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Annual Report
AorTech International plc
Annual Report & Accounts
For the year to 31 March 2013
I N T E R N AT I O N A L P LC
01
02 CHAIRMAN’S STATEMENT
07 BOARD OF DIRECTORS
AND ADVISERS
08 REPORT OF THE DIRECTORS
13 DIRECTORS’ RESPONSIBILITIES
STATEMENT
14 CORPORATE GOVERNANCE
14 ACCOUNTABILITY AND AUDIT
15 REPORT OF THE
REMUNERATION COMMITTEE
18 INDEPENDENT
AUDITOR’S REPORT
20 CONSOLIDATED
INCOME STATEMENT
21 CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
22 CONSOLIDATED BALANCE SHEET
23 CONSOLIDATED CASH FLOW
STATEMENT
24 CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
25 NOTES TO THE
FINANCIAL STATEMENTS
43 INDEPENDENT
AUDITOR’S REPORT ON THE
PARENT COMPANY
FINANCIAL STATEMENTS
45 PARENT COMPANY
BALANCE SHEET
46 NOTES TO THE
PARENT COMPANY
FINANCIAL STATEMENTS
51 NOTICE OF THE
ANNUAL GENERAL MEETING
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The Group’s cash position at
31 March 2013 was $987,000.
Although this shows a decrease of
approximately $1 million from the
same date last year it also shows a
marked increase from the bank
balance at the half year stage of
$295,000. The Group has
generated cash post the year end
and at the end of July 2013 the
cash position had increased to
$1.2m.
Upon the transfer of the Rogers
facility to St Jude Medical at the
end of March 2013, the Group
ceased volume manufacturing of
polymer but since that date has
had access to the facility to
manufacture Elast-Eon™ on a
small batch basis. As a
consequence, there has been a
reduction in the running costs of
the business. The manufacture of
Elast-Eon™ by AorTech in the
Rogers facility will cease by
31 December 2013.
CHAIRMAN’S STATEMENT
I set out below my report to
the shareholders of AorTech for
the year ended 31 March 2013.
There have been fundamental
changes in the Group’s
structure and trading activities
which I will review in more
detail during the course of this
report. In addition, your Board
has implemented a strategy
which has made sizeable
reductions in the running costs
of the Group and has also
taken strategic steps to
enhance the future revenue of
the Group in the coming years.
AUDITED RESULTS
FOR THE YEAR
Group revenue for the year was
$3,795,000 after exceptional items
of $1,990,000 (2012: $5,038,000).
Operating profit after exceptional
items was $1,206,000 (2012:
$38,000). The net loss for the year
was $847,000 (2012: profit
$57,000) after exceptional finance
costs of $2,048,000. These finance
costs relate to the redemption
premium paid of $1,914,000
together with a provision in
respect of potential additional
redemption premium due to loan
note holders. I will refer to these
finance costs later in the report.
The exceptional items of
$3,193,000 net of fees and
expenses was the payment
received from St Jude Medical in
respect of the settlement in
December 2012 of the dispute.
The Group’s administrative and
development expenditure before
exceptional items was $2,563,000
(2012: $3,928,000). The reduction
in this expenditure arises as a
direct consequence of AorTech’s
move from Australia to the Rogers
facility in the USA.
AORTECH INTERNATIONAL PLC | ANNUAL REPORT & ACCOUNTS 2013
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ST JUDE MEDICAL
DISPUTE
All matters with St Jude Medical
have now been fully resolved
with the final payment of
$500,000 having been received in
April 2013. The settlement figure
received from St Jude Medical
was $3,900,000 along with
amounts in respect of inventory
and plant and machinery, of
which $1,990,000 is treated as
exceptional revenue in the
consolidated income statement
and $1,653,000 as exceptional
other income, along with
$618,000 of reimbursed
production expenditure.
SYNCARDIA DISPUTE
As previously announced to the
shareholders, AorTech has taken
legal action for the recovery of its
outstanding debt and related
costs due from SynCardia. This
action is subject to arbitration
although I can now advise that a
mediation process will take place
in September 2013.
AorTech remains confident of its
legal position in this case and will
provide further updates as and
when appropriate.
ISSUE AND
REPAYMENT OF
LOAN NOTES
As advised to shareholders last
year, in the absence of either a
sale of the Company or a fund
raising, the cash position of
AorTech was going to become
critical by the end of October
2012. We were fortunate to
secure the support of a number
of investors, including existing
shareholders in the Company, to
the issue of secured loan notes
totalling £1,210,000, so as to
provide the capital required to
finance the Company, including
meeting the costs of the St Jude
dispute. The loan note holders,
despite having security over the
IP of AorTech, took on a
significant risk due to the
uncertainty over both the
timescale and outcome of the
litigation. The terms of the loan
notes called for an initial
premium of 100% if the original
sum subscribed for loan notes
was repaid before 31 March
2013, together with a “carried
interest” into 15% of any sums
paid to the shareholders on a
change of control or winding up
of the Company. The sums
subscribed for loan notes
together with the initial premium
have been paid to noteholders
already. I indicated at the time of
the interim results that it would
be helpful to consolidate the
remaining 15% carried interest of
the loan note holders by issuing
shares in the Company in
exchange for the remaining loan
note interests. Having now taken
legal, accounting and taxation
advice, we are advised that
converting the remaining interest
into equity at this stage would
not only be costly to the
Company in legal, court and
accounting fees but would also
create a negative taxation
situation for loan note holders.
As a result, we have concluded
that it is best to let the loan note
terms remain as originally
contemplated.
Although the returns on the loan
notes were attractive, the capital
the loan note providers
introduced to the Company
enabled AorTech to continue
trading and allowed us to reach a
negotiated settlement in our
dispute with St Jude. Without
the loan note monies, AorTech
would have undoubtedly failed
with little return of value for
shareholders. The loan notes
have now been repaid and the
further cost to shareholders is
limited to a potential 15%
dilution on a winding up or on a
change of control of the
Company. For accounting
purposes, an estimate has been
made of the current potential
value of this amount, based on
the Company’s market
capitalisation at the year end.
This estimate will be updated
every six months.
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Your Board is still of the
opinion that there potentially
is uplift for the Company
and its shareholders in the
heart valve field.
HEART VALVE
Having last year re-acquired all
the patents and IP in relation to
heart valve technology, your
Board is still of the opinion that
there potentially is uplift for the
Company and its shareholders in
the heart valve field.
We continue to have ongoing
discussions with various parties
regarding the potential of using
our Elast-Eon™ material for new
generation heart valves. We can
now advise that one of our
licensees has commenced its first
clinical implants using Elast-Eon™
in mitral valve repair.
AORTECH INTERNATIONAL PLC | ANNUAL REPORT & ACCOUNTS 2013
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FUTURE STRATEGY
The strategy of deriving value
for AorTech shareholders from
exploitation of our IP rather
than as a manufacturer of bio
materials has been the focus of
the Board over the past 18
months.
We explored the potential sale of
the Company as a way of
achieving value for our IP in the
short term; however with the
cash problems and the major
dispute being distractions from
the core value, a satisfactory
proposal has not been
forthcoming.
Your Board is now pursuing a
strategy to exploit the value of
the Company’s IP, Patents and
know-how without the problems
of having to operate a sub-scale
manufacturing facility. It is our
intention to fully transition
AorTech to an IP business.
The transfer of the Rogers facility
to St Jude has provided the
opportunity to completely
change the basis upon which
AorTech does business and to
provide a more attractive, longer
term return. Due to the very
small scale of the polymer
manufacturing facilities, the cost
of manufacture was much too
high and as a result precluded
the ability to achieve a greater
penetration of Elast-Eon™ into
the market. A review of the
contracts that had been signed
indicated that customers have
elected to use our material
because it solves a problem, with
cost being less of an issue.
A secondary problem is that
placing reliance on a business of
the size and scale of AorTech is a
substantial risk for a medical
device developer.
To this end AorTech is presently
in discussions with a well
respected, mid-sized US polymer
and medical device component
manufacturer, with the intention
of concluding a contract for the
manufacture of AorTech’s
polymers. Under such an
arrangement the income
generated by AorTech would
arise from revenue share from
manufacturing activities together
with licence fees. Our ongoing
discussions to conclude a licence
and manufacturing agreement
with our polymer manufacture
licensee will provide the security
of the supply of Elast-Eon™ to
our customer base and
potentially new business areas
for our manufacturing licensee,
which would also provide
additional revenue potential for
the Group. As part of the licence
agreement to manufacture, our
IP and know-how will be
protected, which should extend
the value of our licence
agreements beyond any patent
expiry date.
It takes a number of years for our
licence agreements to mature to
income generating royalties due
to the time-consuming testing
and regulatory requirements
through which our licensees have
to go. I am pleased to report
that several licences signed in
prior years are now either
approaching clinical trials, in
clinical trials or indeed have
achieved initial regulatory
approval.
The potential income forecast by
the licensees could result in
significant royalties in future
years for the Group. These
forecasts are of course wholly
dependent upon the success of
the licensees in their various
medical device fields.
This strategy and business model
allows the annual operating costs
of AorTech to be kept to a
minimum, provides a supply of
material to existing customers
and enables the Group to benefit
not only from its future royalty
stream but also potentially to
share in the value of new
business generated by our
manufacturing licensee.
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also one that can be done at
attractive net margins without
the requirement to raise further
capital from shareholders.
Your Board, therefore, has
grounds to be more optimistic
about the Group’s future than it
has in the recent past and
believes that all of the hard work
over the past year has been
successful in the transformation
of AorTech.
Bill Brown
Chairman
27 August 2013
ANNUAL GENERAL
MEETING
Section 656 of the Companies
Act 2006 states that “if a public
company’s assets fall below half
or less of its called-up share
capital the directors are required
to convene a general meeting of
the company to discuss whether
any and if so what steps are to be
taken in relation to this
situation”.
Following the finalisation of the
parent company accounts for
AorTech International plc and
making appropriate provisions
for £442,000 under UK GAAP in
respect of the 15% premium due
to loan note holders and a
£4,417,000 provision against the
inter-company loan due by
AorTech Polymer & Medical
Devices Inc in the USA, AorTech
International plc’s net assets
were reduced to approximately
£4,351,000 with its issued share
capital being £12,082,000.
This general meeting has been
convened partly to comply with
Section 656, and this matter will
be dealt with before we move on
to the usual AGM business.
The strategy implemented by
your Board whereby the majority
of our income will be generated
by licence fees and royalties
means that future income of the
Group will flow to the parent
company of the Group, AorTech
International plc. The Group’s
cash position at 31 July 2013 was
$1,212,000 and the Board are
keeping tight control over
running costs. On that basis your
Directors do not consider that
any additional action needs to be
taken.
CONCLUSION
I take this opportunity of
welcoming Roy Mitchell, who
was appointed to the Board on
23 May 2013. Roy brings to the
Board his own skills and expertise
which will enhance the Group’s
future prospects.
I am fully aware that the past
twelve months must have been a
frustrating period for our
shareholders but you may be
assured that your Board has
continued its work to not only
resolve the issues and problems
of the past but to also plan for
the future.
Your Board has strived to
implement a strategy which will
enable the Group to achieve both
growth and profitability to
enhance shareholder value.
We believe that we have now
established the appropriate
business model to deliver not
only a profitable business but
AORTECH INTERNATIONAL PLC | ANNUAL REPORT & ACCOUNTS 2013
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board of directors & advisors
BOARD OF DIRECTORS & ADVISERS
DIRECTORS
Bill Brown non-Executive Chairman
Frank Maguire Chief Executive
Eddie McDaid Finance Director
Roy Mitchell non-Executive Director
Gordon Wright non-Executive Director
COMPANY SECRETARY
David Parsons ACIS
REGISTERED OFFICE
C/o Kergan & Stewart LLP
163 Bath Street
Glasgow G2 4SQ
HEAD OFFICE
Level Two
Springfield House
23 Oatlands Drive
Weybridge
Surrey KT13 9LZ
WEB: WWW.AORTECH.COM
EMAIL: INFO@AORTECH.COM
NOMINATED ADVISER AND BROKER
FinnCap
60 New Broad Street
London EC2M 1JJ
REGISTRARS
Equiniti Registrars,
Aspect House,
Spencer Road,
Lancing,
West Sussex BN99 6DA
INDEPENDENT AUDITOR
Grant Thornton UK LLP
Statutory Auditor
Chartered Accountants
Regent House
80 Regent Road
Leicester LE1 7NH
Registered in Scotland, Company No.170071
Financial statements will be circulated to Shareholders
and copies of the announcement will be made
available from the Company’s registered office.
