AorTech International plc Annual Report 2018

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FY2018 Annual Report · AorTech International plc

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AorTech International Plc. Annual Report and Accounts 2018

AORTECH INTERNATIONAL PLC

ANNUAL REPORT AND ACCOUNTS

For the year to 31 March 2018

Registered in Scotland. Company number SC170071

AorTech International Plc. Annual Report and Accounts 2018

CONTENTS

3. Board of Directors and Advisors

STRATEGIC REPORT

4. Chairman’s Statement

7. Operating and financial review

7. Principal risks and uncertainties

GOVERNANCE

9. Corporate Governance

12. Accountability and Audit

13. Report of the Remuneration Committee

CONSOLIDATED FINANCIAL STATEMENTS

15. Report of the Directors

18. Directors’ Responsibilities Statement

19. Independent Auditor’s Report

23. Consolidated Income Statement

23. Consolidated Statement of Comprehensive Income

24. Consolidated Balance Sheet

25. Consolidated Cash Flow Statement

26. Consolidated Statement of Changes in Equity

27. Notes to the Consolidated Financial Statements

PARENT COMPANY FINANCIAL STATEMENTS

40. Parent Company Balance Sheet

41. Parent Company Statement of Changes in Equity

42. Notes to the Parent Company Financial Statements

46. Notice of the Annual General Meeting

AorTech International Plc. Annual Report and Accounts 2018

Board of Directors and Advisors

Directors

W Brown Executive Chairman
J McKenna Director of Clinical Marketing
G Wright non-Executive Director
G Berg non-Executive Director
J Ely non-Executive Director
D Richmond non-Executive Director

Company Secretary
J C D 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.net
email: info@aortech.net

Nominated Adviser and Broker
Stockdale Securities Limited
100 Wood Street,
London EC2V 7AN

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
101 Cambridge Science Park
Milton Road
Cambridge CB4 0PY

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.

AorTech International Plc. Annual Report and Accounts 2018

STRATEGIC REPORT

CHAIRMAN’S STATEMENT

The Company on which I report today has changed beyond all recognition from the AorTech I reported on
last year. A year ago, AorTech was embroiled in litigation with its former Chief Executive and, as such, the
focus of the Company was on historic events. Resolving the litigation has allowed AorTech to switch focus to
its very exciting future and the execution of a new business plan by a new team and partners. I discuss below
the operating results for the year ended 31 March 2018, but given the transformation of the Company, the
recent changes are of much more significance to its future success.

Strategy Review
In the Company’s interim results announced last December, it was stated that a strategy was being
considered as to how to commercialise AorTech’s platform technology. This strategy is now in place following
the recent oversubscribed fundraising.

In reviewing AorTech’s portfolio of intellectual property (‘IP’), it became very clear to the Board that the family
of biostable polymers was exceptional in long-term performance and is well suited for use in blood contacting
devices and particularly in the cardiovascular system. AorTech has licensed device manufacturers to use
Elast-Eon™ in this area and to date over 5 million devices have been implanted which depend upon the use
of Elast-Eon™ for their success. The challenge for AorTech is to achieve greater value from the benefits
Elast-Eon™ brings to medical devices.

The strategy adopted is therefore to continue to pursue licensing and supply business through our
manufacturing partner Biomerics LLC, to advance development of AorTech’s IP portfolio by moving further up
the value chain and to develop medical devices of our own design.

AorTech is now transitioning to become a medical device business with a portfolio of devices in the
cardiovascular field.

Initial Product Focus
AorTech has identified two growth platforms and three key device products that can be developed utilising
the key properties of the Elast-Eon™ polymer and build upon the £60 million of historic research and
development expenditure. The platforms are Polymeric Heart Valves and Medical Textiles within which initial
products will be cardiac patches and vascular grafts. Each product is described below:

Polymeric Heart Valves
AorTech has the opportunity to transform the global treatment of heart disease by delivering a synthetic heart
valve that will be durable, so reducing the need for future replacement and should not require lifelong drug
treatment. As well as these clear clinical advantages, the manufacturing costs of a synthetic valve will be
considerably less than those of current valve technology making this a potentially disruptive advance in heart
valve surgery. AorTech’s historic investment and progress to date dramatically reduces both the time and
cost of preparing a novel valve for human trial.

When it initially developed a synthetic valve, AorTech was ahead of the market, but the global heart valve
market (valued at some US$5 billion) is now in need of new technology, enhancing the opportunities
available to AorTech.

Medical Textiles

AorTech has identified two device categories that currently rely on abattoir-sourced animal by-products.
These are pericardial patches and large bore vascular grafts. Replacing animal tissue with a world leading
bio-stable polymer will reduce manufacturing costs, eliminate animal by-product sourcing risk and improve
product sterilisation options and performance. The initial products to be developed are targeted to be ready
for human use within two years due to the acceptance of Elast-Eon™ in long-term implants.

Patches

The currently available technology comprises either animal tissue or textile (PTFE) material. Each material is
compromised by either suffering from calcification or subject to tissue ingrowth leading to adhesion. AorTech
will develop an Elast-Eon™ based product that should avoid these problems and address a market that is
suffering a lack of supply of animal sourced products.

AorTech International Plc. Annual Report and Accounts 2018

Vascular Grafts

The currently available technology comprises tightly woven PTFE grafts or softer polyester grafts sealed with
animal-sourced material, limiting sterilisation options. AorTech will develop new graft technology replicating
current graft performance, but utilising Elast-Eon™ as a sealing agent. The graft will be made available as a
direct surgical implant and as a component to other medical device companies, particularly for incorporation
into valved conduits for tissue based valves that require wet sterilisation.

Business Model
The medical device industry is highly regulated and requires a significant amount of infrastructure to operate
to the various standards required. Setting up a development facility with a view to manufacturing devices
would require not only substantial investment in people but a lengthy time commitment in obtaining
certification and establishing systems.

AorTech had previously made a strategic decision to exit polymer manufacture and the relationship with
Biomerics enabled a more attractive manufacturing model to be put in place. Having found this business
model to operate well, AorTech has sought to develop its business by working in partnership with well-
established businesses that not only have the necessary infrastructure in place but can develop our new
products more economically and faster than the Company could by setting up itself. The business model is,
therefore, to keep corporate infrastructure costs to a minimum by outsourcing to experts, thus minimising risk
and maximising return on investment.

Partnership Arrangements
Building upon the model adopted with Biomerics for polymer manufacture and supply, AorTech has
established relationships with three Scottish-based businesses to provide the technology, people and
regulatory environment to develop the new devices business. For the synthetic heart valve, we are partnering
with Vascular Flow Technologies Limited (“VFT”) based in Dundee. VFT is Europe’s leading expert in medical
imaging guided Computational Fluid Dynamics and Finite Element Analysis. Together, VFT and AorTech will
optimise the heart valve design, manufacturing process and undertake the regulatory testing required to
ready the valve for human trials. For the textiles-based products, AorTech is partnering with RUA Medical
(“RUA”) operating from two FDA-registered facilities in Ayrshire. RUA are experts in textile based
implantable devices and have a strong track record of developing, commercialising and manufacturing
devices. RUA will assist in bringing both the patches and grafts to market. Regulatory assistance and
oversight is of critical importance and the workplan for three initial products would be a challenge for in-house
resources. We will therefore be drawing upon support from Edwin Lindsay’s team of 12 consultants at
Compliance Solutions (Life Sciences) Limited for this key activity.

Board Changes
The new strategy and product development plans require a greater level of expertise at Board level in order
to create the platform for commercial success. I am therefore delighted to welcome three recent
appointments to the Board in John Ely, Geoff Berg and David Richmond. John Ely is a veteran of the heart
valve industry with 7 approved cardiac surgery implant devices under his belt and for a period of seven years
ran a team at the FDA that was responsible for approval of cardiovascular devices. Geoff Berg was a leading
heart surgeon and having carried out over 3,000 valve implantations has the ultimate end-user experience of
all the devices that AorTech is developing. David Richmond has over 14 years’ expertise in medical textiles
devices and
in manufacturing methods,
commercialisation and product development.

founded RUA Medical; he brings substantial experience

John McKenna has recently moved from a non-executive role to become an executive Director. John has
been at the forefront of marketing and bringing new cardiovascular products to market and is widely
recognised for his contribution to the industry. As well as his in-depth device knowledge, one of John’s key
responsibilities will be in establishing distribution channels for AorTech’s new devices and leveraging
relationships particularly with the key opinion leading surgeons.

