TIDMAOI
RNS Number : 9100Z
AOI Medical, Inc.
30 September 2009
AOI Medical, Inc.
Interim Results
London, UK, 30 September 2009 - AOI Medical, Inc. (the "Company" or "AOI") (AIM:
AOI), a medical device company focusing on innovative orthopaedic medial devices
for the spine and trauma markets, today announces its interim results for the
six months ended 30 June 2009.
Highlights
* As at 30 June 2009, surgical procedures had been successfully completed on 49
patients as part of the Company's 60 patient confirmatory clinical study for
Ascendx(TM) Vertebral Compression Fracture ("VCF") Reduction System
("Ascendx(TM)") (treatment for vertebral compression fractures)
* In September 2009, the Company successfully completed enrollment for its 60
patient confirmatory clinical study for Ascendx(TM)
* In August 2009, the Company successfully raised US$2.6 million through the issue
of senior convertible loan notes
* Cash and cash equivalents as at 30 June 2009 were US$1.4 million
Enquiries:
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| | |
+----------------------------------------------+---------------------------------+
| Numis Securities Ltd | Tel: +44 (0)20 7260 1000 |
+----------------------------------------------+---------------------------------+
| Nominated Adviser: Michael Meade / Brent | |
| Nabbs | |
+----------------------------------------------+---------------------------------+
| Corporate Broking: David Poutney | |
+----------------------------------------------+---------------------------------+
Background to AOI Medical, Inc.
AOI is a medical device company focusing on the development and
commercialisation of innovative orthopaedic medical devices for the spine and
trauma markets. It is progressing the development of three separate technology
platforms: Ascendx(TM) VCF Reduction System, BAMF Trauma and Cervical Plate.
Further information can be found at www.aoimedical.net
Ascendx(TM) VCF Reduction System Clinical Trial
On 7 September 2009, the Company announced that it had successfully completed
enrollment for the sixty (60) patient clinical trial of its Ascendx(TM)
Vertebral Compression Fracture ("VCF") Reduction System ("Ascendx(TM)"). The
trial was initiated in June 2008 in eight sites across the United States.
The primary end point of the trial was acute procedural success defined as
successful device deployment, cement delivery, and device withdrawal. The data
from the trial will be used as clinical support for the Company's 510(k)
submission to the FDA in relation to Ascendx(TM).
Senior Convertible Loan Notes
On 5 August 2009, the Company announced that it had successfully raised US$2.6
million through the issue of senior convertible loan notes. The net proceeds
from this fundraising are being used to augment the Company's working capital
for the FDA approval and the market launch of Ascendx(TM).
The senior convertible loan notes ("SCLN's"), shall be repayable on or before 30
September 2012 although the SCLN's shall become convertible at the option of the
holder after 1 October 2011 (the "Conversion Date"). The SCLN's carry a coupon
of 8 per cent. interest per annum, payable quarterly in arrears until such time
as they are repaid or converted in accordance with the terms. The SCLN's are
callable, or repaid with no risk of conversion, by the Company on or before the
Conversion Date, after which the SCLN's are convertible into shares of common
stock in the Company ("Common Shares") at a price of 60 cents per Common Share.
Additionally, subscribers for the SCLN's were issued 333 warrants, with an
exercise price of 60 cents per Common Share, for each US$1,000 principal amount
of SCLNs purchased and an additional 100 warrants for each US$1,000 principal
amount of SCLNs purchased if the SCLN's have not been repaid by the Conversion
Date (the "Warrants"). The Warrants may be exercised into new Common Shares at
any time prior to the fifth anniversary of the issuance of the Warrants. The
placement agent for this transaction was issued 167 warrants, with an exercise
price of 60 cents per Common Share, for each US$1,000 principal amount of SCLNs
purchased (the "Placement Agent Warrants"). The Placement Agent Warrants may be
exercised into new Common Shares at any time prior to the fifth anniversary of
their issuance. If the SCLN's were converted in full after the Conversion Date
and all the Warrants and Placement Agent Warrants exercised, approximately 5.89
million new Common Shares would be issued, representing up to approximately 69
per cent. of the current issued share capital of the Company.
The SCLN's carry prepayment penalties in year one (1), two (2) and three (3) of
10 per cent., 20 per cent. and 30 per cent, respectively.
Cash Resources
At 30 June 2009, the Company had cash and cash equivalents of US$1.4 million.
Board Changes
On 8 September 2009, the Company announced that William Christy had stood down
as the Chief Executive Officer and as a Director of AOI with immediate effect
and that Scott Baily had also stood down as a Non-executive Director of AOI with
immediate effect. In addition, it was announced that Ian Johnson would stand
down as the Non-executive Chairman of AOI with effect from the de-listing of the
Company's common stock to trading on AIM.
