26 Sep 2007 07:00
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 2007Nanoscience Inc., the specialist niche investor in emergingtechnologies with strong commercial propositions from within the growingnanotechnology sector, is pleased to announce its unaudited interim resultsfor the six month period ended 30 June 2007. During the period, the Groupcontinued to channel its efforts into furthering the commercial activities ofits two main investee companies; its wholly owned subsidiary Toumaz TechnologyLimited ("Toumaz"), and Future Waves Pte. Limited ("Future Waves") in which itholds 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 474Guy 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 lossof ‚£2.68 million, compared to a loss of ‚£2.48 million in the same period lastyear. This result reflects our share of the loss from Future Waves and theongoing investment in Toumaz, with both companies achieving significantadvances in both their technology and key commercial relationships. The Groupcompleted a successful share placing in July 2007 raising net proceeds ofapproximately ‚£3.25 million from a new institutional investor and certain ofthe Group's directors and existing major shareholders. The placing proceedswill 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 theHealthcare market on the back of widening acceptance of its Sensium AMx chip.We believe this technology to be disruptive to current practices within threedistinct sectors, namely Disposable, Clinical Trials and Medical Devices. Weremain confident that key commercial arrangements will be secured during theremainder of 2007 to help guide the formulation of the Group's revenue andcashflow objectives over the next 12 months.
The European Community has recently agreed to provide ¢â€š¬7.1m 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 ¢â€š¬700,000.
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 ofchip sets to the Digital Audio Broadcasting markets. Its development has beenbolstered during the period through further key customer wins and it now hascommercial agreements, at varying stages, with sixteen customers across theFar East and Europe. Further work during the remainder of 2007 should resultin the business being cashflow positive by Q4 2008, albeit ultimatelydependent on the timing of certain anticipated large orders and the successfulintroduction of planned new products, including the Fenix 2 and Xenif plannedfor 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 alsosuccessfully identified and initiated the development of other applicationsfor our AMx technology, for example within sports and related fields where weare working closely with a key customer to produce customised products thataddress their specific requirements. We are greatly encouraged by the progressthat 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 RoseChairman25 September 2007NANOSCIENCE INCCONSOLIDATED 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 accountedinvestment (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)pCONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR 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) 22,638Issue of share capital 3 29 - - 32Loss for the year - - - (4,158) (4,158)Share based payments - - 285 - 285Transfer on exercise of - options - - (6) 6 -At 31 December 2006 (Audited) 462 22,837 405 (4,907) 18,797 Issue of share capitalon exercise of shareoptions - 10 (1) 1 10Loss for the period - - - (2,684) (2,684)Share based payments - - 79 - 79At 30 June 2007 (Unaudited) 462 22,847 483 (7,590) 16,202CONSOLIDATED BALANCE SHEETAS 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 assetsIntangible assets 13,703 14,237 13,969Property, plant and equipment 62 104 78Interests in associates 1,659 2,837 2,368Available for sale investments 391 - 391 15,815 17,178 16,806 Current assetsTax receivable 414 - 414Trade and other receivables 5 323 298 329Cash and cash equivalents 634 4,053 2,291Total current assets 1,371 4,351 3,034 Total assets 17,186 21,529 19,840 EQUITY AND LIABILITIES Current liabilitiesTrade and other payables 6 375 395 434Total current liabilities 375 395 434 Non-current liabilities 6 609 609 609 Total liabilities 984 1,004 1,043 EquityShare capital 7 462 459 462Share premium 22,847 22,808 22,837Share based payment reserve 483 532 405Profit 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 19,840CONSOLIDATED CASH FLOW STATEMENTFOR 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 activitiesLoss before taxation (2,684) (2,476) (4,594)Amortisation 266 266 534Depreciation 23 35 66Share of loss of associate 781 270 635Share based payments 79 363 285Loss on disposal of non-currentassets - - 1Interest received (31) (98) (157)Decrease/(increase) in trade andother receivables 6 23 (7)(Decrease)/increase in trade andother payables (59) (9) 30Tax refund - - 22Net cash outflow from operatingactivities (1,619) (1,626) (3,185) Cash flows from investing activitiesPurchase of and loans to investmentsand associates (72) (506) (742)Purchase of other non-current assets (7) - (58)Interest received 31 98 157Net cash used in investingactivities (48) (408) (643) Cash flows from financing activitiesProceeds from issue of share