Futura Medical Regulatory News (FUM)

Futura Medical plc

("Futura" or "the Company")

Preliminary Results for the year ended 31 December 2014

Futura Medical plc (AIM: FUM), the innovative healthcare company focused on advanced transdermal technology, is pleased to announce its preliminary results for the year ended 31 December 2014.

Highlights

· £12 million fundraising in March 2014 allows Futura to focus on building value in its product pipeline prior to out-licensing

· CSD500 (condom containing an erectogenic gel) - launched online under Futura's own brand Blue Diamond® in the Netherlands and Belgium; progress towards wider roll-out continues

· MED2002 (topical treatment for erectile dysfunction) - first patient to be dosed in clinical trial programme by the end of Q2 and launch as a special product in the UK expected in H2 2015

· Pain Relief Portfolio - clinical trial programme under way

· Net loss of £3.00 million (2013: net loss of £2.21 million) with net cash inflow in year of £8.50 million (2013: net cash outflow of £1.83 million)

· Cash resources of £9.49 million at 31 December 2014 (31 December 2013: £0.99 million);

tax credit receivable £0.48 million at 31 December 2014 (31 December 2013: £0.31 million)

James Barder, Futura's Chief Executive, commented: "2015 is set to be a year of significant news flow at Futura, with key value inflection points expected across the Company's product portfolio. In the near term, we expect commencement of two pivotal clinical trial programmes and we also expect to complete our work on the potential for extending the shelf life of our novel condom CSD500. We also continue in discussions on further out-licensing agreements. This high level of activity has been facilitated by our significant equity fundraising in 2014. We enter 2015 with a strong balance sheet, a number of projects under way and with a determination to generate value for our shareholders."

Analyst meeting and webcast

A meeting for analysts will be held at 10am this morning, 25 March 2015, at the offices of Buchanan, 107 Cheapside, London EC2V 6DN. There will be a live webcast of the analyst presentation. If you would like to listen to the webcast, please log on to the following web address approximately 5 minutes before 10.00am:

http://vm.buchanan.uk.com/2015/futuramedical250315/registration.htm.

A recording of the webcast will also be made available at www.futuramedical.com and www.buchanan.uk.comfollowing the results meeting.

For further information please contact:

Notes to Editors

Futura Medical plc

Futura Medical is a pharmaceutical group that develops innovative products for consumer healthcare. The Company is developing a portfolio of products and its strategy is to license their manufacture and distribution to major pharmaceutical and healthcare groups.

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

www.futuramedical.com

Chairman's and Chief Executive's Review

2014 was another year during which we made considerable progress in the development of Futura. The milestones achieved during the year were an oversubscribed placing to raise £12 million, the launch of our novel condom CSD500 under our own brand Blue Diamond® and substantial progress with our portfolio of earlier stage opportunities.

The £12 million fundraising announced in March 2014 has allowed Futura's strategy to evolve and for the Company to become a more broadly based business. Most importantly, the fundraising has allowed the Company to build greater value into its product pipeline by providing the finance for clinical trials and regulatory work. The result of this is that products can be licensed out at a later stage, potentially on commercially much more attractive terms.

During the year, we began to deploy the proceeds of the fundraising, particularly in preparing for two clinical trial programmes which are now close to starting. The first patient will be dosed in April in the clinical trial programme of our pain relief products and we expect the first patient will be dosed in our clinical trial programme of MED2002, our novel gel for erectile dysfunction, in Q2. We are also progressing MED2002 towards launch as an unlicensed medicinal product ("special") and expect it to become available on prescription as a special in the UK in the second half of the year.

Blue Diamond®, our own brand of the CSD500 condom, was launched in the Netherlands and Belgium in October 2014. We were pleased by the launch and by progress to date given that it is a completely new condom brand with only one product type, available solely online and with limited advertising. Blue Diamond® is estimated to have accounted for approximately 17% of online condom sales (by value) in the Netherlands and about 10% in Belgium and the Netherlands combined during the remainder of 2014. Whilst we estimate online condom sales to make up only about 6% of total condom sales in these two countries, we believe that our market share is encouraging. We continue to believe in the longer term potential of the online opportunity for Blue Diamond®. We are also in advanced discussions with retailers in the Netherlands and expect the product to be in-store from Q2 2015.

The customer feedback and pharmaco-vigilance data, which we have received following the launch of Blue Diamond®, has been of great use. We are sharing the data with the commercial partners with whom we have licensed CSD500 for the launch of the condom in key territories worldwide.

Our commercial partners' preference for a longer shelf life for CSD500 has determined the pace of the wider roll-out of the product. We are making progress in our work on the shelf life, which we expect to conclude during the next three months. Whilst this work continues, our licensing partners are using the information gained from the launch of Blue Diamond® to assist them in planning their own product launches.

