Half-yearly Report
Embargoed Release: 07:00hrs Wednesday 26 September 2007
Nanoscience Inc.
('Nanoscience' or the 'Group')
Unaudited Interim Results
for the six month period ended 30 June 2007
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 2007. During the period, the Group
continued to channel its efforts into furthering the commercial activities of
its two main investee companies; its wholly owned subsidiary Toumaz Technology
Limited ('Toumaz'), and Future Waves Pte. Limited ('Future Waves') in which it
holds a 28.9 per cent. interest.
Highlights:
- £3.25 million institutional fundraising successfully completed at
a price of 10 pence per share
- Product collaboration to exploit the Toumaz technology platform
within the sports sector
- Successful development and testing of the first fully integrated,
single chip version of Toumaz's Sensium platform
- Design win from Pure Digital Limited
- Receipt of funding from the European Community to aid the
development of Toumaz's Sensium platform
- Initiation of clinical trials of Toumaz's technology
Guy Spelman, CEO, commented:
`Throughout the period we began to realise the rewards for our
efforts with our two main investee companies Toumaz and Future Waves. These
companies are now our primary focus as we begin to see real commercial
traction.
In respect of Future Waves, this took the form of a major design
win from Pure Digital Limited that will see chips supplied by Future Waves
into consumer products in Q4 and six further customers placing orders for our
Fenix 1 chip. Two other design wins and twelve further `design in's' were
secured.
Toumaz witnessed the successful testing of a fully integrated
Sensium chip, the continuing maturity of a number of their ongoing product
collaborations and discussions with potential future partners with regards to
working together on the provision of an end-to-end solution.'
Further Information:
Richard Rose Nanoscience Inc. 07836 250 474
Guy Spelman Nanoscience Inc. 07767 338 967
Matthew Chandler Strand Partners 020 7409 3494
Limited
Andrew Tan Hansard Group 020 7245 1100
Chairman's Statement
The six month period ended 30 June 2007 saw the Group record a loss
of £2.68 million, compared to a loss of £2.48 million in the same period last
year. This result reflects our share of the loss from Future Waves and the
ongoing investment in Toumaz, with both companies achieving significant
advances in both their technology and key commercial relationships. The Group
completed a successful share placing in July 2007 raising net proceeds of
approximately £3.25 million from a new institutional investor and certain of
the Group's directors and existing major shareholders. The placing proceeds
will be used to continue to support our two main investee companies.
Since the publication of our full-year 2006 results in June 2007,
continued progress has been made across our investment portfolio with an
increased momentum towards the commercialisation and development of our core
IP, AMx (Advanced Mixed Signal processing).
Key developments are set out below:
Toumaz Technology (100 per cent. owned)
Throughout the period, Toumaz continued to make advances within the
Healthcare market on the back of widening acceptance of its Sensium AMx chip.
We believe this technology to be disruptive to current practices within three
distinct sectors, namely Disposable, Clinical Trials and Medical Devices. We
remain confident that key commercial arrangements will be secured during the
remainder of 2007 to help guide the formulation of the Group's revenue and
cashflow objectives over the next 12 months.
The European Community has recently agreed to provide Euro7.1m of
funding to a global consortium, including Toumaz, under the direction of a
leading global producer of insulin. The Sensium platform is a key component of
this work and will be the recipient of direct funding of Euro700,000.
Clinical trials in Sussex and at the University of Southampton are
ongoing and are anticipated to result in the Group securing regulatory
approvals in the UK and USA markets in 2008.
Future Waves (28.9 per cent. minority investment)
Our key IP, AMx (Advanced Mixed Signal processing) remains at the
core of this business.
Future Waves' is well on the way to becoming a major supplier of
chip sets to the Digital Audio Broadcasting markets. Its development has been
bolstered during the period through further key customer wins and it now has
commercial agreements, at varying stages, with sixteen customers across the
Far East and Europe. Further work during the remainder of 2007 should result
in the business being cashflow positive by Q4 2008, albeit ultimately
dependent on the timing of certain anticipated large orders and the successful
introduction of planned new products, including the Fenix 2 and Xenif planned
for Q3 2008.
Sentinel Healthcare (50/50 Joint Venture)
Sentinel Healthcare, which seeks to exploit remote monitoring
technology, was established in Q1 2007 to initially target the Dementia, Care
Home and Private residential home markets. It remains on course to have
product offerings in the marketplace in early Q1 2008 with pilots set to be
agreed and operating from Q4 of this year. Dementia is an area of growing
concern within the UK and detailed consultations with industry experts
provided positive feedback on Sentinel's technology and product offerings.
