AorTech International Plc.
AN NUA L R EPO RT 2 01 5
Annual Report and Accounts for
the year to 31 March 2015
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ANNUAL REPORT AND ACCOUNTS 2015
ANNUAL REPORT 2015Annual Report and Accounts forthe year to 31 March 2015AorTech International Plc. CONTENTS
Board of Directors and Advisors
04
STRATEGIC REPORT
Chairman’s Statement
Definitions
Operating and Financial Review
Principal Risks and Uncertainties
05
09
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GOVERNANCE
Corporate Governance
Accountability and Audit
Report of the Remuneration Committee
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CONSOLIDATED FINANCIAL STATEMENTS
Report of the Directors
Directors’ Responsibilities Statement
Independent Auditor’s Report
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Cash Flow Statement
Consolidated Statement of Changes in Equity
Notes to the Consolidated Financial Statements
PARENT COMPANY FINANCIAL STATEMENTS
Independent Auditor’s Report on the Parent Company Financial Statements
Parent Company Balance Sheet
Notes to the Parent Company Financial Statements
NOTICE OF THE ANNUAL GENERAL MEETING
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ANNUAL REPORT AND ACCOUNTS 2015
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4
AorTech International Plc.
BOARD OF DIRECTORS AND ADVISORS
Directors
Bill Brown
Eddie McDaid Chief Executive
Gordon Wright non-Executive Director
non-Executive Chairman and Finance 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 Ltd
60 New Broad Street London EC2M 1JJ
Registrars
Equiniti Registrars Scotland
1st Floor 34 South Gyle Crescent
South Gyle Business Park Edinburgh EH12 9EB
Independent Auditor
Grant Thornton UK LLP
Statutory Auditor Chartered Accountants
Regent House 80 Regent Road Leicester LE1 7NH
Registered in Scotland, Company No.SC170071
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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CHAIRMAN’S STATEMENT
5
I am pleased to report that in the financial year to 31 March
2015 we experienced an improvement in the business
with revenues and other income more than doubling from
$419,000 to $857,000.
The administrative expenses in operating the business before the costs of
the litigation fell from $859,000 to $776,000, resulting in a net profit before
exceptional items and IP amortisation of $81,000.
Exceptional costs relating to the litigation against Frank Maguire and related parties amounted to $204,000 which compares to the cost incurred
at the 6-month stage of $212,000, the reduction in the second half of the year being a further recovery from our insurers net of the excess on
the insurance policy payable by AorTech.
Over the course of the year, the cash position fell from $642,000 to $360,000. At the interim stage however, the cash position stood at $335,000
and there has therefore been progress during the second half.
Litigation
in our
interim
As previously reported
accounts and
in our recent update to
shareholders released on 16 April 2015, the
Company continues to pursue a legal action
against the former CEO Frank Maguire.
This litigation has been extended and has
commenced against Foldax, the Company of
which Mr Maguire is presently CEO, together
with other associated parties. This litigation
which was started in California has now
been transferred to Utah to sit alongside
the case against Frank Maguire. As previously
announced, Mr Maguire has made a counter
claim for alleged non-payment of expenses
amounting to $168,000.
No provision has been made in these financial
statements for any potential gains or losses
as the action has not progressed sufficiently.
Your Board continues to pursue this action
against Mr Maguire, Foldax and other
connected parties in order to protect the
interests of AorTech and its shareholders.
ANNUAL REPORT AND ACCOUNTS 2015
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AorTech International Plc.
CHAIRMAN’S STATEMENT (continued)
Biomerics Manufacturing
Licence
As reported in last year’s Accounts, a licence
with Biomerics LLC was concluded for the
manufacture and distribution of AorTech’s
Elast-Eon™ materials.
We expressed some disappointment in the
progress of this licence in our 2014 Interim
Results but I am now pleased to confirm that
there has been progress on the contractual
relationship between AorTech and Biomerics
with an amendment to the original agreement
concluded since the year end. This amended
agreement incorporates several commercial
changes including further capital expenditure
by both
capital
expenditure commitment will be paid from
future royalties.
companies. AorTech’s
The further positive news on this agreement
is the commitment of a long term supply
of Elast-Eon™ to one of AorTech’s major
licensees together with further enquiries from
other potential customers regarding receiving
supplies of Elast-Eon™.
Other Licensees
I am pleased to report, as demonstrated
in the growth of AorTech’s revenue, the
continued increase of royalties from existing
licensees. The licensees who have achieved
commercialisation are continuing to see
increased sales which should in turn result in
increased royalties to AorTech.
Those licensees who have yet to achieve
full commercialisation are continuing the
development of their products through
the Regulatory process. It is important to
recognise that AorTech’s future success is
dependent upon the continued growth and
success of its licensees.
In AorTech’s Interim results of 30 September
2014 we reported that there was a balance
due from a licensee of $175,000 which had
not been provided against since a Blue Chip
Company had a secondary obligation in
respect of this debt. The debt has subsequently
increased to $275,000. Since the year end
AorTech has received a lump sum settlement
from the Blue Chip Company in order to have
it released from its secondary obligation. No
provision has been made against this debt in
these accounts but should AorTech’s action
for recovery of the debt not be fully successful,
any under recovery will be effectively offset
in cash terms against the settlement figure
received since the year end.
Cash
As previously indicated, although cash fell
from $642,000 to $360,000 during the year,
there was an improvement in cash in the
second half.
In order to achieve this financial position
your Board has had to rigorously monitor
and control overheads and, indeed, in certain
instances Directors’ salaries have been
deferred.
I am pleased to report that the Company’s
cash position has increased since the financial
year end and anticipate that the Company
should be cash flow positive during the
current financial year 2015/2016.
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ANNUAL REPORT AND ACCOUNTS 2015
ANNUAL REPORT 2015Annual Report and Accounts forthe year to 31 March 2015AorTech International Plc.AorTech International Plc.ANNUAL REPORT 2015Annual Report and Accounts forthe year to 31 March 2015
Heart Valve
Now that the polymer licensing business
has been stabilised and has some positive
momentum, we have been able to spend
time and resource
in reviewing exactly
where AorTech stands with the Heart Valve
project. Over the years, there have been three
major development phases of the polymer
heart valve. The first attempt was some 13
years ago when AorTech undertook the
development itself. This attempt failed when
a non-regulatory trial in juvenile sheep had a
very disappointing conclusion. The valve was
redesigned to change the stress profile on
leaflets and the manufacturing process revised
to ensure a better quality leaflet finish. The new
design was licensed to a large medical device
Company that undertook its own rigorous
testing. The data from these tests remain
the property of that licensee but the overall
results were very encouraging. Unfortunately,
the licensee did not pursue the project as we
understand all their valve R&D efforts were
being diverted to their trans-catheter project.
A second major license was entered into in
2007 and was taken back in late 2011. During
the course of this license, further design
changes were made and a range of durability
and animal trials undertaken. Much of the
testing work was positive although there were
also some adverse issues which arose.
Share Capital Reorganisation
The Company’s shares are currently trading
at a price significantly below their nominal
value of 250 pence per share. At the close
of trading on 5 August 2015 the Company’s
Closing Price was 25.5 pence per Existing
Ordinary Share. Accordingly, subject
to
Shareholder approval at the Company’s AGM
which is expected to be held on 24 September
2015, the Directors propose to reorganise the
Company’s share capital as explained below,
with a view to reducing the nominal value of
the Existing Ordinary Shares.
Pursuant to the Share Capital Reorganisation,
it is proposed that each Existing Ordinary
Share with a nominal value of 250 pence will
be sub-divided and redesignated into one
Ordinary Share of 5 pence and one Deferred
Share of 245 pence.
Following the Share Capital Reorganisation
each Shareholder will hold the same number
of Ordinary Shares that he or she held
immediately beforehand, with a nominal value
per Ordinary Share of 5 pence.
The Ordinary Shares resulting from the
Share Capital Reorganisation will have exactly
the same rights as those currently accruing
to the Existing Ordinary Shares under the
Articles, including those relating to voting and
entitlement to dividends.