The use of the Blue Diamond® brand has been of interest to some existing and potential licensing partners. In September 2014 we announced an exclusive licensing agreement with Kwang Dong Pharmaceutical, which will market and distribute CSD500 in South Korea under the Blue Diamond®brand.

We continue in discussions for the out-licensing of CSD500 in territories where a licensing partner has not already been appointed. We are also in discussions on the out-licensing of other products in our portfolio. However our principal focus with MED2002 and the pain relief portfolio is to build the value of the products through the completion of clinical trial programmes prior to entering into licensing arrangements.

Portfolio updates - Sexual healthcare

CSD500: Condom containing the erectogenic Zanifil® gel

CSD500 benefits from three clinically proven claims: the maintenance of a firmer erection, maximised penile size and a longer lasting sexual experience for women. CSD500, which gained CE marking in 2013, represents real innovation in an industry where there has been limited new product development. Furthermore in the past six months two independent consumer studies on CSD500, conducted by two different potential distribution partners, have reported similar results to those shown in our original clinical study and also to results being observed since the launch in the Netherlands and Belgium. In summary, at least 55% of men and women reported an increase in their (or their sexual partner's) penile firmness along with a longer lasting and improved sexual experience. We have received some feedback on the condom being too tight, which may be a sign of product efficacy as we use a standard size condom, consequently we are looking at alternative sizes to address this as well as to provide further consumer choice and build greater presence on retail shelves.

CSD500's unique intellectual property position has been protected throughout the world including the principal consumer markets within Europe, the USA and Canada through patents now granted in 37 countries. We are fortunate with CSD500 to have an extensive patent estate with a remaining life of up to nine years, which could potentially be extended by a further ten years through the new intellectual property that we create through our ongoing R&D work.

Our strategy is to license CSD500 on a territorial basis and to date we have licensed exclusive rights to CSD500 as follows:

Discussions are ongoing in connection with further geographic regions. Some of these licensing partners will use their own brand names and others will use the Blue Diamond®brand. Bizzy Diamond BV, a Dutch condom distributor founded in 2003, launched Blue Diamond® in the Netherlands and Belgium last year. As outlined above, the launch of the product has provided us with valuable insights and data which we are sharing with our other commercial partners. This data includes consumer feedback, which will assist in the future development of the product range, along with in-market pharmaco-vigilance data. We are pleased that the in-market experience of the product to date is consistent with the product's performance in clinical studies. We are also in advanced discussions with retailers in the Netherlands and expect the product to be in-store from Q2 2015.

As we stated at the time of the half year results, the pace of the wider commercial roll-out of the product is being determined by work we are carrying out on the shelf life of the product and examining whether it can be extended. We are conducting a thorough study of all aspects of the product's manufacture with the objective of identifying any areas that could contribute to a longer product shelf life to bring the product more in line with the traditional supply chain of the condom industry. Our commercial partners would like certainty on whether the CSD500 shelf life can be extended before making a decision on whether to launch the product with its existing shelf life of one year. As the launch of Blue Diamond® in the Netherlands and Belgium has demonstrated, the existing shelf life is adequate for the sale and use of the product though it does require some changes to the standard distribution practices of the condom industry. We have identified the components of the manufacturing process that impact shelf life and will have concluded this work during Q2 2015.

MED2002: Eroxon®: Treatment for erectile dysfunction

MED2002, which uses our DermaSys® drug delivery system, is the development name for our topical gel for the treatment of men with erectile dysfunction ("ED"). We hold worldwide rights to the product, which shares the same active ingredient as CSD500. We anticipate that MED2002, which will be branded Eroxon®, is likely to be a prescription-only product.

During 2014 we made major progress with the development of MED2002, following the fundraising in March 2014. We have a dual strategy for its commercialisation comprising clinical work for a regulatory filing and the early launch of the product as a special. Special products, or unlicensed medicines, are medicines that have already been approved in one indication, giving doctors the authority, subject to certain conditions, to prescribe them in other indications and formats provided that other options have been exhausted and until such time as the product achieves regulatory approval in the applicable territory.

MED2002 meets the criteria required within the UK for an unlicensed medicinal product ("special") because of the estimated 7.5% of ED sufferers who cannot be prescribed PDE5 inhibitors (such as Viagra®) due to contraindications with other medications taken by them. We have already identified a specials manufacturer and we are working towards making MED2002 available to UK doctors as a special in the second half of this year. MED2002 production for the clinical study has now been completed and the technical transfer to enable the proposed specials manufacturer to make MED2002 is now underway.