Dealings permitted on Alternative Investment Market
(AIM) of the London Stock Exchange.
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REPORT OF THE DIRECTORS
The Directors present their report and the audited financial
statements for the year ended 31 March 2013.
PRINCIPAL ACTIVITIES
The Company is the holding company of a Group whose principal activities are the development and exploitation of a range of innovative
biomaterials and medical devices.
REVIEW OF BUSINESS & FUTURE DEVELOPMENTS
The consolidated Income Statement is set out on page 20 indicating the Group’s loss for the financial year of US$847,000 (2012: profit of US$57,000)
which will be deducted from the reserves.
On a Group basis, the business review and future prospects are contained within the Chairman's Statement. The Directors consider the Group
financial key performance indicators to be revenue growth, control of operating expenses and the pre tax result. In addition the Directors consider
the Group non financial key performance indicators to be the utilisation of its patents, IP and know-how for new application areas and the signing
of new licence agreements. All appropriate key performance indicators are summarised in the Chairman's Statement.
The Directors consider the principal risks and uncertainties facing the Group at this stage of its development to be as follows: the success rate of
several key customers utilsing our products in various medical device fields; small customer base generating revenues; retention of key management
and personnel; any adverse results which may arise during development and regulatory phases; product liability risks; competitive markets with
changing technology and evolving industry standards. All of the above risks and uncertainties are considered fundamental to the achievement of
the Group's strategy and are being actively managed at Board level through regular review of progress, along with the internal control environment
detailed on page 14 below.
No dividends have been paid or proposed for the years ended 31 March 2013 and 31 March 2012.
GOING CONCERN
After considering the year end cash position, making appropriate enquiries and reviewing budgets and profit and cash flow forecasts for a period
of at least twelve months from the date of signing these financial statements, the Directors have formed a judgement at the time of approving the
financial statements that there is a reasonable expectation that the Group has sufficient resources to continue in operational existence for the
foreseeable future. For this reason the Directors consider the adoption of the going concern basis in preparing the Group financial statements is
appropriate.
AORTECH INTERNATIONAL PLC | ANNUAL REPORT & ACCOUNTS 2013
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DIRECTORS & THEIR INTERESTS
At 31 March 2013 the Chairman of the Company was W Brown; the Chief Executive Director was F Maguire; the Finance
Director was E McDaid, and the non-Executive Director was G Wright. The other Director who served during the year was
J Pither, who resigned on 31 December 2012. On 3 July 2012, J Pither stepped down as Chairman and W Brown took over
that role. R Mitchell was appointed to the Board on 23 May 2013.
At each Annual General Meeting one third of the Directors shall be subject to retirement by rotation. F Maguire retires from
the Board at the Annual General Meeting and, being eligible, offers himself for re-election. R Mitchell, having been appointed
Director since the last Annual General Meeting, will retire and seek re-election.
The interests of the Directors at 31 March 2013 and 31 March 2012 (or date of appointment if later) in the ordinary share
capital of the Company (all beneficially held) were as follows:
31 March 2013 31 March 2012
Number of shares (or date of
appointment)
Number of shares
J Pither* - 25,550
F Maguire 103,350 103,350
E McDaid 333,914 333,914
G Wright 308,311 308,311
W Brown 407 -
R Mitchell* - -
* not a member of the Board of Directors on 31 March 2013
SUBSTANTIAL SHAREHOLDERS
With the exception of the following shareholdings the Directors have not been advised of any individual interest or group
of interests held by persons acting together which at 13 August 2013 exceeded 3% of the Company’s issued share capital:
Number of shares %
Bluehone Investors LLP* 891,861 18.45%
Mr Roy Mitchell and Mrs P Mitchell 335,163 6.94%
Mr Edward McDaid 333,914 6.91%
Caricature Investments Limited** 308,311 6.38%
Mr Alan Smith 201,931 4.18%
Mr Clive Titcomb 192,000 3.97%
Henderson Global Investors (UK) 191,227 3.96%
Halifax Share Dealing 174,976 3.62%
Fermain Capital Ltd 146,500 3.03%
* the holding of Bluehone Investors LLP is as fund manager of Active Capital Trust plc which accounts for 18.45% of the
Company’s issued share capital. W Brown is also a Director of Bluehone Investors LLP.
** Caricature Investments Limited is a company wholly owned by Mr G Wright, a Director of the Company.
The percentage of shares not in public hands (as defined in the AIM rules) at 13 August 2013 was 40.8%.
EMPLOYEES
The Group places considerable value on the involvement of its employees and they are regularly briefed on the Group’s
activities through consultative meetings. Equal opportunities are given to all employees regardless of their gender, colour,
race, religion or ethnic origin. Applications for employment from disabled persons are always considered fully bearing in
mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled every effort is made to
ensure that their employment within the Group continues and that appropriate training is arranged. It is the policy of the
Group that training, career development and promotion of disabled persons should, as far as possible, be identical with that
of other employees.
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MARKET RISK
Market risk encompasses two types of risk, being currency risk and fair value interest rate risk. The Group’s policies for
managing fair value interest rate risk are considered along with those for managing cash flow interest rate risk and are set
out in the sub-section entitled “interest rate risk” below.
CURRENCY RISK
The Group is exposed to translation and transaction foreign exchange risk. The majority of the Group’s sales are to customers
in the United States. These sales are priced and invoiced in US dollars. The Group policy is to try and match the timing of the
settling of these sales and purchase invoices so as to eliminate, as far as possible, currency exposures.
The tables below show the extent to which the Group has residual financial assets and liabilities. Foreign exchange differences
on retranslation of these assets and liabilities are taken to profit or loss of the Group, other than in respect of the retranslation
of foreign subsidiary balances arising on consolidation and parent company equity balances which are recognised in other
comprehensive income and accumulated in the foreign exchange reserve.
Net foreign currency monetary assets
Australian dollar Euro GB Pound Total
US$000 US$000 US$000 US$000
2013
US Dollars 22 - 823 845
2012
US Dollars 93 17 1,196 1,306
LIQUIDITY RISK
The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs and by
investing cash assets safely and profitably. As disclosed within the Report of the Directors, the Directors have set out their
assessment of why they believe the Group continues to remain a going concern, including the assumptions they have made
in this regard.
INTEREST RATE RISK
The Group finances its operations through retained cash reserves, and during the year has issued loan notes which were
redeemed before the year end.
The interest rate exposure of the financial assets and liabilities of the Group as at 31 March 2013 is shown in the table below.
The table includes trade receivables and payables as these do not attract interest and are therefore subject to fair value
interest rate risk.
Fixed Floating Zero Total
US$000 US$000 US$000 US$000
Financial assets
Cash - 171 816 987
Trade receivables - - 1,231 1,231
- 171 2,047 2,218
Interest rate
Financial liabilities
Trade payables - - 169 169
- - 169 169
AORTECH INTERNATIONAL PLC | ANNUAL REPORT & ACCOUNTS 2013
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CREDIT RISK
The Group’s principal financial assets are cash and trade receivables. The credit risk associated with the cash is limited as the
counterparties have high credit ratings assigned by international credit-rating agencies. The principal credit risk arises
therefore from trade receivables.
CAPITAL MANAGEMENT OBJECTIVES
The Directors’ capital management objectives are to ensure the Group’s ability to continue as a going concern and to provide
an adequate return to shareholders. The parent and subsidiary companies’ Boards meet regularly to review performance and
discuss future opportunities and threats with the aim of optimising sustainable returns and minimising risk.
PAYABLES PAYMENT POLICY
The Group’s current policy concerning the payment of the majority of its trade payables is to follow the ‘Better Payment
Practice Code’ issued by the Better Payment Practice Group. For other suppliers, the Group policy is to:
a) Settle the terms of payment with those suppliers when agreeing the terms of each transaction;
b) Ensure that those suppliers are made aware of the terms of payment by inclusion of the relevant terms in contracts;
and
c) Pay in accordance with its contractual and other legal obligations.
The payment policy applies to all payables for revenue and capital supplies of goods and services without exception.
Wherever possible the overseas subsidiaries are encouraged to adopt a similar policy applying local best practice.
The Company’s average payables payment period at 31 March 2013 was 16 days (2012: 18 days).
CHARITABLE & POLITICAL DONATIONS
During the year the Group made no charitable or political donations (2012: nil).
ANNUAL GENERAL MEETING
The notice convening the Annual General Meeting for 11:00am on Thursday, 26 September 2013 in the Tower Suite of the
Institute of Directors, New Broad Street House, 35 New Broad Street, London, EC2M 1NH is set out on page 51. There are a
number of resolutions to be passed and further information in relation to these resolutions is set out below. Prior to voting
on the resolutions the meeting will, as special business, as required by Section 656 of the Companies Act 2006 consider
whether any, and if so, what steps should be taken to deal with the situation that the net assets of the parent company,
AorTech International PLC, currently represents less than half of its called up share capital.
RESOLUTIONS 1 TO 7
Resolution 1 provides for the approval of the Company's financial statements for the year ended 31 March 2013. Resolution
2 provides for approval of the Report of the Remuneration Committee for the year ended 31 March 2013. The vote is advisory
and the Directors’ entitlement to remuneration is not conditional on the resolution being passed. Resolution 3 deals with
the re-appointment of the Director required by the Company's Articles of Association to retire this year. Resolution 4 deals
with the formal appointment of Roy Walter Mitchell to the Board, as required by Article 100 of the Company’s Articles of
Association. Resolution 5 deals with the re-appointment of Grant Thornton UK LLP as the Company's auditor. Following
assessment by the Audit Committee the Board considers the auditor to be effective and independent in their role.
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Resolution 6 provides under the Companies Act 2006 (Section 551) the directors of a company may only allot shares if authorised to do so.
Passing this Resolution will continue the Directors’ flexibility to act in the best interests of shareholders when opportunities arise by issuing
new shares. In Resolution 6 the Company is seeking authority to allot shares with a nominal value of up to £4,027,315 which represents one
third of the Company’s issued ordinary share capital. The Directors intend to use this authority, which will lapse at the conclusion of the
next Annual General Meeting of the Company, for general corporate purposes.
Resolution 7 provides if shares are to be alloted for cash, the Companies Act 2006 requires that those shares are offered first to the existing
shareholders in proportion to the number of shares they hold at the time of the offer. However, it may sometimes be in the interests of the
Company for the Directors to allot shares other than to shareholders in proportion to their existing holdings. At last year’s Annual General
Meeting shareholders authorised the Board, subject to specified limits:
• to allot shares in connection with a rights issue, defined in summary as, an offer of equity securities to shareholders which is open
for a period decided by the Board subject to any limits or restrictions which the Board thinks are necessary or appropriate.
• to allot shares pursuant to the rules of any share scheme approved by the shareholders in general meeting.
• to allot shares not in connection with a rights issue up to a specific amount so that the pre-emption requirement does not apply to
the allotments of shares for cash up to that amount.
This authority is required to be renewed annually. The Directors will be empowered by Resolution 7 to allot equity securities (within the
meaning of Section 560 of the Companies Act 2006) for cash without complying with the statutory pre-emption rights of shareholders under
section 561 of the Companies Act 2006, up to a maximum nominal amount of approximately £604,097. This disapplication is limited to
allotments made to ordinary shareholders and holders of any other class of equity security in proportion (as nearly as may be) to their
holdings and, otherwise, to allotments up to a maximum of 5% of the Company’s issued ordinary share capital.
There are no current plans to allot shares except in connection with the employee share schemes.
Resolutions 1 to 5 are termed ordinary business. Resolutions 6 and 7 are termed special business.
J C D Parsons
Company Secretary
AorTech International plc
Company number SCO170071
Weybridge
27 August 2013
RECOMMENDATION:
An explanation of the resolutions to be proposed is set out on pages 11 and 12 of this document. The Directors consider a) that no additional
action needs to be taken in relation to the situation that the net assets of the parent company, AorTech International PLC, currently represent
less than half of its called up share capital and b) that all the resolutions to be put to the meeting are in the best interests of the Company
and its shareholders as a whole. Your Board will be voting in favour of them and unanimously recommends that you do so as well.