From the review of the history of the Heart
Valve project it is apparent that, despite
these adverse issues, there are many positive
results that indicate the exciting potential in
AorTech’s polymer heart valve. The recent
development and early introduction of a TAVI
valve into the heart valve market provides
exciting new possibilities for the introduction
of a heart valve made from a polymeric
material. The root causes of the failures are
now well understood and taking the positive
aspects from all three projects suggests that
replicating previous trials would get a positive
outcome for both In Vitro and In Vivo testing.
To reach the stage of human trials, all of the
testing carried out to date will need to be
redone under regulatory conditions which
would require quality and manufacturing
systems of a substantially higher standard than
when AorTech manufactured valves for testing
in the past. Seeking any subsequent deal with
an industry major would require successful
data from the above trials.
The opportunity for the Polymer Heart Valve
remains the durability of a mechanical valve
with the hemodynamics of a tissue valve. Cost
of manufacture would be considerably lower
than other prosthetic valves and the leaflet
technology would be perfect for TAVI.
AorTech’s technology, know-how and IP in
the Polymer Valve area is only one of the
ingredients required for success. The two
other key inputs are people with the necessary
Quality, Regulatory, Clinical and Manufacturing
experience together with access to capital. In
order to capitalise on the development work
of the last 15 years for the benefit of AorTech
shareholders, we are considering whether
there is the opportunity of bringing a team
together with the necessary experience and
track record in the device industry that could
be supported by external finance.
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ANNUAL REPORT AND ACCOUNTS 2015
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AorTech International Plc.
CHAIRMAN’S STATEMENT (continued)
The Deferred Shares will have very limited
rights and will effectively be valueless. They will
have no voting rights and will have no rights as
to dividends and only very limited rights on a
return of capital. They will not be admitted to
or listed on any stock exchange and will not
be freely transferable. The rights attaching to
the Deferred Shares are set out in the Articles
as amended pursuant to resolution 7 to be
passed at the AGM. The amendments to the
Articles are being made principally to set out
the rights attaching to the Deferred Shares.
Resolution 8 contained in the Notice of
General Meeting at the end of this document
will, if passed by Shareholders, effect the
proposed Share Capital Reorganisation as
detailed above. If approved, the Share Capital
Reorganisation will take place at 6pm on 24
September 2015. Application will be made to
the London Stock Exchange for the admission
to trading and dealings on AIM in the new
Ordinary Shares arising from the Share
Capital Reorganisation, becoming effective at
8am on 25 September 2015.
The Company does not propose to issue new
share certificates to the existing Shareholders
as a result of the Share Capital Reorganisation.
The existing share certificates which have
been issued to the Shareholders in respect of
their holdings of Existing Ordinary Shares will
remain valid in respect of the New Ordinary
Shares following completion of the Share
Capital Reorganisation.
CREST accounts of Shareholders will not
be credited in respect of any entitlement to
Deferred Shares.
Loan Notes
In October 2012 the Company issued Loan
Notes to obtain the necessary funding to allow
it to continue to operate. The Loan Note
holders still have the right to receive from the
Company a payment of a sum equal to 15%
of sums paid to shareholders on a Change
of Control. Resolution 9 being proposed at
the AGM seeks shareholder approval for the
Board to take all necessary steps to allow
the Company to allot shares in exchange
for the surrender of these rights. 8.26% of
the Loan Notes are owned by Directors or
their connected parties. Bill Brown and Eddie
McDaid, and connected parties, will therefore
abstain from voting on this resolution.
Recommendation
Gordon Wright, acting as an independent
Director, believes resolution 9 to be in the
best interests of the Company and the
Shareholders as a whole and recommends
you to vote in favour of that resolution as
he intends to do in respect of his beneficial
holdings amounting, in aggregate, to 308,311
Existing Ordinary Shares representing 6.38
per cent of the existing total voting rights. As
noted above, Bill Brown and Eddie McDaid,
and connected parties, will abstain from voting
on this resolution.
Your Board believes resolutions 7 and 8 to
be in the best interests of the Company and
the Shareholders as a whole. Accordingly,
the Directors unanimously recommend you
to vote in favour of those Resolutions to
be proposed at the General Meeting. All
of the Directors intend to vote in favour
of Resolutions 7 and 8 in respect of their
beneficial holdings, amounting, in aggregate,
to 667,632 Existing Ordinary Shares,
representing 13.81 per cent, of the existing
total voting rights.
Roy Mitchell
During the past year Roy served as finance
director and his contribution was invaluable
to the Company during that time. His forensic
analysis of documentation provided additional
evidence and support in AorTech’s litigation
action. I wish, on behalf of the Board, to thank
Roy for his expertise and contribution during
these past twelve months.
Conclusion
Despite the time and commitment required in
the litigation action, the past year has been one
of relative success. Revenue from license fees
and royalties are now greater than overheads,
the Company was cash positive in the second
half of the year, progress is being made with
our key licensees and we expect the year
2015/16 to be one of further progress.
BILL BROWN, CHAIRMAN
6 August 2015
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ANNUAL REPORT AND ACCOUNTS 2015
ANNUAL REPORT 2015Annual Report and Accounts forthe year to 31 March 2015AorTech International Plc.
Definitions
“Articles”
the Articles of Association of the Company as at the date of this document;
“Change of Control”
means either:-
(a) the Company coming under the control of a person or a group of persons acting in
concert as a result of either:-
(i) a general offer to acquire the entire issued share capital of the Company (other than those
shares (if any) already owned or controlled by the person making the offer) which is made on
a condition such that if it is satisfied, the person making the offer will have control of the
Company; or
(ii) a compromise or arrangement undertaken pursuant to section 899 of the Companies Act
2006; or
(b) a return of capital being made to the shareholders in relation to an order being made for the
winding up of the Company;
having the right to cast more than 50 per cent of the votes which may ordinarily be cast on a poll
at a general meeting of the Company;
the non voting deferred shares of 245 pence each in the capital of the Company to be created as
part of the Share Capital Reorganisation;
the 4,832,778 Ordinary Shares of 250 pence each in issue as at the date of this document;
5 August 2015, being the latest practicable date for the inclusion of information in this document
prior to its publication;
the £1,210,000 Secured Loan Notes 2013 issued by the Company on 23 October 2012;
the holders of the remaining rights outstanding under the Loan Notes;
the ordinary shares of 5 pence each in the capital of the Company to be created by the Share
Capital Reorganisation;
“control”
“Deferred Shares”
“Existing Ordinary Shares”
“Latest Practicable Date”
“Loan Notes”
“Loan Note Holders”
“New Ordinary Shares”
“Share Capital Reorganisation”
the share capital reorganisation (being the proposed subdivision of the Existing Ordinary Shares
into Deferred Shares and New Ordinary Shares as described above in this document and in the
Notice of the Annual General Meeting).
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AorTech International Plc.
OPERATING AND FINANCIAL REVIEW
Principal Activities
The Company is an Intellectual Property (IP) holding company whose
principal activitiy is exploiting the value of its IP and know-how.
Review of Business and Future
Developments
The consolidated Income Statement is set out
on page 19 indicating the Group’s loss for the
financial year of US$370,000 (2014: loss of
US$1,309,000) which will be deducted from
the reserves.
On a Group basis, the business review
and future prospects subsequent to the
discontinuation of US operations
are
contained within the Chairman’s Statement
on pages 5 to 9. 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 successful utilisation of patents and know-
how by existing licensees and the signing of
new licence agreements.
Principal Risks and
Uncertainties
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 utilising our
products in various medical device fields; small
customer base generating revenues; retention
of key management; 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 as
an IP focussed business and are being actively
managed at Board level through regular
review of progress, along with the internal
control environment detailed on page 12.
No dividends have been paid or proposed for
the years ended 31 March 2015 and 31 March
2014.
Financial Risks
The financial risks faced by the Group are as
follows:
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” overleaf.
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 to 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 in foreign currencies (GB Pound).
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.
2015
US Dollars
2014
US Dollars
GB Pound
US$000
50
371
Liquidity Risk
The Group seeks to manage liquidity 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.
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ANNUAL REPORT 2015Annual Report and Accounts forthe year to 31 March 2015AorTech International Plc.