In addition to MED2002's role as a special product we believe that it has significant potential amongst a much wider patient base owing to its fast onset of action and favourable safety profile. The first patient is expected to be dosed before the end of Q2 in a clinical trial programme of over 140 patients with ED. The primary outcome of the clinical trial, which will be a randomised, placebo-controlled, double blind, home use, crossover design, is statistically significant efficacy. The clinical trial is expected to report before the end of 2015.

In Europe, MED2002 has patent protection until August 2025. We were pleased to announce last month that the US Patent & Trademark Office ("USPTO") has granted a three-year extension to the patent protection of MED2002. The patent extension, until August 2028, reflects the time taken by the USPTO to process MED2002's initial patent application. The patent extension is potentially significant as the final few years of a patent represent the product's commercial window whereas the early years of a patent are devoted to product development. We estimate that MED2002's commercial window will be effectively extended by around 40 per cent in the USA, the world's largest pharmaceutical market, assuming US regulatory approval is obtained during 2018.

PET500: Enhanced sexual control

PET500 is a topical spray that combines our highly efficient DermaSys®AquaFree delivery system with a well-known mild topical anaesthetic. PET500 is licensed to Ansell, one of the world's major sexual health companies, who have worldwide rights to the product and have launched the product in the USA under the name EPIC® as part of their well-known LifeStyles®brand. Under the terms of the licensing agreement Futura will receive a significant royalty rate on sales.

EPIC® is designed to take effect rapidly and to delay male ejaculation, thereby offering enhanced sexual control. Whilst EPIC® was made available in stores throughout the USA, its sales have been modest to the extent that it is no longer stocked by a major US retailer. We believe that the sales performance reflects a lack of promotional activity and we are currently in dialogue with Ansell on moving the product forwards.

Portfolio updates - Pain relief management

Topical pain relief

The rapid skin permeation rates offered by Futura's transdermal delivery system, DermaSys®, have created a major opportunity in topical pain relief. Rapid skin permeation offers potential benefits in pain management including: improved onset of action, duration and degree of pain relief. Futura has a portfolio of three pain relief products whose well characterised active ingredients include diclofenac, ibuprofen and methyl salicylate.

Whilst some out-licensing discussions have already taken place our focus, following the fundraising in March 2014, has been on building value into the pipeline through clinical work prior to entering into out-licensing agreements.

As announced on 18 March 2015 the clinical study of the pain relief portfolio is under way and the first patient will be dosed in April. All three products are being compared against placebo and/or against marketed products in a controlled induced pain model in which the skin of healthy volunteers will be carefully exposed to a controlled amount of ultra-violet light to increase the sensitivity of the skin to pain stimuli. This approach removes some of the subjectivity and variability associated with studying pain in patients being treated for painful conditions.

Two different strengths of TPR100, Futura's novel diclofenac gel, will be compared against a market-leading diclofenac gel, against orally delivered diclofenac and against a placebo of TPR100's gel. TIB200, Futura's novel ibuprofen gel, will be compared against a market-leading topical gel containing ibuprofen, against orally delivered ibuprofen and against a placebo of TIB200's gel.

The endpoints for TPR100 and TIB200 include equivalence with the marketed topical products against which they are being compared and also how they compare with oral versions of the marketed products. Systemic absorption of the active ingredients will be studied to identify any differences in the absorption profiles of the test products and these will be correlated with the side effects profiles. In addition to equivalence, the study will identify any potential superiority of TPR100 and TIB200 compared with the marketed products, for example: onset of action, duration and/or degree of pain relief.

SPR300 will be compared only against a placebo of the gel used in SPR300 as, following consultation with UK regulators, there is no appropriate marketed methyl salicylate product that can be used as an active comparator. The endpoints of the clinical trial for all three products are designed for regulatory approval requirements as well as to identify any potentially strong marketing claims.

The clinical trial is of a randomised, double blind, crossover design in a total of 60 subjects, divided into three groups of 20 who will receive either TPR100, TIB200, SPR300 or controls. The results of the clinical trial are expected by the end of July 2015.

Graphs showing the superior skin penetration of Futura's three pain relief programmes are available at this link: www.futuramedical.com/archive/painreliefclinicalgraphs.pdf. The topical pain relief portfolio comprises:

TPR100: Topical pain relief

A topical gel combining the Non-Steroidal Anti-Inflammatory Drug diclofenac with the DermaSys®delivery system. TPR100 has been shown to achieve in excess of eight times higher permeation through human skin and 35 times greater bioavailability than that achieved by the UK's best-selling topically applied diclofenac based pain relief product, Voltaren® gel at a similar 1% diclofenac w/w concentration.

