Neometals Regulatory News (NMT)

28 Apr 2006 14:49

NMT Group PLC28 April 2006 28 April 2006 NMT GROUP PLC FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005 NMT Group PLC ('NMT' or 'the Company'), the investment company, announces itsfinal results for the year ended 31 December 2005. HIGHLIGHTS • Cash at the end of the financial year: £6.1m (2004: £7.0m) • Review undertaken of business and operations, including the intellectual property portfolio • Significant reductions have been made to the Group's overheads including expenditure on intellectual property • Limited discussions ongoing with potential acquirers of Group intellectual property • New Board including two independent directors • Broad investment strategy to acquire public or private under-performing companies or growth companies and consolidate institutional shareholdings • Confident can deliver attractive returns from execution of the new investment strategy CHAIRMAN'S STATEMENT I was elected as your Chairman on 14 September 2005, in what has been a year ofgreat change. The change in the Group's Board has brought a fresh perspective to NMT after along and unprofitable past. I am confident that the current team can deliverattractive returns from the implementation of the new investment strategy andlook forward to the future challenges that this will bring. Lord KalmsChairman28 April 2006 For further information, please contact: Jonathan Lander, DirectorNMT Group PLC + 44 (0) 1506 445000 Guy PetersShore Capital + 44 (0) 20 7408 4090 2005 was a year of significant change for the Group, which centred around theEGM in September. Prior to the EGM, the Company was engaged in a twin strategy of seekinglicensing agreements for existing products as well as evaluating strategicoptions. In this first part of 2005, a letter of intent and then a confirmatory letter ofintent was signed with a potential Far Eastern licensing partner for themanufacture and distribution of the 2nd Generation ("2-G") syringe. On numerousoccasions, deadlines set by the Company and agreed with the potential FarEastern licensing partner were not met. The Board does not consider theseletters of intent to be of any commercial value and such actions by potentialpartners indicates a low probability of any licensing deal. No efforts are beingmade to pursue this opportunity. In relation to the Safety Needle Unit, the previous Board reported in August2005 that a US-based pharmaceutical and medical devices company had startedmarketing trials of the device. In the latter part of the year, this marketingtrial was delayed indefinitely. A global medical devices company was alsoevaluating the product for fit within their product range, however they alsoceased discussions towards the end of the year. We do not expect that therewill be any further trials with these parties. Upon our appointment at the EGM in September, the Board committed itself toconduct a review of the Company's business and operations. This review wascompleted in February 2006. None of the prospective customers targeted by the Company prior to ourappointment - neither for the 2-G safety syringe nor for the Safety Needle Unithave shown any active interest in making a purchase of the Company's products. In parallel with the discussions with potential customers, we visited a numberof potential outright acquirers of the Company's products and its intellectualproperty ("IP"). Regrettably none of these discussions has resulted in anyoffers for the Company's product or intellectual property portfolio. Whilstthere is no doubt that some aspects of the NMT product and IP portfolio aresuperior there is a significant number of competitor products which are eithercheaper, better supported, or simpler to use. The lack of customers andlicensees after very significant investment over many years, is a strongindicator of the level of that investment's commercial value. Some limiteddiscussions with acquirers are however ongoing. There may also be some value inthe portfolio to the extent that it prevents others from manufacturing devicesthat infringe our intellectual property rights. The Board is carefully balancingthe cost of examining these considerations against the likelihood of significantreturn for shareholders. Appropriate action was taken to reduce cost immediately following ourappointment and this is detailed in the Operating and Financial Review. Inparticular we terminated, in February 2006, the agreement under which theCompany licensed the 1st Generation ("1-G") syringe