For the year ended 31 December 2007
Futura Medical plc (AIM: FUM), the pharmaceutical group that develops innovative products for consumer healthcare, is pleased to announce its final results for the year ended 31 December 2007.
- Operational Highlights
- Chairman's Statement
- Chief Executive's Statement
- Financial Review
- Consolidated Income Statement
- Consolidated Statement of Changes in Equity
- Consolidated Balance Statement
- Consolidated Cash Flow Statement
- Notes
Operational Highlights
- Substantial progress across the Company as it moves closer to regulatory approval of its first condom product, CSD500
- CSD500 - Statistically significant clinical trial results reinforcing the product's commercial potential
- MED2002 - Global development, marketing and licensing agreement signed with SSL International plc for the Company's topically applied gel for erectile dysfunction
- TPR100 - Exclusivity agreement signed with GlaxoSmithKline Consumer Healthcare for the evaluation of Futura's topical formulations for pain relief and the negotiation of global distribution rights
- PET500 – Exciting new application of our DermaSys® technology for the treatment of premature ejaculation and Phase I study to commence shortly
Financial Highlights
- South East England Development Agency (“SEEDA”) grant awarded of up to £200,000
- Funding raised of £1.00 million with further £1.00 million equity funding facility arranged
- Net loss of £2.25 million (2006: net loss of £1.78 million)
- Cash of £2.64 million at 31 December 2007 (2006: £3.78 million including medium term deposits)
James Barder, Futura's Chief Executive, said:
“We expect 2008 to be another exciting year for Futura with the initial focus being on gaining regulatory approval for the Durex® branded condom CSD500 and the subsequent launch programme by SSL. In addition, we anticipate making significant progress across our product portfolio including completing the pivotal study for MED2002, the extended TPR100 optimisation programme, and the first trials on PET500.”
Chairman’s Statement
Futura is pleased to announce its full year results for the year ended 31 December 2007. The year saw another period of substantial progress for the Company with advances across the portfolio.
Our product closest to launch is our lead condom product CSD500 which is partnered with SSL International plc (“SSL”). We remain confident of commercial success following our CSD500 user study, which reinforced the market potential of this product. Of those who expressed a preference compared to using a normal condom, firmer erections were reported by both men and women, increased penile size by men and a longer lasting sexual experience by women. This is supported by our intellectual property position with the continuing success of our patent applications. We have also progressed with our second condom product, FLD500, which has been further refined to improve our intellectual property and reduce development risk.
We are delighted to have strengthened our commercial relationship with SSL, through the signing in September of a global development, marketing and distribution agreement for MED2002, our topically applied gel for the treatment of erectile dysfunction. We believe SSL, which now holds distribution rights to a total of three of our products and as owner of the innovative, global and market leading Durex® product range, is an excellent partner for MED2002. We expect MED2002 to become the world’s first non-prescription treatment for erectile dysfunction.
In our newer therapeutic area of pain relief, we have built a team of experts and advanced our pre-clinical and clinical studies for TPR100 and entered into exclusive discussions with GlaxoSmithKline Consumer Healthcare (“GSK”). We are undertaking a study to evaluate the drug delivery from topical formulations developed by us. We were also awarded a grant to support the conduct of a specific project in our development pipeline. In addition, we progressed a further application of our DermaSys® technology with our premature ejaculation product, PET500, which we anticipate will commence clinical studies during 2008.
On the financial side we completed a fund-raising in November with a further facility available to enable us to maintain the momentum of product development. Nevertheless we continue to be fiscally prudent with a small core team of only 14 and a flexible network of consultants and advisers. I would personally like to take this opportunity to thank this highly effective group of dedicated and hard working professionals who continue to drive the Company forward.
Notwithstanding progress elsewhere, our key focus remains the attainment of regulatory approval for CSD500 which will herald the most exciting phase so far in the Company’s evolution by placing the Company on track to becoming a revenue generating business with a recurring royalty income stream.
Momentum continues into 2008 and we will keep our shareholders and other stakeholders informed of our progress as we look to the future with ever increasing confidence.
Dr William D PotterExecutive Chairman
12 March 2008
Chief Executive’s Statement
The Directors present their report and the audited financial statements of Futura Medical plc for the year ended 31 December 2007.