Other investments and opportunities
In addition to the progress outlined above, we have also
successfully identified and initiated the development of other applications
for our AMx technology, for example within sports and related fields where we
are working closely with a key customer to produce customised products that
address their specific requirements. We are greatly encouraged by the progress
that is being made towards establishing a further revenue stream.
Across the Group we are in discussions with a range of major
international companies with the specific intent of helping further our aims
in the successful rollout of our developed technology.
The remaining smaller scale investments within our portfolio
continue to progress as planned and we remain confident in the Group's
prospects.
Richard Rose
Chairman
25 September 2007
NANOSCIENCE INC
CONSOLIDATED INCOME STATEMENT
FOR THE PERIOD ENDED 30 JUNE 2007
Unaudited Unaudited
Audited
Six months Six months
Year ended
ended ended
31 December
Note 30 June 2007 30 June 2006 2006
£000 £000 £000
Revenue 122 51 364
Cost of sales (139) (225) (352)
Gross (loss)/profit (17) (174) 12
Amortisation (266) (266) (534)
Administrative expenses (1,651) (1,864) (3,594)
Loss from operations (1,934) (2,304) (4,116)
Result from equity accounted
investment (781) (270) (635)
Finance income 31 98 157
Loss before taxation (2,684) (2,476) (4,594)
Taxation - - 436
Loss for the period (2,684) (2,476) (4,158)
Basic loss per ordinary share 4 (1.45)p (1.35)p (2.26)p
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 JUNE 2007
Share
based Profit and
Share Share payment loss
Total
capital premium reserve account equity
£'000 £'000 £'000 £'000 £'000
At 1 January 2006 459 22,808 126 (755) 22,638
Issue of share capital 3 29 - - 32
Loss for the year - - - (4,158) (4,158)
Share based payments - - 285 - 285
Transfer on exercise of -
options - - (6) 6 -
At 31 December 2006
(Audited) 462 22,837 405 (4,907) 18,797
Issue of share capital
on exercise of share
options - 10 (1) 1 10
Loss for the period - - - (2,684) (2,684)
Share based payments - - 79 - 79
At 30 June 2007
(Unaudited) 462 22,847 483 (7,590) 16,202
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2007
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended
30 June 30 June 31 December
2007 2006 2006
£000 £000 £000
Note
ASSETS
Non-current assets
Intangible assets 13,703 14,237 13,969
Property, plant and equipment 62 104 78
Interests in associates 1,659 2,837 2,368
Available for sale investments 391 - 391
15,815 17,178 16,806
Current assets
Tax receivable 414 - 414
Trade and other receivables 5 323 298 329
Cash and cash equivalents 634 4,053 2,291
Total current assets 1,371 4,351 3,034
Total assets 17,186 21,529 19,840
EQUITY AND LIABILITIES
Current liabilities
Trade and other payables 6 375 395 434
Total current liabilities 375 395 434
Non-current liabilities 6 609 609 609
Total liabilities 984 1,004 1,043
Equity
Share capital 7 462 459 462
Share premium 22,847 22,808 22,837
Share based payment reserve 483 532 405
Profit and loss account (7,590) (3,274) (4,907)
Equity shareholders' funds 16,202 20,525 18,797
Total equity and liabilities 17,186 21,529 19,840
CONSOLIDATED CASH FLOW STATEMENT
FOR THE PERIOD ENDED 30 JUNE 2007
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended
30 June 30 June 31 December
2007 2006 2006
£000 £000 £000
Cash flows from operating activities
Loss before taxation (2,684) (2,476) (4,594)
Amortisation 266 266 534
Depreciation 23 35 66
Share of loss of associate 781 270 635
Share based payments 79 363 285
Loss on disposal of non-current
assets - - 1
Interest received (31) (98) (157)
Decrease/(increase) in trade and
other receivables 6 23 (7)
(Decrease)/increase in trade and
other payables (59) (9) 30
Tax refund - - 22
Net cash outflow from operating
activities (1,619) (1,626) (3,185)
Cash flows from investing activities
Purchase of and loans to investments
and associates (72) (506) (742)
Purchase of other non-current assets (7) - (58)
Interest received 31 98 157
Net cash used in investing
activities (48) (408) (643)
Cash flows from financing activities
Proceeds from issue of share capital 10 - 32
Net cash inflow from financing
activities 10 - 32
Net change in cash and cash
equivalents (1,657) (2,034) (3,796)
Cash and cash equivalents at
beginning of period 2,291 6,087 6,087
Cash and cash equivalents at end of
period 634 4,053 2,291
1 GENERAL INFORMATION
The information for the period ended 30 June 2007 does not
constitute statutory accounts as defined in Section 240 of the Companies Act
1985. The figures for the year ended 31 December 2006 have been extracted from
the 2006 statutory financial statements prepared under International Financial
Reporting Standards (IFRS). 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 have resolved that
the Company will follow IFRS and apply the Companies Act 1985 when preparing
its annual financial statements. The Directors have a reasonable expectation
that the Group has adequate resources to continue in operational existence for
the foreseeable future and for this reason they continue to adopt the going
concern basis in preparing the financial statements.