TIB200: Topical ibuprofen

A topical gel combining the well-known analgesic ibuprofen with the DermaSys® delivery system. TIB200 has been shown to achieve in excess of 20 times higher permeation through isolated human skin compared with the UK's best-selling topically applied ibuprofen based topical pain relief product, Nurofen® gel at a similar 5% ibuprofen w/w concentration.

SPR300: Sensory pain relief

A topical gel combining methyl salicylate and menthol with the DermaSys®delivery system. SPR300 has been shown to achieve in excess of four times higher permeation through isolated human skin compared with the UK's best-selling topically applied methyl salicylate/menthol based topical pain relief product, Deep Heat®. In addition SPR300 was directly compared with the best-selling over-the-counter topically applied gels sold in the USA, Icy Hot® and Bengay®, and showed similarly improved permeation rates.

People

The Futura R&D team has increased in the past nine months from three people to seven full time staff in addition to our pool of external consultants. Whilst we remain a virtual company, the additional staff reflect the broader base of the business and our desire to control and drive development and therefore build value. Futura now has 12 employees compared with seven a year earlier. It is not anticipated that staff numbers will grow significantly during the remainder of the current year.

Following the launch of Blue Diamond® we have recognised the opportunity to roll-out the Blue Diamond®brand in other territories. To drive this we have recently appointed an experienced Brand Manager.

David Davies resigned on 12 November 2014 and left the Company on 12 February 2015. We would like to thank him for his contribution over the years and wish him well for the future. We would also like to offer our sincere thanks to all our staff, external consultants, scientific advisers and commercial partners for their contribution to the development of the Company throughout the year.

Outlook

2015 is set to be a year of significant news flow at Futura, with key value inflection points expected across the Company's product portfolio. In the near term, we expect commencement of two pivotal clinical trial programmes and we also expect to complete our work on the potential for extending the shelf life of our novel condom CSD500. We also continue in discussions on further out-licensing agreements.

This high level of activity has been facilitated by our significant equity fundraising in 2014. We enter 2015 with a strong balance sheet, a number of projects under way and with a determination to generate value for our shareholders.

John Clarke James Barder

Chairman Chief Executive

The financial information set out below does not constitute the Company's full statutory accounts for the year ended 31 December 2014 (or year ended 31 December 2013) but it is derived from those accounts that have been audited. Statutory accounts for 2013 have been delivered to the Registrar of Companies and those for 2014 will be delivered after the forthcoming Annual General Meeting. The independent auditors have reported on those accounts; their report was unqualified, did not include an emphasis of matter statement and did not contain any statements under section 498 of the Companies Act 2006.

Group Statement of Comprehensive Income

For the year ended 31 December 2014

Group Statement of Changes in Equity

For the year ended 31 December 2014

Share premium represents amounts subscribed for share capital in excess of nominal value, less the related costs of share issues.

Merger reserve represents the reserve arising on the acquisition of Futura Medical Developments Limited in 2001 via a share for share exchange accounted for as a group reconstruction using merger accounting under UK GAAP.

Retained losses represent cumulative net losses recognised in the Group Statement of Comprehensive Income. The total comprehensive loss for the year represents the total recognised income and expense for the year.

Group Statement of Financial Position

As at 31 December 2014

Group Statement of Cash Flows

For the year ended 31 December 2014

Notes to the Group Financial Information

For the year ended 31 December 2014

1. Accounting policies

1.1 Basis of preparation

This Group financial information has been prepared and approved by the Directors in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union.

The accounting policies set out below have been applied to all periods presented in this Group financial information and are in accordance with IFRSs as adopted by the European Union, and International Financial Reporting Interpretations Committee ("IFRIC") interpretations that were applicable for the year ended 31 December 2014.

1.2 Going concern

The Group had cash balances of £9.49 million at 31 December 2014, with a net cash inflow of £8.50 million in the year.

The Group financial information has been prepared on the going concern basis which assumes that the Group will continue in operational existence for the foreseeable future. The Group financial information does not reflect any adjustments that would be required if they were to be prepared on a basis other than the going concern basis.

1.3 Accounting developments

The following new standards have been adopted in the year, however the Directors do not expect them to have a material effect on the Group financial information:

· IFRS 10 Consolidated Financial Statements

· IFRS 11 Joint Arrangements

· IFRS 12 Disclosure of Interests in Other Entities

· IAS 27 Separate Financial Statements

· IAS 28 Investments in Associates and Joint Ventures

· Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32)

· Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)

· Recoverable amounts disclosures for non-financial assets (Amendments to IAS 36)

Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39)

The following new standards and interpretations, which are not yet effective and have not been adopted early in this financial information, will or may have an effect on the Group's future financial information:

· Defined Benefit Plans: Employee Contributions: Amendments to IAS 19 (effective for periods beginning on or after 1 July 2014)