Overview
It has been another year of significant commercial and operational progress across our entire product portfolio. We have continued to enhance our expertise in sexual healthcare and to develop our position in pain relief management. We are poised to become revenue generating as a result of the imminently expected completion of the regulatory approval process and subsequent launch of our first commercial product CSD500.
We have steadfastly worked towards the key milestone of achieving regulatory approval for CSD500 and we are pleased to report that we have coupled this with our continued progress across the product range.
Product updates
CSD500: Condom safety device
Working closely with SSL, the manufacturer of Durex® condoms, we made considerable progress with CSD500, our condom product that helps healthy men maintain a full erection whilst wearing a condom. Much of our effort during the year was directed at the successful completion of a clinical study comprising 108 couples, funded equally by SSL and Futura, the positive results from which were announced on 9 August 2007. Of those who expressed a preference a significant proportion of both men and women reported improvements in the firmness of the man’s erection during intercourse when using CSD500, compared to using a normal condom, a result that was highly statistically significant. Furthermore, of those who expressed a preference, a significant proportion of both men and women also felt that CSD500 increased the penis size and a significant proportion of women reported a longer lasting sexual experience with CSD500. The quality of the study results has reinforced our confidence that CSD500 has significant commercial potential. The results have been submitted to the EU regulatory authorities and we patiently await the outcome of their review process.
Prior to the commercial launch of CSD500, we have protected the product’s unique intellectual property position with patents now granted, or proceeding to grant, in more than 30 countries throughout the world, including the principal consumer markets within Europe, the US and Canada. Futura will receive royalty based payments from all future sales of the condom for the lifetime of the patents.
SSL is currently carrying out the detailed preparatory work for CSD500’s EU marketing launch, including the selection of the product’s brand name within the Durex® portfolio and the product’s logo and packaging. We have been delighted by the commitment and enthusiasm shown for CSD500 from SSL, which provides further endorsement of the commercial potential of the product.
MED2002: Treatment for erectile dysfunction
MED2002 is our topically applied gel for the treatment of men with erectile dysfunction. This product was initially licensed to GSK but in May 2007 they returned the rights to Futura as current priorities within GSK meant they were unlikely to approve a marketing agreement within the near future. Given the commercial potential of MED2002 we were confident of securing a new agreement on favourable commercial terms and were delighted to announce, on 17 September 2007, that a global development, marketing and distribution agreement had been signed with SSL.
Under the terms of this agreement, Futura will receive an undisclosed royalty on MED2002’s future sales along with milestone payments of up to £18 million, subject to regulatory approvals and the achievement of sales targets. SSL and Futura will jointly manage the completion of the clinical development of MED2002, which is currently expected to cost up to £3.8 million, of which SSL will contribute 65% and Futura 35%.
Once launched, MED2002 is expected to become the world’s first non-prescription pharmaceutical treatment for men with erectile dysfunction, a condition that affects, to some degree, 50% of men aged 45 or over¹. This would be an important step forward as it is estimated that only 15% of men with erectile dysfunction seek treatment² due to the perceived embarrassment of having to consult a doctor to be prescribed one of the current treatments.
A double blind placebo controlled pivotal study for over 200 men with erectile dysfunction is shortly to commence in Germany and Greece. The study has been powered to give statistically significant efficacy data as well as safety data and the preliminary results are expected by the end of 2008.
¹ Massachusetts Male Ageing Study (MMAS), J Urol 1994 Jan; ISI (1): pp 54-61
² Prog Urol February 2003, Vol. 13 part 1, pp 85-91
FLD500: Female lubrication device
FLD500 is our condom product designed to improve natural female lubrication during sexual intercourse. In FLD500 the active compound is on the outside of the condom and is used at a much lower dose level than in CSD500, where it is inside the condom. We have previously reported positive clinical data from FLD500 and have since been working on achieving a commercially optimised shelf life for the product and refining the manufacturing process. We have developed a new prototype of the product which will simplify the manufacturing process and so far in pilot stability studies has shown a significantly improved shelf life. In common with CSD500, FLD500 is licensed to SSL. We are determining the marketing and regulatory strategy for the product with SSL prior to initializing formal stability studies.