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 undertakings 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 Group evaluates whether it has obtained, through its performance to
date, the right to the uninvoiced consideration and therefore whether revenue
should be recognised.
ASSOCIATES AND JOINTLY CONTROLLED ENTITIES
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.
A jointly controlled entity is an entity which operates under a contractual
agreement whereby the Group and other parties undertake an economic activity
that is subject to joint control and exists only when the strategic, financial
and operating decisions relating to the activity require the unanimous consent
of the venturers.
Associates are those entities over which the Group has significant influence
but which are neither subsidiaries nor interests in joint ventures.
The Group's interests in associates or jointly controlled entities are
recognised initially at cost and subsequently accounted for using the equity
method. Acquired investments in associates or jointly controlled entities are
also subject to purchase method accounting. However, any goodwill or fair
value adjustment attributable to the share in the associate or jointly
controlled entities is included in the amount recognised as investment in
associates or jointly controlled entities.
All subsequent changes to the share of interest in the equity of the associate
or jointly controlled entity are recognised in the Group's carrying amount of
the investment. The consolidated financial statements include the Group's
share of the post acquisition, post tax results for the period, including any
impairment loss on goodwill relating to the interest in associates or jointly
controlled entities and movements of reserves of jointly controlled entities
on an equity accounting basis.
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 or jointly controlled entities equals or
exceeds its interest in the associate or jointly controlled entity, including
any unsecured receivables, the Group does not recognise further losses, unless
it has incurred obligations or made payments on behalf of the associate or
jointly controlled entity. If the associate or jointly controlled entity
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 or
jointly controlled entities are eliminated to the extent of the Group's
interest in the associates or jointly controlled entities. 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 or jointly controlled entities 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. Any excess in the net fair value of an
acquiree's identifiable net assets over the cost of acquisition 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. Amortisation
is calculated so as to write off the cost of an asset, less its estimated
residual value on a straight line basis over the useful economic life of the
asset as follows:
Intellectual property rights 4 - 9 years
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. The fair value is then
amortised over the economic life of the asset as detailed above. 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 similar useful lives.
RESEARCH AND DEVELOPMENT
Expenditure on research activities is recognised in the income
statement as an expense as incurred.
Expenditure on development activities is capitalised if the product or
process is technically and commercially feasible and the Group has sufficient
resources to complete development. The expenditure capitalised includes the
cost of materials, direct labour and an appropriate proportion of overheads.
Other development expenditure is recognised in the income statement as an
expense as incurred. Capitalised development expenditure is stated at cost
less accumulated amortisation and impairment losses.
IMPAIRMENT TESTING OF GOODWILL, OTHER INTANGIBLE ASSETS, PROPERTY, PLANT AND
EQUIPMENT, INTERESTS IN ASSOCIATES AND AVAILABLE FOR SALE INVESTMENTS
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 investments in shares, cash
and trade and other receivables.
All financial assets are recognised when the Group becomes party to
the contractual provisions of the instrument. 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.
Available for sale financial assets are measured subsequently at
fair value with changes in value recognised in equity through the statement of
changes in equity. Where the fair value cannot be measured reliably such
financial assets are held at cost.
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 three months or less from the date of acquisition.
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.
Share based payment reserve represents the cumulative amount which has been
expensed in the income statement in connection with share based payments, less
any amounts transferred to the profit and loss account on the exercise of
share options.