capital 10 - 32Net cash inflow from financingactivities 10 - 32 Net change in cash and cashequivalents (1,657) (2,034) (3,796) Cash and cash equivalents atbeginning of period 2,291 6,087 6,087 Cash and cash equivalents at end ofperiod 634 4,053 2,291 1 GENERAL INFORMATIONThe information for the period ended 30 June 2007 does notconstitute statutory accounts as defined in Section 240 of the Companies Act1985. The figures for the year ended 31 December 2006 have been extracted fromthe 2006 statutory financial statements prepared under International FinancialReporting Standards (IFRS). The auditors' report on those accounts wasunqualified and did not contain a statement under section 237(2) of theCompanies Act 1985.2 ACCOUNTING POLICIESBASIS OF PREPARATIONThe Company was incorporated in the Cayman Islands which do not prescribe theadoption of any particular accounting framework. The Board have resolved thatthe Company will follow IFRS and apply the Companies Act 1985 when preparingits annual financial statements. The Directors have a reasonable expectationthat the Group has adequate resources to continue in operational existence forthe foreseeable future and for this reason they continue to adopt the goingconcern 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. Thepurchase method involves the recognition at fair value of all identifiableassets and liabilities, including contingent liabilities of the subsidiary, atthe acquisition date, regardless of whether or not they were recorded in thefinancial statements of the subsidiary prior to acquisition. On initialrecognition, the assets and liabilities of the subsidiary are included in theconsolidated balance sheet at their fair values, which are also used as thebases for subsequent measurement in accordance with the Group accountingpolicies. Goodwill is stated after separating out identifiable intangibleassets. Goodwill represents the excess of acquisition cost over the fair valueof the Group's share of the identifiable net assets of the acquired subsidiaryat 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 theproportion of work performed is greater than the proportion of total contractvalue, the Group evaluates whether it has obtained, through its performance todate, the right to the uninvoiced consideration and therefore whether revenueshould 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 contractualagreement whereby the Group and other parties undertake an economic activitythat is subject to joint control and exists only when the strategic, financialand operating decisions relating to the activity require the unanimous consentof 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 arerecognised initially at cost and subsequently accounted for using the equitymethod. Acquired investments in associates or jointly controlled entities arealso subject to purchase method accounting. However, any goodwill or fairvalue adjustment attributable to the share in the associate or jointlycontrolled entities is included in the amount recognised as investment inassociates or jointly controlled entities.All subsequent changes to the share of interest in the equity of the associateor jointly controlled entity are recognised in the Group's carrying amount ofthe investment. The consolidated financial statements include the Group'sshare of the post acquisition, post tax results for the period, including anyimpairment loss on goodwill relating to the interest in associates or jointlycontrolled entities and movements of reserves of jointly controlled entitieson an equity accounting basis.Items that have been recognised directly in the associate's equity arerecognised in the consolidated equity of the Group. However, when the Group'sshare of losses in an associate or jointly controlled entities equals orexceeds its interest in the associate or jointly controlled entity, includingany unsecured receivables, the Group does not recognise further losses, unlessit has incurred obligations or made payments on behalf of the associate orjointly controlled entity. If the associate or jointly controlled entitysubsequently reports profits, the investor resumes recognising its share ofthose profits only after its share of the profits equals the share of lossesnot recognised.Unrealised gains on transactions between the Group and its associates orjointly controlled entities are eliminated to the extent of the Group'sinterest in the associates or jointly controlled entities. Unrealised lossesare also eliminated unless the transaction provides evidence of an impairmentof the asset transferred. Amounts reported in the financial statements ofassociates or jointly controlled entities have been adjusted where necessaryto ensure consistency with the accounting policies adopted by the Group.
GOODWILL
Goodwill, representing the excess of the cost of acquisition over the fairvalue of the Group's share of the identifiable net assets acquired, iscapitalised and reviewed annually for impairment. Goodwill is carried at costless accumulated impairment losses. Any excess in the net fair value of anacquiree's identifiable net assets over the cost of acquisition is recognisedimmediately after acquisition in the income statement.
