7 Jun 2013 07:00
7 June 2013
Plethora Solutions Holdings plc
("Plethora" or "the Company")
Preliminary Results for the year ended 31 December 2012
The Company announces its audited preliminary results for the year ended 31 December 2012.
Business Review
PSD502 for the treatment of Premature Ejaculation
Plethora was founded in 2004 to develop a number of pharmaceutical products in the area of urology and sexual health; at the centre of this development portfolio was PSD502, a treatment for premature ejaculation (PE).
Plethora successfully developed PSD502 and completed phase III clinical trials in 2009, following which the global rights were licensed to Shionogi. In 2011 Plethora regained operational and economic control of PSD502 in Europe and the Rest of the World (defined to exclude North America, South America, Japan, Korea, Taiwan and China). At the end of 2011 the Company completed a financing in part to provide the funds to pursue regulatory approval of PSD502 in Europe through a centralised application with the European Medicines Agency (EMA). It was anticipated that this process would take until 2013 to obtain the EMA's final decision on approval. The Directors consider that PSD502 has always been the Company's most valuable asset and commercialising it will create greatest shareholder value.
In December 2011 the EMA appointed Agencia Española de Medicamentos y Productos Sanitarios (AEMPS), the Spanish agency, as 'Rapporteur' and the Medicines & Health regulatory Agency, the UK agency, as 'Co-rapporteur'. Previously, AEMPS has acted as Co-rapporteur in the review and subsequent approval of Priligy®, the only other product approved for the treatment of PE. The Company regards this positively as AEMPS has a detailed understanding of the condition and treatments available.
During 2012 Plethora completed all steps planned for the year toward obtaining regulatory approval.
In March 2012 the Company announced that it had held the pre-submission briefing meetings individually with the Rapporteur and Co-rapporteur and the Company reported that the Briefing Package was reviewed and all sections, including non clinical, clinical and manufacturing, were found to be entirely consistent with all regulatory requirements for submission of a registration dossier.
In June 2012 the Company announced that it had filed the completed dossier with the EMA for the approval of PSD502. The dossier runs to over 25,000 pages of information covering all clinical and non-clinical data together with the supporting information about the treatment of PE.
In February 2013 the Company announced that PSD502 would become the Company's sole focus of activity.
Since the submission of the dossier, Plethora has received the first round of questions from the EMA, the "Day 120 Questions". Responses to these have been submitted to the EMA within the permitted timelines and the Draft Assessment Report has been received from the Rapporteur and Co-Rapporteur. While approval is absolutely a matter for the EMA in its sole discretion, from the Company's review of the situation there are no matters which it believes should prevent approval.
The Company anticipates that the EMA will conclude its review and recommendation to the EU for approval in the second half of 2013 in line with the prescribed timetable. If successful such an approval would then permit the marketing of PSD502 in the 27 member states of the European Union. The Company estimates that there are in excess of 150 million men aged between 20-69 years old. With the estimated incidence of PE of 20-30% of men, this implies that the potential population of men in the EU with the disorder is approximately 30-45 million.
In order to realise the commercial value of PSD502, the Company intends to enter into a new partnering agreement with a major pharmaceutical company with the sales and marketing resource to ensure the product is brought to market effectively. During 2012 the Company stated that it had started talks with a number of companies for the commercialisation of the product - these talks continue. It should be expected that upon signature of such a transaction the Company will receive upfront and milestone payments and then royalties on eventual sales. Following completion of the recent financing Plethora has engaged a specialist consulting firm to expand and accelerate its licensing activities. As a result significantly greater resources are being applied to this strategic objective.
The Urology Co
In 2009 the Company formed a new subsidiary, The Urology Co, which was intended to create a revenue earning, profit and cash flow generative specialty pharmaceutical company. This would focus on the Company's core competences of urology and sexual health conditions to leverage that know-how.
This business became operationally effective in 2010 and earned its first material revenues in 2011.
Over the course of 2012, revenues were £582,000 (2011: £181,000) an increase of 3-fold over the previous year. However, this business recorded an operating loss of £1,046,000 (2011: £1,191,000); and while the revenue growth and reduced losses were encouraging, the business has not reached the expected levels of growth and profitability.
In addition, this business required further capital in order to prosper. In February 2013, in light of the Company's capital requirements, the Directors concluded that it would conduct a strategic review of The Urology Co. During this review the Directors considered (i) a reduction in the cost base of the Urology Co to establish profitability; and (ii) selling that business to a third party. It was concluded that cost cutting would not achieve its objective; and, despite attempts to find a potential acquirer of the business, one could not be secured in an acceptable timeframe. The Directors therefore concluded to place it into administration on 25 February 2013.
Financial results for 2012
The reporting of the 2012 financial results need to be considered in light of the events in 2013, particularly the cessation of The Urology Co, and the financing announced in March 2013 and completed on 5 April 2013.
Although operations at The Urology Co ceased trading in the new year, it is not considered as a "discontinued operation" at 31 December 2012 under IFRS 5 as the decisions were taken in 2013. Consequently, the financial results for 2012 are presented on a consolidated basis showing the Group as a whole with The Urology Co as a full trading member of the Group.
