Plethora Solutions Holdings Plc Regulatory News (PLE)

PLETHORA SOLUTIONS HOLDINGS PLC

("Plethora" or the "Company")

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2012

Introduction

During the first half of 2012 Plethora has achieved a number of milestones in both its business areas. The highlights include:

PSD502 - for the treatment of Premature Ejaculation

In September 2011 Plethora announced that it had regained operational and economic control of PSD502 for Europe and the Rest of the World (excluding North America, South America, Japan, Korea, Taiwan and China). The Company then completed a financing and commenced the process to file a dossier with the European Medicines Agency ("EMA") to obtain approval in the EU.

In early June 2012 the Company announced that it had filed the dossier with the EMA for approval. This filing was completed on schedule and on budget. Over the coming months, the Company will receive responses from the two regulatory agencies who are acting as Rapporteur (Spain) and Co-Rapporteur (United Kingdom) which are reviewing the dossier on behalf of the EMA.

Based on the filing date and the current progress through the EMA, the Company announces that it expects to receive final approval of PSD502 by late Q3 / early Q4 2013. This date is ahead of previous expectations communicated to shareholders.

The Company has stated that, following the 2011 agreement, it would seek to commercialise PSD502 through a new partnership, ideally with a major pharmaceutical company with the geographic reach and marketing capability to deliver the potential in this product. Earlier this year we provided guidance that talks had commenced with a number of parties. These discussions continue, although we can give no guidance on the timing or quantum of any potential deal.

The Urology Co

The Urology Co was founded in late 2009, became operational in 2010 and during 2011 earned its first material revenues. During the first half of 2012 The Urology Co recorded revenues of £283,000 (H1 2011: £21,000, FY 2011 £181,000) a 13-fold increase over the same period and a 56% increase over the whole of 2011.

This increase in revenue in part resulted from the two agreements signed in 2011 securing the distribution rights to MultiGyn and MultiMam from BioClin and to Gepan-instil from Pohl Boskamp. In addition, the Company has seen real organic growth from the rest of the portfolio including particularly Hyalofemme, Striant SR, and Urolieve.

Over the course of the first half of the year, trading has generally shown an increasing trend. Encouragingly, revenues for August 2012 were greater than any previous month since launch. This is particularly pleasing as the summer months can often show reduced levels of trading.

The Company announces that it has secured the exclusive UK & Eire distribution rights to a new menstrual protection product, SoftCup, from EvoFem LLC. SoftCup represents the first major innovation in menstrual protection in over 50 years and sales commenced in August 2012. As part of the agreement EvoFem has agreed to support the launch of SoftCup in the UK with a multi-million pound marketing budget. The Company can announce that Boots is the first major retailer to carry SoftCup in the UK. The Directors believe the Boots launch builds upon the relationship established around the other products carried by Boots and distributed by The Urology Co.

Financial Performance

Trading Results

During the first half of 2012, the Group recorded total revenues of £283,000 (H1 2011: £21,000, FY 2011 £189,000) and a gross profit of £129,000 (H1 2011: £9,000, FY 2011 £46,000), earning margins of 46% (H1 2011: 43%, FY 2011: 24%). This trading income was earned wholly by The Urology Co.

The Urology Co then recorded Sales, Marketing & Distribution costs of £426,000 (H1 2011: £624,000, FY 2011 £1,117,000) a reduction of 32% over the same period last year. In addition, this business unit incurred G&A costs of £68,000 (H1 2011: £46,000, FY 2011 £114,000). Delivering an overall loss for the period of £365,000 (H1 2011: £693,000, FY 2011 £1,191,000). The Company notes that as trading revenues are increasing and with the reduced cost base so the monthly losses are decreasing and it can now look forward to the point at which The Urology Co achieves its financial objective of delivering a profitable contribution to Group overheads.

Plethora's R&D activities incurred a total cost of £380,000 (H1 2011: £144,000, FY 2011 £172,000) being the costs incurred to prepare the dossier for filing with the EMA. These costs are anticipated to continue until the dossier is approved by the regulatory agencies. These costs were in line with expectations.

Excluding those overheads attributable to The Urology Co of £68,000, Corporate G&A costs were £461,000 (H1 2011: £867,000, FY 2011 £1,450,000). Over the last few years the Company has sought constantly to reduce the operating costs of the business and this has again been delivered. In the first half of the year Corporate G&A costs decreased by 47% compared to the same period last year.

Overall the Operating Loss for H1 2012 was £1,206,000 (H1 2011: £1,612,000, FY 2011 £2,668,000) a reduction of 25%. It is important to note that the Company achieved this reduction while the Company increased its R&D expenditure. This is attributable to increased margin earned by The Urology Co and a continued focus on reducing the overall cost base of the business.