· Accounting for Acquisitions of Interests in Joint Operations: Amendments to IFRS 11 (effective 1 January 2016)

· Clarification of Acceptable Methods of Depreciation and Amortisation: Amendments to IAS 16 and IAS 38 (effective 1 January 2016)

· Equity Method in Separate Financial Statements (Amendments to IAS 27) (effective 1 January 2016)

· Sale or contribution of assets between an investor and its associate or joint venture (Amendments to IFRS 10 and IAS 28) (effective 1 January 2016)

· IFRS 15 Revenue from Contracts with Customers (effective 1 January 2017)

· IFRS 9 Financial Instruments (effective 1 January 2018)

· Disclosure Initiative: Amendments to IAS 1 (effective 1 January 2016)

1.4 Basis of consolidation

Where the Company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business, so as to obtain benefits from its activities, it is classified as a subsidiary. The Group financial information presents the results of the Company and its subsidiaries Futura Medical Developments Limited and Futura Consumer Healthcare Limited as if they formed a single entity (the "Group"). Intra-group transactions and balances are eliminated in preparing the Group financial information.

1.5 Revenue

Revenue comprises the fair value received or receivable for: exclusivity arrangements, consultancy fees, milestone income or royalties, net of value added tax.

The accounting policies for the principal revenue streams of the Group are as follows:

(i) Exclusivity arrangements and similar agreements are recognised as revenue in the accounting period in which the related services, or required activities, are performed or specified conditions are fulfilled in accordance with the terms of completion of the specific transaction.

(ii) Consultancy fees are recognised as revenue in the accounting period in which the revenue becomes receivable.

(iii) Non-refundable milestone income is recognised as revenue in the accounting period in which the milestones are achieved. If any milestone income is creditable against royalty payments then it is deferred and released to the Group Statement of Comprehensive Income over the accounting periods in which the royalties would otherwise be receivable.

(iv) Royalty income relating to the sale by a licensee of licensed product is recognised on an accruals basis in accordance with the substance of the relevant agreement and based on the receipt from the licensee of the relevant information to enable calculation of the royalty due.

1.6 Leased assets

Leases, which contain terms whereby the Group does not assume substantially all the risks and rewards incidental to ownership of the leased item are classified as operating leases. Operating lease rentals are charged to the Group Statement of Comprehensive Income on a straight-line basis over the lease term. The Group does not hold any assets under finance leases.

1.7 Intangible assets

Research and development ("R&D")

Expenditure incurred on the development of internally generated products is capitalised if it can be demonstrated that:

● it is technically feasible to develop the product for it to be sold;

● adequate resources are available to complete the development;

● there is an intention to complete and sell the product;

● the Group is able to out-license or sell the product;

● sale of the product will generate future economic benefits; and

● expenditure on the project can be measured reliably.

Capitalised development costs are amortised over the periods in which the Group expects to benefit from selling the products developed but not exceeding five years. The amortisation expense is included in R&D costs recognised in the Group Statement of Comprehensive Income. The useful life and the value of the capitalised development cost are assessed for impairment at least annually. The value is written down immediately if impairment has occurred and the unimpaired cost amortised over the reduced useful life. The Directors consider that the criteria to capitalise development expenditure are not met for a product prior to that product being commercially launched in at least one country.

Development expenditure, not satisfying the above criteria, and expenditure on the research phase of internal projects are included in R&D costs recognised in the Group Statement of Comprehensive Income as incurred.

Patents and trademarks

The costs incurred in establishing patents and trademarks are either expensed or capitalised in accordance with the corresponding treatment of the development expenditure for the product to which they relate.

1.8 Plant and equipment

Plant and equipment is initially recognised at cost, and subsequently at cost less accumulated depreciation and any accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is charged to the Group Statement of Comprehensive Income at rates calculated to write off the cost, less estimated residual value, of each asset on a straight-line basis over their estimated useful lives.

The assets' residual values and useful lives are determined by the Directors and reviewed and adjusted if appropriate at each Group Statement of Financial Position date.

1.9 Impairment of non-financial assets

Assets that are subject to depreciation are reviewed for impairment on a half-yearly basis and when events or circumstances suggest that the carrying amount may not be recoverable. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). An impairment loss is recognised immediately in the Group Statement of Comprehensive Income for the amount by which the asset's carrying amount exceeds its recoverable amount.

Recoverable amount is the higher of fair value, less disposal costs, and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods. A reversal of an impairment loss is recognised immediately in the Group Statement of Comprehensive Income.

1.10 Inventories

Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost includes materials, related contract manufacturing costs and other direct costs. Cost is calculated using the first in, first out method. Net realisable value is based on estimated selling price, less further costs expected to be incurred to completion and disposal.