Proposed Cancellation of Admission to AIM
On 8 September 2009, AOI announced that it was intending to put to stockholders
proposals to cancel the admission of its common stock to trading on AIM. The
Directors of AOI consider, inter alia, that the benefits of maintaining a
listing on AIM are out-weighed by the costs incurred in maintaining such a
listing and that AOI derives little benefit in terms of the liquidity in its
shares or in its ability to raise new capital. In addition, the Directors do not
believe that the market places an appropriate valuation on AOI or its shares.
Subsequently, on 23 September 2009, the Company announced that it was seeking
Shareholder approval to cancel the admission of its Common Shares to trading on
AIM at a Special Meeting which will be held on 9 October 2009. A circular,
together with a notice of the Special Meeting were posted to Shareholders on 23
September 2009. A copy of the circular is available on the Company's website at
www.aoimedical.net.If approved, it is expected that cancellation of admission of
the Common Shares to trading on AIM will take effect from 7.00 a.m. on 21
October 2009.
Outlook
AOI is making good progress towards commercialising its lead product,
Ascendx(TM). We believe that the product has significant potential and following
the successful completion of enrollment for our 60 patient confirmatory clinical
study for Ascendx(TM), we are currently on track for FDA approval and market
launch of Ascendx(TM) in the United States in the first half of 2010.
We have also continued to make progress on our other technology platforms whilst
building the Company's intellectual property portfolio, a fundamental part of
our commercial strategy.
FINANCIAL REVIEW
INCOME STATEMENT
Revenue
AOI is an early stage medical device company and as such currently has not yet
derived revenue from principal operations. Revenues of $92,000 were earned
during the first six months of 2009 solely from the Food and Drug Administration
approved clinical trial for Ascendx(TM), the Company's lead product.
Expenses
Operating expenses decreased by approximately $1.0 million to $2.5 million
versus the six months ended 30 June 2008 ("H1 2008") of $3.5 million. $634,000
of this decrease was due to a decrease in salaries and employee benefits. This
decrease in salaries and employee benefits was due to (1) a decrease in
stock-based compensation of $415,000, caused by the vesting terms of stock
options granted during 2007, and (2) a decrease in non-stock-based compensation
and employee benefits of $219,000 caused by a reduction in salary expense of
current employees and a reduction in the total number of employees during 2009.
The decrease in operating expenses was also due to (1) a decrease in stock-based
Board of Directors' fees of $332,000, caused by a decrease in the fair market
value of the Company's common shares from $4.52 at 30 June 2008 to $0.41 at 30
June 2009, and (2) a decrease in research and development costs related to
Ascendx(TM) of $126,000.
Net other expenses decreased from $15,000 in H1 2008 to $nil in H1 2009. H1 2008
includes a net loss of approximately $15,000 related to the sale of fixed income
trading securities, net of related interest income.
BALANCE SHEET
Cash and cash equivalents
The Company had cash and cash equivalents of $1.4 million at 30 June 2009
compared with $1.1 million at 30 June 2008. At 30 June 2008 the Company also had
investments of $5.9 million which were sold during H2 2008 with the net proceeds
deposited into operating cash. The decrease from $7.0 million of cash and cash
equivalents and investments at 30 June 2008 to $1.4 million of cash and cash
equivalents at 30 June 2009 reflects the amount used to fund the operations of
the Company during that time period.
Other current assets
The Company had other current assets of $588,000 at 30 June 2009 compared with
$7.1 million at 30 June 2008. At 30 June 2009 other current assets consist
primarily of inventory of $451,000. At 30 June 2008 other current assets consist
primarily of investments of $5.9 million, inventory of $511,000 and deferred
charges of $563,000. The decrease in investments reflects the sale of all
investments with the net proceeds deposited into operating cash. Deferred
charges are costs incurred related to the Company's capital raise that occurred
during H2 2009. Deferred charges are classified as a non-current asset at 30
June 2009.
Property and equipment, net
Property and equipment, net decreased from $670,000 at 30 June 2008 to $481,000
at 30 June 2009. Of this net decrease, $221,000 reflects depreciation expense,
partially offset by the purchase of property and equipment, primarily tooling,
machinery and equipment needed for research and development and production
efforts.
Intangible Assets, net
Intangible Assets, net of $539,000 (H1 2008: $507,000) is comprised primarily of
capitalized patent costs of $139,000 (H1 2008: $132,000) and capitalized license
costs of $398,000 (H1 2008: $371,000), net of accumulated amortization of
$76,000 (H1 2007: $44,000). The increase over H1 2008 largely reflects two
payments of cash for license costs that total $53,000.
Other Assets
The Company had other assets of $811,000 at 30 June 2009 compared to $32,000 at
30 June 2008. This increase is a result of a change in the classification of
deferred charges. At 30 June 2009 deferred charges were classified as other
assets and at 30 June 2008 deferred charges were classified as other current
assets.
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses decreased to $669,000 in H1 2009 from $1.4
million in H1 2008 largely due to the payment of amounts relating to the capital
raise that occurred during H2 2009, and inventory and Ascendx(TM) clinical trial
costs that were outstanding at 30 June 2008.