Readers are advised to review the segmental reporting of results, showing the Group's operations in three parts - the Plethora Development business dealing with PSD502, The Urology Co, and Central overheads to gain a full understanding of the trading results.
Plethora Development
During 2012 the Company incurred R&D costs of £611,000 (2011: £172,000). These costs relate solely to the regulatory approval work for PSD502. A relatively limited amount of work was conducted in 2011. The costs incurred in 2012 are in line with the Company's expectations.
Looking forward to 2013, the Company anticipates that regulatory costs will be of a similar order of magnitude for the coming year as the Company responds the EMA's questions for review.
The Urology Co
The Urology Co earned revenue of £582,000 (2011: £181,000) for the year, an increase of 3-fold over the prior year. On this, gross profit of £65,000 (2011: £37,000) with margins of 11% (2011: 20%) was achieved. Offset against this were Operating costs of £1,111,000 (2011: £1,229,000), largely comprising sales and marketing costs of £890,000 (2011: £1,117,000). Overall The Urology Co generated a loss for 2012 of £1,046,000 (2011: £1,191,000).
On 25 February 2013, The Urology Co was placed into administration and as a result its assets are reserved for its creditors. It is not anticipated that there will be any recovery for the Company as the shareholder. Consequently provision has been made in full against the inter-company balances due. In 2013 there will be a number of adjustments to both the assets and liabilities of that entity and the results will be shown as a discontinued item.
The immediate effect of ceasing this operation will be to reduce cash outflow of this operation and ensure that the Company's resources are focused entirely on PSD502.
Corporate/Unallocated
The Company incurred total Central Operating Costs of £905,000 (2011: £1,343,000) a decrease of 34% compared to the prior year. Savings were made in a number of areas including a reduction in the management structure, combining the roles of CEO and CFO, and a reduction in property costs following the Company's move in February 2012.
The Company continues to review its operating cost base to determine if there are further savings which can be made. Given the reduced operational activities of the Group following the closure of The Urology Co, steps have been taken, and others identified, to reduce these costs further. In May 2013 the Company closed its London office and relocated to Oxfordshire. This has reduced costs further and brought operational efficiencies being co-located in the same office building as Plethora's European regulatory consultants.
The Company recorded total finance costs of £1,308,000 (2011: £595,000) for the year. A large component of this (£314,000 (2011: £40,000)) relates to accounting for fair value adjustments of the debt instruments which do not have a cash effect on the Company but are necessary for compliance with IFRS. Further detail of these are set out in the Note 8.
Balance sheet
At 31 December 2012 the consolidated balance sheet carried a number of items relating to The Urology Co. Given the administration of The Urology Co, the directors have considered the value realised for assets and based on IAS2, inventory has been written down to £43,000 (2011: £181,000). Based on the principles within IAS39, debtors have also been presented after provisions for the value realised before administration. The effect is that debtors have been written down to £116,000 (2011: £118,000). Trade creditors and accruals of £1,566,000 (2011: £1,119,000) are recorded at the year end at full face value as although a proportion of these remained at the point of administration and will not crystallise on the Group in 2013, these creditors do not meet the derecognition criteria as set out in IAS39.
The residual assets of the Group relating to Plethora Solutions Limited and Plethora Solutions Holdings plc at 31 December 2012 were: cash £31,000 (2011: £985,000), and prepayments £41,000 (2011: £98,000). In addition the Company had trade creditors £769,000 (2011: £738,000) and accruals £797,000 (2011: £381,000).
Borrowings
At 31 December 2012 the Group had total borrowings of £4,413,000 (2011: £2,711,000), full details of which are set out in Note 8.
At 31 December 2012, a number of defaults existed and accordingly, in compliance with accounting standards, these must be recorded as current liabilities.
On 15 March 2013 the Company announced a restructuring of its borrowings, as described further in Note 9. This restructuring was subject to completion of the associated equity financing and this was completed on 5 April 2013. Part of the restructuring was to waive all prior defaults and as at that date all facilities were brought back into full compliance with their terms. In addition, it has been agreed that the maturity of these facilities be extended to 31 December 2014 and beyond. As a result of this the facilities will no longer be classified as being current liabilities.
2013 Outlook
Following the closure of The Urology Co in 2013 the operating cost base of the Company has been reduced substantially. Over the course of 2012 the Group has reduced the General & Administrative costs of the Company and further savings will be sought during 2013.
At the same time the debt restructuring provides for all future interest to accrue to the point of maturity or repayment. This will allow for the Company's cash resources to be focused on the goal of achieving the registration of PSD502 in Europe.
In 2012 the Company incurred £611,000 in R&D costs related to the regulatory filing processes. It is expected that 2013 costs will be of a similar order of magnitude.
The prosecution of the European Marketing Authorisation Application with the EMA is progressing according to plan and based on the information available the Directors believe there are no matters which should prevent approval in late 2013.
The Company has stated that it intends to partner PSD502 with a large pharmaceutical company with the sales and marketing resources to exploit fully the product's potential in the market. It has previously been announced that conversations have commenced with a number of companies. The directors believe that such an agreement will provide for the payment of upfront, milestone and royalties and that these have the potential, based on previous negotiations and comparable transactions to provide very significant cashflow to the Company.
