the present value of estimated future cash flows.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash at bank and in hand, bank deposits
repayable on demand and other short-term highly liquid investments with
original maturities of 3 months or less.
EQUITY
Share capital is determined using the nominal value of shares that have been
issued.
The share premium account represents premiums received on the initial issuing
of the share capital. Any transaction costs associated with the issuing of
shares are deducted from share premium, net of any related income tax benefits.
Retained earnings include all current and prior period results as disclosed in
the income statement.
SHARE BASED PAYMENTS
All share-based payment arrangements are recognised in the financial
statements. The Group operates equity-settled share-based remuneration plans
for remuneration of its employees and has issued a share warrant.
All services received in exchange for the grant of any share-based remuneration
are measured at their fair values. These are indirectly determined by reference
to the fair value of the share options/warrants awarded. Their value is
appraised at the grant date and excludes the impact of any non-market vesting
conditions (for example, profitability and sales growth targets).
Share-based payments are ultimately recognised as an expense in profit or loss
or included as part of the cost of share issues with a corresponding credit to
the share based payment reserve, net of deferred tax where applicable. If
vesting periods or other vesting conditions apply, the expense is allocated
over the vesting period, based on the best available estimate of the number of
share options/warrants expected to vest. Non-market vesting conditions are
included in assumptions about the number of options that are expected to become
exercisable. Estimates are subsequently revised, if there is any indication
that the number of share options/warrants expected to vest differs from
previous estimates. No adjustment is made to the expense or share issue cost
recognised in prior periods if fewer share options/warrants ultimately are
exercised than originally estimated.
Upon exercise of share options/warrants, the proceeds received net of any
directly attributable transaction costs up to the nominal value of the shares
issued are allocated to share capital with any excess being recorded as share
premium.
FINANCIAL LIABILITIES
The Group's financial liabilities include trade and other payables.
Financial liabilities are recognised when the Group becomes a party to the
contractual agreements of the instrument. All interest related charges are
recognised as an expense in "finance cost" in the income statement.
Trade payables are recognised initially at their nominal value and subsequently
measured at amortised cost less settlement payments.
Dividend distributions to shareholders are included in `other short term
financial liabilities' when the dividends are approved by the shareholders'
meeting.
OTHER PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
Other provisions are recognised when present obligations will probably lead to
an outflow of economic resources from the Group and they can be estimated
reliably. Timing or amount of the outflow may still be uncertain. A present
obligation arises from the presence of a legal or constructive commitment that
has resulted from past events, for example, legal disputes or onerous
contracts.
Provisions are measured at the estimated expenditure required to settle the
present obligation, based on the most reliable evidence available at the
balance sheet date, including the risks and uncertainties associated with the
present obligation. Any reimbursement expected to be received in the course of
settlement of the present obligation is recognised, if virtually certain as a
separate asset, not exceeding the amount of the related provision. Where there
are a number of similar obligations, the likelihood that an outflow will be
required in settlement is determined by considering the class of obligations as
a whole. In addition, long term provisions are discounted to their present
values, where time value of money is material.
All provisions are reviewed at each balance sheet date and adjusted to reflect
the current best estimate.
In those cases where the possible outflow of economic resource as a result of
present obligations is considered improbable or remote, or the amount to be
provided for cannot be measured reliably, no liability is recognised in the
balance sheet.
Probable inflows of economic benefits to the Group that do not yet meet the
recognition criteria of an asset are considered contingent assets.
3 TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS
The transition from UK GAAP to IFRS has been made in accordance with IFRS 1,
"First-time Adoption of International Financial Reporting Standards". The
Group's interim report for the six months ended 30 June 2006 and the
comparatives presented for the periods ended 30 June 2005 and 31 December 2005
comply with all presentation recognition and measurement requirements of IFRS
applicable for accounting periods commencing on or after 1 January 2005.
The following reconciliations and explanatory notes thereto describe the
effects of the transition for the financial period ended 31 December 2005. All
explanations should be read in conjunction with the IFRS accounting policies of
Nanoscience Inc.
A reconciliation at 14 February 2005 is not required. This is because 14
February 2005 is the date of incorporation and is also therefore the date of
transition to IFRS. In addition, the transition had no effect on the
comparative financial information at 30 June 2005 and therefore a
reconciliation is not provided at that date.