Share capital
The Company had 8,436,489 USD$0.0001 ordinary shares issued and outstanding at
30 June 2009 (30 June 2008: 8,430,720).
+--------------------------------------+--------+-----------+--+-----------+--+-------------+
| STATEMENTS OF OPERATIONS | | | | | | |
+--------------------------------------+--------+-----------+--+-----------+--+-------------+
| | | | | | | |
+--------------------------------------+--------+-----------+--+-----------+--+-------------+
| | | | | | | |
+--------------------------------------+--------+-----------+--+-----------+--+-------------+
| | | Unaudited | | Unaudited | | Audited |
| | | Six | | Six | | Year ended |
| | | months | | months | | 31 December |
| | | ended 30 | | ended 30 | | 2008 |
| | | June 2009 | | June 2008 | | |
+--------------------------------------+--------+-----------+--+-----------+--+-------------+
| | Notes | $'000 | | $'000 | | $'000 |
+--------------------------------------+--------+-----------+--+-----------+--+-------------+
| | | | | | | |
+--------------------------------------+--------+-----------+--+-----------+--+-------------+
| Revenues | | 92 | | - | | 47 |
+--------------------------------------+--------+-----------+--+-----------+--+-------------+
| | | | | | | |
+--------------------------------------+--------+-----------+--+-----------+--+-------------+
| Cost of Sales | | 36 | | - | | 18 |
+--------------------------------------+--------+-----------+--+-----------+--+-------------+
| | | | | | | |
+--------------------------------------+--------+-----------+--+-----------+--+-------------+
| Gross Profit | | 56 | | - | | 29 |
+--------------------------------------+--------+-----------+--+-----------+--+-------------+
| | | | | | | |
+--------------------------------------+--------+-----------+--+-----------+--+-------------+
| Research and development | | 1,104 | | 1,407 | | 2,524 |
+--------------------------------------+--------+-----------+--+-----------+--+-------------+
| Operations | | 102 | | 49 | | 143 |
+--------------------------------------+--------+-----------+--+-----------+--+-------------+
| Sales and marketing | | 424 | | 415 | | 785 |
+--------------------------------------+--------+-----------+--+-----------+--+-------------+
| General and administrative | | 855 | | 1,580 | | 2,641 |
+--------------------------------------+--------+-----------+--+-----------+--+-------------+
| Total operating expenses | | 2,485 | | 3,451 | | 6,093 |
+--------------------------------------+--------+-----------+--+-----------+--+-------------+
| | | | | | | |
+--------------------------------------+--------+-----------+--+-----------+--+-------------+
| Operating loss | | (2,429) | | (3,451) | | (6,064) |
+--------------------------------------+--------+-----------+--+-----------+--+-------------+
| | | | | | | |
+--------------------------------------+--------+-----------+--+-----------+--+-------------+
| Other income (expense), net | | - | | (15) | | 8 |
+--------------------------------------+--------+-----------+--+-----------+--+-------------+
| | | | | | | |
+--------------------------------------+--------+-----------+--+-----------+--+-------------+
| Net loss | | (2,429) | | (3,466) | | (6,056) |
+--------------------------------------+--------+-----------+--+-----------+--+-------------+
| | | | | | | |
+--------------------------------------+--------+-----------+--+-----------+--+-------------+
| Basic and diluted loss per share - | 2 | (0.29) | | (0.41) | | (0.72) |
| dollars | | | | | | |
+--------------------------------------+--------+-----------+--+-----------+--+-------------+
| | | | | | | |
+--------------------------------------+--------+-----------+--+-----------+--+-------------+
+-------------------------------------+---------+------------+------------+-------------+
| Balance Sheets | | | | |
+-------------------------------------+---------+------------+------------+-------------+
| | | | | |
+-------------------------------------+---------+------------+------------+-------------+
| | | | | |
+-------------------------------------+---------+------------+------------+-------------+
| | | | | |
+-------------------------------------+---------+------------+------------+-------------+
| | | | | |
+-------------------------------------+---------+------------+------------+-------------+
| | Notes | Unaudited | Unaudited | Audited |
| | | Six | Six | Year ended |
| | | months | months | 31 December |
| | | ended | ended | 2008 |
| | | 30 June | 30 June | ($'000) |
| | | 2009 | 2008 | |
| | | ($'000) | ($'000) | |
+-------------------------------------+---------+------------+------------+-------------+
| ASSETS | | | | |
+-------------------------------------+---------+------------+------------+-------------+
| Current assets: | | | | |
+-------------------------------------+---------+------------+------------+-------------+
| Cash and cash equivalents | 1 | 1,397 | 1,127 | 3,696 |
+-------------------------------------+---------+------------+------------+-------------+
| Other current assets | | 588 | 7,072 | 1,341 |
+-------------------------------------+---------+------------+------------+-------------+
| Total current assets | | 1,985 | 8,199 | 5,037 |
+-------------------------------------+---------+------------+------------+-------------+
| | | | | |
+-------------------------------------+---------+------------+------------+-------------+
| Property and equipment, net | | 481 | 670 | 592 |
+-------------------------------------+---------+------------+------------+-------------+
| Intangible assets, net | | 539 | 507 | 554 |
+-------------------------------------+---------+------------+------------+-------------+
| Other assets | | 811 | 32 | 32 |