as we consider that the 1-Gsyringe is not commercially viable. As a result of this termination, we arerequired to re-assign the patents and other intellectual property in relation tothis device back to the inventor, however this will result in a significant costsaving to the Company from May 2006. Having conducted the business review, the Board concluded that it is not in theinterest of shareholders to continue investment in the safety syringe businesssince there is no likelihood of near or medium-term customers for the Group'sexisting or yet-to-be-developed products. In addition, there is insufficientcash remaining in the Group to build a foreseeable profit stream throughinvestment in the longer term. As a result the Board determined in February2006 that the Company should become an investment company. Investment Strategy Companies that do not have any operating businesses are now deemed under the AIMRules to be cash shells. Such companies must adopt an investment strategy attheir next AGM and such a strategy must be implemented within one year of thatdate. It is intended that the next AGM will be in September 2006, allowing theCompany the maximum flexibility to make investments until September 2007. In broad terms the investment strategy of the Company is as follows: To use its cash and shares to do one or more of the following: • invest in or acquire small-to-medium-sized public companies that are under-performing but offer the possibility of a turnaround; • consolidate or facilitate the consolidation of institutional shareholdings in such companies so as to enable the realisation of shareholder value; • acquire private companies with attractive growth prospects; • invest in or acquire private companies that are under-performing but offer the possibility of a turnaround. The Board believes that a broad investment strategy such as this takes advantageof the executive team's ability to react quickly and opportunistically toopportunities as they arise. A fuller description of the investment strategywill be circulated in due course in the AGM notice. Jonathan LanderDirector28 April 2006 OPERATING REVIEW As noted in the Executive Director's Statement a business review was undertakenfollowing the appointment of new Directors in September 2005. Significantreductions have been made to the Group's overheads. All but one member of staffhave now been made redundant, without significant compensation. Furtherreductions have been made in IT support, insurance and property costs. Renewalfees on patents granted have been paid although registration costs for newpatents in application have been suspended. Together these measures havesignificantly cut monthly expenditure. FINANCIAL REVIEW Operating results The Group had no turnover during the year (2004: £nil). The operating loss forthe year before interest and tax was £1.7m (2004: £2.2m). As a result of thedecision to terminate the license and development activities on 6 February 2006,the results for the year have been treated as discontinued operations. In 2004the split between the loss on continuing and discontinued operations was £1.4mand £0.8m respectively. The Group's costs relate principally to the personnel and associated costs inrespect of administration and product development. The Group incurredexceptional costs relating to the termination in its activities of £0.3m, ofwhich £0.2m related to a write down in the Group's assets following animpairment review. After net interest receivable of £0.3m (2004: £0.4m) the loss for the financialyear before taxation was £1.4m (2004: £1.8m). Financial position and cashflow The Group's net cash at the end of the financial year was £6.1m, a decrease of£0.9m for the year. The cash outflow related to discontinued operations (2004:continuing £1.2m, discontinued £4.8m). Taxation The tax credit of £0.04m relates to research and development allowances in theyear and compares with the credit of £0.07m in 2004. No charge arose for the current year due to trading losses incurred. Nick LanderDirector28 April 2006 2005 2004 Total Continuing Discontinued Total £'000 £'000 £'000 £'000 Note Turnover 1 - - - - Cost of sales - - - - Gross profit - - - - Selling and distribution costs (237) (252) - (252)Administration expenses (1,123) (1,177) (148) (1,325)Exceptional administration expenses 5 - - (696) (696) Group operating loss 1,2 (1,360) (1,429) (844) (2,273) Exceptional items 5 (336) - 73 73 Loss before interest (1,696) (1,429) (771) (2,200) Interest receivable 6 293 391 - 391 Loss