A provision is recognised immediately in the Group Statement of Comprehensive Income in respect of obsolete, slow-moving or defective items, where appropriate.

1.11 Financial instruments

Financial assets

The Group classifies its financial assets in the category of loans and receivables, comprising 'trade and other receivables' and 'cash and cash equivalents'. They are recognised initially at fair value and subsequently at amortised cost using the effective interest rate method.

Trade and other receivables are recognised initially at fair value and are subsequently measured at amortised cost using the effective interest rate method, less an estimate made for impairment based on a review of all past due amounts at the year end. A provision for impairment of trade and other receivables is established when there is objective evidence that the Group will not be able to collect all amounts due. If an impairment loss is required the carrying amount of the trade or other receivable is reduced through the use of an allowance account and the amount of the loss recognised immediately in the Group Statement of Comprehensive Income in administrative costs.

Medium-term deposits, comprising sterling fixed rate deposits, with original maturities of more than twelve months are included in trade and other receivables.

Cash and cash equivalents are financial assets and comprise cash in hand and sterling fixed rate short-term deposits with original maturities of twelve months or less which are held by the Group so as to be available to meet short-term cash commitments.

The Group assesses at each Statement of Financial Position date whether there is objective evidence that a financial asset is impaired.

Financial liabilities

The Group's financial liabilities comprise 'trade and other payables' recognised initially at fair value and subsequently at amortised cost using the effective interest rate method.

1.12 Taxation

Income tax is recognised or provided at amounts expected to be recovered or to be paid using the tax rates and tax laws that have been enacted or substantively enacted at the Group Statement of Financial Position date. R&D tax credits are recognised on an accruals basis and are included as an income tax credit under current assets.

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability on the Group Statement of Financial Position date differs from its tax base, except for differences arising on:

· the initial recognition of an asset or liability in a transaction which is not a business combination and which at the time of the transaction affects neither accounting profit nor taxable profit; and

· investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profits will be available against which the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the Group Statement of Financial Position date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered). Deferred tax balances are not discounted.

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:

· the same taxable group company; or

· different group entities which intend to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, on each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

1.13 Foreign currency translation

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Group Statement of Comprehensive Income in the period in which they arise.

1.14 Employee benefits

(i) Defined contribution plans

The Group provides retirement benefits to all employees and Executive Directors who wish to participate in defined contribution pension schemes. The assets of these schemes are held separately from those of the Group in independently administered funds. Contributions made by the Group are charged to the Group Statement of Comprehensive Income in the period in which they become payable.

(ii) Accrued holiday pay

Provision is made at each Group Statement of Financial Position date for holidays accrued but not taken at the salary of the relevant employee at that date. The expected cost of compensated short-term absence (i.e. holidays) is charged to the Group Statement of Comprehensive Income on an accruals basis.

(iii) Share-based payment transactions

The Group operates an equity-settled share-based compensation plan. For all share options awarded to employees, and others providing similar services, the fair value of the share options at the date of grant is charged to the Group Statement of Comprehensive Income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each Group Statement of Financial Position date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of share options that eventually vest. There are no market vesting conditions. If the terms and conditions of share options are modified before they vest, the change in the fair value of the share options, measured immediately before and after the modification, is also charged to the Group Statement of Comprehensive Income over the remaining vesting period.

The proceeds received when share options are exercised, net of any directly attributable transaction costs, are credited to share capital (nominal value) and the remaining balance to share premium. All employee share option holders enter into an HM Revenue & Customs joint election to transfer the employers' national insurance contribution potential liability to the employee, therefore no Group asset or liability arises.

(iv) Long-term incentive plan

The Group operates a long-term incentive plan for staff, the Executive Directors and the Chairman. The quantum of any awards receivable will depend on the Group achieving set milestones and the share price at the time relative to targets set in advance. The Group can exercise discretion in settling any award in equity or in cash.

1.15 Finance income

Interest income is recognised on a time-proportion basis using the effective interest rate method.

1.16 Critical accounting estimates and judgements

Critical accounting estimates, assumptions and judgements are continually evaluated by the Directors based on available information and experience. As the use of estimates is inherent in financial reporting, actual results could differ from these estimates.

Judgements

(i) Revenue recognition

Fees invoiced in respect of non-refundable milestones have been recognised as revenue in the Group Statement of Comprehensive Income in the period when all criteria for revenue recognition have been met.

(ii) Intangible asset recognition

The Directors consider that the criteria to capitalise development expenditure are not met for a product prior to that product being commercially launched in at least one country.

 (iii) Deferred tax recognition

The Directors consider that, given the current stage of development of the business, deferred tax assets should not be recognised before the Group is generating sufficient recurring royalty revenue.