The re-measurement of balance sheet and income statement as at 31 December 2005
may be summarised as follows:
Reconciliation of balance sheet presentation at UK GAAP Effect of IFRS
31 December 2005 transition
£'000 £'000 £'000
ASSETS
Non-current assets
Intangible assets 14,451 52 14,503
Property, plant and equipment 87 - 87
Investments 2,652 - 2,652
17,190 52 17,242
Current assets
Trade and other receivables 322 - 322
Cash and cash equivalents 6,087 - 6,087
6,409 - 6,409
Total assets 23,599 52 23,651
EQUITY
Capital and reserves attributable to the equity
holders of the company
Share capital 459 - 459
Share premium account 22,828 (20) 22,808
Share based payment reserve - 169 169
Retained deficit (701) (97) (798)
Total equity 22,586 52 22,638
LIABILITIES
Non current liabilities 609 - 609
Current liabilities
Trade and other payables 404 - 404
Total liabilities 1,013 - 1,013
Total equity and liabilities 23,599 52 23,651
Reconciliation of income statement presentation UKGAAP Effect of IFRS
at 31 December 2005 transition
£'000 £'000 £'000
Revenue 72 - 72
Cost of sales (283) - (283)
Gross result (211) - (211)
Amortisation (147) 52 (95)
Administrative expenses (340) (149) (489)
Operating loss (698) (97) (795)
Result from equity accounted investment (53) - (53)
Finance income 50 - 50
Loss before taxation (701) (97) (798)
Taxation - - -
Loss for the period (701) (97) (798)
The difference between the retained deficit reported under UK GAAP for the
period ended 31 December 2005 and the retained deficit as reported under IFRS
is represented by a reduction in amortisation charge of £52,000 and a provision
for share based payments of £149,000 resulting in a net charge of £97,000.
The share based payment in connection with the warrants issued to the Company's
Nominated Advisor as part of their fee for services provided in connection with
the Admission of the Company to the AIM market in March 2005 is £20,000 which
has been charged to share premium as a cost of issuing shares. The Company has
modified its former balance sheet and income statement structure on transition
to IFRS.
4 SEGMENTAL REPORTING
By business segment (primary segment):
The group has two material business segments being the operational activities
of Toumaz Technology Limited and the investment activities of Nanoscience Inc.
The revenues attributable to these activities were £51,000 and £Nil for the
period ended 30 June 2006 respectively and the results for that period were a
loss of £1,510,000 and a loss of £966,000 respectively. (Period ended 31
December 2005: £72,000, £Nil, £421,000 and £377,000 respectively).
5 LOSS PER SHARE
The calculation of the basic loss per share is based on the loss attributable
to ordinary shareholders divided by the weighted average number of shares in
issue during the period. The impact of the warrant on the loss per share is
anti-dilutive.
Basic earnings per share
Unaudited Unaudited Unaudited
six months period from period from
ended 30 14 February 14 February
June 2006 2005 to 30 2005 to 31
June 2005 December
2005
Loss on ordinary activities after tax (2,476,000) (38,000) (798,000)
Weighted average number of 0.25p ordinary 183,770,543 28,490,441 61,206,224
shares
Loss per share - basic (1.35)p (0.13)p (1.3)p
6 TRADE AND OTHER RECEIVABLES
Unaudited30 Unaudited Unaudited
June 30 June 31
December
2006 2005 2005
£'000 £'000 £'000
Trade receivables 141 - 230
Other debtors 10 - -
Prepayments and accrued income 147 -
Amounts owed from group undertakings - - 92
Trade and other receivables, net 298 - 322
Trade and other receivables are usually due within 30 - 60 days and do not bear
any effective interest rate.
The fair value of these short term financial assets is not individually
determined as the carrying amount is a reasonable approximation of fair value.
7 TRADE AND OTHER PAYABLES
Unaudited30 Unaudited Unaudited
June 30 June 31
December
2006 2005 2005
£'000 £'000 £'000
Trade and other payables 227 13 193
Other creditors 65 - 172
Accruals and deferred income 103 - 39
Trade and other payables 395 13 404
Due after one year
Accruals and deferred income 609 - 609
The fair value of trade and other payables has not been disclosed as, due to
their short duration, management considers the carrying amounts recognised in
the balance sheet to be a reasonable approximation of their fair value.