on ordinary activities before (1,403) (1,038) (771) (1,809)taxation Taxation on loss on ordinary 7 39 71 - 71activities Loss for the financial year (1,364) (967) (771) (1,738) Loss per ordinary shareBasic and diluted 9 (15.7)p (11.1)p (8.9)p (20.0)p Loss per ordinary share before Exceptional items 9 (11.8)p (11.1)p (2.0)p (23.2)p All 2005 activities are discontinued. There is no difference between the loss on ordinary activities before taxationand the loss for the year stated above and their historical cost equivalents. The group has no recognised gains or losses other than its loss for therespective financial periods. Group Company 2005 2004 2005 2004 Note £'000 £'000 £'000 £'000Fixed assetsTangible assets 11 - 301 - 301 Current assetsDebtors 12 77 232 77 232Cash at bank and in hand 6,090 7,005 6,070 6,985 6,167 7,237 6,147 7,217 Creditors: amounts falling duewithin one year 13 (183) (279) (163) (259) Net current assets 5,984 6,958 5,984 6,958 Total assets less current liabilities 5,984 7,259 5,984 7,259 Provisions for liabilities and charges 15 (89) - (89) -Net assets 5,895 7,259 5,895 7,259 Capital and reservesCalled up share capital 16 37,187 37,187 37,187 37,187Share premium account 17 38,639 38,639 38,639 38,639Profit and loss account 17 (69,931) (68,567) (69,931) (68,567) Total shareholders' equity funds 5,895 7,259 5,895 7,259 These financial statements were approved by the board of directors on 28 April2006 and were signed on its behalf by: Jonathan Lander Nick Lander Director Director Group Company 2005 2004 2005 2004 £'000 £'000 £'000 £'000 Loss for the financial year (1,364) (1,738) (1,364) (1,464) Total movements during the year (1,364) (1,738) (1,364) (1,464)Shareholders' funds at 1 January 7,259 8,997 7,259 8,723 Shareholders' funds at 31 December 5,895 7,259 5,895 7,259 2005 2004 Note £'000 £'000 Net cash outflow from operating activities 18 (1,292) (5,988) Returns on investments and servicing of financeInterest received 307 418 Net cash inflow from returns on investments andservicing of finance 307 418 Taxation 71 195 Capital expenditure and financial investmentPurchase of tangible fixed assets (1) (5) Cash outflow before management of liquidresources and financing (915) (5,380) Management of liquid resourcesCash returned from term deposit 884 5,003 Cash outflow before financing (31) (377) FinancingFinance lease - repayment of principal - (457) Net cash outflow from financing - (457)Decrease in cash in the year 19 (31) (834) Reconciliation of net cash flow to movement in net funds 2005 2004 £'000 £'000 Decrease in cash in the year (31) (834)Cash flow from finance leases - repayment of principal - 457Cash outflow from decrease in liquid resources (884) (5,003)Change in net funds resulting from cash flows and movement (915) in net debt in the year. (5,380)Net funds at 1 January 2005 (note 19) 7,005 12,385 Net funds at 31 December 2005 (note 19) 6,090 7,005 The financial information set out in the announcement does not constitute theCompany's statutory accounts for the years ended 31 December 2005 or 31 December2004. The financial information for the year ended 31 December 2004 is derivedfrom the statutory accounts for that year which have been delivered to theRegistrar of Companies. The auditors reported on those accounts; their reportwas unqualified and did not contain a statement under s237(2) or (3) CompaniesAct 1985. The statutory accounts for the year ended 31 December 2005 will bedelivered to the Registrar of Companies following the company's annual generalmeeting. Principal accounting policies The financial statements have been prepared in accordance with the Companies Act1995 and applicable Accounting Standards in the United Kingdom. The principalaccounting policies have been applied consistently. Basis of accounting The financial information has been prepared in accordance with the historicalcost convention. Basis of consolidation The consolidated profit and loss account, balance sheet and cash flow statementincludes the financial statements of the company and its subsidiary undertakingsmade up to 31 December 2005. Intra-group transactions and balances areeliminated on consolidation. Tangible fixed assets All fixed assets are recorded at purchase cost, together with any incidentalacquisition costs. Depreciation is charged so as to write off the cost of tangible fixed assetsless their estimated residual values, on a straight-line basis over the expecteduseful economic lives of the assets concerned. The principal annual rates