PLETHORA SOLUTIONS HOLDING S PLC
Consolidated statement of comprehensive income - audited
For the year ended 31 December 2012
Note | 2012 | 2011 | 2011 | 2011 | |
£'000 | £'000 | £'000 | £'000 | ||
Before exceptional items | IAS32 Adjustment | Total | |||
Revenue | 3 | 582 | 189 | - | 189 |
Cost of sales | (517) | (143) | - | (143) | |
Gross profit | 65 | 46 | - | 46 | |
Other operating income | - | 25 | - | 25 | |
Operating Costs: | |||||
- research and development expenses | (611) | (172) | - | (172) | |
- selling and distribution expenses | (890) | (1,117) | - | (1,117) | |
- general and administrative expenses | (1,129) | (1,450) | - | (1,450) | |
Total Net Operating Costs | (2,630) | (2,714) | - | (2,714) | |
Operating loss | (2,565) | (2,688) | - | (2,668) | |
Exceptional item - re convertible loan notes | 4 | - | - | (1,738) | (1,738) |
Finance costs | (1,308) | (595) | - | (595) | |
Finance income | 1 | 143 | - | 143 | |
Loss from continuing operations for the year before taxation | (3,872) | (3,120) | (1,738) | (4,858) | |
Income tax | - | - | - | - | |
Loss for the year and total comprehensive loss attributable to the owners of the parent | (3,872)
| (3,120)
| (1,738)
| (4,858)
| |
Loss per share | |||||
Basic and diluted loss per share from total and continuing operations | 5 | (1.9)p | (5.4)p |
PLETHORA SOLUTIONS HOLDINGS PLC
CONSOLIDATED balance sheet - AUDITED
At 31 December 2012
Note | 2012 | 2011 | |
£'000 | £'000 | ||
ASSETS | |||
Non current | |||
Property, plant and equipment | 1 | 4 | |
Current | |||
Inventories | 43 | 181 | |
Trade and other receivables | 6 | 157 | 336 |
Cash and cash equivalents | 31 | 985 | |
231 | 1,502 | ||
Total assets | 232 | 1,506 | |
LIABILITIES | |||
Current | |||
Trade and other payables | 7 | (1,566) | (1,119) |
Borrowings | 8 | (3,806) | (972) |
Non-current | |||
Borrowings | 8 | (607) | (1,739) |
Total liabilities | (5,979) | (3,830) | |
Net liabilities | (5,747) | (2,324) | |
EQUITY | |||
Share capital | 2,089 | 2,008 | |
Share premium | 25,083 | 24,782 | |
Other reserves | 4,908 | 4,908 | |
Convertible loan note reserve | 137 | 112 | |
Share based payment reserve | 1,964 | 1,922 | |
Accumulated losses | (39,928) | (36,056) | |
Total shareholders' deficit | (5,747) | (2,324) | |
PLETHORA SOLUTIONS HOLDINGS PLC
CONSOLIDATED STATEMENT OF changes in equity - audited
For the year ended 31 December 2012
Share capital | Share premium | Other reserves | Convertible loan note reserve | Share based payment reserve | Accumulated losses | Total | ||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
Balance at 1 January 2011 | 543 | 22,127 | 4,908 | 224 | 1,911 | (33,015) | (3,302) |
|
Loss and total comprehensive loss for the year Transactions with owners: | - | - | - | - | - | (4,858) | (4,858) | |
Equity component of convertible loan notes | - | - | - | (112) | - | 112 | - | |
Fair value gain for conversion of loan notes | - | - | - | - | - | 1,705 | 1,705 | |
Issue of new shares | 1,465 | 2,763 | - | - | - | - | 4,228 | |
Cost of issuing new shares | - | (108) | - | - | - | - | (108) | |
Employee share based compensation | - | - | - | - | 11 | - | 11 | |
Balance at 31 December 2011 | 2,008 | 24,782 | 4,908 | 112 | 1,922 | (36,056) | (2,324) | |
Loss and total comprehensive loss for the year Transactions with owners: |
- |
- |
- |
- |
- |
(3,872) |
(3,872) | |
Equity component of Mellon Bridge Loans | - | - | - | 25 | - | - | 25 | |
Issue of new shares | 81 | 301 | - | - | - | - | 382 | |
Employee share based compensation | - | - | - | - | 42 |
| 42 | |
Balance at 31 December 2012 | 2,089 | 25,083 | 4,908 | 137 | 1,964 | (39,928) | (5,747) | |
PLETHORA SOLUTIONS HOLDINGS PLC
CONSOLIDATED cash flow statement - AUDITED
For the year ended 31 December 2012
| Note | 2012 | 2011 | |
| £'000 | £'000 | ||
| ||||
Cash flows from operating activities
| ||||
Loss before taxation | (3,872) | (4,858) | ||
Finance income | (1) | (143) | ||
Finance costs | 1,308 | 595 | ||
Share-based payment charge | 42 | 11 | ||
Depreciation of property, plant and equipment | 3 | 5 | ||
Change in inventories | 138 | (16) | ||
Change in trade and other receivables | 179 | (131) | ||
Change in trade and other payables | 447 | 391 | ||
Fair value loss on conversion of loan notes | - | 1,738 | ||
|
| |||
Cash utilised by operations | (1,756) | (2,408) | ||
Interest paid | (99) | (74) | ||
Income taxes received | - | - | ||
|
| |||
Net cash outflow from operating activities | (1,855) | (2,482) | ||
Cash flows from investing activities | ||||
Purchases of property, plant and equipment | - | (2) | ||
Interest received | 1 | 1 | ||
|
| |||
Net cash used in investing activities | 1 | (1) | ||
Cash flows from financing activities | ||||
Proceeds from issue of shares | 350 | 2,057 | ||
Share issue costs | - | (108) | ||
Proceeds from receipt of borrowings | 550 | 850 | ||
Loan issue costs | - | (87) | ||
|
| |||
Net cash generated from financing activities | 900 | 2,712 | ||
|
| |||
Net (decrease) / increase in cash and cash equivalents | (954) | 229 | ||
Cash and cash equivalents at the beginning of year | 985 | 756 | ||
|
| |||
Cash and cash equivalents at end of year | 31 | 985 | ||
|
| |||
1 Presentation of financial statements
The financial information set out in this audited preliminary statement does not comprise the Company's statutory accounts within the meaning of section 434 of the Companies Act 2006. The statutory accounts of the Company for the year ended 31 December 2012, currently unpublished, will be delivered to the Registrar of Companies in due course and will also be sent to shareholders.