As we transition to a device company, the contacts Gordon Wright has with very senior executives at the
global device companies will be invaluable. Gordon was instrumental in working alongside the founders of
both St Jude Medical and ATS (now Medtronic) both to manufacture their heart valves and to launch them in
Europe.

I have now become full time Executive Chairman of AorTech and am very proud of the quality of the team. I
very much look forward to developing the Company with their help and guidance.

AorTech International Plc. Annual Report and Accounts 2018

Corporate Actions
In order to finance the new strategic plans for the Company, AorTech recently undertook a fundraising
exercise with the assistance of our new stockbrokers, Stockdale Securities Limited. Your Board was
delighted with the level of support from both new and existing shareholders and £2.1 million was raised by
way of a placing and subscription together with a further £500,000 in a heavily oversubscribed open offer. In
total, therefore, £2.6 million was raised before the expenses of the issue, providing the necessary funds for
the Company’s next two years’ development plans.

Litigation Settlement
During the year, we were pleased to settle the Company’s long-running dispute with its former Chief
Executive and related parties. AorTech fortunately had the proceeds from an insurance policy to finance 90
per cent of the costs incurred up to a policy limit of £2 million. Due to litigation tactics, the case was very long-
running and AorTech was close to the expiry of the cover available, which could have resulted in AorTech
being unable to continue to prosecute the case, and the risks to our IP associated with that. Having to play
the hand we had been dealt, I am pleased that we were able to announce that “the parties have amicably
resolved their dispute and the terms of settlement have been incorporated into a confidential settlement
agreement.” The confidentiality terms limit our ability to fully disclose the terms of the settlement. However,
we are satisfied with the outcome and our ongoing IP position. Under Exceptional items in the Consolidated
income statement, a net receipt of $339,000 has been disclosed. This relates to the dispute settlement, but is
after making reimbursements to our insurer; settling additional fees with our attorneys and other advisers,
and making payments incurred on a contingency basis to current and past Board members for considerable
time commitments during the course of the litigation process.

Results and Shareholder Reporting
Revenues from polymer licence and royalty activities were lower at $538,000 (2017: $614,000), due to the
$76,000 reduction in accrued revenues on the polymer supply contract where we recognised $76,000 less
than the licensee paid to AorTech. Administrative expenses of $629,000 were incurred during the year.
However within this amount were exchange rate charges as a result of translating Intangible Assets with a
Sterling holding cost into the reporting currency of US$. Adjusting for these differences, the Company was
broadly break even before amortisation of Intangible Assets. An exceptional profit of $339,000 was reported
as a result of the settlement of the long-running litigation. Cash at the year end increased from $114,000 to
$591,000 demonstrating cash generation even allowing for the proceeds from litigation. The Board is not
recommending the payment of a dividend.

These accounts have been prepared in US$ which is a historical throwback to the time when almost all
revenue and expenditure was dollar-denominated. With the new business model and development of devices
in the UK, it would only confuse the reader and management to continue to report in US$ so in the future
AorTech will revert to reporting its annual results in Sterling.

Other future changes to Corporate Reporting relate to the Corporate Governance regime. AorTech did not
subscribe to any particular governance code, but now that the business has been restructured and the Board
enhanced, the adoption of a recognised code is now a positive tool in developing strong relationships with our
shareholder base. Therefore in line with AIM Notice 50, I am happy to report that from 28 September 2018,
the Board proposes to adopt the recommendations set out in the QCA Corporate Governance Code for small
and mid-sized quoted companies published by the Quoted Companies Alliance in full and will comply or
explain in detail any departure from that code and the reasons for doing so.

Outlook
The past year has been transformational. Historic disputes having been resolved has enabled a new strategy
and business model to be adopted and a succesful fundraising completed. A re-invigorated Board is now in
place and world class business partners working to develop exciting new medical devices. The current year
will be one of investment in product development and closely managing each project to ensure the best
return on that investment.

Bill Brown
Executive Chairman

19 July 2018

AorTech International Plc. Annual Report and Accounts 2018

STRATEGIC REPORT

OPERATING AND FINANCIAL REVIEW

PRINCIPAL ACTIVITIES
The Company is an Intellectual Property (IP) holding company whose principal activity 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 23 indicating the Group’s loss for the financial year of
US$44,000 (2017: loss of US$237,000) which will be deducted from the reserves.

On a Group basis, the business review and future prospects are contained within the Chairman's Statement
on pages 4, 5 and 6. The Directors consider the Group’s financial key performance indicators to be revenue
growth, control of operating expenses and the pre tax result. In addition the Directors consider the Group’s
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. Along with the internal control environment process as detailed on page 12,
mitigation of these risks include: regular review of new market opportunities; active management of licensees;
review of Board skills and remuneration packages (as explained in the Remuneration Report) and
appropriate structuring of licence agreements to mitigate product liability risk.

No dividends have been paid or proposed for the years ended 31 March 2018 and 31 March 2017.

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” below.

CURRENCY RISK
The Group is exposed to translation and transaction foreign exchange risk. The majority of the Group’s sales
are to customers in the United States. These sales are priced and invoiced in US dollars. The Group policy is
to try 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 in foreign currencies (GB
Pounds). 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.

2018
US Dollars

2017
US Dollars

US$000

AorTech International Plc. Annual Report and Accounts 2018

STRATEGIC REPORT

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.

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 2018 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

Interest rate

Fixed
US$000

Floating
US$000

Zero
US$000

Total
US$000

-
-
-

591
188
779

95
-
95

591
188
779

95
-
95

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 ACIS

Company Secretary
AorTech International plc
Company number SC170071
Weybridge

AorTech International Plc. Annual Report and Accounts 2018

GOVERNANCE

Corporate Governance

Historically, AorTech did not comply with the UK Corporate Governance Code but sought to draw upon best
practice. The past year has been one of significant change for AorTech; historic litigation has been
satisfactorily concluded, a new strategy developed, a fund raise successfully completed to finance the
strategy and a strengthening of the Board with three recent appointments.

These recent changes are a new chapter in AorTech’s development with the objective of delivering long term
shareholder value. As such, I believe the adoption of the QCA Corporate Governance Code will assist
AorTech in communicating with shareholders to help promote confidence and trust. The Board is therefore
seeking to adopt the QCA code with effect from September 2018. This adoption will lead to further
disclosures being made in the Company’s website (www.aortech.net) as well as in the Annual Report and
Accounts.

Ethical Values and Behaviours

AorTech operates in the medical device field where human life is dependent upon its products. As such,
sound ethical values and behaviours are not only an asset to the Company but a requirement under the
regulatory standards under which our products are required to be designed, tested and manufactured.
AorTech is still a very small company so the actions of its executives are highly visible and reflect directly
upon the Company. The Company operates through a number of partnerships and we seek to work with
other businesses that portray similar business ethics and values and have the capabilities of operating under
strict regulatory environments.

Strategy

In December 2017, we announced to shareholders that the Board had conducted a thorough review of the
Company’s IP and where it fits into the medical device market. At that time we were considering a detailed
strategic plan to allow AorTech to commercialise its platform technology. The result of that plan culminated in
the recent successful fund raising together with the appointment of new Directors to the Board to execute the
strategy.

AorTech’s platform technology is a family of bio-stable polymers with world class characteristics -™ Elast-
Eon™. These polymers have been in human use for well over 10 years and over 5 million patients have been
implanted with long term devices which are enabled by Elast-Eon™.

AorTech’s strategy is to maximize value from its IP portfolio by developing cardiovascular medical device
products while maintaining a low cost/risk business model. As part of this strategy, the Company has entered
into a development and manufacturing agreement with RUA Medical, a medical textiles manufacturer, and
into a development contract with Vascular Flow Technologies Limited, a medical device development
company. If successfully developed and approved by the relevant regulatory authorities, the Company
proposes to employ a lean sales and marketing strategy for its products, a distribution model to provide
access to hospital markets and OEM sales of devices to other medical device companies.

Directors

The Company is controlled by the Board of Directors which, at 31 March 2018, comprised one Executive (Bill
Brown) and two Independent non-Executive Directors (Gordon Wright and John McKenna). All Directors are
able to take independent advice in furtherance of their duties if necessary.

On 8 June, 2018, Bill Brown became full time Executive Chairman and John McKenna became a part-time
executive Director contracted to 67.5 days per annum. On the same date, three additional non executive
Directors, John Ely, Geoff Berg and David Richmond were appointed. Each new Director is considered
independent and will provide a minimum of one day per month.