AORTECH INTERNATIONAL PLC | ANNUAL REPORT & ACCOUNTS 2013
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DIRECTORS’ RESPONSIBILITIES STATEMENT
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors
have elected to prepare the parent company financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and Applicable Laws) and to prepare the Group financial
statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under
company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair
view of the state of affairs and profit or loss of the company and group for that period. In preparing these financial statements,
the Directors are required to:
•
•
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select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether applicable UK Accounting Standards and IFRSs have been followed, subject to any material
departures disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the
Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to
ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the
assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other
irregularities.
The Directors confirm that:
•
•
so far as each Director is aware, there is no relevant audit information of which the Company's auditor is unaware;
and
the Directors have taken all the steps that they ought to have taken as Directors in order to make themselves
aware of any relevant audit information and to establish that the auditors are aware of that information.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the
Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
AUDITOR
Grant Thornton UK LLP have expressed their willingness to continue in office as auditor and a resolution to reappoint them
will be proposed at the Annual General Meeting.
BY ORDER OF THE BOARD
J C D Parsons
Company Secretary
Weybridge
27 August 2013
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CORPORATE GOVERNANCE
The Group currently has a reduced Corporate Governance structure, reflecting the present stage of development, the size of the business
and the Directors’ assessment of the cost / benefit balance of full Corporate Governance. The situation will, however, continue to be kept
under review in the light of ongoing corporate developments and scaling up of activities.
DIRECTORS
The Company is controlled by the Board of Directors which, at 31 March 2013, comprised two Executive and one non-Executive Director
and a non-Executive Chairman. All Directors are able to take independent advice in furtherance of their duties if necessary.
ACCOUNTABILITY & AUDIT
The Board includes a detailed review of the performance of the Group in the Chairman’s Statement on pages 2 to 6. Reading
this alongside the Report of the Directors on pages 8 to 12 the Board seeks to present a balanced and understandable
assessment of the Group’s position and prospects.
INTERNAL CONTROL
The Board has formalised the review and reporting of the main internal controls within the business. In previous periods,
the Directors commissioned a risk review exercise in the course of which the key risk factors facing the Group were identified.
These areas included regulatory, research and development, commercial, human resources and information technology.
The Board will continue to review the system of internal controls within the Group.
The Board of Directors is responsible for the Group’s system of financial controls. However, it should be recognised that such
a system can provide only reasonable and not absolute assurance against material misstatement or loss.
The principal elements of the system include:
•
•
•
•
A clearly defined structure which delegates authority, responsibility and accountability.
A comprehensive system for reporting financial results. Actual results are measured monthly against budget which
together with a commentary on variances and other unusual items allows the Board to monitor the Group’s
performance on a regular basis.
A comprehensive annual planning and budgeting programme.
A revision of annual forecasts on a periodic basis.
There is no independent internal audit function. The Directors believe that such a function would not be cost effective given
the current size of the Group but they will continue to monitor the situation as the Group goes forward. The Board has
reviewed the effectiveness of the system of internal controls as outlined above and considers the Group has an established
system which the Directors believe to be appropriate to the business.
AUDIT COMMITTEE
The Audit Committee, comprising the non-Executive Directors and chaired by W Brown, meets at least twice per year and
overviews the monitoring of the Group’s internal controls, accounting policies, financial reporting and provides a forum
through which the external auditor reports, as well as ensuring the auditor remains independent of the Company. It meets
at least once a year with the external auditor without Executive Board members present.
AORTECH INTERNATIONAL PLC | ANNUAL REPORT & ACCOUNTS 2013
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REPORT OF THE REMUNERATION COMMITTEE
This report has been prepared in accordance with Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008, which introduced statutory requirements for the disclosure of Directors’ remuneration in respect of periods commencing
on or after 6 April 2008. The report also meets the relevant requirements of the AIM Rules and describes how the Board has applied the
Principles of Good Governance relating to Directors’ remuneration. In accordance with best practice, notwithstanding that these regulations
do not apply to AIM companies, a resolution to approve the report will be proposed at the Annual General Meeting of the Company at which
the financial statements will be approved.
REMUNERATION COMMITTEE
The Remuneration Committee comprises the non-Executive Directors as follows:
G Wright (Chairman)
W Brown
R Mitchell (appointed 23 May 2013)
As appropriate, the Committee may invite the Chief Executive to participate in some of its discussions. No Director plays a part in any
discussion about his own remuneration.
The Committee is responsible for determining the terms and conditions of employment of Executive Directors. It is also responsible for
considering management recommendations for remuneration and employment terms of the Group’s staff, including incentive arrangements
for bonus payments and grants of share options.
The constitution and operation of the Committee is in compliance with the provisions of The UK Corporate Governance Code (June 2010).
When setting its remuneration policy the Committee gives full consideration to the provisions and principles of the Code. In setting the
policy it considers a number of factors including:
•
•
•
The basic salaries and benefits available to executive Directors and senior management of comparable companies.
The need to attract and retain Directors and senior management of an appropriate calibre.
The need to ensure Executive Directors’ and senior management’s commitment to the future success of the Group by means
of incentive schemes.
REMUNERATION OF NON-EXECUTIVE DIRECTORS
The remuneration of the non-Executive Directors is determined by the Board with reference to the annual survey of independent Directors
carried out by Independent Remuneration Solutions.
The non-Executive Directors do not receive any pension or other benefits from the Company, nor do they participate in any of the bonus
schemes.
The non-Executive Directors have service agreements, which are reviewed by the Board annually, and they are also included in the one third
of Directors subject to retirement by rotation at each Annual General Meeting.
REMUNERATION OF EXECUTIVE DIRECTORS
The Executive Directors have service contracts, which can be terminated on one year’s notice by either party. The Remuneration Committee
will review each case of early termination individually in order to ensure compensation settlements are made which are appropriate to the
circumstances, taking care to ensure that poor performance is not rewarded. The most recent executed contract for the Executive Directors
was for E McDaid on 14 July 2011. The Company’s remuneration policy for Executive Directors is to:
•
•
•
•
Have regard to the individual’s experience and the nature and complexity of their work in order to pay a competitive salary that
attracts and retains management of the highest quality.
Link individual remuneration packages to the Group’s long term performance through the award of share options and bonus schemes.
Provide post retirement benefits through defined contribution pension schemes.
Provide employment related benefits including the provision of a company car, life assurance, medical insurance and insurance
relating to the individual’s duties.
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SALARIES AND BENEFITS
The Remuneration Committee meets twice each year to consider and set the annual salaries and benefits for the Executive
Directors, having regard to personal performance and independent advice concerning comparable organisations.
SHARE OPTIONS
The Company operates an Approved Share Option Scheme and an Unapproved Share Option Scheme.
Only Executive Directors and employees of the Group resident in the UK are eligible to participate in the Approved Share
Option Scheme, which has been approved by HM Revenue and Customs under the provisions of Schedule 9 to the Income
and Corporation Taxes Act 1988.
Any person who at the date of grant is approved by the Board is entitled to participate in the Unapproved Share Option
Scheme.
The award of options under both schemes is at the discretion of the Remuneration Committee.
The options issued to date under both schemes will only be exercisable if the average mid market closing price of the
Company’s shares on the five business days prior to the date of exercise exceeds the option price by 15% or more and after
the elapse of three years from the date of grant of the option.
PENSIONS
The Group made contributions to a personal pension plan for F Maguire at the rate of 10% of pensionable salary.
DIRECTORS’ EMOLUMENTS - AUDITED
Details of individual Director’s emoluments for the year are as follows:
2013 2012
Salary Termination Benefits Pension
& fees fees in kind contributions Total Total
US$ US$ US$ US$ US$ US$
Executive
F Maguire 200,075 - 13,702 20,008 233,785 328,148
E McDaid 118,255 - - - 118,255 94,539
Non-executive
J Pither 35,596 39,550 - - 75,146 48,071
Dr S Rollason - - - - - 24,636
G Wright 28,476 - - - 28,476 36,854
W Brown 121,815 - - - 121,815 32,247
504,217 39,550 13,702 20,008 577,477 564,495
Benefits in kind include the provision of a company car and medical insurance.
J Pither is employed by Surrey Management Services Limited ('Surrey’) in the provision of services to the Company. All of the
emoluments of J Pither above are represented by payments made by the Company to Surrey in respect of those services.
Dr S Rollason was, and W Brown is employed by Bluehone Investors LLP (‘Bluehone’) in the provision of services to the Company. All
of the emoluments of Dr S Rollason and W Brown above are represented by payments made by the Company to Bluehone in respect
of these services.
AORTECH INTERNATIONAL PLC | ANNUAL REPORT & ACCOUNTS 2013
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DIRECTORS’ INTERESTS IN SHARES
The interests of Directors in shares of the Company are included in the Report of the Directors on page 9.
DIRECTORS’ INTERESTS IN SHARE OPTIONS
The details of options held by Directors are set out below:
Number of options
At 1 Granted/ At 31 Date
April (expired) March Exercise from which Expiry
2012 during year 2013 price exercisable date
(i) Approved Share Option Scheme
F Maguire 12,000 - 12,000 $3.80 11/07/2005 25/06/2014
(ii) Unapproved Share Option Scheme
F Maguire 7,000 - 7,000 $3.80 11/07/2005 25/06/2014
19,000 - 19,000 $4.25 08/08/2005 25/06/2014
25,000 - 25,000 $3.80 14/07/2006 25/06/2014
200,000 - 200,000 $3.80 30/06/2007 25/06/2014
The range in the mid market price of the Company’s shares during the year ended 31 March 2013 was from £0.51 to £3.585.
The mid market price on 28 March 2013 was £0.61.
On behalf of the Board
Gordon Wright
Chairman of the Remuneration Committee
27 August 2013
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INDEPENDENT AUDITOR’S REPORT
To the Members of AorTech International plc
We have audited the Group financial statements of AorTech International Plc for the year ended 31 March 2013 which
comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance
sheet, the consolidated cash flow statement, the consolidated statement of changes in equity and the related notes.
The financial reporting framework that has been applied in their preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are
required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITOR
As explained more fully in the Directors’ Responsibilities Statement set out on page 13, the Directors are responsible for the
preparation of the Group financial statements and for being satisfied that they give a true and fair view. Our responsibility
is to audit and express an opinion on the Group financial statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s)
Ethical Standards for Auditors.
SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS
A description of the scope of an audit of financial statements is provided on the APB's website at
www.frc.org.uk/apb/scope/private.cfm.
OPINION ON FINANCIAL STATEMENTS
In our opinion the Group financial statements:
•
•
•
give a true and fair view of the state of the Group's affairs as at 31 March 2013 and of its loss for the year then
ended;
have been properly prepared in accordance with IFRSs as adopted by the European Union; and
have been prepared in accordance with the requirements of the Companies Act 2006.