11
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Interest Rate Risk
The Group finances its operations through retained cash reserves, and seeks to strike a balance between liquidity and maximising the return on
funds. Cash holdings are regularly reviewed by the Board.
The interest rate exposure of the financial assets and liabilities of the Group as at 31 March 2015 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.
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Liabilities at amortised cost
Fair value through profit or loss
Fixed
US$000
Floating
US$000
Zero
US$000
Total
US$000
INTEREST RATE
-
-
-
-
-
-
5
-
5
-
-
-
355
360
696
1,051
195
53
248
696
1,056
195
53
248
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. The Directors
regularly review the profile of trade receivables to minimise the Group’s exposure to bad debts.
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 company’s Board meets regularly to review performance and discuss future opportunities and threats with the aim
of optimising sustainable returns and minimising risk. Capital in the business is represented by the Company’s ordinary share capital. Success in
meeting the capital management objectives are assessed by reference to the Group’s profitability, and, in turn, its share price.
J C D PARSONS, COMPANY SECRETARY
AorTech International plc
Company number SC170071
Weybridge
6 August 2015
ANNUAL REPORT AND ACCOUNTS 2015
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AorTech International Plc.
GOVERNANCE
We do not comply with the UK Corporate Governance Code
and we are not required to.
However, we have reported on our Corporate Governance arrangements
by drawing upon best practice available, including those aspects of the
UK Corporate Governance Code we consider to be relevant to the
Company and best practice.
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 2015, comprised
one Executive and
three non-Executive
Directors; one of whom is the non-Executive
Chairman. Currently, the Board comprises
one Executive and
two non-Executive
Directors, one of whom is the non-Executive
Chairman. All Directors are able to take
independent advice in furtherance of their
duties if necessary.
Accountability and Audit
The Board includes a detailed review of the
performance of the Group in the Chairman’s
Statement on pages 5 to 9. Reading this
alongside the Strategic Report and the Report
of the Directors on pages 4 to 9 and 15 to
16 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.
• A comprehensive annual planning and
budgeting programme.
• A revision of annual forecasts on a
periodic basis.
is no
There
internal audit
independent
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.
The principal elements of the system include:
Audit Committee
• 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.
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.
ANNUAL REPORT AND ACCOUNTS 2015
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ANNUAL REPORT 2015Annual Report and Accounts forthe year to 31 March 2015AorTech International Plc.
AorTech International Plc.
REPORT OF THE REMUNERATION COMMITTEE
This report 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 of
Executive Directors
The Executive Director has a service contract,
which can be terminated on three months
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.
Salaries and Benefits
The Remuneration Committee meets twice
each year to consider and set the annual
salaries and benefits for the Executive Director,
having regard to personal performance and
independent advice concerning comparable
organisations.
• The basic salaries and benefits available to
senior
management of comparable companies.
executive Directors
and
• The need to attract and retain Directors
of an appropriate calibre.
• The need to ensure Executive Directors’
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
Independent
Directors carried out by
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 Committee
At 31 March 2015 the Remuneration Committee
comprised the non-Executive Directors as
follows:
G WRIGHT (CHAIRMAN)
W BROWN
R MITCHELL
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,
incentive
arrangements for bonus payments and grants
of share options.
including
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:
ANNUAL REPORT AND ACCOUNTS 2015
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AorTech International Plc.
REPORT OF THE REMUNERATION COMMITTEE (continued)
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 no contributions to a personal or Company pension plan during the year under review.
Directors’ Emoluments - audited
Details of individual Director’s emoluments for the year are as follows:
Executive
F Maguire
E McDaid
Non-executive
W Brown
G Wright
R Mitchell
Salary
& fees
US$
-
138,802
19,368
20,982
29,463
208,615
Pension
contributions
US$
-
-
-
-
-
-
2015
Total
US$
-
138,802
19,368
20.982
29,468
208,615
2014
Total
US$
150,301
76,373
19,093
19,093
28,640
293,500
F Maguire resigned as a Director on 29 November 2013. R Mitchell resigned as a Director on 31 May 2015.
W Brown is employed by Bluehone Investors LLP (‘Bluehone’) in the provision of services to the Company. All of the emoluments of W Brown
above are represented by payments made by the Company to Bluehone in respect of these services.
Directors’ interests in shares
The interests of Directors in shares of the Company are included in the Report of the Directors on page 15.
Directors’ interests in share options
No Director currently holds share options.
The range in the mid market price of the Company’s shares during the year ended 31 March 2015 was from £0.245 to £0.725. The mid market
price on 31 March 2015 was £0.2475.
On behalf of the Board
GORDON WRIGHT, CHAIRMAN OF THE REMUNERATION COMMITTEE
6 August 2015
ANNUAL REPORT AND ACCOUNTS 2015
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ANNUAL REPORT 2015Annual Report and Accounts forthe year to 31 March 2015AorTech International Plc.
AorTech International Plc.
REPORT OF THE DIRECTORS
The Directors present their report and the audited financial
statements for the year ended 31 March 2015.
Going Concern
After considering the year end cash position, making appropriate enquiries and reviewing budgets and profit and cash flow forecasts to 31 March
2021, 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 Consolidated financial statements is appropriate.
The future developments of the Group and an update on Research and Development activities are detailed in the Chairman’s Statement on pages 5 to 9.
Directors and their Interests
At 31 March 2015 the Chairman of the Company was W Brown; the Chief Executive Director was E McDaid; the non-Executive Finance Director
was R Mitchell, and the non-Executive Director was G Wright.
At each Annual General Meeting one third of the Directors shall be subject to retirement by rotation. E McDaid retires from the Board at the
Annual General Meeting and, being eligible, offers himself for re-election.
The interests of the Directors at 31 March 2015 and 31 March 2014 in the ordinary share capital of the Company (all beneficially held) were as follows:
E McDaid
G Wright
W Brown
R Mitchell
R Mitchell resigned as a Director on 31 May 2015.
Substantial Shareholders
31 March 2015
Number of shares
358,914
308,311
407
360,163
31 March 2014
Number of shares
358,914
308,311
407
360,163
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 14 July 2015 exceeded 3% of the Company’s issued share capital:
Forest Nominees Limited
Barclayshare Nominees Limited
Mr Roy Mitchell and Mrs P Mitchell
Mr Edward McDaid
W B Nominees Limited
Caricature Investments Limited*
HSDL Nominees Limited
TD Direct Investing Nominees (Europe) Limited
Pershing Nominees Limited
Number of shares
891,861
458.871
360,163
358,914
334,000
308,311
193,489
187,331
166,500
%
18.45%
9.49%
7.45%
7.43%
6.91%
6.38%
4.00%
3.88%
3.45%
*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 30 June 2015 was 13.81%.
ANNUAL REPORT AND ACCOUNTS 2015
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AorTech International Plc.
REPORT OF THE DIRECTORS (continued)
Information contained within the Strategic Report
The Directors have taken the option to include disclosures in relation to financial risk and dividends within the Strategic Report on pages 10 and
11 as these are deemed to have strategic importance to the Group.
Directors’ Indemnity
The Group maintains Directors and Officers liability insurance which gives appropriate cover against any legal action that may be brought against them.
Annual General Meeting
The notice convening the Annual General Meeting for 11:00am on Thursday, 24 September 2015 in the offices of Kergan Stewart LLP, 163 Bath
Street, Glasgow G2 4SQ is set out on page 47. There are a number of resolutions to be passed and further information in relation to these
resolutions is set out below.
Resolutions 1 To 9
Resolution 1 provides for the approval of
the Company’s financial statements for the
year ended 31 March 2015. Resolution 2
provides for approval of the Report of the
Remuneration Committee for the year ended
31 March, 2015. 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 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.
Resolution 5 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
5 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 6 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 persuant 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 6 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.
Resolution 7 deals with the implementation
of the Share Capital Reorganisation, details of
which are provided on pages 7 and 8.
the articles of
Resolution 8 amends
association of the Company to set out the
rights attaching to Deferred Shares.
Resolution 9 seeks approval for the Directors
to enter into negotiations with the Loan Note
Holders and to agree arrangements for the
surrender of the remaining rights.