Whilst the financial information included in this preliminary announcement has been prepared in accordance with EU endorsed International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs.
The financial information set out in this audited preliminary statement includes comparative figures that have been prepared on the same basis. The auditors have reported on the financial statements for the year ended 31 December 2012, which were prepared under IFRSs as endorsed by the EU. Their report which, whilst unmodified, contains reference to the significant uncertainty disclosed in note 2 below. The auditors' report does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.
This preliminary statement was approved by the board on 7 June 2013.
2 accounting policies
Basis of preparation
These consolidated financial statements have been prepared under the historical cost convention as modified by financial liabilities at fair value through profit and loss using the required measurement bases specified under International Financial Reporting Standards (IFRS) and in accordance with applicable IFRS as adopted by the European Union, IFRIC interpretations and with those parts of the Companies Act 2006 applicable to Companies reporting under IFRS. Accounting policies have been applied consistently other than where new policies have been adopted.
Overall considerations
The significant accounting policies that have been used in the preparation of these consolidated financial statements are summarised below.
The consolidated financial statements have been prepared using the measurement bases specified by IFRS for each type of asset, liabilities, income and expense. The measurement bases are more fully described in the accounting policies below, which have been applied consistently throughout the year.
The accounting estimates and assumptions are consistent with the Group's latest approved budget forecast where applicable. Judgements are based on the information available at each balance sheet date. All estimates are based on the best information available to management.
The Group can classify as discontinued operations only those operations which meet the criteria set out IFRS5 as at the Balance Sheet date. The Urology Company Limited, which was placed into administration in February 2013, did not meet these criteria as at 31 December 2012 and is not shown as a discontinued operation. Post-balance sheet evidence of the recoverability of the current assets of this business has been utilised in determining the realisable values of trade receivables and inventories as at the Balance Sheet date.
Exceptional items, namely items that are material either because of their size or their nature, and which are non-recurring, are presented within their relevant Statement of Comprehensive Income category, but highlighted through separate disclosure. The separate reporting of exceptional items helps provide a full understanding of the Company's underlying performance.
Going concern
In considering the appropriate basis on which to prepare the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future.
As at 31 December 2012, the Group had £31,000 of cash and cash equivalents and net liabilities of £5,747,000. At 31 December 2012, a number of defaults existed in regard to the Group's loan facilities and accordingly, in compliance with accounting standards, these loans have been recorded as current liabilities. Post-year end, the Group has restructured its borrowings, which included the lenders waiving all prior defaults and, as at the date of the refinancing (being 18 March 2013), all facilities were brought back into full compliance with their terms. In addition, the Group secured £2.124 million, before expenses, through the Placing of 106,200,000 New Ordinary Shares at a price of 2p per share. Furthermore, the Directors placed a subsidiary undertaking, The Urology Company Limited, into administration on 25 February 2013. The immediate effect of ceasing this operation was to reduce the cash outflow of this operation so that the Group's resources can be focused entirely on PSD502.
The Directors have prepared detailed cash flow forecasts for the period to 31 December 2014, which show that the Group has adequate working capital for the forecast period. These cash flow projections assume that a number of as yet uncertain events occur including that planned raising of capital is completed and/or that the Company concludes partnering arrangements. It is an underlying assumption that the approval of the PSD502 Marketing Authorisation is successful within the expected timeframes.
Consequently, the Directors have concluded that it is appropriate to prepare the Group's financial statements on the going concern basis, which assumes that the Group 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 Group's ability to continue as a going concern. In the event that some combination of the above events fails to occur as expected, the Group may be unable to realise its assets and discharge its liabilities in the normal course of business.
Significant accounting estimates and judgements
Certain estimates and judgments need to be made by the Directors of the Group which affect the results and position of the Group as reported in the financial statements. Estimates and judgments are required for example, as at the reporting date, as not all liabilities have been settled and certain assets/ liabilities are recorded at fair value which requires a number of estimates and assumptions to be made.
The major areas for judgments within the financial statements are as follows:
• preparing the financial statements on a going concern basis;
• impairment of assets of post-year end discontinued activities; and
• fair value revaluation of warrant instruments and other debt instruments.