usedfor this purpose are: Plant and machinery 10%Plant and machinery - mould tooling 20%Leasehold improvements 10%Fixtures and fittings 33.3%Computer and office equipment 33.3% Depreciation is calculated from the date that assets are brought into use. Provision is made for any permanent diminution in value. Impairment In accordance with FRS 11 "Impairment of fixed assets and goodwill", fixedassets are subject to an impairment review if circumstances or events change toindicate that the carrying value may not be fully recoverable. The review isperformed by comparing the carrying value to its recoverably amount, being thehigher of net realisable value and value in use. Deferred taxation In accordance with FRS 19, full provision is made for deferred tax on anon-discounted basis. Deferred tax assets are recognised where it is deemedmore likely than not that they will be recovered. Research and development Research and development expenditure is written off as incurred. Patents and trademarks Employee and other internal expenditure relating to patents and trademarks iswritten off as incurred. Operating leases Costs in respect of operating leases are charged on a straight-line basis overthe lease term. Foreign currencies All amounts receivable and payable in foreign currency are retranslated intosterling at the closing exchange rate ruling at the balance sheet date, withdifferences on exchange included within the profit and loss account. Currencytransactions included within the profit and loss account are recorded at theaverage monthly exchange rate for the month in which they arise. Assets and liabilities of subsidiaries in foreign currencies are translated intosterling at rates of exchange ruling at the end of the financial year and theresults of foreign subsidiaries are translated at the average rate of exchangefor the year. Differences on exchange arising from the re-translation of the opening netinvestment in subsidiary companies and from the translation of the results ofthose companies at an average rate, are taken to reserves and are reported inthe statement of total recognised gains and losses. All other foreign exchangedifferences are taken to the profit and loss account in the year in which theyarise. Turnover Turnover represents the invoiced value of goods supplied and excludes salesbetween Group companies and Value Added Tax. Turnover is recognised when titleto the goods passes. Pensions Contributions made to personal pension arrangements on behalf of employees, inaccordance with their service agreements, are charged to the profit and lossaccount in the year they fall due. Website development costs Costs of developing the Group's website are written off as incurred. 1 Turnover All activities relate to UK operations. 2 Group operating loss before taxation 2005 2004 £'000 £'000Group operating loss before taxation is stated after charging: Depreciation - tangible fixed assets 81 90Research and development expenditure 444 506Auditors' remuneration for:Audit services (Company: £12,000; 2004: £25,000) 12 25Non audit services 10 -Loss on foreign exchange - 129Hire of other assets - operating leases of land and buildings 18 18Hire of other assets - operating leases of plant and machinery - 19Exceptional administration expenses - 696Exceptional items (Note 5) 336 (73) 3 Directors' emoluments The aggregate emoluments during the year were £67,276 (2004: £275,137) andpension contributions were £nil (2004: £29,672). The services of Lord Kalms,Jonathan Lander and Nick Lander are provided to the Company by Volvere plc underthe terms of a Secondment Agreement dated 26 November 2005, as modified on 9February 2006. The amounts paid to Volvere plc under the terms of theSecondment Agreement totalled £83,542. The principal terms of the modified Secondment Agreement provide for amanagement fee and a performance fee to be paid with effect from 10 February2006. The management fee is a monthly fee payable in cash equal to 0.25% of thenet assets of the Company determined in accordance with the consolidated monthlymanagement accounts. The performance fee is an amount payable in cash equal to20% of any uplift in the share price of the Company, measured at monthly restsfollowing the date of the Agreement. To the extent that the share price fallsagain subsequently, no further performance fee will be payable unless the shareprice of the Company rises above the previous highest level and remains abovethat level at the next monthly calculation date. The Agreement may be terminatedby