Our previously reported clinical data in healthy female volunteers showed that FLD500 was safe, well tolerated and had the potential to promote the vascular changes seen in women during clitoral stimulation and sexual arousal. This data will form part of the regulatory submission for FLD500, although our experience with CSD500 has demonstrated how the value of further clinical work can reduce regulatory risk and support strong marketing claims.
Once CSD500 and FLD500 gain regulatory approval, there is potential for a combination product embracing both CSD500 and FLD500. Such a product could improve natural lubrication for women and give men a firmer erection during protected sexual intercourse.
TPR100: Topical pain relief
One of Futura’s key proprietary assets is its highly efficient, trans-dermal delivery system, DermaSys®, which is used in the Group’s sexual healthcare portfolio but which has the potential to have much broader utility across other therapeutic areas. A particular application of DermaSys®, owing to its ability to provide rapid transfer of active ingredients through the skin, has shown significant potential in the provision of pain relief through our product TPR100. In April 2007, we entered into an exclusivity agreement with GSK, whilst we undertook a study to evaluate the drug delivery from topical TPR100 formulations developed by Futura. Pending the outcome of Futura’s study and the subsequent completion of commercial negotiations, GSK will have the opportunity to acquire global distribution rights.
On 23 August 2007 we announced the appointment of Professor Robert Moore DSc. to join our team of expert consultants in the therapeutic area of pain relief. Professor Moore's extensive knowledge of pain relief, from both academic and commercial perspectives, is already proving to be of great value in the development of TPR100.
PET500: Premature ejaculation treatment
We continue to make progress on our early stage portfolio, particularly with our potential treatment for premature ejaculation, PET500, which uses our DermaSys® delivery system and is now ready to enter into clinical studies. We expect to start a Phase I study shortly to evaluate the product’s characteristics.
Early stage product evaluation
We continue to evaluate the commercial and development potential of other product concepts using our DermaSys® technology and our medical device expertise. For the time being, we do not intend to report on FSD500 or any other individual product which is at this evaluation stage, as our focus is on the more advanced stage products including the recent addition of PET500 to the clinical programme. As our later stage products complete the regulatory process and move into their commercial phase we anticipate being able to introduce further exciting products into the development portfolio at the appropriate time.
Outlook
We expect 2008 to be another exciting year for Futura with the initial focus being on gaining regulatory approval for the Durex® branded condom CSD500 and the subsequent launch programme by SSL. In addition, we anticipate making significant progress across our product portfolio including completing the pivotal study for MED2002, the extended TPR100 optimisation programme, and the first trials on PET500.
We were delighted by the support from both new and existing shareholders for the £1.00 million placing which we completed on 15 November 2007 and this included a further equity funding facility of up to £1.00 million which we can draw on should we so choose. These funds enable us to maintain the momentum of product development at Futura.
We will continue to keep our shareholders and other stakeholders informed of our strategy and progress and look forward to being able to discuss the launch of CSD500 in our next Annual Report.
James Barder Chief Executive
12 March 2008
Financial Review
The Group finished the year with a comfortable cash position, costs remaining firmly under control, an expanded development portfolio and the prospect of recurring revenues moving closer.
International Financial Reporting Standards
The Financial Review should be read in conjunction with the financial statements and the notes to the financial statements.
This is the first annual report for the Group presented under International Financial Reporting Standards as adopted by the European Union (“IFRS”). The comparative figures have also been restated to reflect this. There has been no significant impact on the Group in either the current year results or the restated historic results. An explanation, including the impact of transition to IFRS, is included in the notes to the Group financial statements. The financial statements of the Company continue to be prepared in accordance with United Kingdom Generally Accepted Accounting Practice (“UK GAAP”).
Revenue
Group revenue for the year ended 31 December 2007 was £15,000 (2006: £301). Grant income for the year ended 31 December 2007 was £96,172 (2006: £nil).
In accordance with our revenue accounting policy, the £150,000 already received from GSK in respect of the TPR100 exclusivity agreement has been included as deferred income within current liabilities on the balance sheet and will be recognised as revenue when the relevant conditions of the agreement are met.
Losses
The Group continues to maintain a focus on tight control of all expenditure.
The Group’s loss after taxation for the year ended 31 December 2007 was £2.25 million (2006: £1.78 million). The Group’s operating loss for the year ended 31 December 2007 was £2.62 million (2006: £2.11 million).
Loss per share for the year ended 31 December 2007 was 4.1 pence (2006: 3.4 pence).