AORTECH INTERNATIONAL PLC | ANNUAL REPORT & ACCOUNTS 2013
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OPINION ON OTHER MATTER PRESCRIBED BY THE COMPANIES ACT 2006
In our opinion the information given in the Report of the Directors for the financial year for which the Group financial
statements are prepared is consistent with the Group financial statements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
•
•
certain disclosures of Directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
OTHER MATTER
We have reported separately on the parent company financial statements of AorTech International Plc for the year ended
31 March 2013.
Christopher Frostwick
Senior Statutory Auditor
For and on behalf of
GRANT THORNTON UK LLP
STATUTORY AUDITOR, CHARTERED ACCOUNTANTS
Leicester
27 August 2013
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CONSOLIDATED INCOME STATEMENT
Year ended
31 March
Year ended 31 March 2013 2012
Revenue
Other income
Cost of sales
Administrative expenses
Other expenses – development expenditure
Profit on disposal of property, plant and equipment
Other expenses – amortisation of intangible assets
Other expenses – cost of transfer of operations to USA
Operating (loss) / profit
Finance (expense) / income
(Loss) / profit before taxation
Taxation
(Loss) / profit attributable to equity holders of the parent company
(Loss) / earnings per share
Basic and diluted (US cents per share)
Pre-exceptional
items
US$000
Exceptional
items
US$000
Notes
Total
US$000
Total
US$000
3
1,805
1,990
3,795
5,038
289
2,271
2,560
638
(1,268)
(2,324)
(239)
-
(250)
-
(1,987)
(5)
(1,992)
-
(786)
(420)
-
138
-
-
3,193
(2,048)
1,145
-
(1,992)
1,145
(2,054)
(2,744)
(239)
138
(250)
-
1,206
(2,053)
(847)
-
(847)
(701)
(3,130)
(798)
-
(248)
(761)
38
19
57
-
57
(17.53)
1.18
10
3
7
5
8
9
AORTECH INTERNATIONAL PLC | ANNUAL REPORT & ACCOUNTS 2013
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended Year ended
31 March 31 March
2013 2012
US$000 US$000
(Loss) / profit for the year (847) 57
Other comprehensive income:
26
Exchange differences on translating foreign operations (130)
-
Income tax relating to other comprehensive income -
Other comprehensive income for the year, net of tax (130)
26
Total comprehensive income for the year, attributable
to equity holders of the parent company
(977) 83
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CONSOLIDATED BALANCE SHEET
31 March 31 March
2013 2012
Notes US$000 US$000
Assets
Non current assets
1,840 2,012
Intangible assets 10
4 621
Property, plant and equipment 11
Total non current assets
1,844 2,633
Current assets
- 203
Inventories 12
Trade and other receivables 14
1,820 956
Cash and cash equivalents 15 987 1,917
Total current assets
2,807 3,076
Total assets
4,651 5,709
Liabilities
Current liabilities
Trade and other payables 16 (406) (439)
Total current liabilities (406) (439)
Non current liabilities
Trade and other payables 16 - (182)
Change of control redemption premium 16 (134) -
Total non current liabilities (134) (182)
Total liabilities (540) (621)
Net assets
4,111 5,088
Equity
Issued capital 19 18,351 19,319
Share premium 19 3,555
3,742
(3,043) (3,203)
Other reserve
Foreign exchange reserve
4,819
5,684
Profit and loss account (20,436) (19,589)
Total equity attributable to equity holders of the parent
4,111
5,088
The Group financial statements were approved by the Board on 27 August 2013 and were signed on its behalf by
W Brown, Chairman E McDaid, Director
AORTECH INTERNATIONAL PLC | ANNUAL REPORT & ACCOUNTS 2013
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CONSOLIDATED CASH FLOW STATEMENT
Year ended Year ended
31 March 31 March
2013 2012
US$000 US$000
Cash flows from operating activities
Group (loss) / profit after tax (847) 57
Adjustments for:
53
Depreciation of property, plant and equipment 84
23
(Gain) / loss on disposal of property, plant and equipment (138)
250 248
Amortisation of intangible assets
Finance expense / (income)
2,053 (19)
(Increase) / decrease in trade and other receivables (864) 125
203 31
Decrease in inventories
(215) (437)
Decrease in trade and other payables
Net cash flow from operating activities 526 81
Cash flows from investing activities
Purchase of property, plant and equipment (11) (671)
Proceeds from disposal of property, plant and equipment
682 320
Purchases of intangible assets (72) (49)
- 19
Interest received
Net cash flow from investing activities 599 (381)
Cash flows from financing activities
Interest paid
(5) -
Proceeds from issue of loan notes 1,914 -
Repayment of loan notes (1,914) -
Redemption premium paid to loan note holders (1,914) -
Net cash flow from financing activities
(1,919) -
Net decrease in cash and cash equivalents
(794) (300)
Foreign exchange movements on cash held in foreign currencies
Cash and cash equivalents at beginning of year
(136) 3
1,917 2,214
Cash and cash equivalents at end of year 987 1,917
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Foreign Profit
Share premium Other exchange and loss Total
capital account reserve reserve account equity
US$000 US$000 US$000 US$000 US$000 US$000
Balance at 31 March 2011 19,370 3,751 (3,211) 4,741 (19,646) 5,005
Transactions with owners - - - - - -
Profit for the year - - - - 57 57
Other comprehensive income
Exchange difference on translating
foreign operations (51) (9) 8 78 - 26
Income tax relating to components
of other comprehensive income - - - - - -
Total comprehensive income for the year (51) (9) 8 78 57 83
Balance at 31 March 2012 19,319 3,742 (3,203) 4,819 (19,589) 5,088
Transactions with owners - - - - - -
Loss for the year - - - - (847) (847)
Other comprehensive income
Exchange difference on translating
foreign operations (968) (187) 160 865 - (130)
Income tax relating to components
of other comprehensive income - - - - - -
Total comprehensive income for the year (968) (187) 160 865 (847) (977)
Balance at 31 March 2013 18,351 3,555 (3,043) 5,684 (20,436) 4,111
AORTECH INTERNATIONAL PLC | ANNUAL REPORT & ACCOUNTS 2013
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NOTES TO THE FINANCIAL STATEMENTS
1
BASIS OF PREPARATION
The Group financial statements are for the year ended 31 March 2013. They have been prepared in compliance with International Financial
Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRIC) interpretations as adopted by the European Union as at 31 March
2013.
The Group financial statements have been prepared under the historical cost convention.
The accounting policies remain unchanged from the previous year.
Going concern
After considering the year end cash position, making appropriate enquiries and reviewing budgets and profit and cash flow forecasts for
a period of at least twelve months from the date of signing these financial statements, the Directors have formed a judgement at the
time of approving the financial statements that there is a reasonable expectation that the Group has sufficient resources to continue in
operational existence for the foreseeable future. For this reason the Directors consider the adoption of the going concern basis in preparing
the Group financial statements is appropriate.
Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the
Group in the 31 March 2013 financial statements.
At the date of authorisation of these consolidated financial statements, certain new standards, amendments and interpretations to existing
standards have been published but are not yet effective, and have not been adopted early by the Group.
Management anticipates that all of the pronouncements will be adopted in the Group's accounting policies for the first period beginning
after the effective date of the pronouncement. Information on new standards, amendments and interpretations that are expected to be
relevant to the Group’s financial statements is provided below. Certain other new standards and interpretations have been issued but are
not expected to have a material impact on the Group's financial statements.
New accounting standards issued but not adopted:
•
•
•
•
•
•
IFRS 9 Financial Instruments (effective 1 January 2015; not yet adopted by the EU)
IFRS 10 Consolidated Financial Statements (effective 1 January 2014)
IFRS 12 Disclosure of Interest in Other Entities (effective 1 January 2014)
IAS 19 Employee Benefits (Revised June 2011) (effective 1 January 2013)
IFRS 13 Fair value measurement (effective 1 January 2013)
Presentation of Items of Other Comprehensive Income – Amendments to IAS 1 (effective 1 July 2012)
Presentational currency
The Group’s revenues, profits and cash flows are primarily generated in US dollars, and are expected to remain principally denominated
in US dollars in the future.
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PRINCIPAL ACCOUNTING POLICIES
Basis of consolidation
The Group financial statements consolidate those of the Company and all of its subsidiary undertakings. Subsidiaries are
entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from its
activities. The Group obtains and exercises control through voting rights.
Unrealised gains on transactions between the Group and its subsidiaries are eliminated. Unrealised losses are also eliminated
unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the financial
statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by
the Group.
Revenue
Revenue is measured at the fair value of consideration received or receivable by the Group for goods supplied and services
provided, excluding VAT, sales between Group companies and trade discounts, as follows:
(a) Supply of materials and finished goods: Revenue from the supply of materials and finished goods is recognised when
the significant risks and benefits of ownership of the product have transferred to the buyer, which may be on shipment,
receipt of the goods by the customer or upon completion of the product and the product being ready for delivery,
based on the specific contract terms.
(b) Licence fees: Upfront payments in respect of licence revenues for access by third parties to the Group’s technology
are recognised as revenue once a third party has a binding contractual obligation to the Group based on the specific
contract terms and the Group has no remaining obligations to perform.
(c) Milestone payments: Milestone payments are recognised once the Group’s obligations for each milestone have been
met and the Group has achieved a right to be paid in return for their contractual performance.
(d) Royalty revenues: Royalty revenues are recognised as earned in accordance with third parties’ sales of the underlying
products.
Interest
Interest income is the interest earned on cash or cash equivalents held with the Group’s bankers and recognised within the
period earned, accrued on a time basis by reference to the principal outstanding and at the effective rate applicable.
Employee benefits
Defined contribution pension scheme: The pension costs charged against profits are the contributions payable to the scheme
in respect of the accounting period.
Exceptional items
Items considered significant by virtue of their size or nature are separately disclosed on the face of the Income Statement to
enable a full understanding of the underlying performance of the Group.
AORTECH INTERNATIONAL PLC | ANNUAL REPORT & ACCOUNTS 2013
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Intangible assets
(a) Patents and trademarks (intellectual property):
Patents and trademarks (intellectual property) are included at cost and are amortised on a straight line basis over their useful economic
lives of 20 years, which corresponds to the lives of the individual patents.
(b) Research and development:
Research costs are expensed as incurred. An intangible asset arising from development expenditure on an individual project is recognised
only when the Group can demonstrate all of the following:
• the technical feasibility of the intangible asset so that it will be available for use or sale. In practice this will be when the Group
is satisfied that the appropriate regulatory hurdles have been or will be achieved.
• its intention to complete and its ability to use or sell the asset.
• how the asset will generate future economic benefits.
• the availability of economic resources to complete the asset.
• the ability to measure the expenditure during development.
The Group does not currently have any such internal or external development costs that qualify for capitalisation as intangible assets.
Following the initial recognition of the development expenditure, the cost model is applied requiring the asset to be carried at cost less
any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete
and the asset is available for use. It is amortised over the period of expected future sales. Assets are tested for impairment when an
impairment trigger occurs.
Careful judgement by the Directors is applied when deciding whether the recognition requirements for development costs have been
met. This is necessary as the economic success of any product development is uncertain and may be subject to future technical problems
at the time of recognition. Judgements are based on the information available at each balance sheet date.
Property, plant and equipment
Property, plant and equipment is stated at cost, including any incidental costs of acquisition, net of accumulated depreciation and any
accumulated provision for impairment. No depreciation is charged until the asset is available for use.
Disposal of assets
The gain or loss arising on the disposal of an asset is determined as the difference between the disposal proceeds and the carrying amount
of the asset and is recognised in profit or loss. The gain or loss arising from the sale or revaluation of held for sale assets is included in
"other income" or "other expense" in the income statement.
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Depreciation
Depreciation is calculated to write off the cost of all property, plant and equipment less estimated residual value by the straight line
method where it reflects the basis of consumption of the assets over their estimated useful economic lives.
The periods generally applicable are:
Leasehold property improvements: Period of lease
Plant and equipment 2½ years
Fixtures and fittings 2½ - 5 years
Material residual value estimates are updated as required, but at least annually.
Impairment testing of intangible assets and property, plant and equipment
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash
flows (cash-generating units). As a result some assets are tested individually for impairment and some are tested at a cash-generating
unit level.
Individual assets or cash-generating units that include intangible assets with an indefinite useful life, and those intangible assets
not yet available for use are tested for impairment at least annually. All other individual assets or cash-generating units are tested
for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recov-
erable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use
based on an internal discounted cash flow evaluation. All assets are subsequently reassessed for indications that an impairment
loss previously recognised may no longer exist.
Inventories
Inventories are stated at the lower of cost and net realisable value. Costs of ordinarily interchangeable items are assigned using the
first in, first out cost formula. Cost includes materials, direct labour and an attributable proportion of manufacturing overheads
based on normal levels of activity. Net realisable value is based on estimated selling prices less any further costs expected to be in-
curred to completion and disposal.
Financial assets
Financial assets fall into the following category: Loans and receivables.
All financial assets are recognised when the Group becomes a party to the contractual provisions of the instrument.
Financial assets are recognised at fair value plus transaction costs.
Trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. Trade and other receivables are measured subsequent to initial recognition at amortised cost using the effective interest
method, less provision for impairment. Any change in their value through impairment or reversal of impairment is recognised in
profit or loss.