The reasons that the Directors believe it is appropriate to prepare the financial statements on a going concern basis are detailed above.
Judgment is required in determining required inventory obsolescence provisions. Management take into consideration, the expiry date of inventory on hand as well as the post-year end discontinuation of the business.
There are no other major areas of estimation.
3 segmental reporting
At 31 December 2012, 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" - albeit this subsidiary was closed down and placed into administration post year end. 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.
Year ended 31 December 2012 |
Plethora Development £'000 |
The Urology Co £'000 |
Unallocated £'000 |
Group £'000 |
Continuing operations | ||||
Revenue - external customers | - | 582 | - | 582 |
Depreciation | (3) | - | - | (3) |
Other operating costs | (611) | (1,628) | (905) | (3,144) |
Finance costs | - | - | (1,308) | (1,308) |
Finance income | - | - | 1 | 1 |
Loss before tax | (614) | (1,046) | (2,212) | (3,872) |
Taxation | - | - | - | - |
Loss for the year from continuing operations | (614) | (1,046) | (2,212) | (3,872) |
Inventories | - | 43 | - | 43 |
Other segment assets | - | 160 | 1 | 161 |
Unallocated assets | ||||
- Current assets | - | - | 28 | 28 |
Total assets | - | 203 | 29 | 232 |
Other segment liabilities | (611) | (509) | (446) | (1,566) |
Unallocated liabilities | ||||
- Borrowings | - | - | (4,413) | (4,413) |
- Current liabilities | - | - | - | - |
Total liabilities | (611) | (509) | (4,859) | (5,979) |
Net liabilities | (611) | (306) | (4,830) | (5,747) |
Year ended 31 December 2011 |
Plethora Development £'000 |
The Urology Co £'000 |
Unallocated £'000 |
Group £'000 |
|
Continuing operations |
|
| |||
Revenue - external customers | 8 | 181 | - | 189 |
|
Other operating income | - | - | 25 | 25 |
|
Depreciation | - | - | (5) | (5) |
|
Other operating costs | (162) | (1,372) | (1,343) | (2,877) |
|
Exceptional costs | - | - | (1,738) | (1,738) |
|
Finance costs | - | - | (595) | (595) |
|
Finance income | - | - | 143 | 143 | |
Profit/(loss) before tax | (154) | (1,191) | (3,513) | (4,858) | |
Taxation | - | - | - | - | |
Loss for the year from continuing operations | (154) | (1,191) | (3,513) | (4,858) | |
Inventories | - | 181 | - | 181 | |
Other segment assets | - | 178 | 4 | 182 | |
Unallocated assets | |||||
- Current assets | - | - | 1,143 | 1,143 | |
Total assets | - | 359 | 1,147 | 1,506 | |
Other segment liabilities | (177) | (321) | - | (498) | |
Unallocated liabilities | |||||
- Borrowings | - | - | (2,711) | (2,711) | |
- Current liabilities | - | - | (621) | (621) | |
Total liabilities | (177) | (321) | (3,332) | (3,830) |
|
| |||||
Net assets/(liabilities) | (177) | 38 | (2,185) | (2,324) |
|
4 Exceptional items
There are no exceptional items in 2012. However in October 2011, concurrent with the completion of the financing, £1,655,000 of the £2,445,000 outstanding loan notes were repaid through the conversion of the principal plus accrued interest to 86,946,731 new ordinary shares at 2.5p per share.
The Board has complied with IAS32 Financial Instruments in respect of the presentation of the convertible loan notes. Under this standard the Company is required to recognise a loss of £1,738,000 being the difference between the 12.5p the original conversion terms were set and the actual conversion value, 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 to cancel the cost booked. This charge has no impact on cashflow, or after the gain in reserves on shareholders funds.
5 LOSS PER SHARE
The calculation of the basic and diluted loss per share is based on the loss on ordinary activities after tax and on the weighted average number of ordinary shares in issue during the year. The earnings and weighted average number of shares used in the calculations are set out below:
2012 Loss £'000 | 2012 Loss per share pence | 2011 Loss £'000 | 2011 Loss per share pence | |
Loss for the year (excluding exceptional item) | (3,872) | (1.9)p | (3,120) | (3.5)p |
Exceptional item - IAS 32 Adjustment | - | - | (1,738) | (1.9)p |
Basic and total loss per share | (3,872) | (1.9)p | (4,858) | (5.4)p |
| ||||
Diluted and total loss per share | (3,872) | (1.9)p | (4,858) | (5.4)p |
Basic loss per share is calculated based on a weighted average number of shares in issue of 205,702,248 (2011: 89,880,265). Diluted earnings per share takes into account the dilutive effect of share options to the extent they are in the money and convertible loan notes. The dilutive effect on the loss per share in 2012 is not shown as the effect on the loss per share of share options and convertible loans is anti-dilutive on the loss.