+-------------------------------------+---------+------------+------------+-------------+
| Total other assets | | 1,831 | 1,209 | 1,178 |
+-------------------------------------+---------+------------+------------+-------------+
| TOTAL ASSETS | | 3,816 | 9,408 | 6,215 |
+-------------------------------------+---------+------------+------------+-------------+
| | | | | |
+-------------------------------------+---------+------------+------------+-------------+
| LIABILITIES AND STOCKHOLDERS' | | | | |
| EQUITY | | | | |
+-------------------------------------+---------+------------+------------+-------------+
| Current liabilities: | | | | |
+-------------------------------------+---------+------------+------------+-------------+
| Accounts payable and accrued | | 669 | 1,376 | 596 |
| expenses | | | | |
+-------------------------------------+---------+------------+------------+-------------+
| Total current liabilities | | 669 | 1,376 | 596 |
+-------------------------------------+---------+------------+------------+-------------+
| | | | | |
+-------------------------------------+---------+------------+------------+-------------+
| Deferred rent | | 28 | 43 | 36 |
+-------------------------------------+---------+------------+------------+-------------+
| Total long-term liabilities | | 28 | 43 | 36 |
+-------------------------------------+---------+------------+------------+-------------+
| | | | | |
+-------------------------------------+---------+------------+------------+-------------+
| Stockholders' Equity: | | | | |
+-------------------------------------+---------+------------+------------+-------------+
| Common stock | 3 | 1 | 1 | 1 |
+-------------------------------------+---------+------------+------------+-------------+
| Additional paid-in capital | 3 | 19,125 | 18,977 | 19,160 |
+-------------------------------------+---------+------------+------------+-------------+
| Accumulated deficit | 3 | (16,007) | (10,989) | (13,578) |
+-------------------------------------+---------+------------+------------+-------------+
| Total stockholders' equity | | 3,119 | 7,989 | 5,583 |
+-------------------------------------+---------+------------+------------+-------------+
| | | | | |
+-------------------------------------+---------+------------+------------+-------------+
| TOTAL LIABILITIES AND | | 3,816 | 9,408 | 6,215 |
| STOCKHOLDERS' EQUITY | | | | |
+-------------------------------------+---------+------------+------------+-------------+
| | | | | |
+-------------------------------------+---------+------------+------------+-------------+
+-------------------------------------------------+-----------+-----------+-----------+
| STATEMENTS OF CASH FLOWS | | | |
+-------------------------------------------------+-----------+-----------+-----------+
| | | | |
+-------------------------------------------------+-----------+-----------+-----------+
| | | | |
+-------------------------------------------------+-----------+-----------+-----------+
| | Unaudited | Unaudited | Audited |
| | Six | Six | year |
| | months | months | ended 31 |
| | ended 30 | ended 30 | December |
| | June | June | |
+-------------------------------------------------+-----------+-----------+-----------+
| | 2009 | 2008 | 2008 |
+-------------------------------------------------+-----------+-----------+-----------+
| | $'000 | $'000 | $'000 |
+-------------------------------------------------+-----------+-----------+-----------+
| | | | |
+-------------------------------------------------+-----------+-----------+-----------+
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
+-------------------------------------------------+-----------+-----------+-----------+
| Net loss | (2,429) | (3,466) | (6,056) |
+-------------------------------------------------+-----------+-----------+-----------+
| Adjustments to reconcile net loss to net cash | | | |
| provided by (used in) operating activities: | | | |
+-------------------------------------------------+-----------+-----------+-----------+
| Depreciation and amortization | 163 | 103 | 230 |
+-------------------------------------------------+-----------+-----------+-----------+
| Loss on disposal of property and equipment | 1 | 5 | 5 |
+-------------------------------------------------+-----------+-----------+-----------+
| Realized loss on investments | - | 171 | 171 |
+-------------------------------------------------+-----------+-----------+-----------+
| Stock grants and options | 208 | 547 | 781 |
+-------------------------------------------------+-----------+-----------+-----------+
| Deferred compensation | (243) | 88 | 38 |
+-------------------------------------------------+-----------+-----------+-----------+
| Changes in operating assets and liabilities: | | | |
+-------------------------------------------------+-----------+-----------+-----------+
| Investments | - | 1,000 | 6,874 |
+-------------------------------------------------+-----------+-----------+-----------+
| Accounts receivable | (1) | - | (47) |
+-------------------------------------------------+-----------+-----------+-----------+
| Other receivables | (1) | 47 | 44 |
+-------------------------------------------------+-----------+-----------+-----------+
| Inventory | 90 | (511) | (541) |
+-------------------------------------------------+-----------+-----------+-----------+
| Prepaid expenses | 12 | 44 | 59 |
+-------------------------------------------------+-----------+-----------+-----------+
| Other assets | - | - | 12 |
+-------------------------------------------------+-----------+-----------+-----------+
| Accounts payable and accrued expenses | (13) | 384 | (187) |
+-------------------------------------------------+-----------+-----------+-----------+