Resolutions 1 to 4 are termed ordinary business.
Resolutions 5 to 9 are termed special business.
J C D PARSONS, COMPANY SECRETARY
AorTech International plc
Company number SC170071
Weybridge
6 August 2015
Recommendation:
An explanation of the resolutions to be
proposed is set out on page 16 of this
document. The Directors consider 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.
ANNUAL REPORT AND ACCOUNTS 2015
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ANNUAL REPORT 2015Annual Report and Accounts forthe year to 31 March 2015AorTech International Plc.
AorTech International Plc.
DIRECTORS’ RESPONSIBILITIES STATEMENT
The Directors are responsible for preparing the Strategic Report and Directors’ Report, 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:
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 and
the Remuneration Report 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
6 August 2015
17
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AorTech International Plc.
INDEPENDENT AUDITOR’S REPORT
To The Members Of Aortech International Plc
We have audited the Consolidated financial statements of AorTech International Plc for the year ended 31 March 2015 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 17, the Directors are responsible for the preparation of the
Consolidated 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 Consolidated 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 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 Financial Reporting Council’s website at www.frc.org.uk/
auditscopeukprivate.
Opinion on financial statements
In our opinion the Consolidated financial statements:
•
•
•
give a true and fair view of the state of the Group’s affairs as at 31 March 2015 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.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and the Report of the Directors for the financial year for which the Consolidated
financial statements are prepared is consistent with the Consolidated 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:
•
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 2015.
CHRISTOPHER FROSTWICK, SENIOR STATUTORY AUDITOR
For and on behalf of
GRANT THORNTON UK LLP
STATUTORY AUDITOR, CHARTERED ACCOUNTANTS
East Midlands
6 August 2015
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ANNUAL REPORT AND ACCOUNTS 2015
ANNUAL REPORT 2015Annual Report and Accounts forthe year to 31 March 2015AorTech International Plc.
AorTech International Plc.
CONSOLIDATED INCOME STATEMENT
YEAR ENDED 31 MARCH 2015
YEAR ENDED 31 MARCH 2014
Pre-
Pre-
exceptional
Exceptional
exceptional
Exceptional
items
items
Total
items
items
Total
Notes
US$000
US$000
US$000
US$000
US$000
US$000
Revenue
3
844
-
844
418
Other income
13
-
13
1
-
-
418
1
Administrative expenses
(776)
(204)
(980)
(859)
(83)
(942)
3
8
5
Other expenses -
amortisation of intangible assets
Operating (loss) / profit
Finance income / (expense)
Loss from continuing operations
attributable to owners of the
parent company
Loss from discontinued
operations
Loss attributable to owners of
the parent company
Loss per share
Basic and diluted
(US cents per share)
11
(332)
-
(332)
(251)
(204)
(455)
-
129
129
(241)
(681)
-
-
(83)
(59)
(241)
(764)
(59)
(251)
(75)
(326)
(681)
(142)
(823)
17
(44)
-
(44)
(486)
-
(486)
(295)
(75)
(370)
(1,167)
(142)
(1,309)
10
(7.66)
(27.09)
19
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ANNUAL REPORT AND ACCOUNTS 2015
Aortech Annual Report 2015 (D1).indd 19
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AorTech International Plc.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Loss for the year
Other comprehensive income:
Exchange differences on translating foreign operations
Income tax relating to other comprehensive income
Other comprehensive income for the year, net of tax
Total comprehensive income for the year, attributable to owners of the parent company
No items of other comprehensive income can be subsequently reclassified to profit and loss.
Year ended
31 March 2015
US$000
Year ended
31 March 2014
US$000
(370)
(1,309)
17
-
17
(353)
(51)
-
(51)
(1,360)
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Aortech Annual Report 2015 (D1).indd 20
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ANNUAL REPORT AND ACCOUNTS 2015
ANNUAL REPORT 2015Annual Report and Accounts forthe year to 31 March 2015AorTech International Plc.
AorTech International Plc.
CONSOLIDATED BALANCE SHEET
Assets
Non current assets
Intangible assets
Trade and other receivables
Total non current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Total current liabilities
Non current liabilities
Notes
11
14
12
14
15
16
Change of control redemption premium
16
(53)
31 March 2015
US$000
31 March 2014
US$000
1,546
-
1,546
1,861
300
2,161
-
46
737
360
1,097
2,643
(192)
(192)
(53)
(245)
401
642
1,089
3,250
(306)
(306)
(193)
(193)
(499)
20
20
2,398
2,751
17,937
3,474
(2,974)
6,076
(22,115)
20,144
3,901
(3,340)
3,791
(21,745)
Total non current liabilities
Total liabilities
Net assets
Equity
Issued capital
Share premium
Other reserve
Foreign exchange reserve
Profit and loss account
Total equity attributable to equity holders of the parent
2,398
2,751
The Consolidated financial statements were approved by the Board on 6 August 2015 and were signed on its behalf by
W D BROWN, CHAIRMAN
E MCDAID, DIRECTOR
ANNUAL REPORT AND ACCOUNTS 2015
Company number SC170071
Aortech Annual Report 2015 (D1).indd 21
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21
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AorTech International Plc.
CONSOLIDATED CASH FLOW STATEMENT
Cash flows from operating activities
Group loss after tax
Adjustments for:
Amortisation of intangible assets
Finance (income) / expense
Increase in trade and other receivables
(Decrease) / increase in trade and other payables
Net cash flow from continuing operations
Net cash flow from discontinued operations
Net cash flow from operating activities
Cash flows from investing activities
Purchase of intangible assets
Net cash flow from continuing operations
Net cash flow from discontinued operations
Net cash flow from investing activities
Cash flows from financing activities
Interest paid
Proceeds from issue of loan notes
Repayment of loan notes
Redemption premium paid to loan note holders
Net cash flow from financing activities
Net decrease in cash and cash equivalents
Foreign exchange movements on cash held in foreign currencies
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Year ended
31 March 2015
US$000
Year ended
31 March 2014
US$000
(326)
332
(129)
36
(254)
(341)
2
(339)
-
-
-
-
-
-
-
-
-
(339)
57
642
360
(823)
241
59
102
69
(352)
312
(40)
(439)
(439)
-
(439)
-
-
-
-
-
(479)
134
987
642
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Aortech Annual Report 2015 (D1).indd 22
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ANNUAL REPORT AND ACCOUNTS 2015
ANNUAL REPORT 2015AorTech International Plc.Annual Report and Accounts forthe year to 31 March 2015
AorTech International Plc.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Balance at 31 March 2013
Transactions with owners
Loss for the year
Other comprehensive income
Issued
Share
capital
US$000
Share
premium
US$000
Other
reserve
US$000
Foreign
exchange
reserve
US$000
Profit
and loss
account
US$000
Total
equity
US$000
18,351
3,555
(3,043)
5,684
(20,436)
4,111
-
-
-
-
-
-
-
-
-
-
(1,309)
(1,309)
Exchange difference on translating foreign operations
1,793 346
(297)
(1,893)
-
(51)
Total comprehensive income for the year
1,793
346
(297)
(1,893)
(1,309)
(1,360)
Balance at 31 March 2014
20,144
3,901
(3,340) 3,791
(21,745)
2,751
Transactions with owners
Loss for the year
Other comprehensive income
-
-
-
-
-
-
-
-
-
-
(370)
(370)
Exchange difference on translating foreign operations
(2,207)
(427)
366
2,285
-
17
Total comprehensive income for the year
(2,207)
(427)
366
2,285
(370)
(353)
Balance at 31 March 2015
17,937
3,474
(2,974)
6,076
(22,115)
2,398
23
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ANNUAL REPORT AND ACCOUNTS 2015
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AorTech International Plc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of preparation
The Consolidated financial statements are for the year ended
31 March 2015. They have been prepared in compliance with
International Financial Reporting Standards
IFRS
Interpretations Committee (IFRIC) interpretations as adopted by the
European Union as at 31 March 2015.
(IFRS) and
The Consolidated 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
to 31 March 2021, 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 Consolidated financial statements is appropriate.