AorTech International Plc. Annual Report and Accounts 2018

Bill Brown (Chairman). Bill was appointed to the Board on 21 October 2011 and became Chairman on 3
July 2012. Bill is a chartered accountant with over 30 years’ experience in advising and investing in high
growth smaller companies. Has floated several companies and has significant experience in fund raisings,
corporate deals and restructurings. He launched the first dedicated fund for AIM and was instrumental in the
growth and internationalisation of AIM as a member and Chairman of the AIM Advisory Committee. He joined
the Aortech Board in late 2011 and, having conducted a strategic review, concluded that despite the
Company having outstanding technology, its business model would not succeed. Since then, the historic
problems have been addressed and a strategy developed to monetise the core technology. In addition to
conducting and negotiating the resolution of the recent legal dispute, Bill has dealt with the licensing,
commercial and IP issues gaining a detailed understanding of all of the Company’s projects and
opportunities.

John McKenna is a leading marketing expert in the field of cardiovascular devices. With over 30 years’
experience in cardiothoracic surgery, he has helped develop and launched a number of successful devices,
including heart valves, large vessel grafts and stents. John has worked for a number of leading medical
companies, including Pfizer, Vascutek (Terumo) and CryoLife, and has contacts with both leading heart
surgeons and senior executives at the major device companies. John rejoined the AorTech Board in late
2016, and has helped develop the product strategy based on his analysis of competing products and current
market need from the industry. He has established European-wide distribution networks for medical devices
and OEM supply agreements, particularly in heart valve related products.

Gordon Wright has an extensive knowledge of the cardiovascular field having been involved in healthcare
companies for over 30 years. Gordon is one of the co-founders of AorTech as well as a number of other
medical device businesses. He was principal shareholder and managing director of BioMedical Systems
Limited from 1979 to 1988 which developed and manufactured the Bioflo tissue valve, and of Ecosse Medical
Limited from 1985 to 1988 which manufactured catheters for open heart surgery and PVC tubing for heart
and lung machines. Both these successful companies were sold in 1988 to 3M Health Care Limited. Gordon
further worked alongside the founders of St Jude Medical and ATS (now Medtronic) initially to manufacture
their heart valves and to launch them in Europe, and he retains high level contacts in all the major device
companies and with many leading heart surgeons. Gordon has been on the Board since November 2005, but
is considered by the Board to be independent.

John Ely (NED). John is a recognised expert in cardiovascular devices and spent 7 years at the FDA, where
he was responsible for a team that approved cardiovascular medical devices, including heart valves. In
industry, he has successfully managed the process of obtaining pre-market approvals for 6 heart valves,
including both tissue and mechanical valves. He has also led research and development, regulatory and
quality assurance teams at Baxter International Inc., Edwards Lifesciences Corporation and On-X Life
Technologies, Inc. John has authored over 25 scientific papers and is the named inventor on 3 US patents.
He was previously engaged as an expert witness in the area of heart valve design and development process,
giving him an intimate knowledge of AorTech’s heart valve project.

Geoff Berg (NED). Geoff was formerly a consultant heart surgeon at the Golden Jubilee Hospital in Glasgow
where he specialised in surgical treatment of valvular heart disease and was recognised as one of the
leading surgeons in mitral valve repair and replacement. He has authored a number of scientific papers on
the treatment of heart disease and conducted studies into the long term performance of replacement heart
valves. He has been involved in the early stage development of a number of cardiovascular devices,
including a stentless animal tissue heart valve, and the launch of the only biological valved conduit. He is a
recognised authority on stentless aortic valve surgery and has co-authored papers on stentless versus
stented aortic valve insertions.

David Richmond (NED). David is the founder of Culzean Medical Devices Limited which trades as RUA
Medical, which was re-acquired from Lombard Medical Technologies plc in December 2013 (having
previously been sold to them in June 2007). RUA provides contract design, development, manufacture,
assembly, retail packing and consultancy services to clients worldwide in the medical device and biotech
industries from its two modern clean room facilities in Scotland.

AorTech International Plc. Annual Report and Accounts 2018

Directors’ Attendance

The table below details the formal Board, Audit Committee and Remuneration Committee meetings held
during the year and the attendance at each by the Directors serving and entitled to attend.

Director

Board
Held/Attended

Audit Committee
Held/Attended

Remuneration Committee
Held/Attended

Bill Brown
Gordon Wright
John McKenna

6/6
6/6
6/6

Nominations Committee

2/2
2/2
2/2

During the year the Company did not have a formal Nominations Committee. The Board as a whole as part of
the strategy review identified the key additional skills and experience required to help facilitate the
implementation of the strategy which led to the appointment of the new Directors. A Nominations Committee
comprising the Chairman and all of the non executive directors has been established with effect from
September 2018.

The Board recognises that it is healthy for membership of the board to be periodically refreshed and 50% of
the Board are now recent appointments. The Nominations Committee will undertake a review of the
effectiveness of its performance once each member has gained sufficient experience on which to judge and
contribute to the evaluation of performance.

The Nominations Committee will be chaired by the Company Chairman. Meetings will be arranged as
necessary. The Committee is responsible for nominating candidates (both executive and non-Executive) for
the approval of the Board to fill vacancies or appoint additional persons to the Board. Its terms of reference
will be available upon request and will be placed on the Company’s website.

All Directors receive induction on joining the Board covering the Group’s operations, goals and strategy, and
their responsibilities as directors of the Group. The Company supports the Directors in developing their
knowledge and capabilities.

The Directors have established a procedure, agreed by the Board, for Directors in the furtherance of their
duties to take independent professional advice, if necessary, at the Company’s expense.

All Directors are subject to election by shareholders at the first opportunity after their appointment. In
accordance with the Articles of Association, all Directors are required to retire by rotation and shall be eligible
for re-election. The terms and conditions of appointment of the non-Executive Directors are available for
inspection upon request.

The terms of reference of the Nominations Committee will be available upon request and will be placed on
the Company’s website.

Audit Committee

The Audit Committee, comprising the Directors and chaired by W Brown, meets at least twice per year and
oversees 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.

AorTech International Plc. Annual Report and Accounts 2018

ACCOUNTABILITY AND AUDIT

The Board includes a detailed review of the performance of the Group in the Chairman’s Statement on pages
4, 5 and 6. Reading this alongside the Strategic Report and the Report of the Directors on pages 7 to 8 and
15 to 17 respectively, the Board seeks to present a balanced and understandable assessment of the Group’s
position and prospects.

Internal Control

The Board has formalised the review and reporting of the main internal controls within the business. In
previous periods, the Directors commissioned a risk review exercise in the course of which the key risk
factors facing the Group were identified. These areas included regulatory, research and development,
commercial, human resources and information technology. The Board will continue to review the system of
internal controls within the Group.

The Board of Directors is responsible for the Group’s system of financial controls. However, it should be
recognised that such a system can provide only reasonable and not absolute assurance against material
misstatement or loss.

The principal elements of the system include:

A clearly defined structure which delegates authority, responsibility and accountability.

A comprehensive system for reporting financial results. Actual results are measured monthly against
budget which together with a commentary on variances and other unusual items allows the Board to
monitor the Group’s performance on a regular basis.

A comprehensive annual planning and budgeting programme.

A revision of annual forecasts on a periodic basis.

There is no independent internal audit function. The Directors believe that such a function would not be cost
effective given the current size of the Group but they will continue to monitor the situation as the Group goes
forward. The Board has reviewed the effectiveness of the system of internal controls as outlined above and
considers the Group has an established system which the Directors believe to be appropriate to the business.

Bill Brown
Executive Chairman

19 July 2018

AorTech International Plc. Annual Report and Accounts 2018

GOVERNANCE

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 Committee

At 31 March 2018 the Remuneration Committee comprised the non-Executive Directors as follows:

G Wright (Chairman)
J McKenna

As appropriate, the Committee may invite the Executive Chairman to participate in some of its discussions.
No Director plays a part in any discussion about his own remuneration.

The Committee is responsible for determining the terms and conditions of employment of Executive
Directors. It is also responsible for considering management recommendations for remuneration and
employment terms of the Group’s staff, including incentive arrangements for bonus payments and grants of
share options.

When setting its remuneration policy the Committee gives full consideration to the provisions and principles of
the Code. In setting the policy it considers a number of factors including:

The basic salaries and benefits available to executive Directors and senior management of comparable
companies.