| Deferred rent | (8) | (4) | (11) |
+-------------------------------------------------+-----------+-----------+-----------+
| Net cash provided by (used in) operating | (2,221) | (1,592) | 1,372 |
| activities | | | |
+-------------------------------------------------+-----------+-----------+-----------+
| | | | |
+-------------------------------------------------+-----------+-----------+-----------+
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
+-------------------------------------------------+-----------+-----------+-----------+
| Increase in intangible assets | (38) | (77) | (141) |
+-------------------------------------------------+-----------+-----------+-----------+
| Purchase of property and equipment | (1) | (227) | (259) |
+-------------------------------------------------+-----------+-----------+-----------+
| Net cash used in investing activities | (39) | (304) | (400) |
+-------------------------------------------------+-----------+-----------+-----------+
| | | | |
+-------------------------------------------------+-----------+-----------+-----------+
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
+-------------------------------------------------+-----------+-----------+-----------+
| Increase in deferred charges | (39) | (335) | (634) |
+-------------------------------------------------+-----------+-----------+-----------+
| Net cash used in financing activities | (39) | (335) | (634) |
+-------------------------------------------------+-----------+-----------+-----------+
| | | | |
+-------------------------------------------------+-----------+-----------+-----------+
| NET INCREASE (DECREASE) IN CASH AND CASH | (2,299) | (2,231) | 338 |
| EQUIVALENTS | | | |
+-------------------------------------------------+-----------+-----------+-----------+
| | | | |
+-------------------------------------------------+-----------+-----------+-----------+
| Cash and cash equivalents, beginning of period | 3,696 | 3,358 | 3,358 |
+-------------------------------------------------+-----------+-----------+-----------+
| | | | |
+-------------------------------------------------+-----------+-----------+-----------+
| CASH AND CASH EQUIVALENTS, END OF PERIOD | 1,397 | 1,127 | 3,696 |
+-------------------------------------------------+-----------+-----------+-----------+
| | | | |
+-------------------------------------------------+-----------+-----------+-----------+
| Supplemental cash flow information: | | | |
+-------------------------------------------------+-----------+-----------+-----------+
| Cash paid during the year for interest | - | - | - |
+-------------------------------------------------+-----------+-----------+-----------+
| | | | |
+-------------------------------------------------+-----------+-----------+-----------+
| Supplemental disclosure of non-cash activity: | | | |
+-------------------------------------------------+-----------+-----------+-----------+
| Deferred charges unpaid at end of period | 86 | 229 | 19 |
+-------------------------------------------------+-----------+-----------+-----------+
| | | | |
+-------------------------------------------------+-----------+-----------+-----------+
| Issuance of stock options and warrants | - | 41 | 41 |
+-------------------------------------------------+-----------+-----------+-----------+
| | | | |
+-------------------------------------------------+-----------+-----------+-----------+
NOTES TO THE UNAUDITED INTERIM RESULTS
1. BASIS OF PREPARATION
The interim financial information has been prepared on the basis of the
accounting policies set out in the Company's audited financial statements for
the year ended 31 December 2008.
Results for the periods ended 30 June 2009 and 30 June 2008 have not been
audited. The results for the period ended 31 December 2008 have been extracted
from the audited financial statements.
Copies of the interim results for the six months ended 30 June 2009 can be found
on the Company's website at www.aoimedical.net.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of
three months or less when purchased to be cash equivalents.
Accounts Receivable
Accounts receivable are stated at amounts management expects to collect from
outstanding balances. Management provides for probable uncollectible amounts
through a charge to earnings and a credit to a valuation allowance based on its
assessment of the current status of individual accounts. Balances still
outstanding after management has used reasonable collection efforts are written
off through a charge to the valuation allowance and a credit to accounts
receivable.
Inventory
Inventory is stated at the lower of cost or market. The Company uses the average
cost method of determining cost for its inventory.
Deferred Charges
Deferred charges represent costs incurred directly related to a capital raise,
which would be offset against any proceeds raised.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization are
computed on a straight-line basis over the estimated useful lives of the related
assets, ranging from two to seven years. Amortization of leasehold improvements
is estimated on a straight-line basis over the estimated lives of the related
asset or applicable lease term, if shorter. Repairs and maintenance are charged
to operations as incurred, while significant improvements are capitalized.
Long-lived assets held and used by the Company are reviewed for impairment
whenever changes in circumstances indicate the carrying value of an asset may
not be recoverable.
Research and Development
Expenditures for research and development are expensed as incurred.
Intangible Assets
Intangible assets consist of capitalized patent costs and capitalized license
costs, net of accumulated amortization.