The Company incurred finance costs of £246,000 (H1 2011: £272,000, FY 2011 £595,000) showing a reduction of 10% compared to the prior year. In addition, the Company is required under IFRS to revalue the warrants issued in connection with the Capital for Enterprise ("CfE") and Galloway loans. As the Company's share price has appreciated over the period, the effect is to generate a charge to the income statement of £574,000 (H1 2011: £nil, FY 2011 £102,000 credit). This charge is a non-cash item. The Directors are required to adopt this accounting treatment to comply with current standards, despite the fact that an increase in shareholder value demonstrated in the share price creates a substantial increase in the loss for the period.

After taking account of finance costs the loss for the period was £2,026,000 (H1 2011: £1,884,000, FY 2011 £4,858,000)

Balance Sheet

At 30 June 2012 the Group had total assets of £573,000 (Dec 2011: £1,506,000) comprising Cash £213,000 (Dec 2011: £985,000), Inventory £199,000 (Dec 2011: £181,000) and Receivables £159,000 (Dec 2011: £336,000).

Against this total, trade creditors and accruals were £1,110,000 (Dec 2011: £1,119,000).

Total borrowings were £3,409,000 (Dec 2011: £2,711,000) of which £1,051,000 (Dec 2011: £972,000) were recorded as current liabilities being the Convertible Loan Note due December 2012. The balance being the two remaining facilities due 2015. Also included in the total borrowings figure is £574,000 which relates to revaluations of warrant instruments associated with the CfE Loan due 2015 and Galloway Loan due 2015 as stipulated by IAS.

The Group has sought to conserve its cash resources and manages its working capital carefully. To assist liquidity the Group issued new shares to the value of £350,000 in June 2012. In September 2012 the Group also secured additional loan finance raising £350,000 from Jim Mellon a non-executive director, details are set out in note 8.

Outlook

In 2011 the Group clearly set out its strategy that it would: (i) pursue the commercialisation of PSD502 in the shortest timeframe and (ii) seek to grow The Urology Co. In the first half of 2012, both of these objectives have been met.

We have consistently stated that we intend to enter into a new partnership for the launch of PSD502. We can confirm that dialogue has commenced with a number of parties, although we cannot give precise guidance to the timing or quantum of a deal.

Finally, The Urology Co has shown increasing revenues over the course of 2012 and we can now foresee a point where it will deliver on its underlying objective of delivering a contribution to group overheads and provide a commercial infrastructure in the UK to co-promote PSD502 alongside a partner.

Consolidated Statement of Comprehensive Income

 Consolidated Balance Sheet

Consolidated Interim Cash Flow Statement

Condensed Consolidated Statement of Changes in Equity

Six months ended 30 June 2012

Year ended 31 December 2011

Condensed Consolidated Statement of Changes in Equity

Six months ended 30 June 2011

Notes to the Financial Information

1. Basis of Preparation

The interim financial information is unaudited and has not been subject to review by the Company's auditors in accordance with ISRE 2410. This consolidated financial information for the six months ended 30 June 2012 has been prepared in accordance with International Financial Reporting Standards ("IFRS") and International Financial Reporting Interpretations Committee ("IFRIC") interpretations that had been published by 30 June 2012 and endorsed by the European Union ("EU"). The accounting policies adopted are consistent with those of the financial statements for the year ended 31 December 2011.

The financial information set out in the interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2011, prepared under IFRS, have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain a statement under Section 498(2) or Section 498(3) of the Companies Act 2006. The interim report was approved by the Board on 29 September 2012.

A copy of the interim results for the six months ended 30 June 2012 will be available on the Company's website at www.plethorasolutions.co.uk.

2. Going Concern

In considering the appropriate basis of the interim financial information the directors are required to consider whether the Company can continue in operational existence for the foreseeable future.

 At 30 June 2012 the Company had £213,000 of cash and cash equivalents. In addition, the Company raised further loan finance in September of £350,000.

 The directors have prepared detailed cash flow forecasts for the period to 31 December 2013, which show that the Company has adequate working capital for the forecast period. These cash flow projections assume that a number of as yet uncertain events occur including that The Urology Company achieves sales and earns margin broadly in line with budget and that the Company's lenders do not withdraw any of its existing financing facilities and that the Group completes certain planned capital raising activities.

 Consequently, the directors have concluded that it is appropriate to prepare the Company's financial statements on the going concern basis, which assumes that the Company will continue in operational existence for the foreseeable future. Nevertheless, there is material uncertainty in relation to the events set out above, which may cast significant doubt on the Company's ability to continue as a going concern. In the event that some combination of the above events fails to occur as expected, the Company may be unable to realise its assets and discharge its liabilities in the normal course of business. 