TAXATION
Current income tax assets and/or liabilities comprise those obligations to, orclaims from, fiscal authorities relating to the current or prior reportingperiod, that are unpaid at the balance sheet date. They are calculatedaccording to the tax rates and tax laws applicable to the fiscal periods towhich they relate, based on the taxable result for the year. All changes tocurrent tax assets or liabilities are recognised as a component of tax expensein the income statement.Deferred income taxes are calculated using the liability method on temporarydifferences. This involves the comparison of the carrying amounts of assetsand liabilities in the consolidated financial statements with their respectivetax bases. In addition, tax losses available to be carried forward as well asother income tax credits to the Group are assessed for recognition as deferredtax assets.Deferred tax liabilities are always provided for in full. Deferred tax assetsare recognised to the extent that it is probable that they will be able to beoffset against future taxable income. Deferred tax assets and liabilities arecalculated, without discounting, at tax rates that are expected to apply totheir respective period of realisation, provided they are enacted orsubstantively 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 ASSETSIntellectual 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 propertyare capitalised and, subject to impairment reviews, amortised over theestimated economic life of the intellectual property concerned. Amortisationis calculated so as to write off the cost of an asset, less its estimatedresidual value on a straight line basis over the useful economic life of theasset 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 assetacquired in a business combination is deemed to have a cost to the Group ofits fair value at the acquisition date. The fair value of the intangible assetreflects market expectations about the probability that the future economicbenefits embodied in the asset will flow to the Group. The fair value is thenamortised over the economic life of the asset as detailed above. Where anintangible asset might be separable, but only together with a related tangibleor intangible asset, the Group of assets is recognised as a single assetseparately from goodwill where the individual fair values of the assets in theGroup are not reliably measurable. Where the individual fair value of thecomplimentary assets are reliably measurable, the Group recognises them as asingle 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 orprocess is technically and commercially feasible and the Group has sufficientresources to complete development. The expenditure capitalised includes thecost of materials, direct labour and an appropriate proportion of overheads.Other development expenditure is recognised in the income statement as anexpense as incurred. Capitalised development expenditure is stated at costless 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 thelowest levels for which there are separately identifiable cash flows(cash-generating units). As a result, some assets are tested individually forimpairment and some are tested at cash-generating unit level. Goodwill isallocated to those cash-generating units that are expected to benefit fromsynergies of the related business combination and represent the lowest levelwithin the Group at which management monitors the related cash flows.Goodwill, other individual assets or cash-generating units thatinclude goodwill, other intangible assets with an indefinite useful life, andthose intangible assets not yet available for use are tested for impairment atleast annually. All other individual assets or cash-generating units aretested for impairment whenever events or changes in circumstances indicatethat the carrying amount may not be recoverable.An impairment loss is recognised for the amount by which theasset's or cash-generating unit's carrying amount exceeds its recoverableamount. The recoverable amount is the higher of fair value, reflecting marketconditions less costs to sell, and value in use based on an internaldiscounted cash flow evaluation. Impairment losses recognised forcash-generating units, to which goodwill has been allocated, are creditedinitially to the carrying amount of goodwill. Any remaining impairment loss ischarged pro rata to the other assets in the cash generating unit. With theexception of goodwill, all assets are subsequently reassessed for indicationsthat 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 objectiveevidence is received that the Group will not be able to collect all amountsdue to it in accordance with the original terms of the receivables. The amountof the write-down is determined as the difference between the asset's carryingamount 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-basedremuneration are measured at their fair values. These are indirectlydetermined by reference to the fair value of the share options/warrantsawarded. Their value is appraised at the grant date and excludes the impact ofany non-market vesting conditions (for example, profitability and sales growthtargets).Share based payments are ultimately recognised as an expense in the profit orloss or included as part of the cost of share issues with a correspondingcredit to the share based payment reserve, net of deferred tax whereapplicable. If vesting periods or other vesting conditions apply, the expenseis allocated over the vesting period, based on the best available estimate ofthe number of share options/warrants expected to vest. Non-market vestingconditions are included in assumptions about the number of options that areexpected to become exercisable. Estimates are subsequently revised, if thereis any indication that the number of share options/warrants expected to vestdiffers from previous estimates. No adjustment is made to the expense or shareissue cost recognised in prior periods if fewer share options/warrantsultimately are exercised than originally estimated.Upon exercise of share options/warrants, the proceeds received net of anydirectly attributable transaction costs up to the nominal value of the sharesissued are allocated to share capital with any excess being recorded as sharepremium.FINANCIAL LIABILITIESThe Group's financial liabilities include trade and other payables. Financialliabilities are obligations to pay cash or other financial assets and arerecognised when the Group becomes a party to the contractual provisions of theinstrument.
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 toan outflow of economic resources from the Group and they can be estimatedreliably. Timing or amount of the outflow may still be uncertain. A presentobligation arises from the presence of a legal or constructive commitment thathas resulted from past events, for example, legal disputes or onerouscontracts.Provisions are measured at the estimated expenditure required to settle thepresent obligation, based on the most reliable evidence available at thebalance sheet date, including the risks and uncertainties associated with thepresent obligation. Any reimbursement expected to be received in the course ofsettlement of the present obligation is recognised, if virtually certain as aseparate asset, not exceeding the amount of the related provision. Where thereare a number of similar obligations, the likelihood that an outflow will berequired in settlement is determined by considering the class of obligationsas a whole. In addition, long term provisions are discounted to their presentvalues, where time value of money is material. All provisions are reviewed ateach balance sheet date and adjusted to reflect the current best estimate.In those cases where the possible outflow of economic resource as a result ofpresent obligations is considered improbable or remote, or the amount to beprovided for cannot be measured reliably, no liability is recognised in thebalance sheet. Probable inflows of economic benefits to the Group that do notyet meet the recognition criteria of an asset are considered contingentassets.