Estimates and assumptions

(iv) Useful lives of plant and equipment

Plant and equipment is amortised or depreciated over its useful life. Useful lives are based on the Directors' estimates of the periods over which the assets will be used in developing revenue generating products and the estimates are reviewed annually for continued appropriateness. The estimated useful lives are between two and five years for computer equipment and between three and ten years for furniture and fittings. Changes to estimates can result in significant variations in the carrying value and amounts charged to the Group Statement of Comprehensive Income in specific periods.

(v) Fair value of financial instruments

The Group determines the fair value of financial instruments using valuation techniques which can be significantly affected by the assumptions used, including interest and discount rates and estimates of future cash flows.

 (vi) Inventories

The Group reviews the net realisable value of its inventories on a half-yearly basis to provide assurance that recorded inventories are stated at the lower of cost or net realisable value. Factors that could impact realisable value include: the timing and success of future technological innovations in relation to product R&D, competitor and Government actions, supplier prices and economic trends.

 (vii) Share-based payments

The Group operates an equity-settled share-based compensation plan as detailed in note 17. Employee (and similar) services received and the corresponding increase in equity are measured by reference to the fair value of the equity instruments as at the date of grant.

2. Financial risk management

2.1 Financial risk factors

The Group's activities expose it to a variety of financial risks: market risk (including foreign exchange rate risk, cash flow interest rate risk and fair value interest rate risk); credit risk and liquidity risk.

It is Group policy not to enter into speculative positions using complex financial instruments. The Group's primary treasury objective is to minimise exposure to potential capital losses whilst at the same time securing favourable market rates of interest on Group cash deposits using money market deposits with banks. Cash balances used to settle the liabilities from operating activities are also maintained in current accounts which earn interest at variable rates.

(i) Market risk

Foreign exchange rate risk

The Group primarily enters into supplier contracts which are to be settled in sterling. However, some contracts involve other currencies including the US dollar and the euro. Where supplier contracts of more than £100,000 total value are to be settled in foreign currencies consideration is given to settling the sums to be paid through conversion of sterling deposits to the appropriate foreign currency holdings at the outset of the contract to minimise the risk of adverse currency fluctuations.

For contracts with smaller values the foreign exchange rate risk is not considered sufficient to require the establishment of foreign currency accounts unless specific circumstances are identified which warrant this.

At 31 December 2014 the Group had trade payables of £55,809 denominated in a foreign currency

(31 December 2013: £40,215).

Cash flow interest rate risk and fair value interest rate risk

The Group's interest rate risk arises from short-term money market deposits. Deposits which earn variable rates of interest expose the Group to cash flow interest rate risk. Deposits at fixed rates expose the Group to fair value interest rate risk. The Group analyses its interest rate exposure on a dynamic basis.

The impact in the year ended 2014, of a defined interest rate shift of a 1% higher rate of interest earned per annum applied to the term deposits over the period of the deposit, on the post-tax loss for the year and net assets would have been £110,629 reduction/increase (2013: £21,608 reduction/increase).

The impact in the year ended 2014, of a defined interest rate shift of a 1% lower (or to zero) rate of interest earned per annum applied to the term deposits over the period of the deposit, on the post-tax loss for the year and net assets would have been £20,775 increase/reduction (2013: £11,149 increase/reduction).

(ii) Credit risk

Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions as well as credit exposure in relation to outstanding receivables. The Group policy is to spread deposits over at least two institutions with investment grade A1 or better (Standard & Poor's credit rating) and deposits are made in sterling only. The Group does not expect any losses from non-performance by these institutions.

(iii) Liquidity risk

Liquidity risk arises from the Group's management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. Prudent liquidity risk management involves maintaining sufficient cash and cash equivalents and the monitoring of rolling forecasts of the Group's liquidity reserve on the basis of expected cash flow.

The Group had trade and other payables at the Group Statement of Financial Position date of £607,886 (2013: £477,998) as disclosed in note 15, which fall due within one year.

2.2 Capital risk management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for equity holders of the Company and benefits for other stakeholders and to maintain an optimal capital structure to minimise the cost of capital.

2.3 Fair value estimation

The Group uses amortised cost, using the effective interest rate method, to determine subsequent fair value, after initial recognition, for its financial instruments.

3. Segment reporting

The Group is organised and operates as one business segment. The main area of R&D continues to be in the field of innovative products for consumer healthcare using the Group's advanced proprietary transdermal technology.

The Group manages any overseas R&D from the UK, the primary business segment. Segment revenue is based on the geographical location of the Group's customers. Since there is currently only one business segment and one geographical segment, no separate segment reporting has been prepared.