6 Trade and other RECEIVABLES
2012 | 2011 | ||
£'000 | £'000 | ||
Trade receivables | 154 | 118 | |
Less: provision for impairment of trade receivables | (38) | - | |
Trade receivables - net | 116 | 118 | |
Other receivables | - | 120 | |
Prepayments and accrued income | 41 | 98 | |
Total | 157 | 336 | |
7 current liabilities : trade and other payables
| 2012 | 2011 | ||||||
| £'000 | £'000 | ||||||
| ||||||||
| Trade and other payables | 769 | 738 | |||||
Social security and other taxes | 178 | 27 |
| |||||
Accrued expenses | 619 | 354 |
| |||||
| 1,566 | 1,119 | ||||||
| ||||||||
Due to the short term duration of trade and other payables the carrying value in the balance sheet represents the fair value of the liabilities.
8 borrowings
2012 | 2011 | ||
£'000 | £'000 | ||
Current borrowings | |||
Convertible Loan Notes Due 2012 | 800 | 741 | |
Interest accrued on Convertible Loan Notes Due 2012 | 335 | 231 | |
CfE Loan Due 2015 | 901 | - | |
Interest on CfE Loan Due 2015 | 108 | - | |
Galloway Loan Due 2015 | 756 | - | |
Interest on Galloway Loan Due 2015 | 91 | - | |
Mellon Bridge Loans | 804 | - | |
Interest accrued on Mellon Bridge Loans | 11 | - | |
3,806 | 972 | ||
Non current borrowings | |||
CfE Loan Due 2015 | - | 733 | |
CfE loan warrant instrument | 238 | 120 | |
Interest on CfE Loan Due 2015 | - | 24 | |
Galloway Loan Due 2015 | - | 642 | |
Galloway Loan Warrant instrument | 369 | 173 | |
Interest on Galloway Loan Due 2015 | - | 47 | |
607 | 1,739 | ||
Total Borrowings | 4,413 | 2,711 |
At 31 December 2012, a number of breaches existed on all of the loan facilities and accordingly, in compliance with accounting standards, these must be recorded as current liabilities.
(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.
Prior to the debt restructuring the terms of the outstanding Convertible Loan Notes Due 2012 were: maturity 31 December 2012; coupon interest 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. This facility was not repaid on maturity and was in default at the balance date.
Under IFRS £112,000 (2011: £112,000) of the Convertible Loan Notes Due 2012 is regarded as equity and is recorded in the convertible loan note reserve.
As part of the Debt Restructuring post year end, the Company agreed with the holders of £800,000 Convertible Loan Notes, which had maturity of 31 December 2012, to extend the maturity to 31 December 2014. In addition, interest accrued on the Convertible Loan Notes to 28 February 2013 being £351,707 will be paid through the issue of 17,858,342 New Ordinary Shares at 2p per share. Furthermore, the interest rate from 1 March 2013 has been increased to 14% per annum and will accrue to maturity. Finally, the conversion price of the Convertible Loan Notes has been changed to 2p per share from 12.5p per share.
The following non-IFRS disclosure shows the effect of the accounting treatment.
Convertible Loan Notes Due 2012 | 31 December2012
| 31 December 2011 |
£'000 | £'000 | |
Amount recorded in liabilities | 800 | 741 |
Amount recorded in equity | 112 | 112 |
912 | 853 | |
Add: loan arrangement fees set against liability | - | 18 |
Less: notional interest | (112) | (71) |
Principal amount of loan notes | 800 | 800 |
(ii) CfE Loan Due 2015
On 29 June 2010 the Company entered into a £1,000,000, five year secured term loan ("CfE Loan") with Capital For Enterprise Fund A L.P. ("CfE Fund"), which is managed by Maven Capital Partners. 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. Prior to the restructuring in 2013 the terms of the CfE Loan were: 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 was, 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.
Post-year end, the CfE Loan, which was repayable on 30 June 2015, will now be repayable on 31 March 2015 as part of the Debt Restructuring agreements. As with the Convertible Loan Notes, interest accrued to 28 February 2013, being £128,384 will be paid through the issue of 6,419,190 New Ordinary Shares. The interest rate from 1 March 2013 to Maturity will be reset to 14% per annum and will accrue to maturity. The CfE loan carries a redemption premium of 25%. It has been agreed that the loan and the accrued interest are convertible into New Ordinary Shares at 2p per share at the option of the Lender. As part of the arrangements regarding the CfE Loan, CfE Fund was granted a warrant to subscribe, at a price of 1p per Ordinary Share, for Ordinary Shares representing up to 3% of the fully diluted ordinary share capital of the Company. This warrant was subject to certain restrictions which have been modified as part of the Debt Restructuring. The warrant was subject to a cap (Ordinary Shares having a market value at the date of subscription of £500,000) - this cap has been removed; the expiry date of the warrant has been extended to 31 March 2023; and the warrant is now exercisable at any time at the discretion of CfE Fund having previously only been exercisable by reference to an Exit Event.
The following non-IFRS disclosure shows the effect of the accounting treatment.
CfE Loan Due 2015 | 31 December 2012 | 31 December 2011
|
£'000 | £'000 | |
Amount recorded in current liabilities (excl. principal interest) | 901 | - |
Amount recorded in non-current liabilities (excl. principal interest) | - | 733 |
Warrant instrument recorded in non-current liabilities | 238 | 120 |
Add: loan arrangement fees set against liability | 60 | 84 |
(Less)/Add: fair value movement on warrant instrument | (118) | 142 |
Less: notional interest | (81) | (79) |
Principal loan amount | 1,000 | 1,000 |
(iii) Galloway Loan Due 2015
On 20 October 2011, the Company entered into a £850,000 secured term loan ("Galloway Loan") with Galloway Limited, a company in which Jim Mellon has an interest. 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.