giving three months' notice in writing by either Volvere or the Company. Inthe event that the Agreement is terminated by the Company other than in certainspecified circumstances, Volvere is entitled to a termination payment of 6% ofthe then current Net Asset Value (calculated as at the end of the previousmonth). In addition, Volvere is entitled to a payment of an amount equal to: O x B, where: O = the value of an option using the Black Scholes valuation model with thefollowing inputs: Maturity = 24 months; Volatility = the higher of thehistorical 12 months volatility and 20%; Exercise price = the lowest closingmid-market price for the 12 months prior to the termination date; interest rate= 4%; and B = the weighted average number of the Company's ordinary shares outstanding forthe month prior to termination. No directors received contributions into personal pension schemes (2004: two). The aggregate emolument of the highest paid director was £49,995 (2004:£97,146). Directors' remuneration Salary Benefits Pension Total Total and Fees in kind 2005 2004 £ £ £ £ £Executive directors Past directorsA T Fletcher (i) 49,995 49,995 97,146R Smith (ii) - - - - 448,193G W Cassels (iii) - - - - 319,679 49,995 - - 49,995 865,018 Salary Benefit Pension Total Total and fees in kind 2005 2004Non-executive directors £ £ £ £ £ L Gold 2,500 - - 2,500 -Past DirectorsL Rostron (i) 14,400 - - 14,400 22,600Lady Balfour of Burleigh (iv) - - - - 2,083R H Gilmour (iv) - - - - 2,917 16,900 - - 16,900 27,600 Total 66,895 - - 66,895 892,618 (i) 2005 emoluments are to date of resignation on 14th September 2005.(ii) 2004 emoluments are to date of resignation on 9 April 2004.(iii) 2004 emoluments are to date of resignation on 5 July 2004.(iv) 2004 emoluments are to date of resignation on 16 January 2004. 4 Employee information The total number of persons employed by the Group at 31 December 2005 was 6(2004: 8). The average monthly number of persons (including executive directors)employed by the Group during the year was: 2005 2004By Function Number NumberSales and marketing 2 3Finance and administration 3 2Research and development and quality 4 4 9 9 2005 2004Staff costs (for the above persons): £'000 £'000 Wages and salaries 425 564Social security costs 49 63Pension contributions 20 19 494 646 Contributions are made to personal pension arrangements on behalf of employees,in accordance with their service agreements. Contributions are charged againstprofit in the year in which they fall due. 5 Exceptional items The following exceptional items have been reflected in the accounts for the yearended 31 December 2005: In February 2006 it was decided to cease all investment in the safety syringebusiness resulting in an exceptional charge of £0.3m. £0.2m was a non-cashcharge on the write down of the mould tools to their expected value on disposalof £nil. Closure costs of £0.1m arose principally relating to the redundancy ofremaining staff and the associated costs to close the office. The following exceptional items have been reflected in the accounts for the yearended 31 December 2004: The exceptional item in the prior year relates to the £0.1m release from theDecember 2003 reorganisation provision. Exceptional administration expenses of £0.7m relate to the resolution of thelawsuit filed by Retractable Technologies Inc in April 2004 by out of courtsettlement. The settlement comprised the payment of £0.6m and admission ofnon-wilful infringement of RTI patents. In addition, a further £0.1m ofuninsured legal costs were incurred. 6 Interest 2005 2004 £'000 £'000Interest receivable:Short term deposit interest receivable 293 391 7 Taxation Analysis of tax credit in year: 2005 2004 £'000 £'000Current tax:Tax credit receivable in respect of current year 39 71 39 71 There is no corporation tax payable due to losses arising during the year. The tax assessed for the period is lower than the standard rate of corporationtax in the UK (30%). The differences are explained below: 2005 2004 £'000 £'000 Loss before tax (1,403) (1,809) Loss on ordinary activities multiplied by the standard rate ofCorporation tax of 30% (2004: 30%) (421) (543) Effects of:Charges / (credits) not deductible for tax purposes and other permanent 44 (28)differencesDepreciation for the period in excess of capital allowances 71 (9)Losses not utilised 267 514Other short term timing differences - (5) Total current tax credit for the year (39) (71) Deferred tax The Group has an unrecognised deferred tax asset of £18.5m at 31 December 2005(2004: £18.3m). Deferred tax assets are only recognised to the extent that theyare more likely than not to be recovered in the foreseeable future. Carriedforward losses will only be recoverable from future profits on the same trade. The amounts of unrecognised deferred tax are shown below. 