Profit and loss account 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 the 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 the 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 obligations to pay cash or other financial assets and are
recognised when the Group becomes a party to the contractual provisions of the
instrument.
All financial liabilities are recognised initially at fair value, net of
direct issue costs, and are subsequently recorded at amortised cost using the
effective interest method with interest related charges recognised as an
expense in the income statement.
Dividend distributions to shareholders are included in `other short term
financial liabilities' when the dividends are approved by the shareholders'
before the year end.
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.
PROPERTY, PLANT AND EQUIPMENT
i Measurement bases
Property, plant and equipment are stated at cost less accumulated depreciation
and impairment losses. The cost of an asset comprises its purchase price and
any directly attributable costs of bringing the asset to the working condition
and location for its intended use. Subsequent expenditure relating to
property, plant and equipment is added to the carrying amount of the assets
only when it is probable that future economic benefits associated with the
item will flow to the Group and the cost of the item can be measured reliably.
All other costs, such as repairs and maintenance are charged to the income
statement during the period in which they are incurred.
When assets are sold, any gain or loss resulting from their disposal, being
the difference between the net disposal proceeds and the carrying amount of
the assets, is included in the income statement.
ii Depreciation
Depreciation is calculated so as to write off the cost of property, plant and
equipment, less its estimated residual value, which is revised annually, over
its useful economic life as follows:
Leasehold improvements -33.3% straight line
Office equipment 33.3% straight line
Fixtures and fittings 25% straight line
Computer equipment 33.3% straight line
RETIREMENT BENEFIT SCHEME
The Group operates a defined contribution retirement benefit scheme. The
assets of the scheme are held separately from those of the Group in
independently administered funds. Entrants into this scheme are entitled to
have a percentage of their basic salary paid into the scheme by the Group.
These contributions are charged to the income statement as an employee benefit
expense in respect of the accounting period in which they become payable.
FOREIGN CURRENCIES
The financial statements are presented in UK Sterling which is the functional
and presentational currency of the Group. Monetary assets and liabilities in
foreign currencies are translated into sterling at the rates of exchange
ruling at the balance sheet date. Transactions in foreign currencies are
translated into sterling at the rate of exchange ruling at the date of the
transaction. Exchange differences are taken into account in arriving at the
operating profit or loss.
SEGMENTAL REPORTING
A segment is a distinguishable component of the Group that is
engaged either in a particular business (business segment) or conducting
business in a particular geographical area (geographical segment), which is
subject to risks and rewards that are different from those of other segments.
critical accounting estimates and judgements
The Group makes estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related actual
results. The estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within
the next accounting year are discussed below:
Impairment of assets
The Group conducts impairment reviews of assets when events or changes in
circumstances indicate that their carrying amounts may not be recoverable
annually, or in accordance with the relevant accounting standards. An
impairment loss is recognised when the carrying amount of an asset is lower
than the greater of its net selling price or the value in use. In determining
the value in use, management assesses the present value of the estimated
future cash flows expected to arise from the continuing use of the asset and
from its disposal at the end of its useful life. Estimates and judgments are
applied in determining these future cash flows and the discount rate.
Valuations of share options granted
The fair value of share options granted was calculated using the Binomial
option pricing model which requires the input of highly subjective
assumptions, including the volatility of the company's share price. Because
changes in subjective input assumptions can materially affect the fair value
estimate, in the opinion of the Directors of the Company, the existing model
will not always necessarily provide a reliable single measure of the fair
value of the share options. Details of the inputs are set out in Note 7 to the
interim financial information.
3 SEGMENTAL REPORTING
a) Primary reporting format - business segment
As defined under International Accounting Standard 14 'Segment Reporting' (IAS
14), the only material business segment the Group has is that of the
commercial exploitation of nano technologies.
b) Secondary reporting format - geographical segment
Under the definitions contained in IAS 14 the only material geographic segment
that the Group operates in is the UK.
4 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 share options and share warrant on
the loss per share is anti-dilutive.