8 SHARE CAPITAL
30 June 30 June 31 December
2006 2005 2005
£'000 £'000
Authorised
4,000,000,000 ordinary shares of 0.25p 10,000 10,000 10,000
Allotted, issued and fully paid
183,770,543 (30 June 2005: 40,100,000) 459 100 459
ordinary shares of 0.25p
Allotments during the period
There were no allotments during the period.
Warrants
On 21 February 2005 a warrant was issued to Strand Partners Limited, the
Company's Nominated Advisor, in connection with their role in the admission of
the Company to the AIM market. The warrant entitles Strand Partners Limited to
subscribe, at a price of 10p per share, for such number of ordinary shares as
are equivalent (on a fully diluted basis) to one per cent. of the issued
ordinary share capital of the Company at that time. The issued warrant may be
exercised at any time during the period from 8 March 2005 to 8 March 2010.
The fair value of the warrants granted was determined using the Black-Scholes
valuation model. Significant inputs into the calculations were:
* share price of 5p per share at date of grant of warrant
* exercise price of 10p per warrant
* 50% volatility based on expected share price
* a risk free interest rate of 5.0%.
In total £20,000 of share based expense has been included in the share premium
account as a cost of the admission to AIM which gave rise to share based
payment reserve. No liabilities were recognised due to share based payment
transactions.
Share options
At 30 June 2006, options over 1,000,000 Ordinary Shares were in issue to a
director. In addition, at that date the company had issued replacement options
under an EMI Scheme to option holders in the option scheme operated by Toumaz
Technology Limited who held such options at the date of completion of its
acquisition and who wished to avail themselves of the opportunity to receive
options over shares in Nanoscience. These replacement options are over a total
of 11,449,272 Ordinary Shares (including 1,683,835 options held by a director).
The options mainly vest (or are treated as having vested) in two tranches of
50% each. The first tranche vests at dates ranging between 13 January 2005 and
3 March 2007 with the second tranche vesting a year later. The options are
exercisable at exercise prices ranging between 3.6 pence and 6.9 pence per
share.
The fair value of options granted was determined using the Black-Scholes
valuation model. There were four different tranches of options granted.
Significant inputs into the calculations were as follows:
Date of original Dates exercisable Grant Market price At 30 Fair
grant price at date of June 2006 value at
issue 30 June
Number 2006
13 January 2003 50% after 13 3.6p 16.25p 3,024,336 11.6p
January 2005 and
50% after 13
January 2006
26 September 2003 50% after 26 3.6p 16.25p 1,008,111 11.7p
September 2005 and
50% after 26
September 2006
3 March 2005 50% after 3 March 5.2p 16.25p 4,536,484 11.12p
2007and 50% after
3 March 2008
30 September 2005 After 31 May 2006 6.94p 16.25p 2,880,323 10.52p
* 40% volatility based on expected share price
* a risk free interest rate of 5.0%.
In total £304,000 of share based expense has been included in the income
statement in the interim period ending 30 June 2006.
9 ACQUISITIONS
On 3 November 2005 the Group acquired 334,467 ordinary shares of £0.01 each in
Toumaz Technology Limited ("Toumaz"), being 100% of its nominal share capital
for consideration of £15,655,000 settled in full by the issue of shares.
Goodwill arising on the acquisition of Toumaz has been capitalised. The
purchase has been accounted for by the acquisition method of accounting.
The assets and liabilities of Toumaz Technology Limited acquired were as
follows:
Book Value Fair value Fair Value
adjustments
£'000 £'000 £'000
Fixed assets:
Intangible assets - Technology - 3,738 3,738
Intangible assets - Other 278 - 278
intangibles
Property, plant and equipment 89 - 89
Investments 38 2,344 2,382
405 6,082 6,487
Current assets:
Trade and other receivables 339 - 339
Trade and other payables (702) - (702)
Net current liabilities (363) - (363)
Total assets less current 42 6,082 6,124
liabilities
Net current liabilities (609) - (609)
(567) 6,082 5,515
Consideration (16,097)
Goodwill capitalised 10,582
Consideration satisfied by:
Issue of shares 15,655
Capitalisation of legal fees 442
and other costs
16,097
10 RELATED PARTY TRANSACTIONS
In the period ended 30 June 2006 CVS Management Limited, a subsidiary of Corvus
Capital Inc., a shareholder in the Company, charged fees amounting to £3,000
for accounting and administrative services to the Company (period ended 31
December 2005 : £9,500: period ended 30 June 2005 £6,500).