2005 2004 £'000 £'000 Excess of capital allowances over depreciation (1,262) (1,191)Short term timing differences - -Losses (17,284) (17,184) (18,546) (18,375) 8 Loss for the year As permitted by section 230 of the Companies Act 1985, the parent company'sprofit and loss account has not been detailed separately in these financialstatements. The parent company's loss for the year was £1,364,000 (2004:£1,464,000). 9 Loss per ordinary share Loss per ordinary share is calculated by dividing the loss attributable toordinary shareholders by the weighted average number of shares in issue. 2005 2004 £'000 £'000 Loss attributable to members of NMT Group PLC 1,364 1,738 Exceptional items (note 5 ) (336) (623)Loss before exceptional item 1,028 1,115 2005 2004 Weighted average number of ordinary shares in issue 8,711,317 8,711,317Basic and diluted (15.7)p (20.0)pLoss per ordinary share before exceptional items (11.8)p (23.2)p The loss before exceptional items provides a more meaningful comparison ofbusiness performance year on year. 10 Investments Interest in subsidiary undertakings £CompanyAt 1 January 2005 and 31 December 2005 3 The subsidiaries of the company at 31 December 2005 were as follows: Country of Description of shares % interest Purpose of companyName of undertaking incorporation held New Medical Technology Ltd Scotland Ordinary £1 shares 100% DormantZero-Stik Limited Scotland Ordinary £1 shares 100% DormantNew Medical Technology Inc USA Common stock 100% Dormant 11 Tangible fixed assets Group and company Plant and Computer and machinery Fixtures and office fittings equipment Total £'000 £'000 £'000 £'000CostAt 1 January 2005 379 4 67 450Additions - - 1 1Disposals - - (6) (6) At 31 December 2005 379 4 62 445 Accumulated depreciationAt 1 January 2005 92 4 53 149Charge for financial year 73 - 8 81Impairment on discontinuation of business 214 - 7 221 Disposals - - (6) (6) At 31 December 2005 379 4 62 445 Net book amountAt 31 December 2005 - - - - At 31 December 2004 287 - 14 301 12 Debtors Group Company 2005 2004 2005 2004 £'000 £'000 £'000 £'000Amounts falling due within one year:Other debtors 9 51 9 51Prepayments and accrued income 29 110 29 110Corporation tax recoverable 39 71 39 71 77 232 77 232 13 Creditors: amounts falling due within one year Group Company 2005 2004 2005 2004 £'000 £'000 £'000 £'000 Trade creditors 105 136 85 116Other taxes and social security costs 9 25 9 25 Accruals and deferred income 69 118 69 118 183 279 163 259 14 Financial instruments A financial instrument is defined as any contract that gives rise to both afinancial asset of one entity and a financial liability or equity instrument ofanother entity. The Group's policy on financial instruments is detailed in theoperating and financial review. Short term trade debtors and creditors have been excluded from all of thefollowing disclosures, with the exception of the currency exposure disclosure. Interest rate risk profile The interest rate risk profile of the Group's financial assets is: Floating Floating rate Fixed rate rate Fixed rate financial financial 2005 financial financial 2004 assets assets Total assets assets TotalCurrency £'000 £'000 £'000 £'000 £'000 £'000 Sterling 40 6,030 6,070 70 6,915 6,985 Euros - - - - - - US dollar cash anddeposits 20 - 20 20 - 20 60 6,030 6,090 90 6,915 7,005 Cash and deposits are placed on short-term maturities up to a maximum of threemonths at relevant market rates for the maturity concerned. The fixed ratedeposits had a weighted average interest rate of 4.45% (2004: 4.73%) and aweighted average period of 4 days (2004: 4 days). Floating rate deposits bearinterest rates, based on LIBOR, its equivalent overseas measure, or UK MoneyMarkets rates, plus a given margin for the respective maturity period. Fair values Fair value is the amount at which a financial instrument could be exchanged inan arm's length transaction between informed and willing parties other than aforced or liquidation sale and excludes accrued interest. Where available,market rates have been used to determine fair value. A comparison by category of book values and fair values of the Group's financialassets is given below. 