The need to attract and retain Directors 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 Directors carried out by Independent Remuneration Solutions.

The non-Executive Directors do not receive any pension or other benefits from the Company, nor do they
participate in any of the bonus schemes.

The non-Executive Directors have service agreements, which are reviewed by the Board annually, and they
are also included in the one third of Directors subject to retirement by rotation at each Annual General
Meeting.

Remuneration of Executive Directors
The Executive Directors have a service contract, which can be terminated on twelve 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 contracts for the Executive Directors were for
W Brown and J McKenna on 8 June 2018. 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 Directors, having regard to personal performance and independent advice concerning
comparable organisations.

AorTech International Plc. Annual Report and Accounts 2018

REPORT OF THE REMUNERATION COMMITTEE (continued)

Share Options
The Company previously operated an Approved Share Option Scheme and an Unapproved Share Option
Scheme. These schemes were closed in 2015. The Group had not recognised any expense related to
equity-settled share based payment transactions in prior years on the grounds that the charge was not
material. As part of the capital raise undertaken in June 2018, a new EMI option scheme has been adopted.
Details of options issued are set out below.

Pensions
The Group made no contributions to a personal or Company pension plan during the year under review, but
are doing so in the current year.

Directors’ Emoluments - audited
Details of individual Director’s emoluments for the year are as follows:

Executive
E McDaid
W Brown

Non-Executive
W Brown
E McDaid
G Wright
J McKenna

Salary
& fees
US$

Pension
contributions
US$

-
79,902

-
-
23,971
25,968

129,841

-
-

-
-
-
-

2018

Total
US$

2017

Total
US$

-
79,902

13,132
65,658

-
-
23,971
25,968

7,879
19,697
23,637
9,849

129,841

139,852

E McDaid resigned as a Director on 31 October 2016. J McKenna was appointed as a Director on 31 October
2016. During the year, US$184,307 was paid to a related party consultancy operated by W Brown in respect
of additional work on a litigation case which was settled during the year. This payment represented time
spent over a three year period and payment was contingent upon a positive settlement of the dispute.

GOVERNANCE
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.

J McKenna is employed by John McKenna (1953) Ltd in the provision of services to the Company. All of the
emoluments of J McKenna above are represented by payments made by the Company to John McKenna
(1953) Ltd 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 13.

Directors’ interests in share options
No Director held share options during the year under review. During the current year ending 31 March 2019,
J McKenna was granted 469,531 share options and W Brown was granted 1,121,072 share options. These
options were granted with an exercise price of 30 pence per share and can be exercised as follows: 20%
after two years, 30% on achieving CE Mark for a product and 50% on the share price trading in excess of £3
a share.

On behalf of the Board

G Wright
Chairman of the Remuneration Committee

AorTech International Plc. Annual Report and Accounts 2018

FINANCIAL STATEMENTS

REPORT OF THE DIRECTORS

The Directors present their report and the audited financial statements for the year ended 31 March 2018.

GOING CONCERN

After considering the year end cash position and taking into account the recent £2.6 million fund raising,
making appropriate enquiries and reviewing budgets and profit and cash flow forecasts to 31 December 2019
which incorporate planned investment in new product development, 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 that the adoption of the going concern basis in preparing the consolidated financial
statements is appropriate.

The future developments of the Group are detailed in the Chairman’s Statement on pages 4, 5 and 6.

DIRECTORS AND THEIR INTERESTS

At 31 March 2018 the Chairman and Chief Executive Officer of the Company was W Brown, and the non-
Executive Directors were J McKenna and G Wright.

At each Annual General Meeting one third of the Directors shall be subject to retirement by rotation. G Wright
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 2018 and 31 March 2017 in the ordinary share capital of the
Company (all beneficially held) were as follows:

G Wright
W Brown
J McKenna

J McKenna was appointed as a Director on 31 October 2016.

SUBSTANTIAL SHAREHOLDERS

31 March
2018
Number of
shares

31 March
2017
Number of
shares

308,311
11,982
8,785

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 6 July 2018 exceeded 3% of the
Company’s issued share capital:

Walker Crips Stockbrokers
Miton Asset Management
Charles Stanley Private Client Broker
Hargreaves Lansdown Asset Management
Interactive Investor
Mr Gordon Wright
Share Centre Investment Management
Mr William Brown
Mr Clive Titcomb

Number of
shares
2,452,207
1,301,929
862,641
775,336
764,733
641,645
597,825
506,649
493,111

%
16.70%
8.86%
5.87%
5.28%
5.21%
4.37%
4.07%
3.45%
3.36%

The percentage of shares not in public hands (as defined in the AIM rules) at 6 July 2018 was 25.35%

AorTech International Plc. Annual Report and Accounts 2018

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 7 and 8 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, 23 August 2018 in the offices of
Kergan Stewart LLP, 163 Bath Street, Glasgow G2 4SQ is set out on page 46. There are a number of
resolutions to be passed and further information in relation to these resolutions is set out below.

RESOLUTIONS 1 to 7

Resolution 1 provides for the approval of the Company's financial statements for the year ended 31 March
2018. Resolution 2 provides for approval of the Report of the Remuneration Committee for the year ended
31 March 2018. 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. Resolutions 4, 5 and 6 deal with the formal
appointment of Geoffrey Berg, John Ely and David Richmond respectively to the Board, as required by Article
100 of the Company’s Articles of Association. Resolution 7 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 8 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 8 the Company
is seeking authority to allot shares with a nominal value of up to a maximum of £605,800.25 represented by
12,116,005 shares in the Company. The Directors intend to use this authority, which will lapse at the
conclusion of the next Annual General Meeting of the Company, for the grant and exercise of Options over
shares under the scheme for Directors and employees of the Company and otherwise for general corporate
purposes.

Resolution 9 provides if shares are to be allotted 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 the General Meeting held in June
2018 shareholders authorised the Board, subject to specified limits:

•

to allot shares in connection with a rights issue, defined in summary as an offer of equity securities to
shareholders which is open for a period decided by the Board subject to any limits or restrictions
which the Board thinks are necessary or appropriate;

to allot shares pursuant to the rules of any share scheme approved by the shareholders in general
meeting; and

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 requires to be renewed. The Directors will be empowered by Resolution 9 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. This
disapplication is limited to allotments made on the exercise of employee options, to ordinary shareholders

REPORT OF THE DIRECTORS (continued)

AorTech International Plc. Annual Report and Accounts 2018

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 10% of the Company’s issued ordinary share capital.

Resolutions 1 to 7 are termed ordinary business. Resolutions 8 and 9 are termed special business.

J C D Parsons ACIS
Company Secretary
AorTech International plc
Company number SC170071
Weybridge

19 July 2018

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.

AorTech International Plc. Annual Report and Accounts 2018

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 including FRS 101 "Reduced Disclosure Framework") 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 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 ACIS
Company Secretary
Weybridge

19 July 2018

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AORTECH INTERNATIONAL PLC

AorTech International Plc. Annual Report and Accounts 2018

Opinion

Our opinion on the financial statements is unmodified
We have audited the financial statements of AorTech International plc (the ‘parent company’) and its
subsidiaries (the ‘Group’) for the year ended 31 March 2018, which comprise the Consolidated income
statement, the Consolidated statement of comprehensive income, the Consolidated and Parent company
balance sheets, the Consolidated cash flow statement, the Consolidated and Parent company statements of
changes in equity and notes to the financial statements, including a summary of significant accounting
policies. The financial reporting framework that has been applied in the preparation of the Group financial
statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the
European Union. The financial reporting framework that has been applied in the preparation of the parent
company financial statements is applicable law and United Kingdom Accounting Standards, including
Financial Reporting Standard 101 ‘Reduced Disclosures Framework’ (United Kingdom Generally Accepted
Accounting Practice).

In our opinion:
•

•

the financial statements give a true and fair view of the state of the Group’s and of the parent
company’s affairs as at 31 March 2018 and of the Group’s loss for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted
by the European Union;
the parent company financial statements have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and
the financial statements have been prepared in accordance with the requirements of the Companies
Act 2006.

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the ‘Auditor’s
responsibilities for the audit of the financial statements’ section of our report. We are independent of the
Group and the parent company in accordance with the ethical requirements that are relevant to our audit of
the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we
have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Who we are reporting to
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.

Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to
report to you where:
•

the Directors’ use of the going concern basis of accounting in the preparation of the financial
statements is not appropriate; or
the Directors have not disclosed in the financial statements any identified material uncertainties that
may cast significant doubt about the Group’s or the parent company’s ability to continue to adopt the
going concern basis of accounting for a period of at least twelve months from the date when the
financial statements are authorised for issue.

•

Overview of our audit approach
•
•
•

Overall materiality: $23,000, which represents 1.5% of the group's total assets;
Key audit matter was identified as intangible assets impairment; and
We performed full scope audit procedures on the financial statements of the parent company,
AorTech International plc.

AorTech International Plc. Annual Report and Accounts 2018

Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit
of the financial statements of the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified. These matters included those that had the
greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts
of the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.

Key Audit Matter – Group and parent

How the matter was addressed in the audit – Group and
parent

Intangible assets impairment

There is a risk that the carrying value of
intangible assets (intellectual property)
may be impaired.

The carrying amount of the intellectual
property
the consolidated balance
sheet as at 31 March 2018 was $737,000
and there is a risk that this exceeds the
recoverable amount due to the Group
incurring losses.

Management’s assessment of the net
present value of the intellectual property
incorporated significant
in
assumptions, such as timing, extent and
probability of future revenues and cash
flows as well as applying an appropriate
discount rate.

judgements

We therefore identified the impairment of
intangible assets as a key audit matter,
which was one of the most significant
assessed risks of material misstatement.

Our audit work included, but was not restricted to:

• Consideration of

the appropriateness of
in

the
their
methodology applied by management
assessment of the recoverable amount by comparing
it
the Group’s accounting policy and our
understanding of the business;

• Checking revenue assumptions to existing contracts

with clients;

• Checking forecast expenses against current year

expenditure levels;

• Checking the mathematical accuracy of the NPV

model;

• Checking the appropriateness of the discount rate
applied to future cash flows by benchmarking against
industry trends as well as comparing with the prior
year rate used for consistency;

• Assessing the appropriateness of the probabilities
applied to occurrence of future cash flows with
reference to existing contracts with customers;

• Performing sensitivity analysis on key assumptions
made in the model and challenging these through
consideration of the impact of alternative assumptions
and comparison against results of prior years. The
sensitivity analysis was performed on size, timing and
probability of future cash flows and the discount rate;
• Evaluating the information included in the impairment
models through our knowledge of the business; and
discussions with management; and

• Assessing the accounting policy to check it is in
accordance with the financial reporting framework

The Group's accounting policy on intangible assets (including
related impairment) is shown in note 2 to the financial
statements and related disclosures are included in note 10.

Key observations
Based on our audit work, our testing did not identify any
evidence for impairment of intangible assets to be recognised
within the financial statements and we found no errors in the
calculations provided by management.

Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable
that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use
materiality in determining the nature, timing and extent of our audit work and in evaluating the results of that
work.

AorTech International Plc. Annual Report and Accounts 2018

Materiality was determined as follows:

Materiality measure

Group

Parent

Financial statements as a whole

Performance materiality used to
drive the extent of our testing

Specific materiality

Communication of misstatements
to the audit committee

total

assets.

$23,000, which is 1.5% of the
This
Group’s
the
benchmark
is considered
the
most appropriate because
principal activity of the business is
its
exploiting
intellectual
and
intangible
knowhow, and so
assets are
the key driver of
revenue and cash flows for the
Group.

value of

property

the

than

level

Materiality for the current year is
lower
that we
determined for the year ended 31
March 2017 as the Group’s total
assets value in the current year is
lower than total assets value in
the prior year.
75%
materiality.

statement

financial

90%

£15,000, which is 1.5% of the
Company’s total assets capped
at
the Group’s
materiality. This is considered
most appropriate because the
parent
comprises
virtually all of the operations of
team
the Group,
determined that the majority of
the Group materiality can be
allocated to the component.

the audit

company

Materiality for the current year is
lower than the level that we
determined for the year ended
31 March 2017 as total assets
value in the current year is lower
than total assets value in the
prior year.
75% of
materiality.

financial statement

We also determine a lower level
of materiality for certain areas
such as Directors’ remuneration
and related party transactions.

$1,000 and misstatements below
that threshold that, in our view,
warrant reporting on qualitative
grounds.

£1,000
and misstatements
below that threshold that, in our
view, warrant
reporting on
qualitative grounds.

An overview of the scope of our audit
Our audit approach was a risk-based approach founded on a thorough understanding of the Group's
business and is risk based. We took into account the size and risk profile of the Group and each component,
any changes in the business and other factors when determining the level of work to be performed at each
component, which included the following considerations:
•

AorTech International plc was the only trading component during the year with the rest of the
components being dormant. We have tailored our audit response accordingly with the Group audit
team performing full scope audit procedures on the parent company. We checked that the Group
consolidation workings and adjustments are appropriate. In assessing the risk of material
misstatement to the Group and parent financial statements, we have considered the transactions
undertaken by the Group and therefore where the focus of our audit work was required;
We undertook substantive testing on significant transactions, balances and disclosures, the extent of
which was based on various factors such as our overall assessment of risks, knowledge of the
business and overall assessment of the control environment. Our audit approach is consistent with
that for the prior year; and
Revenues and total assets for the Group and parent company are covered 100% through full-scope
audit procedures.

•

Other information
The Directors are responsible for the other information. The other information comprises the information
included in the annual report and accounts other than the financial statements and our auditor’s report
thereon. Our opinion on the financial statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or

AorTech International Plc. Annual Report and Accounts 2018

our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material misstatement of the other information. If,
based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact.

We have nothing to report in this regard.

Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion, based on the work undertaken in the course of the audit:
•

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 financial statements; and
the strategic report and the report of the Directors have been prepared in accordance with applicable
legal requirements.

•

Matters on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the Group and the parent company and its environment
obtained in the course of the audit, we have not identified material misstatements in the strategic report or the
report of the Directors.

Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which 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.

•

•
•

Responsibilities of directors for the financial statements
As explained more fully in the Directors’ responsibilities statement set out on page 18, the Directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and fair
view, and for such internal control as the Directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Group’s and the parent
company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or
the parent company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor’s report.

Paul Brown
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Cambridge

19 July 2018

AorTech International Plc. Annual Report and Accounts 2018

Consolidated income statement

Year ended 31 March 2018

Pre-
exceptional
items
US$000

Notes

Exceptional
items
US$000

Total
US$000

Year ended 31 March 2017
Pre-
exceptional
items
US$000

Exceptional
items
US$000

Total
US$000

Revenue

Other income

Administrative expenses

Other expenses - amortisation
of intangible assets

Operating loss

Finance (expense) / income

Loss from continuing
operations attributable to
owners of the parent
company

Loss attributable to owners
of the parent company

Loss per share

Basic and diluted
(US cents per share)

538

(629)

(292)

(383)

339

538

339

614

(629)

(571)

(559)

(292)

339

(44)

(292)

(249)

(292)

(237)

(383)

339

(44)

(249)

(237)

(383)

339

(44)

(249)

(237)

(0.79)

(4.27)

Consolidated statement of comprehensive income

Loss for the year

Year
ended
31 March
2018
US$000

Year ended
31 March
2017
US$000

(44)

(237)

Other comprehensive income:
I Items that will not be reclassified subsequently to profit and loss
Exchange differences
Items that will be reclassified subsequently to profit and loss

Exchange differences

Other comprehensive income for the year, net of tax

Total comprehensive income for the year, attributable
to owners of the parent company

1,863

(2,329)

(1,716)

147

103

2,125

(204)

(441)

The notes on pages 27 to 39 form part of these financial statements

Consolidated balance sheet

Assets
Non current assets
Intangible assets

Total non current assets

Current assets
Trade and other receivables
Cash and cash equivalents

Total current assets
Total assets

Liabilities
Current liabilities
Trade and other payables

Total current liabilities

Total liabilities

Net assets

Equity

Issued capital
Share premium
Other reserve
Foreign exchange reserve
Profit and loss account

AorTech International Plc. Annual Report and Accounts 2018

31 March
2018

US$000

31 March
2017

US$000

Notes

12
13

16
16

737

188
591

779
1,516

(95)

914

392
114

506
1,420

(102)

1,421

1,318

16,979
3,502
(2,807)
7,036
(23,289)

15,189
3,133
(2,511)
8,752
(23,245)

Total equity attributable to equity holders of the parent

1,421

1,318

The Consolidated financial statements were approved by the Board on 19 July 2018 and were signed on its behalf
by