2. Principal accounting policies
Basis of consolidation
The Consolidated 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:
Standards adopted for the first time
A number of new and revised standards are effective for annual periods
beginning on or after 1 January 2014, including IFRS10 Consolidated
Financial Statements. Adoption of these standards has not had an
impact on the Group’s financial statements.
(a) 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.
(b) 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.
(c) Royalty revenues: Royalty revenues are recognised as earned in
accordance with third parties’ sales of the underlying products.
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 2015 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. None of these new standards,
amendments and interpretations are expected to have a significant
impact on the Group’s financial statements.
New accounting standards issued but not adopted:
• IFRS 9 Financial Instruments
(EU effective date 1 January 2018)
• IFRS 15 Revenues from contracts with customers
(EU effective date 1 January 2017)
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.
Aortech Annual Report 2015 (D1).indd 24
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ANNUAL REPORT AND ACCOUNTS 2015
ANNUAL REPORT 2015Annual Report and Accounts forthe year to 31 March 2015AorTech International Plc.
Intangible assets
Interest
(a) Patents and trademarks (intellectual property):
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.
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.
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. There were no contributions payable during
this year.
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.
Profit or loss from discontinued operations
A discontinued operation is a component of the Group that either has
been disposed of, or is classified as held for sale, and:
•
represents a separate major line of business or geographical area
of operations
•
is part of a single co-ordinated plan to dispose of a separate
major line of business or geographical area of operations or
•
is a subsidiary acquired exclusively with a view to resale
Profit or loss from discontinued operations, including prior year
components of profit or loss, is presented as a single amount in the
income statement. This amount, which comprises the post-tax profit or
loss of discontinued operations and the post-tax gain or loss resulting
from the measurement and disposal of assets classified as held for sale,
is further analysed in note 17.
The disclosures for discontinued operations in the year relate to all
operations that have been discontinued by the reporting date of the
latest period presented.
(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.
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.
Development costs capitalised during the year are being amortised
over their useful economic lives of five years.
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.
25
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ANNUAL REPORT AND ACCOUNTS 2015
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26
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AorTech International Plc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Impairment testing of intangible assets
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
(the capital value of which have now been settled), 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 loan notes, the
capital value of which have been settled, 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.
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 recoverable
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 incurred 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 initially measured at fair value
and subsequently 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.
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.
Aortech Annual Report 2015 (D1).indd 26
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ANNUAL REPORT AND ACCOUNTS 2015
ANNUAL REPORT 2015Annual Report and Accounts forthe year to 31 March 2015AorTech International Plc.
Taxation
Share based employee compensation
Current tax is the tax currently payable based on taxable profit for
the accounting period.
The Group operates equity settled share based compensation plans for
the remuneration of its employees.
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.
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.
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. 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.
27
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ANNUAL REPORT AND ACCOUNTS 2015
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
Prior to this financial year, the Group had written off all such
development costs because the specific criteria for capitalisation
had not been met. The Board regularly reviews this judgement
in respect of specific development projects. During the prior year
costs were incurred in relation to the Biomerics project which met
the specific criteria for capitalisation.
b) The Directors must judge whether future profitability is likely in
making the decision whether or not to recognise 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 2014 and March 2015 financial years. In
addition, the Directors have assessed whether any provision
for impairment is necessary against receivables through the
estimation of future cash flows in both financial years.
During the prior year the remaining manufacturing capability
was transferred entirely to Biomerics LLC, and AorTech
International Plc no longer operates in the USA selling polymer.
As such, this has been considered to represent discontinued
operations in the prior year.
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) Amortisation 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.
ANNUAL REPORT AND ACCOUNTS 2015
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ANNUAL REPORT 2015AorTech International Plc.Annual Report and Accounts forthe year to 31 March 2015
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3. Segmental reporting
The principal activity of the AorTech International Plc Group currently is exploiting the value of its IP and know-how. The Group’s operating
segment is based on geographical location of operations.
Analysis of revenue by products and services and by geographical area
United Kingdom
Supply of product
Licence fees – services
Royalty revenue
During the year ended 31 March 2015, 23.7% of the Group’s revenues depended upon a single customer (2014: 23.1%).
Analysis of result - operating loss
Continuing operations
United Kingdom
USA
Operating loss
Finance income (expenses) – all UK
Loss on continuing operations before taxation
Discontinued operations
USA
Loss on discontinued operations
2015
2014
US$000 US$000
10
403
431
844
48
332
38
418
2015
2014
US$000 US$000
(455)
(764)
-
-
(455)
(764)
129
(59)
(326)
(823)
(44)
(486)
(44)
(486)
The operating loss disclosure above is after charging amortisation of $332,000 (all UK) (2014: $241,000 (all UK)), and after a profit on
disposal of $nil (2014: $4,000 (all USA)).
Analysis of non current assets by location
United Kingdom
USA
ANNUAL REPORT AND ACCOUNTS 2015
1,546
1,861
-
-
1,546
1,861
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4. Remuneration of Directors and key management personnel
Key Management Personnel
Emoluments – short-term employee benefits
Pension costs – post-employment benefits
2015
US$000
2014
US$000
237
-
237
440
13
453
The key management personnel whose remuneration is included in the table above for the current year comprise the three current Directors
and one previous Director of the parent company. For the prior year, the key management personnel whose remuneration is included in the table
above comprised the Financial Controller, the Principal Scientist and the Vice-President Operations & Quality of AorTech Polymers & Medical
Devices, Inc and the current and previous Directors of the parent company. These additional individuals are no longer employed by the Group.
Please see the Report of the Remuneration Committee on page 13 for full details of Directors’ emoluments which have been audited.
Included in the aggregate emoluments for the year ended 31 March 2015 are payments of $19,000 (2014: $19,000) made by the Company to
third parties. The highest paid Director’s total emoluments were $138,802. No pension contributions were paid during the year (2014: total
emoluments of $150,301 including pension contributions of $12,738).
5. Loss before taxation
Loss before taxation has been arrived at after charging:
Foreign exchange differences
Amortisation of intangible assets
Employee benefits expense:
Employee costs (Note 7)
Land and buildings held under operating leases:
Other operating leases
Audit and non-audit services:
Fees payable to the Company’s auditor and its associates for the audit of the
parent and Group financial statements
Fees payable to the Company’s auditor and its associates for other services :
The audit of the Company’s subsidiaries pursuant to legislation
Tax services
Other services
2105
US$000
2014
US$000
15
332
72
241
243
482
-
30
-
6
2
19
22
-
4
-
6. Exceptional items
Exceptional items relate to the loan note redemption premium as explained in note 16, and legal fees incurred in relation to the departure of
Frank Maguire (former CEO).
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ANNUAL REPORT AND ACCOUNTS 2015
ANNUAL REPORT 2015Annual Report and Accounts forthe year to 31 March 2015AorTech International Plc.
7. Employees
Employee costs (including Directors):
Wages and salaries
Social security costs
Pension costs
The average number of employees (including Directors)
during the year was made up as follows:
Development and quality control
Administration
2015
US$000
2014
US$000
237
6
-
243
460
9
13
482
2015
Numbers
-
2014
Numbers
1
4
4
6
7
8. Finance income / (expense)
YEAR ENDED 31 MARCH 2015
YEAR ENDED 31 MARCH 2014
Pre-
exceptional
items
US$000
Exceptional
items
US$000
Change of control redemption premium
Credit / (charge)
-
-
129
129
Pre-
exceptional
items
US$000
Exceptional
items
US$000
-
-
(59)
(59)
Total
US$000
129
129
Total
US$000
(59)
(59)
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ANNUAL REPORT AND ACCOUNTS 2015
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9. Income tax expense
No current tax or deferred tax expense arises on the loss for the year (2014: $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 for the year before tax
Loss for year multiplied by the respective standard rate of corporation tax
applicable in each domain (average 21%: 2014 - 23%)
Effects of:
Expenses not deductible for tax purposes and other tax differences
Losses not utilised
Losses utilised
Tax on loss for the year
2015
US$000
2014
US$000
(370)
(1,309)
(78)
(301)
43
(124)
35
-
-
505
(80)
-
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 $6,858,000
– tax effect is $1,440,000 (2014: $6,864,000 – tax effect $1,578,000). Losses in the USA total nil (2014: $6,161,000 - tax effect $1,417,000).