3. Segmental Reporting

The Group is organised into two main business segments: the development of new pharmaceutical products known as "Plethora Development" and the sale and marketing of pharmaceutical and healthcare products in the UK and continental Europe known as "The Urology Co". Unallocated costs represent shared property costs, in addition to background support services, such as finance, IT and marketing, and corporate expenses which cannot be directly attributed to either business segment.

The Group operates from a single geographical area, namely the United Kingdom.

3. Segmental Reporting (continued)

4. Loss per Share

5. Trade and other payables

6. Borrowings

(i) Convertible loan notes due 2012

During 2011, the Company converted £1,655,000 (plus accrued interest of £519,000) of its £2,455,000 outstanding Convertible Loan Notes, through the issue of 86,946,731 new ordinary shares. The conversion was done at the prevailing share price of 2.5p and resulted in a reduction in the principal of Convertible Loan Notes 2012 from £2,455,000 to £800,000.

In compliance with IAS32 Financial instruments the Company recognized a loss of £1,738,000 being the difference between the original conversion terms (12.5p per share) and the actual conversion value of 2.5p per share multiplied by the 86,946,731 shares issued. This amount is accounted for in the profit and loss account as a cost, however, at the same time a gain is booked in reserves. This charge has no impact on cash flow, or, after the gain in reserves, on shareholders' funds.

The terms of the outstanding Convertible Loan Notes Due 2012 remain unchanged and include: maturity 31 December 2012; coupon 13% per annum, accrued until maturity; convertible into new ordinary shares at 12.5p per share; secured by first charge over the Company's assets; repayable by the Company at any point post issuance; convertible by the Company after 31 December 2010 provided the Company's share price is 25% greater than the conversion price for the preceding 60 days prior to conversion.

6. Borrowings (continued)

The following non-IFRS disclosure shows the effect of the accounting treatment.

As at 30 June 2012 a total of £283,000 of interest had been accrued in respect of the loan notes. This amount will be paid either in cash or by conversion to equity at 12.5p per share at maturity (namely 31 December 2012).

As set out in Note 7 the Company intends to convert £800,000 plus accrued interest into ordinary shares.

(ii) CfE Loan due 2015

On 29 June 2010 the Company entered into a £1 million, five year secured term loan ("CfE Loan") with Capital For Enterprise Fund A L.P. ("CfE Fund"). The CfE Loan will be repayable by 29 June 2015. However, the Company may, at its option, repay part, or all, of the loan ahead of the maturity date. During the prior year the Company received a waiver from the CfE fund which remedied technical breaches of a financial covenant. Interest accrues on the loan at 10% per annum. The loan agreement provides for the Company to pay a premium on repayment of the loan. This premium is fixed at either 20% of any amounts repaid in the first 3 years or 25% in years 4 or 5 or at maturity. The CfE Fund has also been granted a warrant to acquire new ordinary shares in the Company at nominal value. The number of shares issuable under the warrant is the lower of 3% of the Company's fully diluted share capital, or such number of shares as equals £500,000 at the then prevailing market price. The warrant is only exercisable at an Exit Event, as defined in the loan agreement.

The following non-IFRS disclosure shows the effect of the accounting treatment.

6. Borrowings (continued) 

(iii) Galloway Loan due 2015

On 20 October 2011 the Company entered into a £850,000 secured term loan ("Galloway Loan") with Galloway Limited. The Galloway Loan will be repayable on 30 June 2015. However, the Company may, at its option, repay part, or all, of the loan ahead of the maturity date. Interest accrues on the loan at 10% per annum. The loan agreement provides for the Company to pay a fixed redemption premium of 25%. Galloway Limited has also been granted a warrant to acquire new ordinary shares in the Company at nominal value. The number of shares issuable under the warrant is the lower of 5% of the Company's fully diluted share capital, or such number of shares as equals £1,500,000 at the then prevailing market price. The warrant is only exercisable at an Exit Event, as defined in the loan agreement.

The following non-IFRS disclosure shows the effect of the accounting treatment.

7. Share Capital

During June 2012 the Company issued 7,000,000 new ordinary shares of 1p each at a placing price of 5p per share to raise £350,000 before expenses.

8. Post balance sheet events

September 2012 Loan Facility

In September 2012 the Company entered into a loan agreement with Mr Jim Mellon, a non-executive director of the Company to secure an additional £350,000. The loan is repayable on demand, with its first interest period to 31 December 2012.