W Brown, Chairman

G Wright, Director

Company number SC170071

The notes on pages 27 to 39 form part of these financial statements

Consolidated cash flow statement

Cash flows from operating activities

Group loss after tax

Adjustments for:

Amortisation of intangible assets

Finance expense / (income)

Effect of exchange rate during the year

(Increase) / decrease in trade and other receivables

Increase / (decrease) in trade and other payables

Net cash flow from continuing 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 investing activities

Net cash flow from financing activities

Net increase / (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

AorTech International Plc. Annual Report and Accounts 2018

Year ended
31 March
2018
US$000

Year ended
31 March
2017
US$000

(44)

292

204

(7)

499

(22)

477

114

591

(237)

292

(43)

(149)

(63)

(200)

314

114

The notes on pages 27 to 39 form part of these financial statements

AorTech International Plc. Annual Report and Accounts 2018

Consolidated statement of changes in equity

Issued
Share
capital

US$000

Share
premium

Other
reserve

Foreign
exchange
reserve

Profit
and
loss
account

Total
equity

US$000

Balance at 31 March 2016

17,426

3,595

(2,881)

6,627

(23,008)

1,759

Transactions with owners

Loss for the year

Other comprehensive income

(237)

Exchange difference on translating foreign operations

(2,237)

(462)

370

2,125

(204)

Total comprehensive income for the year

(2,237)

(462)

370

2,125

(237)

(441)

Balance at 31 March 2017

15,189

3,133

(2,511)

8,752

(23,245)

1,318

Transactions with owners

Loss for the year

(44)

Other comprehensive income

Exchange difference on translating foreign operations

1,790

Total comprehensive income for the year

1,790

369

(296)

(1,716)

147

(1,716)

(44)

103

Balance at 31 March 2018

16,979

3,502

(2,807)

7,036

(23,289)

1,421

The notes on pages 27 to 39 form part of these financial statements

AorTech International Plc. Annual Report and Accounts 2018

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of preparation

General information

AorTech International plc is the ultimate parent company of the Group, whose principal activities comprise
exploiting the value of its IP and know-how.

AorTech International plc is incorporated and domiciled in the UK and its registered office is c/o Kergan
Stewart LLP, 163 Bath Street, Glasgow, G2 4SQ.

Basis of preparation

The Consolidated financial statements are for the year ended 31 March 2018. They have been prepared in
compliance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee
(IFRIC) interpretations as adopted by the European Union as at 31 March 2018.

The Consolidated financial statements have been prepared under the historical cost convention.

The accounting policies remain unchanged from the previous year.

Going concern

Changes in accounting policies

Standards, amendments and interpretations to existing standards that are not yet effective

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, based on an initial analysis are expected to have a significant impact on the
Group’s financial statements based on current agreements in place and activity. The Group will continue to
monitor the impact of those new standards, particularly IFRS 15 if new customer agreements are entered into
or Group activity changes.

New accounting standards issued but not adopted:

IFRS 9 ‘Financial Instruments’ (2014) (effective date 1 January 2018) – the new standard introduces
extensive changes to IAS 39’s guidance on the classification and measurement of financial assets and
introduces a new “expected credit loss” model for the impairment of financial assets. IFRS 9 also provides
new guidance on the application of hedge accounting. It is not expected that the application of this new
standard will cause a material change to the Company’s performance.

IFRS 15 ‘Revenues from Contracts with Customers’ (change to IASB effective date 1 January 2018) – this
new standard presents new requirements for the recognition of revenue, replacing IAS 18 ‘Revenue’, IAS 11
‘Construction Contracts’ and several revenue-related interpretations. The new standard establishes a

AorTech International Plc. Annual Report and Accounts 2018

control-based revenue recognition model and provides additional guidance in many areas not covered in
detail under existing IFRSs, including how to account for arrangements with multiple performance obligations,
variable pricing, customer refund rights, supplier repurchase options and other common complexities.

The Company has carefully assessed the new standard and considers that there is no change needed to the
revenue recognition policy.

Presentational currency

The Group’s revenues, profits and cash flows have historically been generated in US Dollars. These
Accounts have been prepared in US$ which is a historical throwback to the time when almost all revenue and
expenditure was dollar-denominated. With the new business model and development of devices in the UK, it
is intended that in the future AorTech will revert to reporting its annual results in Sterling.

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 and trade discounts, as follows:

(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. Where revenue recognised is based on minimum royalty levels, such
revenue is treated as being inherent in the licence, disclosed as licence fee income and
recognised consistent with royalty income as detailed below.

(b) Royalty revenues: Royalty revenues are recognised as earned in accordance with third parties’

sales of the underlying products.

Interest

Interest income is the interest earned on cash or cash equivalents held with the Group’s bankers and
recognised within the period earned, accrued on a time basis by reference to the principal outstanding and at
the effective rate applicable.

Exceptional items

Items considered significant by virtue of their size or nature are separately disclosed on the face of the
Income Statement to enable a full understanding of the underlying performance of the Group.

AorTech International Plc. Annual Report and Accounts 2018

2. Principal accounting policies (continued)

Intangible assets

(a) Patents and trademarks (intellectual property):

Patents and trademarks (intellectual property) are included at cost and are amortised on a straight line basis
over their useful economic lives of 20 years, which corresponds to the lives of the individual patents.

(b) Research and development:

Research costs are expensed as incurred. An intangible asset arising from development expenditure on an
individual project is recognised only when the Group can demonstrate all of the following:

•

the technical feasibility of the intangible asset so that it will be available for use or sale. In practice
this will be when the Group is satisfied that the appropriate regulatory hurdles have been or will be
achieved.

its intention to complete and its ability to use or sell the asset.

• how the asset will generate future economic benefits.

•

the availability of economic resources to complete the asset.

the ability to measure the expenditure during development.

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.

Impairment testing of intangible assets

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.

2. Principal accounting policies (continued)

AorTech International Plc. Annual Report and Accounts 2018

All assets are subsequently reassessed for indications that an impairment loss previously recognised may no
longer exist.

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.

Financial liabilities

Financial liabilities fall into the following category: Financial liabilities at amortised cost.

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 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.

Taxation

Current tax is the tax currently payable based on taxable profit for the accounting period.

Deferred taxes are calculated using the liability method on temporary differences. Deferred tax is generally
provided on the difference between the carrying amounts of assets and liabilities and their tax bases.
However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an
asset or liability unless the related transaction is a business combination or affects tax or accounting profit.
Deferred tax on temporary differences associated with shares in subsidiaries is not provided if reversal of
these temporary differences can be controlled by the Group and it is probable that reversal will not occur in
the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax
credits to the Group are assessed for recognition as deferred tax assets.

2. Principal accounting policies (continued)

AorTech International Plc. Annual Report and Accounts 2018

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
Ltd (formerly AorTech Europe Ltd) 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 on consolidation and from the
translation of the AorTech International Plc balance sheet into US$.
"Profit and loss account" represents retained profits.

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) which is the UK on
the basis of where the cost base of the business is. 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.

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.

2. Principal accounting policies (continued)

AorTech International Plc. Annual Report and Accounts 2018

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. The Board regularly reviews this judgement in respect of specific development
projects.

b) The Directors must judge whether future profitability is likely in making the decision whether or not to
recognise a deferred tax asset. At this stage the timing of future profits is insufficiently certain to warrant
inclusion of a deferred tax asset.

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. 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.

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) Estimates as to recoverability of receivables, including future expected cash flows.

AorTech International Plc. Annual Report and Accounts 2018

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

On sales from United Kingdom
Licence fees – services
Royalty revenue

2018

2017

US$000

120
418

538

125
489

614

During the year ended 31 March 2018, 53.0% of the Group’s revenues depended upon a single customer
(2017: 28.0%). The majority of the Group’s revenues are earned in the United States in both years.

Analysis of result - operating loss

Continuing operations

United Kingdom

USA

Operating loss

Finance (expense) / income – all UK

Loss on continuing operations before taxation

2018
US$000

2017
US$000

(44)

(237)
-

(237)

The operating loss disclosure above is after charging amortisation of $292,000 (all UK) (2016: $292,000 (all UK)).

Analysis of non current assets by location

United Kingdom

USA

2018
US$000

737

4. Remuneration of Directors and key management personnel

Key management personnel

Emoluments – short-term employee benefits

Pension costs – post-employment benefits

2018

US$000

130

2017
US$000

914

2017

US$000

140

The key management personnel whose remuneration is included in the table above for the current year
comprise the three current Directors. The key management personnel whose remuneration is included in the
table above for the prior year comprise the three current Directors and one previous Director of the parent
company.