10. Loss per share
Loss for the year attributable to equity shareholders
Loss per share
Basic and diluted (US cents per share)
From continuing operations
From discontinued operations
Issued ordinary shares at start of the year
Issued ordinary shares at end of the year
Weighted average number of shares in issue for the year
2015
US$000
2014
US$000
(370)
(1,309)
(6.75)
(17.03)
(0.91) (10.06)
(7.66)
(27.09)
Shares
Shares
4,832,778 4,832,778
4,832,778 4,832,778
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.
Aortech Annual Report 2015 (D1).indd 32
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ANNUAL REPORT AND ACCOUNTS 2015
ANNUAL REPORT 2015Annual Report and Accounts forthe year to 31 March 2015AorTech International Plc.
11. Intangible assets
Gross carrying amount
At 1 April 2013
Exchange differences
Additions during year
At 31 March 2014
Exchange differences
At 31 March 2015
Amortisation and impairment
At 1 April 2013
Exchange differences
Charge for the year
At 31 March 2014
Exchange differences
Charge for the year
At 31 March 2015
Net book value
At 31 March 2014
At 31 March 2015
12. Inventories
Finished goods
Development
costs
US$000
Intellectual
property
US$000
Total
US$000
-
-
5,035
5,035
(552)
(552)
319
120
439
319
4,603
4,922
(28)
126
98
291
4,729
5,020
-
-
11
11
(6)
3,195
3,195
(375)
(375)
230
241
3,050
3,061
87
81
63
269
332
68
3,406
3,474
308
1,553
1,861
223
1,323
1,546
2015
US$000
2014
US$000
-
46
In 2015 a total of $44,000 of inventories was included in the income statement as a writedown expense (2014: expense $43,000).
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ANNUAL REPORT AND ACCOUNTS 2015
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AorTech International Plc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13. Financial instruments
Risk management
The Group’s financial instruments comprise cash and cash equivalents, trade and other receivables, trade and other payables and a change of
control redemption premium. 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
2015
US$000
2014
US$000
360
695
642
698
1,055
1,340
(192)
(53)
(245)
(306)
(193)
(499)
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 non-trading Australian and US subsidiaries whose functional currencies are the Australian and US dollars 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.
Cash balances are carried within the Group in bank accounts, which comprise the following currency holdings:
Sterling
US dollars
2015
US$000
2014
US$000
50
310
360
370
272
642
The Group holds its cash balances in a mixture of Sterling and US dollars. As the Group reports in US dollars, there is translation risk in respect
of such Sterling balances. Based on year-end balances held in Sterling, a 10% movement in the $ / £ exchange rate would have had a $4,000
impact on net assets.
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ANNUAL REPORT AND ACCOUNTS 2015
ANNUAL REPORT 2015Annual Report and Accounts forthe year to 31 March 2015AorTech International Plc.
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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 ended 31 March 2013. The cash balances and short term deposits are held at both fixed and floating rates as follows:
Cash
Short-term deposits
Interest
rate %
2015
US$000
Interest
rate %
2014
US$000
0%
355
0%
0.51%
5
0.50%
360
453
189
642
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 $1,000 (2014: $2,000), 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 one third party where provision has been made in line with an agreed settlement following a mediation
and arbitration process. The management do not consider that there is any concentration of risk within either trade or other receivables, other
than the amounts due from one third party. The maximum exposure to credit risk on trade and other receivables is considered to be $699,000
(2014: $698,000).
Liquidity risk
The Group currently holds cash balances and short term deposits in Sterling and US 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.
14. Trade and other receivables
Current
Trade receivables
Other receivables
Prepayments
Non -current
Trade receivables
2015
US$000
2014
US$000
577
118
42
737
388
10
3
401
-
300
$202,000 (2014: $75,000) of net trade and other receivables were past due for payment but not impaired at 31 March 2015, of which $202,000
(2014: $75,000) was over 30 days and $150,000 (2014: $25,000) was over 90 days. Non-current Trade receivables in the prior year represent that
portion of amounts due from third parties during the year ending 31 March 2016.
ANNUAL REPORT AND ACCOUNTS 2015
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AorTech International Plc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15. Cash and cash equivalents
Cash at bank and in hand
16. Trade and other payables
Current liabilities
Trade payables
Accruals
Non current liabilities
Change of control redemption premium
2015
US$000
2014
US$000
360
360
642
642
2015
US$000
2014
US$000
-
192
192
53
245
76
230
306
193
499
Details of the loan notes issued and redeemed in the year ended 31 March 2013, 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 notes 7 and 12 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 $53,000 (2014: $193,000) in the Consolidated accounts at 31 March
2015, based on the market capitalisation of the Group at 31 March 2015 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.
The change of control redemption premium constitutes a financial instrument measured at fair value under IFRS 13 “Fair value measurement”.
The fair value at each balance sheet date is calculated by reference to 15% of the market capitalisation of the Group multiplied by a discount
factor to reflect the Directors’ assessment of the likelihood and timing of any change of control of the Group. The Group’s market capitalisation
constitutes a Level 1 input under the hierarchy in IFRS 13 (a quoted price in an active market). The discount factor is a Level 3 input (not based
on observable data). The overall instrument is a Level 3 input due to the significance of the discount factor.
Relevant inputs were:
- Market capitalisation
- Discount factor
2015
$1.78m
20%
2014
$6.43m
20%
A discount factor of 10% or 30% would decrease / increase the current year credit by $65,000.
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ANNUAL REPORT AND ACCOUNTS 2015
ANNUAL REPORT 2015Annual Report and Accounts forthe year to 31 March 2015AorTech International Plc.
17. Discontinued operations
On 1 October 2013, the Group signed an agreement with Biomerics LLC for the manufacture and distribution of our patented materials, including
to our existing licensees. In the opinion of the Directors, the Biomerics transaction transformed the Group into a pure intellectual property
company. As a consequence, results attributable to manufacturing activity constitute a discontinued operation, and have been presented as such
in the prior year figures in the Income Statement.
The results of the discontinued manufacturing operations are shown in more detail below.
Pre-
exceptional
items
2014
$000
Exceptional
items
2014
$000
Pre-
exceptional
items
2015
$000
Exceptional
items
2015
$000
-
-
-
-
Total
2015
$000
-
-
(44)
-
(44)
Revenue
Other income
Cost of sales
Administrative expenses
-
-
Profit on disposal of property, plant and
equipment
-
-
-
-
245
13
(211)
(537)
4
Operating (loss) / profit
(44)
-
(44)
(486)
18. Operating lease commitments
The Group had no commitments under non-cancellable operating leases at 31 March 2015 or 31 March 2014.
Total
2014
$000
245
13
(211)
(537)
4
(486)
-
-
-
-
-
-
19. 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 = $1.48 at 31 March 2015 (£1 = $1.67 at 31 March 2014). There were no
options in issue at 31 March 2015 (31 March 2014: no options)
Details of the number of such share options and the weighted average exercise price (WAEP) outstanding during the year are as follows:
2015 WAEP
2014 WAEP
Number
US$
Number
US$
Outstanding at the beginning of the year
Forfeited during the year
Outstanding at the year end
Exercisable at the year end
-
-
-
-
-
-
-
-
12,000
(12,000)
-
-
$3.80
$3.80
-
-
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ANNUAL REPORT AND ACCOUNTS 2015
Aortech Annual Report 2015 (D1).indd 37
12/08/2015 11:31
AorTech International Plc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 = $1.48 at 31 March 2015 (£1 = $1.67 at 31 March 2014).