No dividends were paid and none are proposed by the Directors (2006: £nil).
Financial instruments
The financial instruments held by the Group are disclosed in note 13.
Group research and development costs
The Group aims to achieve cost effective research and development and to bring products to market through licensing partners as soon as is practicable.
Group research and development costs each year reflect the number of products being developed, the stage of development reached for each and the impact on their progress of external factors. Such factors during the year ended 31 December 2007 included pending decisions of regulatory bodies and finalisation of joint development arrangements.
Research and development (“R&D”) costs of £1,508,269 have increased compared to the previous year, and to a level similar to that of 2005, largely due to the utilisation of external laboratory facilities and phase I development costs for TPR100.
The table below shows the trend in our historic research and development costs and other administrative costs over the past five reporting periods:
| Year ended 31 December 2007 | Year ended 31 December 2006 | Year ended 31 December 2005 | Year ended 31 December 2004 | 11 months ended 31 December 2003 | |
| IFRS £ | IFRS £ | UK GAAP £ | UK GAAP £ | UK GAAP £ | |
| Research and development costs | 1,508,269 | 1,079,986 | 1,553,056 | 971,043 | 632,062 |
| Other administrative costs | 1,227,320 | 1,029,075 | 805,161 | 754,725 | 885,888 |
| Total operating costs | 2,735,589 | 2,109,061 | 2,358,217 | 1,725,768 | 1,517,950 |
| R&D ratio | 55% | 51% | 66% | 56% | 42% |
The figures for the years 2005 and prior, prepared under UK GAAP, have not been restated for the holiday pay accrual under IAS 19 as the figures are not materially different.
The R&D ratio is the percentage of research and development costs relative to total operating expenses. The Board is mindful to keep a sensible balance as reflected in this ratio. Total research and development spend since formation of the business in 1997 totals £7.72 million (remaining at 55% of total operating costs as reported last year). During the year, the sole subsidiary Futura Medical Developments Limited continued to incur this research and development expenditure which has been accounted for as explained in accounting policy note 1.5 of the Notes to the Consolidated Financial Statements and has been written off as incurred for all reporting periods prior to and including the year ended 31 December 2007.
The Board considers that this overall total research and development spend relative to its pipeline of later stage products and emerging new products distinguishes the Group’s lower funding requirements and risk profile from more typical businesses in the wider pharmaceutical industry. The Group’s strategy is to focus on medical devices and pharmaceutical drugs that offer the potential for a significant return on the costs of development. As well as progressing its existing research and development programme, the Group continues to seek new opportunities for potential products to add to its portfolio.
Other administrative costs
Other administrative costs for the year ended 31 December 2007 were £1,227,320 (2006: £1,029,075). These comprise all other operating costs excluding those relating to product development and associated intellectual property. The main constituents and their relative proportions were:
| Year ended 31 December 2007 |
Year ended 31 December 2006 |
|
| Wages and salaries | 53% | 52% |
| Legal and professional advisers | 22% | 23% |
| Office costs and staff expenses | 13% | 14% |
| Licensing negotiations | 12% | 11% |
| 100% | 100% |
The principal reasons for the increase in other administrative costs relate to commercial and negotiation costs in respect of the development and licensing of MED2002 and the expansion of our small core team with the addition of two new support staff. These were recruited in 2007 to support increased activity levels as the Group moves towards revenue generation and seeks further product development opportunities internally and externally. This completes the current expansion of the central administrative functions of the Group as the platform for the next phase of the growth strategy.
Supplier payment policy
The Group’s policy concerning the payment of its trade creditors is to pay on the basis of the agreed terms of payment established with each supplier, providing that all terms and conditions have been complied with and are in accordance with the Group’s financial control procedures.
The average credit period (expressed as creditor days) during the year ended 31 December 2007 was 18 days (2006: 30 days) for the Group. At the year end the Company had trade creditors totalling £2,697 (2006: £5,521) giving rise to the average credit period for the year ended 31 December 2007 of 9 days (2006: 11 days).
Charitable and political contributions
No political donations were made during either year. Charitable donations of £236 were made during the year (2006: £nil).
Taxation
A research and development tax credit of £208,717 (2006: £196,133) in respect of research and development expenditure incurred has been recognised in the financial statements. The increase compared with the prior year reflects the increased research and development spend in the year.