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 2018 are payments of
$106,000 (2017: $83,000) made by the Company to third parties. The highest paid Director’s total emoluments
were $80,000 (2017: $73,000). No pension contributions were paid during either year.

AorTech International Plc. Annual Report and Accounts 2018

2018

US$000

292

2017

US$000

(24)

292

130

143

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)

Audit and non-audit services:

Audit of the Accounts of the Company

Audit related assurance services

Taxation compliance services

All other taxation advisory services

All other assurance services

6. Other Income - Exceptional items

Other Income - Exceptional items relates to the net proceeds in relation to litigation regarding the departure of
a former employee.

7. Employees

Employee costs (including Directors):

Wages and salaries

Social security costs

The average number of employees (including Directors)
during the year was made up as follows:

Administration

2018

US$000

2017

US$000

130

2018

Numbers

140

143

2017

Numbers

AorTech International Plc. Annual Report and Accounts 2018

8. Income tax expense

No current tax or deferred tax expense arises on the loss for the year (2017: $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

2018

US$000

(44)

2017

US$000

(237)

Loss for year multiplied by the respective standard rate of corporation
tax applicable in each domain (average 19%) (2017: 20%)

(8)

(47)

Effects of:

Expenses not deductible for tax purposes and other tax differences

Unrelieved trading losses

Adjust deferred tax to average rate

Tax on loss for the year

(14)

(2)

(42)

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 $6,518,000 – tax effect is $1,108,000 (2017:
$5,899,000 – tax effect $1,003,000). Losses in the USA total $nil (2017: $nil).

9. Loss per share

Loss for the year attributable to equity shareholders

Loss per share

Basic and diluted (US cents per share)

From continuing 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

2018

US$000

(44)

(0.79)

5,557,695

2017

US$000

(237)

(4.27)

5,557,695

AorTech International Plc. Annual Report and Accounts 2018

10. Intangible assets

Gross carrying amount
At 1 April 2016
Additions
Exchange differences
At 31 March 2017
Additions
Exchange differences
At 31 March 2018

Amortisation and impairment
At 1 April 2016
Exchange differences
Charge for the year
At 31 March 2017
Exchange differences
Charge for the year
At 31 March 2018
Net book value
At 31 March 2017
At 31 March 2018

Development
costs

Intellectual
property

Total

US$000

451

4,581

5,032

(58)

(588)

(646)

393

3,993

4,386

470

516

461

4,463

4,924

136

3,529

3,665

(22)

(463)

209

(485)

292

197

3,275

3,472

396

209

423

292

307

3,880

4,187

196

718

154

583

914

737

Amortisation charge is included within the Administrative expenses line on the Consolidated income statement.

11. 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 at amortised cost– loans and
receivables

Cash and cash equivalents

Trade and other receivables

Financial liabilities

Liabilities at amortised cost

Fair value through profit or loss

2018

2017

US$000

591

188

779

(95)

114

143

257

(102)

AorTech International Plc. Annual Report and Accounts 2018

11. Financial instruments (continued)

All amounts are short-term (all payable within six months) 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

2018

2017

US$000

570

591

114

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 $2,000 (2017: $7,000) impact on net
assets and expenses.

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:

Interest
rate %

2018
US$000

Interest
rate %

2017
US$000

Cash

591

109

Short-term deposits

0.25%

591

114

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 $nil (2017: $nil), 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 amounts due from two third parties where full
provision has been made 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 a third party. The maximum exposure to credit risk on trade and other receivables is considered to be
$20,000 (2016: $30,000).

AorTech International Plc. Annual Report and Accounts 2018

11. Financial instruments (continued)

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.

12. Trade and other receivables

Current

Trade receivables

Other receivables

Prepayments and accrued income

Non-current

Trade receivables

2018

2017

US$000

128

188

129

249

392

$nil (2017: $60,000) of net trade and other receivables were past due for payment but not impaired at 31
March 2018, of which $nil (2017: $nil) was over 30 days and $nil (2017: $60,000) was over 90 days. A
provision of $474,000 (2017: $449,000) was recognised against trade receivables.

Included in the above is $119,000 (2017: $221,000) of accrued income.

13. Cash and cash equivalents

Cash at bank and in hand

14. Trade and other payables

Current liabilities

Trade payables

Accruals and deferred income

2018

2017

US$000

591

114

2018

2017

US$000

102

Included in the above is $9,000 (2017: $8,000) of deferred income.

AorTech International Plc. Annual Report and Accounts 2018

15. Operating lease commitments

The Group had no commitments under non-cancellable operating leases at 31 March 2018 or 31 March 2017.

16. Share capital

Ordinary shares of 5 pence each

In issue at 1 April 2017

In issue at 31 March 2018

Deferred shares of 245 pence each

In issue at 1 April 2017

In issue at 31 March 2018

Shares
Number

5,557,695

Nominal
Value
US$000
348

389

Premium
net of costs
US$000
258

288

Shares
Number

4,832,778

Nominal
Value
US$000
14,841

16,590

Premium
net of costs
US$000
2,875

3,214

Total

US$000
606

677

Total

US$000
17,716

19,804

At the AGM of Members held on 24 September 2015, the Members approved the Reorganisation of the
Company’s share capital by sub-dividing the existing 250 pence ordinary shares into 5 pence ordinary shares
and 245 pence deferred shares. The share premium attached to the existing shares has followed the new
shares. The deferred shares have limited rights including no voting rights. The deferred shares are not
admitted or listed on any stock exchange.

Capital management objectives are set out in the Strategic Report on page 7.

17. Contingent liabilities

There were no contingent liabilities at 31 March 2018 or at 31 March 2017.

18. Related party transactions

Related party transaction disclosures are included within the Report of the Remuneration Committee.

AorTech International Plc. Annual Report and Accounts 2018

PARENT COMPANY FINANCIAL STATEMENTS

Parent company balance sheet

Assets

Non current assets
Intangible assets
Investment in subsidiary undertakings

Total non current assets

Current assets
Trade and other receivables
Cash and cash equivalents

Total current assets

Total assets

Liabilities

Current Liabilities
Trade and other payables

Total Current Liabilities

Total liabilities

Net assets

Equity

Issued capital
Share premium
Profit and loss account

Total equity attributable to equity holders of the
parent

Notes

31 March
2018

£000

31 March
2017

£000

2
3

694
-

694

1,283
-

1,283

134
422

312
91

556

1,250

403

1,686

(69)

(82)

1,181

1,604

12,118
2,500
(13,437)

12,118
2,500
(13,014)

1,181

1,604

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 2018
was £423,000 (2017: loss of £556,000).

The parent company financial statements were approved by the Board on 19 July 2018 and were signed on its
behalf by

W Brown, Chairman

G Wright, Director

Company number SC170071

The notes on pages 42 to 45 form part of these financial statements

AorTech International Plc. Annual Report and Accounts 2018

PARENT COMPANY FINANCIAL STATEMENTS (continued)

Parent Company Statement of Changes in Equity

At 1 April 2016

Loss and total
comprehensive income for
the year

Share
capital

£000
12,118

Share
premium

£000
2,500

Retained
earnings

£000
(12,458)

(556)

At 31 March 2017

12,118

2,500

(13,014)

Loss and total
comprehensive income for
the year

(423)

At 31 March 2018

12,118

2,500

(13,437)

Total
Shareholders’
funds

£000
2,160

(556)

1,604

(423)

1,181

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS

1. ACCOUNTING POLICIES

AorTech International Plc. Annual Report and Accounts 2018

Statement of compliance
The financial statements were prepared in accordance with FRS 101 'Reduced Disclosure Framework'. The
Company has elected to adopt the standard for the year ended 31 March 2018.

Basis of preparation
The Company meets the definition of a qualifying entity under FRS 101. The financial statements have
therefore been prepared in accordance with FRS 101 as issued by the Financial Reporting Council.

As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under
that standard in relation to financial instruments, capital management, presentation of a cash flow statement,
share based payments, fair value measurements, comparative reconciliations for tangible and intangible
assets, standards not yet effective, related party transactions with other wholly-owned members of the Group
and key management personnel compensation. Equivalent disclosures are, where required, given in the
Group accounts of AorTech International plc. The Group accounts of AorTech International plc are available
to the public.