Options in issue
Exercise
Price (US$)
Exercise period
on or before:
10,000
20,000
4.83
4.45
1 September 2016
15 December 2021
Details of the number of share options and the weighted average exercise price (WAEP) outstanding during the year are as follows:
2015 WAEP
2014 WAEP
Number
US$
Number
Outstanding at the beginning of the year
Forfeited during the year
Outstanding at the year end
Exercisable at the year end
34,000
(4,000)
30,000
30,000
$5.25
$5.39
$4.58
$4.83
291,000
(257,000)
34,000
10,000
US$
$3.99
$4.26
$5.25
$5.42
The options issued to date under both schemes will only be exercisable if the average mid market closing price of the Company’s shares on the five
business days prior to the date of exercise exceeds the option price by 15% or more and after the elapse of three years from date of Option Grant.
The fair value of options granted after 7 November 2002 but not vested at 1 April 2006 has been arrived at using an appropriate Black Scholes
model. The assumptions inherent in the use of this model are as follows:
• The option life is assumed to be at the end of the allowed period
• There are no non-market vesting conditions
• No variables change during the life of the option (e.g. dividend yield)
• Volatility of share price has been calculated over the three years prior to the balance sheet date.
Date of
grant
01.09.06
16.12.11
Vesting
Period
(years)
3
3
Date of
vesting
01.09.09
16.12.14
Exercise
Price
(US$)
5.42
5.00
Risk-free
rate
Share price
at grant
(US$)
Volatility of
Share price
Fair value
(US$000)
Number
outstanding
4.61%
4.00%
6.06
4.55
63%
31%
118
52
10,000
20,000
The Group has not recognised any expense related to equity-settled share based payment transactions during the year (2014: 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.
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Aortech Annual Report 2015 (D1).indd 38
12/08/2015 11:31
ANNUAL REPORT AND ACCOUNTS 2015
AorTech International Plc.ANNUAL REPORT 2015Annual Report and Accounts forthe year to 31 March 2015
20. Share capital
In issue at 1 April 2014
In issue at 31 March 2015
Shares
Number
4,832,778
4,832,778
Nominal
Value
US$000
20,144
17,937
Premium
Net of costs
US$000
3,901
3,474
Total
US$000
24,045
21,411
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 Strategic Report on page 11.
21. Contingent liabilities
There were no contingent liabilities at 31 March 2015 or at 31 March 2014.
22. Related party transactions
Related party transaction disclosures are included within note 7 to the parent company financial statements in respect of loan note holders, and
within the Report of the Remuneration Committee.
39
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ANNUAL REPORT AND ACCOUNTS 2015
Aortech Annual Report 2015 (D1).indd 39
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AorTech International Plc.
INDEPENDENT AUDITOR’S REPORT
On The Parent Company Financial Statements
We have audited the parent company financial statements of AorTech International Plc for the year ended 31 March 2015 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 17, 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 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 Financial Reporting Council's website at
www.frc.org.uk/auditscopeukprivate.
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 2015;
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.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and 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 Consolidated financial statements of AorTech International Plc for the year ended 31 March 2015.
CHRISTOPHER FROSTWICK, SENIOR STATUTORY AUDITOR
For and on behalf of
GRANT THORNTON UK LLP
STATUTORY AUDITOR, CHARTERED ACCOUNTANTS
East Midlands
6 August 2015
Aortech Annual Report 2015 (D1).indd 40
12/08/2015 11:31
ANNUAL REPORT AND ACCOUNTS 2015
ANNUAL REPORT 2015Annual Report and Accounts forthe year to 31 March 2015AorTech International Plc.
AorTech International Plc.
PARENT COMPANY BALANCE SHEET
Fixed assets
Intangible assets
Investment in subsidiary undertakings
Current assets
Debtors – amounts falling due within one year
Debtors – amounts falling due after one year
Cash at bank
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Creditors: amounts falling due after more than one year
Net assets
Capital and reserves
Called up share capital
Share premium account
Profit and loss account
Equity shareholders' funds
Notes
31 March 2015
£000
31 March 2014
£000
3
4
5
5
6
7
8
10
10
10
2,362
-
2,362
497
-
243
740
(129)
611
2,973
(179)
2,794
12,082
2,340
(11,628)
2,794
3,540
-
3,540
231
180
366
777
(117)
660
4,200
(580)
3,620
12,082
2,340
(10,802)
3,620
The parent company financial statements were approved by the Board on 6 August 2015 and were signed on its behalf by
W D BROWN, CHAIRMAN
E MCDAID, DIRECTOR
Company number SC170071
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ANNUAL REPORT AND ACCOUNTS 2015
Aortech Annual Report 2015 (D1).indd 41
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AorTech International Plc.
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
1. 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
to 31 March 2021, 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.
Aortech Annual Report 2015 (D1).indd 42
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ANNUAL REPORT AND ACCOUNTS 2015
ANNUAL REPORT 2015Annual Report and Accounts forthe year to 31 March 2015AorTech International Plc.
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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. The costs of £196,000
incurred in validating the Company’s polymers for manufacture on the Company’s behalf by Biomerics LLC were capitalised during the year ended
31 March 2014 and are to be amortised over 5 years.
Loan notes & Redemption Premium policy
The loan notes issued and redeemed during the year ended 31 March 2013 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 ended 31 March 2013 and the redemption premium paid
in the year ended 31 March 2013 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 that 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 2015 was £826,000 (2014: loss of £731,000 after the reversal of an
inter-company debt provision of £462,000).
3. Intangible Assets
Cost
At 31 March 2014 and 31 March 2015
Amortisation
At 31 March 2014
Charge for the year
Impairment for the year
At 31 March 2015
Net book value
At 31 March 2014
At 31 March 2015
Impairment of £600,000 has been recognised in the year.
ANNUAL REPORT AND ACCOUNTS 2015
Intellectual property
£000
5,125
1,585
578
600
2,763
3,540
2,362
Aortech Annual Report 2015 (D1).indd 43
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AorTech International Plc.
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
4. Fixed Asset Investments
Investment in subsidiary undertakings
Cost
Historical cost
Provision for impairment
Net book value at 31 March
Interest in subsidiary undertakings
Name of undertaking
(i) AorTech Biomaterials Limited
(ii) AorTech Critical Care Limited
(iii) AorTech Heart Valve Technologies Limited
(iv) AorTech Biomaterials Pty Limited
(v) AorTech Polymers & Medical Devices, Inc
(vi) River Clyde Marine, Inc
2015
£000
2014
£000
23,159
(23,159)
-
23,159
(23,159)
-
Country of registration or
incorporation
Description of
shares held
Scotland
Scotland
Scotland
Ordinary £1
Ordinary £1
Ordinary £1
Australia
Ordinary Aus. $1
USA
USA
Common US $1
Common US $1
Proportion of
nominal value of
shares held
%
100
92
100
100
100
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) Ceased operations and placed into voluntary liquidation during year ended 31 March 2014
(vi) A dormant and non-trading company in the USA
5. Debtors
Amounts falling due within one year
Trade debtors, less provision
Other debtors
Prepayments
Amounts falling due after more than one year
Trade debtors
Amounts owed by Group undertakings
Less: Provision*
2015
£000
389
28
80
497
-
3,955
(3,955)
497
2014
£000
225
5
1
231
180
3,955
(3,955)
411
*A cumulative impairment charge of £3,955,000 as at 31 March 2015 (31 March 2014: £3,955,000) has been made to fully provide against
the remaining amount of the inter-company loan account due as at 31 March 2015 to AorTech International plc by its American subsidiary,
AorTech Polymers & Medical Devices, Inc.
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ANNUAL REPORT AND ACCOUNTS 2015
ANNUAL REPORT 2015Annual Report and Accounts forthe year to 31 March 2015AorTech International Plc.
45
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6. Creditors: Amounts Falling Due Within One Year
Accruals
7. Creditors: Amounts Falling Due After More Than One Year
Change of control redemption premium
2015
£000
129
129
2015
£000
179
179
2014
£000
117
117
2014
£000
580
580
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 to the Company continues after the Notes have been
redeemed. In accordance with UK GAAP, a provision in the sum of £179,000 (2014: £580,000) for this change of control redemption premium
has been made at 31 March 2015 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.
8. Share Capital
See Note 20 in the Consolidated financial statements.
ANNUAL REPORT AND ACCOUNTS 2015
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AorTech International Plc.
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
9. Share Based Payments
See Note 19 in the Consolidated financial statements.