Capital structure and funding
The Group remains funded primarily by equity capital. This reflects the development status of its products.
Cash held by the Group at 31 December 2007 totalled £2.64 million. This comprised cash and cash equivalents and medium term deposits with original maturities of more than three months, shown below at each period end:
| 31 December 2007 |
31 December 2006 |
31 December 2005 |
31 December 2004 |
31 December 2003 |
|
| £m | £m | £m | £m | £m | |
| Medium term deposits | - | 1.04 | - | - | - |
| Cash and cash equivalents | 2.64 | 2.74 | 1.81 | 3.67 | 2.40 |
| Total cash | 2.64 | 3.78 | 1.81 | 3.67 | 2.40 |
The Group did not have any bank borrowings at 31 December 2007 (2006: £nil).
The Group was pleased to announce, on 27 July 2007, that it had been awarded an R&D grant of up to £200,000, from the South East England Development Agency (SEEDA), to support the conduct of a specific project that forms part of the overall development programme of a product that uses a particular application of the Group’s DermaSys® technology. This award followed a thorough review by SEEDA. Of the grant income recognised in the income statement for the year of £96,172, the Group had received £80,662 by the year end.
On 15 November 2007, the Group raised £1.00 million, net of costs, following a private placing at 48.56 pence (2006: net receipts from a private placing and the exercise of share options was £3.69 million). The funds raised are for working capital, including the support of the ongoing development of products within our existing pipeline and initial development of selected new opportunities generated by our research initiatives.
This brings the total cash raised from share issues by the Group from formation of the business in 1997 until 31 December 2007 to £14.53 million, net of costs.
In addition, as announced on 15 November 2007, there is a further equity funding facility in place of up to £1.00 million which, if used, would involve the issue of new ordinary shares at a price per share set at a 10 per cent discount to the average mid-price of the Company’s shares during the five trading days prior to the agreement to issue the tranche of shares.
Other significant sources of funding received for the Group from formation of the business until 31 December 2007 comprised research and development tax credits of £1.04 million, bank interest of £0.73 million and R&D grants of £0.16 million.
Anthony L Clayden Finance Director
12 March 2008
The financial information set out below does not constitute the Company’s full statutory accounts for the year ended 31 December 2007 for the purposes of section 240 of the Companies Act 1985, but it is derived from those accounts that have been audited. Statutory accounts for 2006 have been delivered to the Registrar of Companies. The independent auditors have reported on those accounts; their report was unqualified and did not include an emphasis of matter statement. The independent auditor’s report did not contain statements under the Companies Act 1985, s237 (2) or (3).
Consolidated Income Statement
For the year ended 31 December 2007
| Year ended 31 December 2007 |
Year ended 31 December 2006 |
||
| Notes | £ | £ | |
| Revenue | 1.3 | 15,000 | 301 |
| Grant income | 4 | 96,172 | - |
| Research and development costs | (1,508,269) | (1,079,986) | |
| Administrative costs | (1,227,320) | (1,029,075) | |
| Operating loss | 5 | (2,624,417) | (2,108,760) |
| Finance income | 8 | 161,291 | 136,114 |
| Loss before tax | (2,463,126) | (1,972,646) | |
| Taxation | 9 | 208,717 | 196,133 |
| Loss for the year attributable to equity holders of the parent company | 19 | (2,254,409) | (1,776,513) |
| Basic and diluted loss per share (pence) | 10 | (4.1p) | (3.4p) |
All amounts relate to continuing activities.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2007
| Share capital |
Share premium reserve |
Other reserve |
Retained losses |
Total equity |
||
| Notes | £ | £ | £ | £ | £ | |
| At 1 January 2006 | 97,877 | 8,560,987 | 1,152,165 | (7,832,392) | 1,978,637 | |
| Loss for the year | 19 | - | - | - | (1,776,513) | (1,776,513) |
| Share-based payment | - | - | - | 43,374 | 43,374 | |
| Shares issued during the year | 17 | 12,730 | 3,836,420 | - | - | 3,849,150 |
| Cost of share issues | 19 | - | (146,132) | - | - | (146,132) |
| At 1 January 2007 | 110,607 | 12,251,275 | 1,152,165 | (9,565,531) | 3,948,516 | |
| Loss for the year | 19 | - | - | - | (2,254,409) | (2,254,409) |
| Share-based payment | - | - | - | 64,651 | 64,651 | |
| Shares issued during the year | 17 | 4,631 | 1,111,869 | - | - | 1,116,500 |
| Cost of share issues | 19 | - | (101,768) | - | - | (101,768) |
| At 31 December 2007 | 115,238 | 13,261,376 | 1,152,165 | (11,755,289) | 2,773,490 |
The loss for the year represents the total recognised income and expense for the year.