Provision against trade receivables is made when there is objective evidence that the Group will not be able to collect all amounts
due to it in accordance with the original terms of those receivables. The amount of the write-down is determined as the difference
between the asset's carrying amount and the present value of estimated future cash flows discounted at the original effective interest
rate. An assessment for impairment is undertaken at least at each balance sheet date.
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Cash and cash equivalents comprise cash on hand and demand deposits together with other short-term, highly liquid investments that
are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.
Financial liabilities
Financial liabilities fall into the following category: Financial liabilities at amortised cost and fair value through profit or loss.
Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a party to the
contractual provisions of the instrument. All financial liabilities are recorded initially at fair value, net of direct issue costs.
A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged or cancelled or
expires.
Financial liabilities at amortised cost (trade payables and accruals) are subsequently recorded at amortised cost using the effective interest
method, with interest related charges recognised as an expense in finance cost in the income statement. Finance charges, including
premiums payable on settlement or redemption and direct issue costs, are charged to the income statement on an accruals basis using
the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period
in which they arise.
Financial liabilities at fair value through profit or loss represents the change of control redemption premium under the loan notes, which
is considered to be an embedded derivative which is separable from the loan notes and therefore has been accounted for as a separate
instrument. Such financial liabilities are carried subsequently at fair value with gains or losses recognised in profit or loss.
Fair value has been determined by reference to the potential value of the change in control premium to be paid at some time in the
future, which has been estimated based on the Company’s market capitalisation at the balance sheet date, with a discount applied to
reflect the probability of such a change of control happening (the effect of the liquidity restriction and the change of control clause) and
to reflect an estimate of likely timescale. These estimates will be reassessed at each balance sheet date. All changes in the instrument’s
fair value are reported in profit or loss and included within finance costs.
Taxation
Current tax is the tax currently payable based on taxable profit for the accounting period.
Deferred taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference
between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition
of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or
accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries is not provided if reversal of these
temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. In addition,
tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.
Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that
the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets
and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or
substantively enacted at the balance sheet date.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in profit or loss, except where they relate to
items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity.
Tax which relates to items recognised in other comprehensive income is recognised in other comprehensive income.
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Equity
Equity comprises the following:
•
•
•
•
•
“Issued capital” represents the nominal value of equity shares.
"Share premium" represents the excess over nominal value of the fair value of cash consideration received for
equity shares, net of expenses of the share issue.
"Other reserve" represents the difference arising on consolidation between the nominal value of AorTech International Plc
shares issued (£3,206,884) and the nominal value of AorTech Biomaterials Limited (formerly AorTech Europe Limited)
shares acquired (£1,001,884) and the associated share premium account (£201,857) in the company. This acquisition was
prior to the transition to IFRS.
"Foreign exchange reserve" represents the differences arising from translation of net investments in overseas subsidiaries.
"Profit and loss account" represents retained profits.
Share based employee compensation
The Group operates equity settled share based compensation plans for the remuneration of its employees.
All employee services received in exchange for the grant of any share based compensation are measured at their fair values. These
are indirectly determined by reference to the fair value of the share option awarded. Their value is appraised at the grant date and
excludes the impact of any non-market vesting conditions (e.g. profitability or sales growth targets).
All share based compensation, where material, is ultimately recognised as an expense in the income statement with a
corresponding credit to the other reserve, net of deferred tax where applicable. If vesting periods or other vesting conditions apply,
the expense is allocated over the vesting period, based on the best available estimate of the number of shares options expected to
vest. Non market vesting conditions are included in assumptions about the number of options that are expected to become
exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs
from previous estimates. No adjustment to expense recognised in prior periods is made if fewer share options ultimately are exercised
than originally estimated.
Upon exercise of share options, the proceeds received, net of any directly attributable transaction costs, up to the nominal value of
the shares issued are allocated to share capital with any excess being recorded as share premium. At this time, the
appropriate balance in the other reserve relating to the share options exercised is transferred to retained earnings by way of a
transfer within reserves.
Foreign currencies
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (the functional currency). The Company’s functional currency is Sterling and
the Group’s presentational currency is US Dollars.
Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and
liabilities in foreign currencies are translated at the rates of exchange ruling at the balance sheet date. Non-monetary items that
are measured at historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Non-monetary
items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value
was determined.
Any exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those
at which they were initially recorded are recognised in profit or loss in the period in which they arise.
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Exchange differences on non-monetary items are recognised in other comprehensive income to the extent that they relate to a gain
or loss on that non-monetary item taken to other comprehensive income, otherwise such gains and losses are recognised in profit or loss.
The assets and liabilities in the financial statements of foreign subsidiaries and retranslation of the parent to the presentational currency,
including equity items, are translated at the rate of exchange ruling at the balance sheet date. Income and expenses are translated at the
average of exchange rates in force at the end of each month of the reporting period. All resulting exchange differences are recognised in
other comprehensive income and accumulated in a separate component of equity. On disposal of a foreign operation the cumulative
translation differences (including, if applicable, gains and losses on related hedges) are reclassified from equity to profit or loss as a
reclassification adjustment as part of the gain or loss on disposal.
The Group has taken advantage of the exemption in IFRS 1 and has deemed cumulative translation differences for all foreign operations
to be nil at the date of transition to IFRS. The gain or loss on disposal of these operations excludes translation differences that arose
before the date of transition to IFRS and includes later translation differences.
Use of accounting estimates and judgements
Many of the amounts included in the financial statements involve the use of judgement and/or estimation. These judgements and
estimates are based on management’s best knowledge of the relevant facts and circumstances, having regard to prior experience, but
actual results may differ from the amounts included in the financial statements. Information about such judgements and estimation is
contained in the accounting policies and/or the notes to the financial statements and the key areas are summarised below:
Judgements in applying accounting policies:
a) Capitalisation of development costs requires detailed analysis of the technical feasibility and commercial viability of the project.
To date the Group has written off all such development costs because the specific criteria for capitalisation have not been met,
although the Board regularly reviews this judgement in respect of specific development projects.
b) The Directors must judge whether future profitability is likely in making the decision whether or not to create a deferred tax
asset. At this stage the timing of future profits is insufficiently certain to warrant inclusion of a deferred tax asset.
c) Identification of functional currencies requires a judgement as to the economic environments of the subsidiaries of the Group
and the selection of the presentational currency must reflect the requirements of the users of the financial statements.
d) Revenue recognition requires the Directors to assess the terms of contracts and to determine whether specific obligations have
been met before recognising revenue in relation to licence fees and milestone payments. Specifically the Directors have assessed
the restructured licence agreement and ensured all contract milestones have been met before recognising the relevant revenue
in full in the March 2013 financial year. In addition, the Directors have assessed whether any provision for impairment is
necessary against receivables through the estimation of future cash flows.
e) The disposal of assets in the US to St Jude Medical as part of the settlement agreement is not judged to represent a discontinued
operation as the Group continues to operate in the US selling polymer. As such this is not considered to be the disposal of a
component under the definition in IFRS 5. The closure of the Australian operations in 2011 was judged not to represent a
discontinued operation under IFRS 5, but rather the transfer of the manufacturing capability to a different geographical location.
Sources of estimation uncertainty:
a) Estimates are required as to intangible asset carrying values and impairment charges.
b) Estimates of future profitability are required for the decision whether or not to create a deferred tax asset.
c) Depreciation rates are based on estimates of the useful lives and residual values of the assets involved.
d) The discount applied in determining the fair value of the change of control redemption premium constitutes an estimate.
e) Estimates as to recoverability of receivables, including future expected cash flows.
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SEGMENTAL REPORTING
The principal activity of the AorTech International Plc Group currently is the development and exploitation of a range of
innovative biomaterials and medical devices.
The Group’s operating segments are based on geographical location of operations.
Analysis of revenue by products and services 2013 2012
and by geographical area US$000 US$000
United Kingdom
Supply of materials and finished goods -
5
St Jude Medical transaction – licence fee income 1,990 -
Licence fees – services 313 4,338
USA
Supply of materials and finished goods 1,492 694
Royalty revenue - 1
3,795 5,038
During the year ended 31 March 2013, 37.0% of the Group’s revenues depended upon a single customer (2012: 76.0%),
excluding those in respect of the St Jude Medical transaction.
2013 2012
Analysis of result - operating (loss) / profit US$000 US$000
United Kingdom
1,732 (551)
3,281
Australia
(101)
USA – including cost of transfer of operations in 2012 (425) (2,692)
Operating profit
1,206
Finance (expenses) / income – all UK
(2,053)
(Loss) / profit before taxation
(847)
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The operating (loss) / profit disclosure above is after charging amortisation of $250,000 (all UK), depreciation of $84,000
(all USA), development expenditure of $239,000 (all USA) and after a profit on disposal of $138,000 (all USA).
Analysis of non current assets by location
United Kingdom 1,840 1,963
USA 4 670
1,844 2,633
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REMUNERATION OF DIRECTORS AND KEY MANAGEMENT PERSONNEL
Key management personnel 2013 2012
US$000 US$000
Emoluments – short-term employee benefits 1,147 1,184
Pension costs – post-employment benefits 20 32
1,167 1,216
The key management personnel whose remuneration is included in the table above are the Financial Controller, the Chief
Scientific Officer, the Principal Scientist and the Vice-President Operations & Quality of AorTech Polymers & Medical Devices,
Inc; and the five Directors of the parent company.
Please see the Report of the Remuneration Committee on page 15 for full details of Directors’ emoluments which have been
audited.
Included in the aggregate emoluments for the year ended 31 March 2013 are payments of $197,000 (2012: $91,000) made by
the Company to third parties. The highest paid Director received total emoluments of $233,785 including pension contributions
of $20,008 (2012: total emoluments of $328,148 including pension contributions of $24,035).
5
(LOSS) / PROFIT BEFORE TAXATION
2013 2012
(Loss) / profit before taxation has been arrived at after charging / (crediting): US$000 US$000
Foreign exchange differences 34 5
Depreciation and amortisation:
Depreciation of property, plant and equipment 84 53
Amortisation of intangible assets 250 248
Employee benefits expense:
Employee costs (Note 6) 1,622 2,608
Land and buildings held under operating leases:
Other operating leases 116 127
Audit and non-audit services:
Fees payable to the Company’s auditor and its associates
for the audit of the Group financial statements 79 125
Fees payable to the Company’s auditor and its associates for other services :
The audit of the Company’s subsidiaries pursuant to legislation 2 1
Tax services 104 27
Other services 11 12
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Exceptional items
The St Jude Medical transaction has been accounted for in the financial statements as follows:
$000 $000
Revenue – accelerated licence fees
1,990
Other income – further consideration from St Jude Medical
1,653
Other income – reimbursement of production costs to March 2013
618
Cost of sales – inventory acquired
(168)
Cost of sales – production costs to March 2013
(618)
Administrative expenses – legal and other costs
(420)
Profit on disposal of property, plant and equipment:
Proceeds received
676
Net book value of assets transferred (538)
138
Operating profit from St Jude Medical transaction – exceptional item 3,193
The total consideration received by AorTech under the transaction agreements was $3.9 million less legal and other costs.
Of this, $3.4 million was paid upon signing and $0.5 million paid shortly after the end of March 2013 along with payment
in respect of the acquisition of certain of AorTech’s assets. The agreements accelerated certain existing transitional arrange-
ments relating to the manufacture and supply of Elast-Eon™, reaffirmed St Jude Medical’s exclusive, perpetual, non-royalty
bearing licence to use Elast-Eon™ for implantable leads for implantable cardiac rhythm management devices or monitoring
systems, and set forth the purchase by St Jude Medical of certain AorTech assets. Among the transitional arrangements
between the parties, the agreements also provided for the reimbursement by St Jude Medical to AorTech for the financial
costs of running the Rogers facility for a period to 31 March 2013 at which time the complete transfer of the Rogers facility
to St Jude Medical took place. These arrangements have ensured St Jude Medical’s reliable ongoing supply of Elast-Eon™.