4. Operating loss

Loss on foreign exchange 1,314 5,398

The fees of the Group's auditor, BDO LLP, for services provided are analysed below:

5. Wages and salaries

The average monthly number of persons (including all Directors) employed by the Group during the year was 10 (by category: R&D 4, administration 6), (2013:10, by category: R&D 4, administration 6) and their aggregate emoluments were:

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

6. Directors' emoluments

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

There were no share options exercised by the Directors during the year. In 2013 two Directors exercised share options under the Group share option scheme and realised a combined gain of £19,182. In respect of the highest paid Director the realised gain in 2013 was £nil.

During the year, three Directors (2013: three Directors) participated in a private money purchase defined contribution pension scheme.

7. Finance income

8. Taxation

Current tax

The tax assessed for the year is different from the standard rate of corporation tax in the UK.

The differences are explained below:

The Group has tax losses of £17,272,460 (2013: £15,500,889) available for offset against future taxable profits.

Deferred tax

Deferred tax assets amounting to £3,475,177 (2013: £3,249,939) have not been recognised on the basis that their future economic benefit is not certain. Assuming a prevailing tax rate of 20% (2013: 20%) when the timing differences reverse, the unrecognised deferred tax asset comprises:

9. Loss per share (pence)

The calculation of the loss per share is based on a loss of £2,997,881 (2013: loss of £2,208,332) and on a weighted average number of shares in issue of 89,452,302 (2013: 77,591,370).

The loss attributable to equity holders of the Company for the purpose of calculating the fully diluted loss per share is identical to that used for calculating the basic loss per share. The exercise of share options, disclosed in note 17, or the issue of shares under the long-term incentive plan, would have the effect of reducing the loss per share and is therefore anti-dilutive under the terms of IAS 33 'Earnings per Share'.

10. Plant and equipment

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

11. Inventories

12. Financial instruments by category

The accounting policies for financial instruments have been applied to the line items below:

13. Trade and other receivables

Trade and other receivables do not contain any impaired assets. The Group does not hold any collateral as security and the maximum exposure to credit risk at the Group Statement of Financial Position date is the fair value of each class of receivable.

14. Cash and cash equivalents

15. Trade and other payables

16. Share capital

The number of issued ordinary shares as at 1 January 2013 was 77,447,946.

During the year ended 31 December 2013, the Company issued shares of 0.2 pence each as follows:

The number of issued ordinary shares as at 1 January 2014 was 77,809,576.

During the year ended 31 December 2014, the Company issued shares of 0.2 pence each as follows:

17. Share options

At 31 December 2014, the number of ordinary shares of 0.2 pence each subject to share options granted under the Company's Approved and Unapproved Share Option Schemes were:

On 12 September 2014 share options over 1,240,000 new ordinary shares were granted to employees and a consultant (including Directors).

Details of share options exercised by employees in 2014, given in note 16, generated additional funds of £67,500 for the Group.

The share options outstanding at 31 December 2014 represented 4.9% of the issued share capital as at that date (2013: 4.8%) and would generate additional funds of £2,662,100 (2013: £2,087,900) if fully exercised. The weighted average remaining life of the share options was 57 months (2013: 59 months), with a weighted average remaining exercise price of 54.84 pence (2013: 55.90 pence).

The share options exercisable at 31 December 2014 totalled 2,664,741 (2013: 1,924,741) with an average exercise price of 50.33 pence (2013: 45.71 pence) and would have generated additional funds of £1,341,150 (2013: £879,750) if fully exercised.

The Group's share option scheme rules apply to 4,199,741 of the share options outstanding at 31 December 2014 (31 December 2013: 3,029,741) and include a rule regarding forfeiture of unexercised share options by a Director or employee upon the cessation of their employment (except in specific circumstances).

There were no market vesting conditions within the terms of the grant of the share options.

The Black-Scholes formula is the option pricing model applied to the grants of all share options made in respect of calculating the fair value of the share options.

18. Pension costs

The pension charge represents contributions payable by the Group to independently administered funds which during the year ended 31 December 2014 amounted to £93,993 (2013: £86,746). Pension contributions payable one month in arrears at 31 December 2014 included in accrued expenses at the relevant Group Statement of Financial Position date totalled £4,139 (2013: £2,748).

19. Commitments

At 31 December 2014 the Group had operating lease commitments in respect of property leases cancellable on one month's notice of £5,829 (2013: £5,714).

20. Related party transactions

Related parties, as defined by IAS 24 'Related Party Disclosures', are the wholly owned subsidiary company, Futura Medical Developments Limited, Futura Consumer Healthcare Limited and the Board. Transactions between the Company and the wholly owned subsidiary company have been eliminated on consolidation and are not disclosed.

Key management compensation

The Directors represent the key management personnel. Details of their compensation and share options are given in note 6.