Consolidated Balance Sheet
As at 31 December 2007
| As at 31 December 2007 |
As at 31 December 2006 |
||
| Notes | £ | £ | |
| Assets | |||
| Non-current assets | |||
| Plant and equipment | 11 | 35,415 | 20,109 |
| Total non-current assets | 35,415 | 20,109 | |
| Current assets | |||
| Inventories | 12 | 23,344 | 32,648 |
| Trade and other receivables | 14 | 183,283 | 1,196,024 |
| Income tax asset | 9 | 208,717 | 195,034 |
| Cash and cash equivalents | 15 | 2,637,892 | 2,740,767 |
| Total current assets | 3,053,236 | 4,164,473 | |
| Liabilities | |||
| Current liabilities | |||
| Trade and other payables | 16 | (315,161) | (236,066) |
| Total liabilities | (315,161) | (236,066) | |
| Total net assets | 2,773,490 | 3,948,516 | |
| Capital and reserves attributable to equity holders of the parent company |
|||
| Share capital | 17 | 115,238 | 110,607 |
| Share premium reserve | 19 | 13,261,376 | 12,251,275 |
| Other reserve | 19 | 1,152,165 | 1,152,165 |
| Retained losses | 19 | (11,755,289) | (9,565,531) |
| Total equity | 2,773,490 | 3,948,516 |
The financial statements from which this final results announcement is derived were approved and authorised for issue by the Board on 12 March 2008 and were signed on its behalf by James H Barder, Director.
Consolidated Cash Flow Statement
For the year ended 31 December 2007
| Notes | Year ended 31 December 2007 |
Year ended 31 December 2006 |
|
| £ | £ | ||
| Cash flows from operating activities | |||
| Loss before tax | (2,463,126) | (1,972,646) | |
| Adjustments for: | |||
| Depreciation | 11 | 15,194 | 10,630 |
| Finance income | 8 | (161,291) | (136,114) |
| Loss on sale of plant and equipment | 5 | - | 6 |
| Share-based payment charge | 18 | 64,651 | 43,374 |
| Cash flows from operating activities before changes in working capital | (2,544,572) | (2,054,750) | |
| Decrease/(increase) in inventories | 12 | 9,304 | (692) |
| Increase in trade and other receivables - excluding medium term deposits | 14 | (21,147) | (76,067) |
| Increase/(decrease) in trade and other payables | 16 | 79,095 | (2,616) |
| Cash used in operations | (2,477,320) | (2,134,125) | |
| Income tax received | 195,034 | 282,636 | |
| Net cash used in operating activities | (2,282,286) | (1,851,489) | |
| Cash flows from investing activities | |||
| Purchase of plant and equipment | 11 | (30,500) | (5,418) |
| Sale of plant and equipment | - | 44 | |
| Disposal/(acquisition) of medium term deposits | 14 | 1,039,031 | (1,039,031) |
| Interest received | 156,148 | 124,730 | |
| Cash generated by/(absorbed in) investing activities | 1,164,679 | (919,675) | |
| Cash flows from financing activities | |||
| Issue of ordinary shares | 17 | 1,016,500 | 3,849,150 |
| Expenses paid in connection with share issues | 19 | (1,768) | (146,132) |
| Cash generated by financing activities | 1,014,732 | 3,703,018 | |
| (Decrease)/increase in cash and cash equivalents | 15 | (102,875) | 931,854 |
| Cash and cash equivalents at beginning of year | 15 | 2,740,767 | 1,808,913 |
| Cash and cash equivalents at end of year | 15 | 2,637,892 | 2,740,767 |
Notes to the Financial Statements
The Notes to the Financial Statements are contained in the full results which is available to download in PDF format
Page last up-dated: 13 March 2008
Page last reviewed: 12 August 2008
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