It was agreed as part of the Debt Restructuring that maturity on Galloway Loan facility of £850,000 will be 31 March 2015. In addition, the interest accrued on the loan to 28 February 2013, being £78,014 will be paid through the issue of 3,900,685 New Ordinary Shares at 2p per share. The interest rate from 1 March 2013 to maturity will be reset at 14 per cent. per annum and will accrue to maturity. The Galloway Loan carries a redemption premium of 25 per cent. It has been agreed that the Galloway Loan and the accrued interest are convertible into New Ordinary Shares at 2p per share at the option of the Lender. As part of the arrangements regarding the Galloway Loan, Galloway was granted a warrant to subscribe, at a price of 1.25p per Ordinary Share, for Ordinary Shares representing up to 5% of the fully diluted ordinary share capital of the Company. This warrant was subject to certain restrictions which have been modified as part of the Debt Restructuring. The warrant was subject to a cap (Ordinary Shares having a market value at the date of subscription of £1,500,000) - this cap has been removed; the expiry date of the warrant has been extended to 31 March 2023; and the warrant is now exercisable at any time at the discretion of Galloway having previously only been exercisable by reference to an Exit Event.
The following non-IFRS disclosure shows the effect of the accounting treatment.
Galloway Loan Due 2015 | 31 December 2012 | 31 December 2011
|
£'000 | £'000 | |
Amount recorded in current liabilities (excl. principal interest) | 756 | - |
Amount recorded in non-current liabilities (excl. principal interest) | - | 642 |
Warrant instrument recorded in non-current liabilities | 369 | 173 |
Add: loan arrangement fees set against liability | 60 | 85 |
Less: fair value adjustment for warrant instrument | (196) | (39) |
Less: notional interest | (139) | (11) |
Principal loan amount | 850 | 850 |
(iv) Mellon Bridge Loans
During 2012, Jim Mellon provided additional working capital by way of two bridging loans of £350,000 and £200,000 on the 20 September 2012 and 11 December 2012 respectively.
Mellon Bridge Loan 1
On 20 September 2012, the Company secured a £350,000 bridge loan from Jim Mellon for the purpose of providing working capital for the Group and funding for the regulatory submission of PSD 502 dossier to EMA. This was repayable on 20 days notice and has an interest rate of 10 per cent per annum. This facility also carries a redemption premium of 75 per cent.
As part of the Debt Restructuring, it was agreed that the maturity on this loan will become 31 March 2015. In addition, the interest accrued on the loan to 28 February 2013, being £15,342 will be paid through the issue of 767,123 New Ordinary Shares at 2p per share. The interest rate from 1 March 2013 to maturity will remain unchanged at 10 per cent. per annum and will accrue to maturity. The redemption premium of 75% remains unchanged. It has been agreed that the loan and the accrued interest are convertible into New Ordinary Shares at 2p per share at the option of the Lender. If this loan is repaid at maturity this will, with the accrued interest and the redemption premium, give rise to a repayment of £667,877 and consequently if converted will give rise to the issue of 33,393,836 New Ordinary Shares.
The following non-IFRS disclosure shows the effect of the accounting treatment.
Mellon Bridge Loan 1 | 31 December 2012 |
£'000 | |
Amount recorded in current liabilities (excl. principal interest) | 623 |
Less: notional interest | (273) |
Principal loan amount | 350 |
Mellon Bridge Loan 2:
On 11 December 2012, the Company secured a further £200,000 bridge loan from Jim Mellon for provision of working capital. Interest is accrued on this facility at 10 per cent per annum and has applicable redemption premium of 33%. This facility is convertible to ordinary shares at 5p per share at the Company's option within the first year and at the lender's option after the first anniversary of the loan. The conversion option has been fair valued at £25,000 and represents an addition to the Convertible Loan Note Reserve in the year.
It has been agreed as part of the Debt Restructuring that this loan together with the interest accrued and the applicable 33% redemption premium on the loan will be rolled up to 31 March 2015 and may be payable, at the option of Jim Mellon, in New Ordinary Shares at 2p per share.
The following non-IFRS disclosure shows the effect of the accounting treatment.
Mellon Bridge Loan 2 | 31 December 2012 |
£'000 | |
Amount recorded in current liabilities (excl. principal interest) | 181 |
Amount recorded in equity | 25 |
Less: notional interest | (6) |
Principal loan amount | 200 |
The future contractual payments of principal for convertible loan notes and third party borrowings are as follows:
2012 | 2011 | |
£'000 | £'000 | |
Within one year: | ||
Convertible Loan Notes Due 2012 | 800 | 800 |
CfE Loan Due 2015 | 1,000 | - |
Galloway Loan Due 2015 | 850 | - |
Mellon Bridge Loans | 550 | - |
In more than two years but not more than five years: | ||
CfE Loan Due 2015 | - | 1,000 |
Galloway Loan Due 2015 | - | 850 |
3,200 | 2,650 |
9 Post Balance Sheet Events
Financing and Debt Restructuring
On 18th March 2013, the Company announced that it had secured £2.124 million, before expenses, through the Placing of 106,200,000 New Ordinary Shares at a price of 2p per share, which represents an 8% premium to the closing mid market price on 15 March 2013. The Company will use the proceeds of the Placing to provide working capital and complete the regulatory approval of PSD502 in Europe.