6
EMPLOYEES
2013 2012
US$000 US$000
Employee costs (including Directors):
Wages and salaries 1,602 2,522
Pension costs 20 86
1,622 2,608
The average number of employees (including Directors)
during the year was made up as follows: 2013 2012
Numbers Numbers
Production 4 4
Sales 1 2
Development and quality control 7 10
Administration 6 9
18 25
AORTECH INTERNATIONAL PLC | ANNUAL REPORT & ACCOUNTS 2013
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7
FINANCE (EXPENSE) / INCOME
Year ended
31 March
2012
Year ended 31 March 2013
Bank interest (expense) / income
Loan premium payable on redemption
Change of control redemption premium
(5)
-
-
(5)
Pre-exceptional
items
US$000
Exceptional
items
US$000
Total
US$000
(5)
(1,914)
(134)
-
(1,914)
(134)
(2,048)
(2,053)
US$000
19
-
-
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INCOME TAX EXPENSE
No current tax or deferred tax expense arises on the (loss)/profit for the year (2012: nil).
The tax assessed for the year differs from the standard rate of corporation tax as applied in the respective trading
domains where the Group operates. The differences are explained below:
(Loss) / profit for the year before tax
(Loss) / profit for year multiplied by the respective standard
rate of corporation tax applicable in each domain
(average 24%: 2012 - 26%)
Effects of:
Expenses not deductible for tax purposes and other tax differences
Taxable gains – Australia
Other tax deductions
Losses not utilised
Losses utilised
Tax on (loss) / profit for the year
2013
US$000
(847)
(203)
75
-
-
382
(254)
-
2012
US$000
57
15
42
531
(209)
647
(1,026)
-
Unrelieved tax losses remain available to offset against future taxable profits. These losses have not been recognised as
deferred tax assets within the financial statements as they do not meet the conditions required in accordance with IAS 12.
Losses carried forward in the UK total $6,197,000 – tax effect is $1,487,000 (2012: $6,268,000 – tax effect $1,504,000). Losses
carried forward in Australia total $nil following the closure of operations and utilisation against taxable gains. Losses in the
USA total $5,378,000 – tax effect $1,291,000 (2012: $4,232,000 - tax effect $1,016,000).
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(LOSS) / EARNINGS PER SHARE
2013
US$000
2012
US$000
(Loss) / profit for the year attributable to equity shareholders
(847) 57
(Loss) / earnings per share
(17.53) 1.18
Basic and diluted (US cents per share)
Shares Shares
Issued ordinary shares at start of the year 4,832,778 4,832,778
Ordinary shares issued in the year - -
Issued ordinary shares at end of the year 4,832,778 4,832,778
Weighted average number of shares in issue for the year 4,832,778 4,832,778
The diluted loss per share does not differ from the basic loss per share as the exercise of share options would have
the effect of reducing the loss per share and is therefore not dilutive under the terms of IAS 33. There was no dilution
in respect of the prior year.
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INTANGIBLE ASSETS
Intellectual property
US$000
Cost
At 1 April 2011
Exchange differences
Additions during year
At 31 March 2012
Exchange differences
Additions during year
At 31 March 2013
Amortisation
At 1 April 2011
Exchange differences
Charge for the year
At 31 March 2012
Exchange differences
Charge for the year
At 31 March 2013
Net book value
At 31 March 2012
At 31 March 2013
4,863
35
49
4,947
16
72
5,035
2,675
12
248
2,935
10
250
3,195
2,012
1,840
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PROPERTY, PLANT AND EQUIPMENT
Property Plant Fixtures
improvements & equipment & fittings Total
US$000 US$000 US$000 US$000
Cost
4,134
At 1 April 2011 1,428 2,267 439
Additions 535 136 - 671
Disposals / written off in year (1,428) (2,264) (439) (4,131)
At 31 March 2012 535 139 - 674
Additions - 11 - 11
(145) - (680)
Disposals / written off in year (535)
At 31 March 2013 - 5 - 5
Depreciation
At 1 April 2011 1,428 1,921 439 3,788
Charge for the year 41 12 - 53
Disposals / written off in year (1,428) (1,921) (439) (3,788)
At 31 March 2012 41 12 - 53
Charge for the year 68 16 - 84
Disposals / written off in year (109)
(27) - (136)
At 31 March 2013
- 1 - 1
Net book value
At 31 March 2012 494 127 - 621
At 31 March 2013 - 4 - 4
The property improvements and the plant & equipment located in the USA facility were sold to St Jude Medical as part of
the negotiated settlement.
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INVENTORIES
2013 2012
US$000 US$000
Raw materials - 102
Finished goods - 101
- 203
In 2013 a total of $1,001,000 of inventories was included in the income statement as an expense (2012: $339,000).
There was no amount resulting from writedowns of inventories in either 2013 or 2012. There were no reversals of previous
writedowns that were recognised in the income statement in either 2013 or 2012.
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FINANCIAL INSTRUMENTS
Risk management
The Group’s financial instruments comprise cash and cash equivalents, trade and other receivables and trade and other payables.
These arise directly from the Group’s operations and it is the Group’s policy that no trading in financial instruments shall be undertaken.
The Board reviews and agrees policies to manage risk to ensure that the entities within the Group will be able to continue as a going concern
whilst maximising the return to stakeholders through the effective management of liquid resources raised through share issues.
Categories of financial instrument
Financial assets – loans and receivables
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Liabilities at amortised cost
Fair value through profit or loss
2013
US$000
2012
US$000
987
1,762
2,749
(406)
(134)
(540)
1,917
900
2,817
(391)
-
(391)
All amounts are short-term (all payable within six months) with the exception of other payables greater than one year and their carrying
values are considered reasonable approximations of fair value.
Foreign currency risk
The Group has a non-trading Australian subsidiary whose functional currency is the Australian dollar and a US subsidiary whose functional
currency is the US dollar, along with the UK parent company whose functional currency is Sterling. Entities generally do not hold financial
instruments in a currency other than their own functional currency, other than the UK parent company which has a trade receivable
denominated in US dollars from SynCardia.
Cash balances are carried within the Group in bank accounts, which comprise the following currency holdings:
Sterling
US dollars
Australian dollars
Euros
2013
US$000
823
142
22
-
987
2012
US$000
1,199
608
93
17
1,917
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Interest rate risk
The Group finances its operations through equity fundraising and does not currently carry any borrowings, following the
repayment of the loan notes during the year. The cash balances and short term deposits are held at both fixed and floating
rates as follows:
Cash
Interest rate
%
2013
US$000
Interest rate
%
2012
US$000
0%
0.50%
816
171
987
0%
0.50%
1,690
227
1,917
Sensitivity analysis
If, for example, there had been a rise or fall of interest rates over the year of 1%, this would have resulted in an
increase/decrease in profit and equity of $3,000 (2012: $18,000), all other variables remaining constant.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
Group. In order to minimise this risk the Group endeavours only to deal with companies which are demonstrably creditworthy
and this, together with the aggregate financial exposure, is continuously monitored. The maximum exposure to credit risk
in the case of both the cash and short term deposits is the value of the outstanding amount.
The Group has trade receivables resulting from sales and other receivables from provision of other services which the
management consider to be of low risk other than the amount due from SynCardia where provision has been made and a
mediation and arbitration process is underway. The management do not consider that there is any concentration of risk
within either trade or other receivables, other than amounts due from SynCardia. The maximum exposure to credit risk on
trade and other receivables is considered to be $1,762,000 (2012: $900,000).
Liquidity risk
The Group currently holds cash balances and short term deposits in Sterling, US and Australian dollars. These balances
provide funding for the Group’s trading activities. There is no material difference between the fair values and the book values
of these financial instruments.
Details of the amount payable at an undetermined date in the future under the change of control clause on the loan notes
are given in note 16, along with further details of the terms in note 7 to the parent company financial statements.
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TRADE AND OTHER RECEIVABLES
2013 2012
US$000 US$000
Current assets
Trade receivables 1,231 858
Other receivables 531 42
Prepayments 58 56
1,820 956
Trade receivables are shown net of a provision of $404,000 to reflect uncertainty over the timing and amount of receipt of
the SynCardia debt outstanding (gross debt of $1,197,000 before provision). In addition, $48,000 (2012: $29,000) of net
trade and other receivables were past due for payment but not impaired at 31 March 2013, of which $39,000 was over 30
days and $9,000 was over 90 days.
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CASH AND CASH EQUIVALENTS
2013 2012
US$000 US$000
Cash at bank and in hand 987 1,917
987 1,917
TRADE AND OTHER PAYABLES
2013 2012
US$000 US$000
Current liabilities
Trade payables 169 133
Deferred income - 48
Accruals 237 258
406 439
Non current liabilities
Deferred income - 182
Change of control redemption premium 134 -
540 621
Deferred income comprised lease incentives. Deferred income at 31 March 2012 related to amounts received up front in
relation to a lease incentive in the US, which has been released in the year following the exit from the lease.
Details of the loan notes issued and redeemed in the year, the redemption premium paid and the change of control redemption
premium payable in the future can be found in note 7 of the parent company accounts. Related party disclosures are also
provided in note 7 of the parent company accounts as loan notes were issued to certain Directors. In accordance with IFRS,
the Directors have included a financial liability for this derivative financial instrument totalling $134,000 in the Group accounts
at 31 March 2013, based on the market capitalisation of the Group at 31 March 2013 and an estimate by the Directors of the
likelihood of the change of control and consideration of possible timescales. These estimates will be reviewed and updated
every six months for the purpose of the interim and year end accounts.
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OPERATING LEASE COMMITMENTS
The Group had the following total commitments under non-cancellable operating leases in the United States at 31 March 2013.
The commitments at 31 March 2012 related to the United States operations:
2013 2012
US$000 US$000
The following payments are due to be made on
operating lease commitments:
Within one year 6 240
Two to five years 9 744
15 984
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SHARE BASED PAYMENTS
The Group has an approved share option plan for the benefit of employees resident in the UK and Executive Directors. All
share options are denominated in Sterling and converted for disclosure purposes at £1 = $1.52 at 31 March 2013 (£1 = $1.60
at 31 March 2012).
Options in issue Exercise
Price (US$)
12,000 3.80 25 June 2014
Exercise period on or before:
Details of the number of share options and the weighted average exercise price (WAEP) outstanding during the year are as follows:
2013 WAEP 2012 WAEP
Number US$ Number US$
Outstanding at the beginning of the year 12,600 $4.03 12,600 $4.04
Forfeited during the year (600) $4.48 - -
Outstanding at the year end 12,000 $3.80 12,600 $4.03
Exercisable at the year end 12,000 $3.80 12,600 $4.03
The Group has an unapproved share option plan for the benefit of other employees. All share options are denominated in
Sterling and converted for disclosure purposes at £1 = $1.52 at 31 March 2013 (£1 = $1.60 at 31 March 2012).
Options in issue Exercise Exercise period on or before:
Price (US$)
232,000 3.80 25 June 2014
19,000 4.25 25 June 2014
10,000 4.94 1 September 2016
5,000 6.50 21 January 2018
1,000 3.80 15 June 2020
20,000 4.56 15 December 2021
4,000 5.51 16 February 2022
Details of the number of share options and the weighted average exercise price (WAEP) outstanding during the year are as follows:
2013 WAEP 2012 WAEP
Number US$ Number US$
Outstanding at the beginning of the year 367,000 $4.33 442,250 $4.52
Granted during the year - - 24,000 $4.98
Forfeited during the year (76,000) $4.62 (99,250) $5.33
Outstanding at the year end 291,000 $3.99 367,000 $4.33
Exercisable at the year end 266,000 $4.68 334,000 $4.30
The options issued to date under both schemes will only be exercisable if the average mid market closing price of the
Company’s shares on the five business days prior to the date of exercise exceeds the option price by 15% or more and after
the elapse of three years from date of Option Grant.
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The fair value of options granted after 7 November 2002 but not vested at 1 April 2006 has been arrived at using an
appropriate Black Scholes model. The assumptions inherent in the use of this model are as follows:
• The option life is assumed to be at the end of the allowed period
• There are no non-market vesting conditions
• No variables change during the life of the option (e.g. dividend yield)
• Volatility of share price has been calculated over the three years prior to the balance sheet date.