Patent costs include legal costs incurred for various patent applications and
filing fees. Once the patent is granted, the Company will amortize the
capitalized patent costs over the remaining life of the patent using the
straight-line method. If the patent is not granted, the Company will write-off
any capitalized patent cost at that time.
License costs include payments to the licensor and legal costs incurred to
obtain certain license agreements. Costs to obtain the licenses are capitalized
as incurred per the license agreements. The Company amortizes capitalized
license costs over the estimated useful life of the licenses.
The Company records the acquisition and amortization of patents and license fees
in accordance with Statement of Financial Accounting Standards ("SFAS") No. 142,
"Goodwill and Other Intangible Assets". The Company reviews patents and license
fees for impairment in accordance with SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". Internal and external facts and
circumstances are considered for indication of the ability to recover the
carrying value of the unamortized patent costs and license fees.
Investments
Investments include trading securities. Such investments are carried at fair
value. Unrealized gains and losses are charged to operations and the investment
is carried at its new cost basis.
Fair Values of Financial Instruments
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash and cash equivalents and accounts payable and accrued liabilities: The
carrying amounts reported in the balance sheets approximate fair values because
of the short maturities of those instruments.
Revenue Recognition
Revenue is realized and earned when all of the following criteria are met:
persuasive evidence of a sales arrangement exists; delivery has occurred and the
product has been used; the price is fixed or determinable; and collectibility is
reasonably assured. Revenues earned were solely from the Food and Drug
Administration approved clinical trial for AscendxTM, the Company's lead
product.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently payable plus deferred taxes
related primarily to tax loss carryforwards. Any applicable deferred tax assets
and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. In addition, a valuation allowance is
established to reduce any deferred tax asset for which it is determined that it
is more likely than not that some portion of the deferred tax asset will not be
realized.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Stock-Based Compensation
The Company follows SFAS No. 123R, Share Based Payment, for stock-based
compensation, which establishes a fair value based method of accounting for such
stock-based compensation. Stock-based compensation cost is measured at the grant
date based on the fair value of the award, taking into consideration estimated
forfeitures, and is recognized as compensation expense over the vesting period.
The Company provides the disclosure requirements of SFAS No. 123, Accounting for
Stock-Based Compensation, and SFAS No. 148, Accounting for Stock-Based
Compensation - Transition and Disclosure, and Amendment of FAS No.123, for
employee arrangements. Stock-based awards to non-employees are accounted for
under SFAS 123, related amendments and related interpretations.
Recent Accounting Pronouncements
In July 2006 the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
This interpretation, among other things, creates a two-step approach for
evaluating uncertain tax positions. Recognition (step one) occurs when an
enterprise concludes that a tax position, based solely on its technical merits,
is more likely than not to be sustained upon examination. Measurement (step two)
determines the amount of benefit that more likely than not will be realized upon
settlement. Derecognition of a tax position that was previously recognized would
occur when a company subsequently determines that a tax position no longer meets
the more likely than not threshold of being sustained. FIN 48 specifically
prohibits the use of a valuation allowance as a substitute for derecognition of
tax positions, and it has expanded disclosure requirements. FIN 48 is effective
for fiscal years beginning after 15 December 2008, in which the impact of
adoption should be accounted for as a cumulative-effect adjustment to the
beginning balance of retained earnings. The Company has adopted FIN 48 as of 1
January 2009, as required. The adoption of FIN 48 has had no effect on the
Company's financial position, results of operations or cash flows. There are no
unrecognized tax benefits to disclose in the notes to the financial statements.
In September 2006 the FASB issued SFAS No. 157, Fair Value Measurements ("SFAS
157"), which defines fair value as the price that would be received to sell an
asset or that would be paid to transfer a liability in an orderly transaction
between market participants at the measurement date. SFAS 157 establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. The requirements of SFAS 157 became effective for the Company's
fiscal year 2008. However, in February 2008 the FASB decided that an entity need
not apply this standard to nonfinancial assets and liabilities that are
recognized or disclosed at fair value in the financial statements on a
nonrecurring basis until the subsequent year. The adoption of SFAS 157 did not
have a significant impact on the Company's financial statement.
In May 2009, the FASB issued SFAS No. 165, Subsequent Events ("SFAS 165"), which
establishes general standards of accounting for, and requires disclosure of,
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. The Company adopted the provisions of
SFAS 165 as of 30 June 2009. The adoption of these provisions did not have a
significant impact on the Company's financial statements.
In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles
("SFAS 168"). SFAS 168 will become the single source of authoritative
nongovernmental U.S. generally accepted accounting principles ("GAAP"),
superseding existing FASB, American Institute of Certified Public Accountants
("AICPA"), Emerging Issues Task Force ("EITF"), and related accounting
literature. SFAS 168 reorganizes the thousands of GAAP pronouncements into
roughly 90 accounting topics and displays them using a consistent structure.