At the same time the Company entered into agreements with its lenders in relation to a Debt Restructuring, further details are set out below.
The convertible Loan Notes of £800,000, which had maturity of 31 December 2012, has been extended to 31 December 2014. In addition, interest accrued on the Convertible Loan Notes to 28 February 2013 being £351,707 will be paid through the issue of 17,858,342 New Ordinary Shares at 2p per share. Furthermore, the interest rate from 1 March 2013 has been increased to 14% per annum and will accrue to maturity. Finally, the conversion price of the Convertible Loan Notes has been changed to 2p per share from 12.5p per share.
The Capital for Enterprise Loan, managed by Maven Capital Partners, which was repayable on 30 June 2015, will now be repayable 31 March 2015. As with the Convertible Loan Notes, interest accrued to 28 February 2013, being £128,384 will be paid through the issue of 6,419,190 New Ordinary Shares. The interest rate from 1 March 2013 to Maturity will be reset to 14% per annum and will accrue to maturity. The CfE loan carries a redemption of 25%. It has been agreed that the loan and the accrued interest are convertible into New Ordinary Shares at 2p per share at the option of the Lender. As part of the arrangements regarding the CfE loan, Capital for Enterprise Fund A .L.P. was granted a warrant to subscribe, at a price of 1p per Ordinary Share, for Ordinary Shares representing up to 3%. of the fully diluted ordinary share capital of the Company. This warrant was subject to certain restrictions which have been modified as part of the Debt Restructuring. The warrant was subject to a cap (Ordinary Shares having a market value at the date of subscription of £500,000) - this cap has been removed; the expiry date of the warrant has been extended to 31 March 2023; and the warrant is now exercisable at any time at the discretion of Capital For Enterprise having previously only been exercisable by reference to an Exit Event.
The Galloway loan facility of £850,000 was secured from Galloway Limited, a company in which Jim Mellon has an interest. It has been agreed as part of the Debt Restructuring that maturity on this loan will be 31 March 2015. In addition, the interest accrued on the loan to 28 February 2013, being £78,014 will be paid through the issue of 3,900,685 New Ordinary Shares at 2p per share. The interest rate from 1 March 2013 to maturity will be reset at 14% per annum and will accrue to maturity. The Galloway Loan carries a redemption premium of 25%. It has been agreed that the Galloway Loan and the accrued interest are convertible into New Ordinary Shares at 2p per share at the option of the Lender. As part of the arrangements regarding the Galloway Loan, Galloway was granted a warrant to subscribe, at a price of 1.25p per Ordinary Share, for Ordinary Shares representing up to 5% of the fully diluted ordinary share capital of the Company. This warrant was subject to certain restrictions which have been modified as part of the Debt Restructuring. The warrant was subject to a cap (Ordinary Shares having a market value at the date of subscription of £1,500,000) - this cap has been removed; the expiry date of the warrant has been extended to 31 March 2023; and the warrant is now exercisable at any time at the discretion of Galloway having previously only been exercisable by reference to an Exit Event.
During 2012, Jim Mellon provided additional working capital by way of two bridging loans, namely Mellon Bridge Loan 1 of £350,000 on the 20 September 2012 and Mellon Bridge Loan 2 of £200,000 secured on 11 December 2012.
As part of the Debt Restructuring, it was agreed that maturity of Mellon Bridge Loan 1 of £350,000 will become 31 March 2015. In addition, the interest accrued on the loan to 28 February 2013, being £15,342 will be paid through the issue of 767,123 New Ordinary Shares at 2p per share. The interest rate from 1 March 2013 to maturity will remain unchanged at 10 per cent. per annum and will accrue to maturity. The Mellon Bridge Loan 1 carries a redemption premium of 75%. It has been agreed that the loan and the accrued interest are convertible into New Ordinary Shares at 2p per share at the option of the Lender.
As part of the Debt Restructuring, it has been agreed that Mellon Bridge Loan 2 of £200,000 together with the interest accrued and the applicable 33% redemption premium on the loan will be rolled up to 31 March 2015 and may be payable, at the option of Jim Mellon, in New Ordinary Shares at 2p per share.
In addition to the above bridge loans, Jim Mellon has made available to the Company a further £200,000 bridge loan upon announcement of the Placing which was repaid upon its completion (the "Further Mellon Bridge Loan").
Administration
Following a strategic review of its subsidiary The Urology Company Limited, the Group subsequently announced on 25 February 2013 that it was appointing Administrators to The Urology Company Limited.
Board Changes
On 12 April 2013 the Group announced the following board changes: that Richard Horsman has resigned as non executive director with immediate effect; and that Bill Robinson notified the board that he intends to retire as Chairman and to stand down as a non-executive director of the Company. The board has agreed that Jim Mellon will undertake the role of Chairman with immediate effect on an interim basis until a successor can be found. Mr Robinson will remain as a non-executive director of the Company until the next Annual General Meeting at which he will not stand for re-election.