Date of Vesting Date of Exercise Risk-free Share price Volatility Fair value Number
grant Period vesting Price Rate at grant of Share (US$000) outstanding
(years) (US$) (US$) price
14.07.03 3 14.07.06 3.80 3.83% 2.14 63% 12 25,000
30.06.04 3 30.06.07 3.80 5.04% 2.94 63% 132 200,000
01.09.06 3 01.09.09 4.94 4.61% 6.06 63% 118 10,000
21.01.08 3 21.01.11 6.50 4.21% 7.85 45% 44 5,000
16.06.10 3 16.06.13 3.80 4.00% 2.78 36% 32 1,000
16.12.11 3 16.12.14 4.56 4.00% 4.55 31% 52 20,000
17.02.12 3 17.02.15 5.51 4.00% 5.69 31% 9 4,000
The Group has not recognised any expense related to equity-settled share based payment transactions during the year
(2012: nil), on the grounds that the charge is not material. The Directors have also concluded that the cumulative position
to date is also not material.
19
SHARE CAPITAL
Shares Nominal Premium Total
Number Value net of costs
US$000 US$000 US$000
In issue at 1 April 2012 4,832,778 19,319 3,742 23,061
In issue at 31 March 2013 4,832,778 18,351 3,555 21,906
At an EGM of Members held on 20 August 2007, the Company’s authorised share capital was increased from £14,000,000
(US$27,762,000) comprising 5,600,000 Ordinary shares of £2.50 (US$4.96) each to £17,500,000 (US$34,702,500), comprising
7,000,000 shares of £2.50 (US$4.96) each.
Capital management objectives are set out in the Report of the Directors on page 11.
20
CONTINGENT LIABILITIES
There were no contingent liabilities at 31 March 2013 or at 31 March 2012.
AORTECH INTERNATIONAL PLC | ANNUAL REPORT & ACCOUNTS 2013
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INDEPENDENT AUDITOR’S REPORT
To the Members of AorTech International plc
We have audited the parent company financial statements of AorTech International Plc for the year ended 31 March 2013
which comprise the parent company balance sheet and the related notes. The financial reporting framework that has been
applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted
Accounting Practice).
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required
to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITOR
As explained more fully in the Directors’ Responsibilities Statement set out on page 13, the Directors are responsible for the
preparation of the parent company financial statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the parent company financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices
Board’s (APB’s) Ethical Standards for Auditors.
SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS
A description of the scope of an audit of financial statements is provided on the APB's website at
www.frc.org.uk/apb/scope/private.cfm.
OPINION ON FINANCIAL STATEMENTS
In our opinion the parent company financial statements:
• give a true and fair view of the state of the Company’s affairs as at 31 March 2013;
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
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OPINION ON OTHER MATTER PRESCRIBED BY THE COMPANIES ACT 2006
In our opinion the information given in the Report of the Directors for the financial year for which the financial statements are prepared
is consistent with the parent company financial statements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
OTHER MATTER
We have reported separately on the Group financial statements of AorTech International Plc for the year ended 31 March 2013.
Christopher Frostwick
Senior Statutory Auditor
For and on behalf of
GRANT THORNTON UK LLP
STATUTORY AUDITOR, CHARTERED ACCOUNTANTS
Leicester
27 August 2013
AORTECH INTERNATIONAL PLC | ANNUAL REPORT & ACCOUNTS 2013
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PARENT COMPANY BALANCE SHEET
31 March 31 March
2013 2012
Notes £000 £000
Fixed assets
4,269
Intangible assets 3 3,815
Investment in subsidiary undertakings 4 - -
3,815 4,269
Current assets
Debtors – amounts falling due within one year 5 519 518
Debtors – amounts falling due after one year 5 -
3,907
Cash at bank 542 748
1,061
5,173
Creditors: amounts falling due within one year 6 (83)
(72)
Net current assets
978 5,101
Total assets less current liabilities
4,793 9,370
Creditors: amounts falling due after more than one year 7
(442) -
Net assets
4,351 9,370
Capital and reserves
Called up share capital 8 12,082 12,082
2,340
Share premium account 10
(5,052)
Profit and loss account 10 (10,071)
2,340
Equity shareholders' funds 10
4,351
9,370
The parent company financial statements were approved by the Board on 27 August 2013 and were signed on its behalf by
W Brown, Chairman
E McDaid, Director
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NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
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ACCOUNTING POLICIES
Accounting convention
The parent company financial statements are prepared under the historical cost convention and in accordance with applicable United
Kingdom accounting standards (United Kingdom Generally Accepted Accounting Practice). A summary of the material accounting policies,
which have been applied consistently, is set out below. The principal accounting policies represent the most appropriate in accordance
with FRS 18.
Going concern
After considering the year end cash position, making appropriate enquiries and reviewing budgets and profit and cash flow forecasts for
a period of at least twelve months from the date of signing these financial statements, the Directors have formed a judgement at the
time of approving the financial statements that there is a reasonable expectation that the parent company has sufficient resources to
continue in operational existence for the foreseeable future. For this reason the Directors consider the adoption of the going concern
basis in preparing the parent company financial statements is appropriate.
Investments
Investments held as fixed assets are stated at the lower of cost and net realisable value, less provision for any impairment. In the opinion
of the Directors the value of such investments is not less than that shown at the balance sheet date.
Deferred tax
Deferred tax is recognised (on an undiscounted basis) on all timing differences where the transactions or events that give the Company
an obligation to pay more tax in the future, or a right to pay less tax in the future, have occurred by the balance sheet date. Deferred tax
assets are recognised when it is more likely than not that they will be recovered. Deferred tax is measured using rates of tax that have
been enacted or substantively enacted by the balance sheet date.
Foreign currencies
Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions
in foreign currencies are translated into sterling at the rate of exchange ruling at the date of transaction. Exchange differences are taken
into account in arriving at the operating result.
Share based payments
All share based payment arrangements granted after 7 November 2002 that had not vested prior to 1 April 2006 are recognised in the
financial statements. All goods and services received in exchange for the grant of any share based payment are measured at their fair
values. Where employees are rewarded using share based payments the fair values of their services are determined indirectly by reference
to the fair value of the instrument granted to the employee. This fair value is appraised at the grant date and excludes the impact of
non-market vesting conditions (e.g. profitability and sales growth targets).
All equity settled share based payments are ultimately recognised as an expense in the profit and loss account with a corresponding credit
to ‘other reserves’.
Upon exercise of share options the proceeds received, net of attributable transaction costs, are credited to share capital and, where
appropriate, share premium.
Debtors
The amounts owed by Group undertakings are in respect of long term loans and have been treated as part of the net investment in the
foreign entities, and included within debtors due in greater than one year. These balances have been treated as monetary assets and
retranslated at the rate of exchange ruling at the balance sheet date. Exchange differences arising on these loans are taken into account
in arriving at the operating result. The recoverability of these balances is reassessed at each balance sheet date, with an impairment
provision recorded when considered necessary.
Intangible assets
Patents and trademarks (intellectual property) are included at cost less estimated residual amount and are amortised on a straight line
basis over their remaining useful economic lives of 20 years, which corresponds to the lives of the individual patents. The assets were
transferred from the Australian subsidiary in 2011 at an independent valuation which has been used as deemed cost for these assets in
the UK.
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Loan notes & Redemption Premium policy
The loan notes issued and redeemed and redemption premium thereon are considered to be a single capital instrument in
accordance with FRS 4. The loan notes issued and redeemed in the year and the redemption premium paid in the year have
been accounted for based on the terms of the loan note trust deed (see note 7), with the redemption premium paid expensed
as a finance cost in the year.
The redemption premium payable upon a future change of control of the company is considered to be a financial liability at
the year end. As such, the most appropriate accounting policy has been deemed to be to record a non-current liability at the
balance sheet date based on 15% of the market capitalisation of the company at that date, with the expense recorded as a
finance cost in the year. At each future balance sheet date, the carrying amount of the change of control liability will be
reassessed based on the value of 15% of the market capitalisation at that date. Any difference between this amount and the
previous carrying amount will be recognised within finance costs in the profit and loss account.
2
COMPANY PROFIT AND LOSS ACCOUNT
The parent company has taken advantage of section 408 of the Companies Act 2006 and has not included its own profit and
loss account in these financial statements. The parent company’s loss for the year ended 31 March 2013 was £5,019,000 after
the write-off of an inter-company debt of £4,417,000 (2012: loss of £3,518,000 after the write-off of an inter-company debt of
£2,868,000).
3
INTANGIBLE ASSETS
Intellectual property
£000
Cost
At 31 March 2012
4,777
Additions during year 80
At 31 March 2013 4,857
Amortisation
At 31 March 2012 508
Charge for the year 534
At 31 March 2012 1,042
Net book value
At 31 March 2012
4,269
At 31 March 2013 3,815
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4
FIXED ASSET INVESTMENTS
2013 2012
£000 £000
Investment in subsidiary undertakings
Cost
Historical cost 23,159 23,159
Provision for impairment
(23,159) (23,159)
Net book value at 31 March - -
Interest in subsidiary undertakings Proportion
Country of Description of nominal
registration of value of
Name of undertaking or incorporation shares held shares held
%
(i) AorTech Biomaterials Limited Scotland Ordinary £1 100
(ii) AorTech Critical Care Limited Scotland Ordinary £1 92
(iii) AorTech Heart Valve Technologies Limited Scotland Ordinary £1 100
(iv) AorTech Biomaterials Pty Limited Australia Ordinary Aus. $1 100
(v) AorTech Polymers & Medical Devices, Inc USA Common US $1 100
(vi) River Clyde Marine, Inc USA Common US $1 100
The principal business activities and country of operations of the above undertakings are:
(i) A non-trading company in the UK
(ii) A dormant company in the UK
(iii) A non-trading company in the UK
(iv) Ceased operations and placed into voluntary liquidation during year ended 31 March 2013
(v) The manufacture, marketing and development of new biostable polyurethanes operating principally in USA
(vi) Research into marine applications for biostable polyurethanes
5
DEBTORS
2013 2012
£000 £000
Amounts falling due within one year
Trade debtors, less provision 496
496
Other debtors 15 21
Prepayments 8 1
519 518
Amounts falling due after more than one year
Amounts owed by Group undertakings 4,417 3,907
Less: Provision* (4,417) -
519 4,425
*An impairment charge of £4,417,000 has been made to fully provide against the remaining amount of the inter-company loan
account due as at 31 March 2013 to AorTech International plc by its American subsidiary, AorTech Polymers & Medical Devices, Inc.
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CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
2013 2012
£000 £000
Accruals 83 72
83 72
7
CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
2013 2012
£000 £000
Change of control redemption premium 442 -
442 -
On 26 October 2012 AorTech International plc created £1,250,000 of Secured Loan Notes ("the Notes") and issued £1,210,000
($1,914,000) of the Notes to existing investors including certain Directors (or members of their families). The Notes were
repayable on or before 1 October 2013. The Notes did not bear any interest but were subject to a redemption premium of 100
per cent. of the nominal value of the Notes if repayment was made prior to 31 March 2013 and 150 per cent. if thereafter.
The Notes attracted an additional redemption premium of 15 per cent. of the equity value on a change of control of AorTech
at any time in the future, 15 per cent. of the value of a sale of any of its intellectual property rights while the Notes were
outstanding, and 15 per cent. of the value of the net proceeds of any settlement of the dispute with St. Jude Medical or
restructuring of the License and Supply Agreement with St. Jude Medical, after having taken into account the costs of settlement
and the value of the notes redeemed and redemption premium paid. The Notes were secured by a floating charge over all of
AorTech’s assets.
The initial loan note subscriptions by W Brown and E McDaid (or members of their families) and Active Capital Trust PLC which
amounted to, in aggregate, £270,000, along with the 100 per cent redemption premiums paid of £270,000, and their share of
any change of control redemption premiums payable in the future were deemed related party transactions for the purposes
of Rule 13 of the AIM Rules and IAS 24 / FRS 8. The Directors of AorTech (excluding W Brown and E McDaid) considered, having
consulted with finnCap Limited, that the terms of the transaction were fair and reasonable so far as shareholders are concerned.
The original sum subscribed in October 2012 for the Notes, together with an initial 100% premium due, was re-paid to the
loan note holders prior to 31 March 2013. As no sale of intellectual property rights had occurred while the Notes were
outstanding, no additional redemption premium under this clause was due. In addition, based on the value of the net proceeds
of the settlement of the dispute with St Jude Medical, having taken into account the legal and other costs incurred, and the
value of the loan notes redeemed and redemption premium paid, then no additional redemption premium was due under
this clause.