Also included is relevant Securities and Exchange Commission guidance organized
using the same topical structure in separate sections. SFAS 168 will be
effective for financial statements issued for reporting periods that end after
15 September 2009. This will have an impact on the Company's financial
statements since all future references to authoritative accounting literature
will be references in accordance with SFAS 168.
2. LOSS PER SHARE
The Company computes loss per share in accordance with SFAS No. 128, Earnings
per Share. SFAS No. 128 provides for the calculation of basic and diluted
earnings per share. Basic earnings per share includes no dilution and is
computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted earnings per
share reflects the potential dilution of securities that could share in the
earnings of the Company. The impact of stock options was anti-dilutive,
therefore basic and diluted net loss per share are the same. All options,
warrants and convertible debt were excluded for the periods ended 30 June 2009
and 2008 and the year ended 31 December 2008.
+------------------------------------+----------------+----------------+----------------+
| | Unaudited six | Unaudited six | Audited year |
| | months ended | months ended | ended |
| | 30 June 2009 | 30 June 2008 | 31 December |
| | | | 2008 |
+------------------------------------+----------------+----------------+----------------+
| Loss attributable to common | $(2,429) | $(3,466) | $(6,056) |
| shareholders($'000) | | | |
+------------------------------------+----------------+----------------+----------------+
| Weighted average number of common | 8,436 | 8,431 | 8,431 |
| shares('000s) | | | |
+------------------------------------+----------------+----------------+----------------+
| Basic and diluted loss per share | $(0.29) | $(0.41) | $(0.72) |
+------------------------------------+----------------+----------------+----------------+
3. RECONCILIATION OF CHANGES IN STOCKHOLDERS' EQUITY
+-------------------------+------------+------------+-------------+------------+
| | | | | |
+-------------------------+------------+------------+-------------+------------+
| | Common |Additional |Accumulated | Total |
| | Shares | Paid-in | Deficit | ($'000) |
| | ($'000) | Capital | ($'000) | |
| | | ($'000) | | |
+-------------------------+------------+------------+-------------+------------+
| Balance 31 December | 1 | 19,160 | (13,578) | 5,583 |
| 2008 | | | | |
+-------------------------+------------+------------+-------------+------------+
| | | | | |
+-------------------------+------------+------------+-------------+------------+
| Stock-based | - | 208 | - | 208 |
| compensation | | | | |
+-------------------------+------------+------------+-------------+------------+
| | | | | |
+-------------------------+------------+------------+-------------+------------+
| Deferred compensation | - | (243) | - | (243) |
+-------------------------+------------+------------+-------------+------------+
| | | | | |
+-------------------------+------------+------------+-------------+------------+
| Net loss | - | - | (2,429) | (2,429) |
+-------------------------+------------+------------+-------------+------------+
| | | | | |
+-------------------------+------------+------------+-------------+------------+
| Balance 30 June 2009 | 1 | 19,125 | (16,007) | 3,119 |
+-------------------------+------------+------------+-------------+------------+
| | | | | |
+-------------------------+------------+------------+-------------+------------+
4. STOCK BASED COMPENSATION
The following table summarizes the stock option activity during the six months
ended 30 June 2009:
+---------------------------------+--------------+--------+----------------+
| | Number of | | Weighted |
| | Options | | Average |
| | | | Exercise Price |
+---------------------------------+--------------+--------+----------------+
| | | | |
+---------------------------------+--------------+--------+----------------+
| Outstanding at 31 December 2008 | 642,894 | | $4.42 |
+---------------------------------+--------------+--------+----------------+
| Granted | - | | - |
+---------------------------------+--------------+--------+----------------+
| Forfeited | (45,875) | | $4.85 |
+---------------------------------+--------------+--------+----------------+
| Outstanding at 30 June 2009 | 597,019 | | $4.38 |
+---------------------------------+--------------+--------+----------------+
| | | | |
+---------------------------------+--------------+--------+----------------+
| Exercisable at 30 June 2009 | 370,551 | | $3.99 |
+---------------------------------+--------------+--------+----------------+
The following table shows total stock-based compensation expense for the six
months ended 30 June:
+---------------------------------+--+-------------+----+-------------+
| | |
+---------------------------------+-----------------------------------+
| | | 2009 | | 2008 |
+---------------------------------+--+-------------+----+-------------+
| | | | | |
+---------------------------------+--+-------------+----+-------------+
| Research and development | | $75,311 | | $205,818 |
+---------------------------------+--+-------------+----+-------------+
| Sales and marketing | | $84,736 | | $12,066 |
+---------------------------------+--+-------------+----+-------------+
| General and administrative | | $48,280 | | $329,498 |
+---------------------------------+--+-------------+----+-------------+