PROPERTY, PLANT AND EQUIPMENT
i Measurement bases
Property, plant and equipment are stated at cost less accumulated depreciationand impairment losses. The cost of an asset comprises its purchase price andany directly attributable costs of bringing the asset to the working conditionand location for its intended use. Subsequent expenditure relating toproperty, plant and equipment is added to the carrying amount of the assetsonly when it is probable that future economic benefits associated with theitem 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 incomestatement 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 andequipment, less its estimated residual value, which is revised annually, overits useful economic life as follows:Leasehold improvements -33.3% straight lineOffice equipment 33.3% straight lineFixtures and fittings 25% straight lineComputer 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 inforeign 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 resultingaccounting estimates will, by definition, seldom equal the related actualresults. The estimates and assumptions that have a significant risk of causinga material adjustment to the carrying amounts of assets and liabilities withinthe next accounting year are discussed below:
Impairment of assets
The Group conducts impairment reviews of assets when events or changes incircumstances indicate that their carrying amounts may not be recoverableannually, or in accordance with the relevant accounting standards. Animpairment loss is recognised when the carrying amount of an asset is lowerthan the greater of its net selling price or the value in use. In determiningthe value in use, management assesses the present value of the estimatedfuture cash flows expected to arise from the continuing use of the asset andfrom its disposal at the end of its useful life. Estimates and judgments areapplied 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 Binomialoption pricing model which requires the input of highly subjectiveassumptions, including the volatility of the company's share price. Becausechanges in subjective input assumptions can materially affect the fair valueestimate, in the opinion of the Directors of the Company, the existing modelwill not always necessarily provide a reliable single measure of the fairvalue of the share options. Details of the inputs are set out in Note 7 to theinterim 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 attributableto ordinary shareholders divided by the weighted average number of shares inissue during the period. The impact of the share options and share warrant onthe 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 183,891,674shares 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 individuallydetermined as the carrying amount is a reasonable approximation of fair value6 TRADE AND OTHER PAYABLES Unaudited Unaudited Audited 30 June 2007 30 June 2006 2006 ‚£'000 ‚£'000 ‚£'000 Trade and other payables 235 227 218Other creditors 42 65 52Accruals and deferred income 98 103 164 Trade and other payables 375 395 434 Due after one yearAccruals and deferred income 609 609 609The fair value of trade and other payables has not been disclosed as, due totheir short duration, management considers the carrying amounts recognised inthe 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 ‚£'000Authorised4,000,000,000 ordinary shares of 0.25p 10,000 10,000
10,000
Allotted, issued and fully paid184,922,671 (30 June 2006: 183,770,543, 31December 2006 184,634,639) ordinary sharesof 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, theCompany's Nominated Adviser, in connection with their role in the admission ofthe Company to the AIM market, to subscribe at a price of 10 pence per sharefor such number of ordinary shares as are equivalent (on a fully dilutedbasis) to the lower of one per cent. of the issued ordinary share capital ofthe 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 2005to 8 March 2010.The fair value of the warrants granted was determined using the Black-Schƒ¶lesvaluation model and ‚£20,000 of share based expense has been included in theshare premium account as a cost of the admission to AIM which gave rise to theshare based payment reserve. No liabilities were recognised due to share basedpayment transactions.Share optionsThe Company has adopted an employee Share Option Scheme (the "Employee ShareOption Scheme") in order to incentivise key management and staff. Pursuant tothe Employee Share Option Scheme, a duly authorised committee of the Board ofDirectors of the Company may, at its discretion, grant options to eligibleemployees, including Directors, of the Company or any of its subsidiaries tosubscribe 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 thedate of grant of the particular option or (ii) the average of the closingprices of the shares of the Company for the five trading days immediatelypreceding the date of the grant of the options or (iii) the nominal value ofthe shares. Options which lapse or are cancelled prior to their exercise dateare deleted from the register of outstanding options and are available forre-use. The fair value of options granted was determined using theBlack-Scholes valuation model. Significant inputs into the calculations wereas 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 ofDate of original Dates exercisable price issue Number Fair valuegrant 50% after 13 January 2005 and 50% after 13 12.95p and13 January 2003 January 2006 3.6p 16.25p 2,016,224
13.12p
50% after 26 September 2005 and 50% after 26 12.92p and26 September 2003 September 2006 3.6p 16.25p 288,032
13.08p 50% after 3 March 2007 and 50% after 3 March3 March 2005 2008 5.2p 16.25p 3,744,416 12.58p 50% after 1 May 2007 and 10p and 1.85p and3 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 3.35p24 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 3.28p20 November 2006 8.5p 8.5p 1,000,000 50% after 12 March 2009 and 50% after 12 March 2010, subject to certain revenue targets13 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
NANOSCIENCE INC