On change of control of the Company whether by means of a general offer to acquire the entire issued share capital of the
Company or a scheme of arrangement, or on a return of capital to shareholders as part of a winding up of the Company, an
additional premium is payable to noteholders equal to 15% of the sums payable to shareholders in relation to that event. This
liability of the Company continues after the Notes have been redeemed. In accordance with UK GAAP, a provision in the sum
of £442,000 for this change of control redemption premium has been made at 31 March 2013 in respect of the additional 15%
premium which would become due to loan note holders, based on the market capitalisation of the Company at that date. The
level of this provision will be reviewed every six months for the purpose of the interim and year end accounts.
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9
SHARE CAPITAL
See Note 19 in the Group financial statements.
SHARE BASED PAYMENTS
See Note 18 in the Group financial statements.
10
STATEMENT OF MOVEMENT IN SHAREHOLDERS’ FUNDS
Total
Share Share Profit and shareholders’
capital premium loss account funds
£000 £000 £000 £000
12,888
1 April 2011 12,082 2,340 (1,534)
(3,518)
Loss for the year - -
(3,518)
At 31 March 2012 12,082 2,340 (5,052)
Loss for the year - - (5,019)
9,370
(5,019)
At 31 March 2013 12,082 2,340 (10,071) 4,351
As a result of the loss for the year ended 31 March 2013, and in particular the impairment provision of £4,417,000 made
against the intercompany debtor, the Directors of the parent company are required to call a general meeting in accordance
with section 656 of the Companies Act 2006, as the net assets of the parent company have fallen to less than half of the
called up share capital. As a result, the Directors have called a general meeting for 26 September 2013 to consider whether
any, and if so what, steps should be taken to deal with the situation.
11
DIRECTORS AND EMPLOYEES
The Directors are the only employees of the parent company. Disclosure of their emoluments is given in the audited section
of the Report of the Remuneration Committee on page 16.
12
RELATED PARTY TRANSACTIONS
In accordance with FRS 8, “Related Party Disclosures”, AorTech International plc has taken advantage of the exemption for
wholly owned subsidiaries not to disclose any transactions or balances between wholly owned Group entities including those
that have been eliminated on consolidation. There were no related party transactions during the year with non fully owned
subsidiaries. Other related party transaction disclosures are included within note 7 to the parent company accounts in respect
of loan note holders and within the report of the Remuneration Committee.
AORTECH INTERNATIONAL PLC | ANNUAL REPORT & ACCOUNTS 2013
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NOTICE OF THE ANNUAL GENERAL MEETING
Notice is hereby given that the sixteenth Annual General Meeting of AorTech International Plc will be held in the Tower Suite
of the Institute of Directors, New Broad Street House, 35 New Broad Street, London, EC2M 1NH on Thursday, 26 September
2013 at 11:00am for the purpose of (a) as special business, considering in accordance with Section 656 of the Companies Act
2006 whether any, and if so what, steps should be taken to deal with the situation that the net assets of the Company currently
represent less than half of its called up share capital; and (b) considering and if thought fit passing the following resolutions,
numbers 1 to 6 as Ordinary Resolutions and number 7 as a Special Resolution:
AS ORDINARY BUSINESS
1.
2.
3.
4.
5.
To receive and adopt the financial statements of the Company for the year ended 31 March 2013 together with the
Reports of the Directors and Auditor thereon.
To approve the Report of the Remuneration Committee for the year ended 31 March 2013.
To re-elect Frank Maguire, who is retiring by rotation.
To elect as a Director Roy Walter Mitchell, who was appointed a Director on 23 May 2013.
To re-appoint Grant Thornton UK LLP as auditor of the Company and to authorise the Directors to fix their
remuneration.
AS SPECIAL BUSINESS
To consider, and if thought fit, pass the following resolution as an Ordinary Resolution:
6. The Directors be hereby generally and unconditionally authorised for the purpose of section 551 of the Companies
Act 2006 (“the Act”) to exercise all the powers of the Company to allot shares in the Company or to grant rights to subscribe
for or convert any security into shares in the Company (“Rights”) up to an aggregate nominal amount of £4,027,315
(representing approximately one third of the Company's issued ordinary share capital) which authority will expire at the
conclusion of the next Annual General Meeting of the Company save that the Company may, before such expiry, make an offer
or agreement which would, or might, require relevant securities to be allotted after such expiry and the Directors may allot
such securities in pursuance of such offer or agreement as if the authority so conferred had not expired. This authority is in
substitution for all previous authorities conferred on the Directors in accordance with section 80 of the Companies Act 1985
or section 551 of the Act but without prejudice to any allotment of shares or grant of Rights already made or agreed to be
made pursuant to such authorities.
To consider, and if thought fit, pass the following resolution as a Special Resolution:
7. That subject to the passing of Resolution 6 above as an Ordinary Resolution, the Directors be and are hereby empowered
until the conclusion of the next Annual General Meeting of the Company (“the period of the Section 570 power”), pursuant to
Section 570 of the Act to allot equity securities (as defined by Section 560 of the Act) pursuant to the authority granted by
Resolution 6 above in accordance with Section 551 of the Act as if Section 561(1) of the Act did not apply to such allotment,
provided that this power shall be limited to:
(a) the allotment of equity securities in connection with or pursuant to an offer by way of rights issue, open offer or any other
pre-emptive offer in favour of ordinary shareholders and in favour of holders of any other class of equity security in accordance
with the rights attached to such class where the equity securities respectively attributable to the interests of such persons on
a fixed record date are proportionate (as nearly as may be) to the respective numbers of equity securities held by them or are
otherwise allotted in accordance with the rights attaching to such equity securities subject to such exclusions or arrangements
as the Directors may deem necessary or expedient to deal with fractional entitlements or legal or practical problems under
the laws of any territories or requirements of any recognized regulatory body or stock exchange in any territory;
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(b) the allotment of equity securities pursuant to the terms of any share scheme for directors and employees of the Company
and/or its subsidiaries approved by the shareholders of the Company in general meeting; and
(c) the allotment (otherwise than pursuant to sub-paragraphs (a) and (b) above) of equity securities having a nominal amount
or giving the right to subscribe for or convert into relevant shares having a nominal amount, not exceeding in aggregate
£604,097 (representing approximately five per cent of the issued ordinary share capital of the Company), or if less, five percent
of the issued Ordinary share capital of the Company from time to time; but so that this power shall allow the Company to
make an offer or enter into an agreement before the expiry of the period of the Section 570 power which would, or might,
require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of any such
offer or agreement as if the power conferred thereby had not expired. This resolution revokes and replaces all unexcercised
powers previously granted to the Directors to allot equity securities as if either section 89(1) of the Companies Act 1985 or
section 561(1) of the Act did not apply but without prejudice to any such allotment of equity securities made or agreed to be
made pursuant to such authorities.
By order of the Board,
J C D Parsons
Company Secretary
Oatlands Drive, Weybridge, Surrey KT13 9LZ
27 August 2013
1. Members will only be entitled to attend and vote at the meeting if they are registered on the Company’s register of members
at 6:00pm on 24 September 2013 or by 6.00 pm two days prior to the date of any adjournment of the meeting. Changes to
entries on the Register of Members after that time shall be disregarded in determining the rights of any person to attend and
vote at the meeting. If the meeting is adjourned, the time by which a person must be entered on the register of members of
the Company in order to have the right to attend and vote at the adjourned meeting is 6:00pm on the day preceding the date
fixed for the adjourned meeting. Changes to the register of members after the relevant times shall be disregarded in
determining the rights of any person to attend and vote at the meeting.
2. Any member of the Company who is entitled to attend and vote at the Annual General Meeting may appoint another
person or persons (whether a member or not) as their proxy or proxies to attend, speak and vote on their behalf. To be valid,
Forms of Proxy must be lodged with the Company's Registrars, Equiniti Limited, Aspect House, Lancing, West Sussex, BN99
6ZL not later than 48 hours before the time appointed for the holding of the meeting or any adjourned meeting together with
any documentation required. In the case of a corporation, the Form of Proxy should be executed under its common seal or
signed by a duly authorised officer or attorney of the corporation. Details of how to appoint the Chairman of the Meeting or
another person as your proxy or proxies using the proxy form are set out in the notes to the proxy form together with details
as to how to change or teminate proxy appointments. A vote witheld is not a vote in law which means that the vote will not
be counted in the calculation of votes for or againsat a resolution. If no voting indication is given your proxy will vote (or
abstain from voting) as he or she thinks fit in relation to any other matter put before the meeting.
3. Completing and returning a Form of Proxy will not prevent any member from attending the meeting in person and voting
should they so wish. Any member or his proxy attending the meeting has a right to ask any question at the meeting relating
to the business of the meeting.
4. A corporation which is a member can appoint one or more corporate representatives who may exercise, on its behalf, all
its powers as a member provided that no more than one corporate representative exercises powers over the same share.
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5. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so
by using the procedures described in the CREST Manual (available at www.euroclear.com). CREST personal members or other
CREST sponsored members, and those CREST members who have appointed a voting service provider should refer to their
CREST sponsors or voting service provider(s), who will be able to take the appropriate action on their behalf. In order for a
proxy appointment or instruction made by means of CREST to be valid, the appropriate CREST message (a "CREST Proxy
Instruction") must be properly authenticated in accordance with Euroclear UK & Ireland Limited's specifications and must
contain the information required for such instructions, as described in the CREST Manual. The message must be transmitted
so as to be received by the Company's agent, Equiniti Limited (CREST Participant ID RA19), no later than 48 hours before the
time appointed for the meeting. For this purpose, the time of receipt will be taken to be the time
(as determined by the time stamp applied to the message by the CREST Application Host) from which the Company's agent is
able to retrieve the message by enquiry to CREST in the manner prescribed by CREST.
CREST members and, where applicable, their CREST sponsor or voting service provider should note that Euroclear UK & Ireland
Limited does not make available special procedures in CREST for any particular messages. Normal system timings and limitations
will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned
to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider,
to procure that his CREST sponsor or voting service provider takes) such action as shall be necessary to ensure that a message
is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable,
their CREST sponsor or voting service provider are referred in particular to those sections of the CREST Manual concerning
particular limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the
Uncertificated Securities Regulations 2001.
6. As at noon on 2 September 2013 the Company’s issued share capital comprised 4,832,778 ordinary shares of £2.50 each.
Each ordinary share carries the right to one vote at a general meeting of the Company and, therefore, the total number of
voting rights in the Company as at noon on 2 September 2013 is 4,832,778.
7. The following documents will be available at the registered office of the Company on any weekday (except Saturday) during
normal business hours from the date of this notice until the date of the Annual General Meeting:
(a) A copy of the service agreements for the Executive Directors.
(b) A copy of the letters of appointment for the Non-Executive Directors.
(c) The Memorandum and Articles of Association of the Company.
These documents will also be available for inspection during the Annual General Meeting and for at least fifteen minutes before
it begins.
8. Any member attending the meeting has the right to ask questions. The Company must cause to be answered any such
question relating to the business being dealt with at the meeting but no such answer need be given if (a) to do so would
interfere unduly with the preparation for the meeting or involve the disclosure of confidential information, (b) the answer has
already been given on a website in the form of an answer to a questions, or (c) it is undersirable in the interests of the company
or the good order of the meeting that the question be answered.
9. If you have any general queries about the meeting please contact the Company Secretary at jcdavidparsons@btconnect.com
or by calling on 01932 252 123. You may not use any electronic address provided either in this notice of meeting or any related
documents (including the Form of Proxy) to communicate for any purposes other than those expressly stated.
By order of the Board,
J C D Parsons
Company Secretary
Oatlands Drive, Weybridge, Surrey KT13 9LZ
27 August 2013
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AORTECH INTERNATIONAL PLC | ANNUAL REPORT & ACCOUNTS 2013
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AorTech International plc
Head Office:
Level Two, Springfield House, 23 Oatlands Drive,
Weybridge, Surrey UK, KT13 9LZ
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+44(0)1932 252 123
+44(0)1932 251 113
info@aortech.com
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www.aortech.com
I N T E R N AT I O N A L P LC