10. Statement Of Movement In Shareholders’ Funds
1 April 2013
Loss for the year
At 31 March 2014
Loss for the year
At 31 March 2015
Share
capital
£000
12,082
-
12,082
-
12,082
Share
premium
£000
Profit and
loss account
£000
Total
shareholders’
funds
2,340
-
2,340
-
2,340
(10,071)
4,351
(731)
(731)
(10,802)
3,620
(826)
(826)
(11,628)
2,794
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 14.
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.
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ANNUAL REPORT AND ACCOUNTS 2015
ANNUAL REPORT 2015Annual Report and Accounts forthe year to 31 March 2015AorTech International Plc.
AorTech International Plc.
NOTICE OF THE ANNUAL GENERAL MEETING
Notice is hereby given that the eighteenth Annual General Meeting of AorTech International Plc will be held in the offices of Kergan Stewart
LLP, 163 Bath Street, Glasgow G2 4SQ on Thursday, 24 September 2015 at 11:00am for the purpose of considering and if thought fit passing the
following resolutions, numbers 1 to 5, 8 and 9 as Ordinary Resolutions and numbers 6 and 7 as Special Resolutions:
As Ordinary Business
1. To receive and adopt the financial statements of the Company for the year ended 31 March 2015 together with the Strategic Report and
the Reports of the Directors and Auditor thereon.
2. To approve the Report of the Remuneration Committee for the year ended 31 March 2015.
3. To re-elect E McDaid, who is retiring by rotation.
4. 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:
5. 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:
6. That subject to the passing of Resolution 5 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 5 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 recognised regulatory body
or stock exchange in any territory;
(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.
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AorTech International Plc.
NOTICE OF THE ANNUAL GENERAL MEETING (continued)
To consider, and if thought fit, pass the following resolution as a Special Resolution:
7. That the articles of association be amended as follows:-
(a). The following definitions shall be inserted into article 2 after the definition of “the London Stock Exchange”:
“Deferred Shares
the deferred shares of 245 pence each in the capital of the Company having the rights set out in these Articles;
Ordinary Shares
the ordinary shares of 5 pence each in the capital of the Company having the rights set out in these Articles;
share
a share of the Company of whatever class.”
(b). Article 5 be deleted in its entirety and replaced with:
“5. Shares and Liability of Members
The share capital of the Company is divided into Ordinary Shares and Deferred Shares and the liability of the members is limited to the
amount if any unpaid on the shares held by them. Except as otherwise provided by these Articles, the Ordinary Shares and the Deferred
Shares shall rank pari passu in all respects but constitute different classes of shares.”
(c). The following new article 6A be inserted after article 6:
“6A.
Deferred Shares
6A.1
The Deferred Shares shall have the rights and be subject to the following restrictions:
6A.1.1
the Deferred Shares shall not confer on the holders thereof any right to receive notice of or to attend or vote at any
general meeting of the Company;
6A.1.2
a Deferred Share shall confer no right of pre-emption (whether on allotment or transfer) on its holder;
6A.1.3
6A.1.4
6A.1.5
the Deferred Shares shall not carry any entitlement to dividends or to participate in any way in the income or profits of the
Company or the assets of the Company;
on a return of capital, whether on a winding-up or otherwise, or sale of the Company, the holders of the Deferred
Shares shall be entitled to receive a total of one pound (£1.00) for the entire class of Deferred Shares (which payment shall
be deemed satisfied by payment to any one holder of Deferred Shares), but only after the holders of each Ordinary
Share have received £100,000,000, but the holders of Deferred Shares shall not be entitled to participate further;
the Company shall have the irrevocable authority at any time after the creation or issue of Deferred Shares to appoint any
person to execute on behalf of the holders of such shares a transfer thereof and/or agreement to transfer the
same without making any payment to the holders thereof to such person or persons as the Company may determine
and, in accordance with the provisions of the Statutes, as the case may be, to purchase or cancel such shares without
making any payment to or obtaining the sanction of the holders thereof and pending such transfer and/or purchase or
cancellation to retain the certificates (if any) in respect thereof provided also that the Company may, in accordance with the
provisions of the Statutes, purchase all but not some only of the Deferred Shares then in issue at a price not
exceeding one pound (£1.00) for all the Deferred Shares so purchased;
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ANNUAL REPORT AND ACCOUNTS 2015
ANNUAL REPORT 2015Annual Report and Accounts forthe year to 31 March 2015AorTech International Plc.
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6A.1.6
the rights attaching to the Deferred Shares shall not be deemed to be varied, modified or abrogated by the creation
and/or allotment and/or issue of any further shares in the capital of the Company of any class (whether ranking pari
passu with or in priority to them) or the passing of any resolution of the Company reducing its share capital or
cancelling the Deferred Shares or anything done pursuant to any other act, matter or thing whatsoever save for any
proposal to vary (otherwise than to the advantage of the holders of the Deferred Shares) the rights of the holders of
the Deferred Shares to participate in a return of capital; and
6A.1.7
notwithstanding any provision of these Articles, the Company shall not be required to issue any share certificates in respect
of the Deferred Shares.”
(d). In article 7.1 the words “in such manner as may be specified by those rights or” be inserted after the word “abrogated” and before the
word “either” in the third line of first sentence.
(e). In article 14 the words “and Article 6A.1.7” be inserted after the figure “47” in the first line.
(f). In article 72 the word “none” in the third sentence of the second paragraph be deleted and replaced with the word “one”.
(g). In article 76 the word “one” be deleted and replaced with the words “forty eight”.
(h). In article 138 the words “The accidental omission to send any document required to be sent to any person under this article 138 or the
non-receipt of any document by any person entitled to receive it does not invalidate any such document or the proceedings at any general
meeting.” be inserted after the last sentence of that article.
To consider, and if thought fit, pass the following resolution as an Ordinary Resolution:
8. That, conditional on the passing of resolution 7 above, (a) each of the ordinary shares of 250 pence each in the capital of the Company (“the
Existing Ordinary Shares”) which at 6pm on 24 September 2015 are shown in the books of the Company to be in issue shall be sub-divided
into one new ordinary share of 5 pence in the capital of the Company and one new deferred share of 245 pence in the capital of the Company
(each a “Deferred Share”), such shares having the rights and being subject to the restrictions set out in the Company’s articles of association
as amended pursuant to resolution 7 above.
To consider, and if thought fit, pass the following resolution as an Ordinary Reolution -
9. That the Directors be and are hereby authorised to enter into negotiations with the holders of the Secured Loan Notes 2013 issued by the
Company on 23 October 2012 (“the Loan Notes”) for the purpose of reaching agreement with the holders of the Loan Notes for the
surrender of the remaining rights outstanding under the Loan Notes in exchange for the allotment, credited as fully paid, of up to a maximum
number of shares equal to 15% of the enlarged issued ordinary share capital of the Company on the date of issue and, following such
agreement being reached, the Directors be and are hereby instructed to take all necessary steps to effect such surrender of rights and
allotment of shares.
By order of the Board,
J C D PARSONS, COMPANY SECRETARY
Oatlands Drive,
Weybridge
Surrey KT13 9LZ
6 August 2015
ANNUAL REPORT AND ACCOUNTS 2015
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AorTech International Plc.
NOTICE OF THE ANNUAL GENERAL MEETING (continued)
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
22 September 2015 or by 6.00pm 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 6DA 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 against 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.
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 https://www.euroclear.com/site/public/EUI). 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.
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ANNUAL REPORT AND ACCOUNTS 2015
ANNUAL REPORT 2015Annual Report and Accounts forthe year to 31 March 2015AorTech International Plc.
6. As at noon on 5 August 2015 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 5 August 2015 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 agreement for the Executive Director.
(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 252123. 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.
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AorTech International plc
Level Two Springfield House 23 Oatlands Drive
Weybridge Surrey KT13 9LZ
tel: +44 (0) 1932 252 123 fax: +44 (0)1932 251 113
web: www.aortech.com email: info@aortech.com
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AorTech International Plc.ANNUAL REPORT 2015Annual Report and Accounts forthe year to 31 March 2015