2005 2005 2004 2004 Book value Fair value Book value Fair value £'000 £'000 £'000 £'000Primary financial instruments held or issued tofinance the Group's operations:Cash at bank and in hand 6,090 6,090 7,005 7,005 6,090 6,090 7,005 7,005 Summary of methods and assumptions: Short term deposits - Fair value approximates to the carrying value because of the short maturity of these instruments. Currency exposures The table below shows the extent to which Group companies have net monetaryassets and liabilities in currencies other than their local currency at 31December 2005 and which give rise to net currency gains and losses recognised inthe profit and loss account of each company and the Group. Net monetary assets/(liabilities):At 31 December 2005 US DollarFunctional currency of Group operation £'000 Sterling (8) (8) At 31 December 2004 USFunctional currency of Group Dollaroperation £'000 Sterling (18) (18) 15 Provision for Liabilities and Charges Reorganisation £'000 Group and companyAt 1 January 2005 - Costs incurred in year (27)Profit and loss charge 116At 31 December 2005 89 The provision relates to the remaining costs associated with the closure of theLivingston office. It is anticipated that the reorganisation provision will beutilised within one year from the year end date. 16 Share capital Authorised Number ('000) £'0002005:Ordinary shares of £4.00 each 16,600 66,400 3,600Deferred shares of £0.01 each 360,000 376,600 70,000 2004:Ordinary shares of £4.00 each 16,600 66,400 Deferred shares of £0.01 each 360,000 3,600 376,600 70,000 Allotted, called up and fully paid Number ('000) £'0002005:Ordinary shares of £4.00 each 8,711 34,845Deferred shares of £0.01 each 234,159 2,342 242,870 37,187 2004:Ordinary shares of £4.00 each 8,711 34,845Deferred shares of £0.01 each 234,159 2,342 242,870 37,187 The deferred shares were created in 2001 to comply with the Companies Act 1985(as amended). The deferred shares are not listed on AIM. The rights attachingto the deferred shares are such to ensure they have negligible value. 17 Movements on reserves Share premium Profit and account loss account TotalGroup £'000 £'000 £'000 At 1 January 2005 38,639 (68,567) (29,928)Loss for the financial year - (1,364) (1,364)At 31 December 2005 38,639 (69,931) (31,292) Share Profit & premium loss Total account accountCompany £'000 £'000 £'000 At 1 January 2005 38,639 (68,567) (29,928)Loss for the financial year - (1,364) (1,364)At 31 December 2005 38,639 (69,931) (31,292) 18 Reconciliation of operating loss to net cash out flow from operating activities 2005 2004 £'000 £'000Continuing operationsOperating loss - (1,429)Depreciation of tangible fixed assets - 90Increase in debtors - (122)Increase in creditors - 264 Net cash outflow from continuing operations - (1,197)Discontinued operationsOperating loss (1,360) (844)Depreciation of tangible fixed assets 81 -Decrease in debtors 109 2,896Decrease in creditors (96) (606) Net cash (outflow)/inflow from discontinued operations before exceptional (1,266) 1,446items Exceptional items (336) 73 Impairment of tangible fixed assets 221 -Increase/(decrease) in re-organisation provisions 89 (6,310) Net cash outflow from discontinued operations (1,292) (4,791) Net cash outflow from operating activities (1,292) (5,988) 19 Analysis of net funds 2004 Cash flow 2005 £'000 £'000 £'000 Cash and current accounts 91 (31) 60Term deposits 6,914 (884) 6,030Cash at bank and in hand 7,005 (915) 6,090 20 Financial commitments At 31 December 2005 the Group had annual commitments under non-cancellableoperating leases as follows: 2005 2004 Land & Plant & Land & Plant & buildings equipment buildings equipment £'000 £'000 £'000 £'000Leases expiringWithin one year 18 - 18 6 18 - 18 6 21 Post balance sheet event On 6 February 2006, the company decided to terminate the license and developmentactivities. As a result, the results for the year have been treated asdiscontinued operations and the group incurred exceptional costs of £0.3m (note5). 22 Related party disclosure As stated in Note 3 above, Lord Kalms, Jonathan Lander and Nick Lander areprovided by Volvere plc under the terms of a service agreement dated 26 Novemberas modified on 9 February 2006. The amount payable under this agreement in theperiod amounted to £83,542. Subsequent to the year end Volvere plc increasedits holding in the company to 29.9% of the issued ordinary share capital. 23 Incorporation The company is incorporated in Scotland, registered number SC 170841. This information is provided by RNS The company news service from the London Stock Exchange