Basic loss per share
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended 31 December
30 June 2007 30 June 2006 2006
Loss on ordinary activities after tax £(2,684,000) £(2,476,000) £(4,158,000)
Weighted average number of 0.25p ordinary 183,891,674
shares 184,870,157 183,770,543
Loss per share - basic (1.45)p (1.35)p (2.26)p
5 TRADE AND OTHER RECEIVABLES
Unaudited Unaudited Audited
30 June 2007 30 June 2006 2006
£'000 £'000 £'000
Trade receivables 29 141 191
Other debtors 231 10 -
Prepayments and accrued income 63 147 138
Trade and other receivables, net 323 298 329
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
6 TRADE AND OTHER PAYABLES
Unaudited Unaudited Audited
30 June 2007 30 June 2006 2006
£'000 £'000 £'000
Trade and other payables 235 227 218
Other creditors 42 65 52
Accruals and deferred income 98 103 164
Trade and other payables 375 395 434
Due after one year
Accruals and deferred income 609 609 609
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.
7 SHARE CAPITAL
Unaudited Unaudited Audited
30 June 2007 30 June 2006 2006
£'000 £'000 £'000
Authorised
4,000,000,000 ordinary shares of 0.25p 10,000 10,000 10,000
Allotted, issued and fully paid
184,922,671 (30 June 2006: 183,770,543, 31
December 2006 184,634,639) ordinary shares
of 0.25p 462 459 462
288,032 ordinary shares were issued during the period following the
exercise of share options.
Warrants
On 21 February 2005 a warrant was issued to Strand Partners Limited, the
Company's Nominated Adviser, in connection with their role in the admission of
the Company to the AIM market, to subscribe at a price of 10 pence per share
for such number of ordinary shares as are equivalent (on a fully diluted
basis) to the lower of one per cent. of the issued ordinary share capital of
the Company at the time of exercise or a maximum of 1,000,000 ordinary shares.
The 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-Schöles
valuation model and £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 the
share based payment reserve. No liabilities were recognised due to share based
payment transactions.
Share options
The Company has adopted an employee Share Option Scheme (the 'Employee Share
Option Scheme') in order to incentivise key management and staff. Pursuant to
the Employee Share Option Scheme, a duly authorised committee of the Board of
Directors of the Company may, at its discretion, grant options to eligible
employees, including Directors, of the Company or any of its subsidiaries to
subscribe for shares in the Company at a price not less than the higher of (i)
the closing price of the shares of the Company on the Stock Exchange on the
date of grant of the particular option or (ii) the average of the closing
prices of the shares of the Company for the five trading days immediately
preceding the date of the grant of the options or (iii) the nominal value of
the shares. Options which lapse or are cancelled prior to their exercise date
are deleted from the register of outstanding options and are available for
re-use. The fair value of options granted was determined using the
Black-Scholes valuation model. Significant inputs into the calculations were
as follows:
- 50% volatility based on expected share price (ascertained by reference to
historic share prices of both the Company and comparable listed companies)
- a risk free interest rate of between 3.5% and 5.25%
At 30 June 2007, the Group had the following options outstanding:
Market
price at
Grant date of
Date of original Dates exercisable price issue Number Fair value
grant
50% after 13 January
2005 and 50% after 13 12.95p and
13 January 2003 January 2006 3.6p 16.25p 2,016,224 13.12p
50% after 26 September
2005 and 50% after 26 12.92p and
26 September 2003 September 2006 3.6p 16.25p 288,032 13.08p
50% after 3 March 2007
and 50% after 3 March
3 March 2005 2008 5.2p 16.25p 3,744,416 12.58p
50% after 1 May 2007 and 10p and 1.85p and
3 May 2005 50% after 2 May 2008 25p 8p 1,000,000 0.28p
30 September 2005 After 31 May 2006 6.94p 16.25p 2,880,320 9.54p
50% after 23 October
2008 and 50% after 23
October 2008 subject to 2.72p and
a share price of 25p 3.35p
24 October 2006 8.75p 8.75p 2,000,000
50% after 19 November
2008 and 50% after 19
November 2008 subject to 2.66p and
a share price of 25p 3.28p
20 November 2006 8.5p 8.5p 1,000,000
50% after 12 March 2009
and 50% after 12 March
2010, subject to certain
revenue targets
13 March 2007 9.75p 9.75p 2,500,000 3.99p
15,428,992
In total £79,000 of share based expense has been included in the income
statement in the interim period ended 30 June 2007 (period ended 30 June 2006:
£363,000; year ended 31 December 2006: £285,000).
8 RELATED PARTY TRANSACTIONS
In the period ended 30 June 2007 companies within the group headed by a
shareholder in the Company, charged fees amounting to £16,500 (period ended 30
June 2006 : £3,000, year ended 31 December 2006 : £18,365) for providing
accounting and administrative services to the Group
END