| | | | | |
+---------------------------------+--+-------------+----+-------------+
| | | $208,327 | | $547,382 |
+---------------------------------+--+-------------+----+-------------+
The options outstanding and exercisable at 30 June 2009 are as follows:
+----------+--+-------------+--+-----------+--+----------+--+-----------+--+-------------+--+----------+--+-----------+
| | | Options Outstanding | | Options Exercisable |
+----------+--+---------------------------------------------------------+--+------------------------------------------+
|Range of | | Number | | Weighted | | Weighted | | Aggregate | | Options | | Weighted | | Aggregate |
|Exercise | | outstanding | | Average | | Average | | Intrinsic | | Exercisable | | Average | | Intrinsic |
| Prices | | | | Remaining | | Exercise | | Value | | | | Exercise | | Value |
| | | | | Expected | | Price | | | | | | Price | | |
| | | | | Life in | | | | | | | | | | |
| | | | | Years | | | | | | | | | | |
+----------+--+-------------+--+-----------+--+----------+--+-----------+--+-------------+--+----------+--+-----------+
| | | | | | | | | | | | | | | |
+----------+--+-------------+--+-----------+--+----------+--+-----------+--+-------------+--+----------+--+-----------+
| $0.01 - | | 248,235 | | 2.2 |$ | 2.06 |$ | 39,000 | | 168,379 |$ | 1.40 |$ | 39,000 |
| $3.70 | | | | | | | | | | | | | | |
+----------+--+-------------+--+-----------+--+----------+--+-----------+--+-------------+--+----------+--+-----------+
| $4.34 - | | 120,242 | | 2.5 | | 4.90 | | - | | 69,367 | | 5.20 | | - |
| $5.99 | | | | | | | | | | | | | | |
+----------+--+-------------+--+-----------+--+----------+--+-----------+--+-------------+--+----------+--+-----------+
| $6.63 - | | 222,236 | | 3.5 | | 6.63 | | - | | 126,499 | | 6.63 | | - |
| $6.75 | | | | | | | | | | | | | | |
+----------+--+-------------+--+-----------+--+----------+--+-----------+--+-------------+--+----------+--+-----------+
| $7.07 | | 6,306 | | 3.1 | | 7.07 | | - | | 6,306 | | 7.07 | | - |
+----------+--+-------------+--+-----------+--+----------+--+-----------+--+-------------+--+----------+--+-----------+
| | | 597,019 | | 2.7 |$ | 4.38 |$ | 39,000 | | 370,551 |$ | 3.99 |$ | 39,000 |
+----------+--+-------------+--+-----------+--+----------+--+-----------+--+-------------+--+----------+--+-----------+
At 30 June 2009, approximately $241,000 of deferred compensation expense
remained to be expensed over a weighted average period of 2.3 years.
5. SUBSEQUENT EVENTS
The following events have occurred after 30 June 2009, which the Company
considers necessary to disclose in order to keep these financial statements from
being misleading. Subsequent events have been evaluated through 30 September
2009, the date the financial statements were issued.
In August 2009, the Company successfully raised approximately $2.6 million
through the issue of senior convertible loan notes. The net proceeds from this
fundraising are being used to augment the Company's working capital for the FDA
approval and the market launch of Ascendx(TM).
The senior convertible loan notes ("SCLNs"), shall be repayable on or before 30
September 2012 although the SCLNs shall become convertible at the option of the
holder after 1 October 2011 (the "Conversion Date"). The SCLNs carry a coupon of
8 per cent. interest per annum, payable quarterly in arrears until such time as
they are repaid or converted in accordance with the terms. The SCLNs are
callable, or repayable with no risk of conversion, by the Company on or before
the Conversion Date, after which the SCLNs are convertible into shares of common
stock in the Company ("Common Shares") at a price of 60 cents per Common Share.
Additionally, subscribers for the SCLNs were issued 333 warrants, with an
exercise price of 60 cents per Common Share, for each $1,000 principal amount of
SCLNs purchased and an additional 100 warrants for each $1,000 principal amount
of SCLNs purchased if the SCLNs have not been repaid by the Conversion Date (the
"Warrants"). The Warrants may be exercised into new Common Shares at any time
prior to the fifth anniversary of the issuance of the Warrants. The placement
agent for this transaction was issued 167 warrants, with an exercise price of 60
cents per Common Share, for each $1,000 principal amount of SCLNs purchased (the
"Placement Agent Warrants"). The Placement Agent Warrants may be exercised into
new Common Shares at any time prior to the fifth anniversary of their issuance.
If the SCLNs were converted in full after the Conversion Date and all the
Warrants and Placement Agent Warrants exercised, approximately 5.89 million new
Common Shares would be issued, representing up to approximately 69 per cent. of
the current issued share capital of the Company.
The SCLNs carry prepayment penalties in year one (1), two (2) and three (3) of
10 per cent., 20 per cent. and 30 per cent., respectively.
On 8 September 2009, the Company announced that William Christy had stood down
as the Chief Executive Officer and as a Director of the Company with immediate
effect and that Scott Baily had also stood down as a Non-executive Director of
the Company with immediate effect. In addition, it was announced that Ian
Johnson would stand down as the Non-executive Chairman of the Company with
effect from the de-listing of the Company's common stock to trading on AIM.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LLMPTMMTTBIL
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