The financial statements have been prepared on the historical cost basis.

Going concern
The Directors have prepared a cash flow forecast up to 31 December 2020 which indicated that taking into
account the recent fund raising of £2.6 million, current revenues and overheads together with planned
investment in new product development, 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 that the adoption of the going concern basis
in preparing the Consolidated financial statements is appropriate.

Use of key 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:

Sources of estimation uncertainty
Amortisation rates are based on estimates of the useful lives and residual values of the assets involved.

Investments
Investments held as fixed assets are stated at cost less provision for 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. The Company’s functional and presentational currency is Sterling.

Transactions and balances
Transactions in foreign currencies are translated into Sterling using the spot exchange rates ruling at the
dates of the transactions. At each period end foreign currency monetary items are translated using the
closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS (Continued)

AorTech International Plc. Annual Report and Accounts 2018

date of the transaction and non-monetary items measured at fair value are measured using the exchange
rate when fair value was determined.

Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at
period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in the Statement of income and retained earnings except when deferred in other comprehensive
income as qualifying cash flow hedges.

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 of prior years.

Debtors
The amounts owed by Group undertakings are in respect of long term loans and have been treated as part of
the net investment in the foreign entities, and included within debtors due in greater than one year. These
balances have been treated as monetary assets and retranslated at the rate of exchange ruling at the
balance sheet date. Exchange differences arising on these loans are taken into account in arriving at the
operating result. The recoverability of these balances is reassessed at each balance sheet date, with an
impairment provision recorded when considered necessary.

Intangible assets
Patents and trademarks (intellectual property) are included at cost less estimated residual amount and are
amortised on a straight line basis over their remaining useful economic lives of 20 years, which corresponds
to the lives of the individual patents. Some of these assets were transferred from the Australian subsidiary in
2011 at an independent valuation of £4,777,000 which has been used as deemed cost for these assets in the
UK. Development costs incurred in validating the Company’s polymers for manufacture on the Company’s
behalf by Biomerics LLC are being amortised over 5 years.

2. INTANGIBLE ASSETS

Cost

At 31 March 2017

Additions for the year

At 31 March 2018

Amortisation

At 31 March 2017

Charge for the year

At 31 March 2018

Net book value

At 31 March 2017

At 31 March 2018

Intellectual
property

Development
costs

£000

4,929

4,945

3,803

543

4,346

1,126

599

£000

314

157

219

157

Total

£000

5,243

5,259

3,960

605

4,565

1,283

694

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS (Continued)

AorTech International Plc. Annual Report and Accounts 2018

3. 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) Cortech Medical Limited

Country of
registration or
incorporation

Scotland

2018

£000

2017

£000

23,159

(23,159)

Description
of shares
held

Ordinary £1

Proportion
of nominal
value of
shares held
%

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) Research and experimental development on biotechnology, acquired by AorTech 22 June 2018

4. TRADE AND OTHER RECEIVABLES

Current
Trade receivables
Other receivables
Prepayments and accrued income

Non current
Amounts owed by Group undertakings
Less: Provision*

2018

£000
31
11
92

134

3,955
(3,955)
-

2017

£000
102
11
199

312

3,955
(3,955)
-

*A cumulative impairment charge of £3,955,000 as at 31 March 2018 (31 March 2017: £3,955,000) has been
made to fully provide against the remaining amount of the inter-company loan account due as at 31 March
2018 to AorTech International plc by its American subsidiary, AorTech Polymers & Medical Devices, Inc. A
provision of £322,000 (2017: £359,000) was recognised against trade receivables.

Included in the above is £85,000 (2017: £176,000) of accrued income.

AorTech International Plc. Annual Report and Accounts 2018

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS (Continued)

5. TRADE AND OTHER PAYABLES

Trade payables
Accruals and deferred income

Included in the above is £6,000 (2017: £6,000) of deferred income.

6. SHARE CAPITAL

2018

£000
4
65
69

2017

£000
7
75
82

See Note 16 in the Consolidated financial statements which details the number of shares in issue at each
period end and movements in the period. The nominal value of all shares in issue at 31 March 2018 is
£12,118,000 (2017: £12,118,000).

7. 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 13.

8. RELATED PARTY TRANSACTIONS

The Company is exempt under the terms of FRS 101.8 from disclosing transactions with its wholly owned
subsidiaries. There were no related party transactions during the year with non fully owned subsidiaries.

AorTech International Plc. Annual Report and Accounts 2018

NOTICE OF THE ANNUAL GENERAL MEETING

Notice is hereby given that the twenty-first 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, 23 August 2018 at
11:00am for the purpose of considering and if thought fit passing the following resolutions of whch numbers 1
to 8 will be proposed as Ordinary Resolutions and number 9 as a Special Resolution:

AS ORDINARY BUSINESS

To receive and adopt the financial statements of the Company for the year ended 31 March 2018
together with the Strategic Report and the Reports of the Directors and Auditor thereon.

To approve the Report of the Remuneration Committee for the year ended 31 March 2018.

To re-elect as a Director, James Gordon Wright, who is retiring by rotation.

To elect as a Director Geoffrey Alan Berg, who was appointed as a Director since the previous
Annual General Meeting.

To elect as a Director John Louis Ely, who was appointed as a Director since the previous Annual
General Meeting.

To elect as a Director David Muir Richmond, who was appointed as a Director since the previous
Annual General Meeting.

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:

That, in substitution for all equivalent authorities and other powers granted to the Directors at the
Company’s General Meeting held on 8 June 2018 but without prejudice to any allotment of shares or
grant of rights to subscribe for or convert any security into shares in the Company, in accordance
with section 551 of the Companies Act 2006 the Directors be generally and unconditionally
authorised to exercise all powers of the Company to allot shares in the Company or to grant rights to
subscribe for or to convert any security into shares in the Company up to a maximum aggregate
nominal amount of £605,800.25, being made up of (a) £116,246.65 (being equal to 2,324,933
Ordinary Shares of £0.05) in respect of options granted prior to, or to be granted after, the date of this
Notice pursuant to the terms of any share scheme for Directors and employees of the Company
and/or its subsidiaries approved by shareholders of the Company in general meeting and (b) up to
£489,553.60 (being equal to 9,791,072 Ordinary Shares of £0.05); provided that, unless previously
revoked, varied or extended, this authority will expire at whichever is the earlier of the conclusion of
the annual general meeting of the Company to be held in 2019 or the date falling 15 months from the
date of passing this resolution, save that the Company may before such expiry make an offer or
agreement which would or might require the allotment of shares in the Company, or the grant of
rights to subscribe for or to convert any security into shares in the Company after such expiry.

To consider and, if thought fit, pass the following resolution as a Special Resolution -

That, in substitution for all equivalent authorities and other powers granted to the Directors at the
Company’s General Meeting held on 8 June 2018 but without prejudice to any allotment of shares
made or agreed to be made pursuant to such authorities and other powers, subject to and conditional
upon the passing of Resolution 8 set out in this Notice, in accordance with section 571(1) of the
Companies Act 2006 (the “Act”), the Directors be and are hereby empowered pursuant to section 570
of the Act to allot equity securities (within the meaning of section 560 (1) of the Act) for cash
pursuant to the authority conferred by Resolution 8 set out in this Notice, as if section 561(1) of the
Act did not apply to any such allotment, provided that this power shall be limited to:-

NOTICE OF THE ANNUAL GENERAL MEETING (continued)

AorTech International Plc. Annual Report and Accounts 2018

(a) 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;

(b) 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 interest 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; and

(c) the allotment (otherwise than pursuant to sub-paragraphs (a) and (b) of this Resolution) 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 £73,433 (being equal to 1,468,660 Ordinary
Shares of £0.05, representing approximately 10 per cent. of the issued ordinary share capital of the
Company at the date of the Notice of meeting containing this Resolution) or, if less, 10 per cent. of
the issued ordinary share capital of the Company from time to time

and such powers shall expire at whichever is the earlier of the conclusion of the Annual General
Meeting of the Company to be held in 2019 or the date falling 15 months from the date of passing
this resolution but may be previously revoked, varied or extended by special resolution, save that the
Company may before such expiry make an offer or agreement which would or might require the
allotment of shares in the Company, or the grant of rights to subscribe for or to convert any security
into shares in the Company after such expiry.

By order of the Board,

J C D Parsons ACIS
Company Secretary
Weybridge
Surrey KT13 9LZ

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 21 August 2018 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 6ZL not later than 48 hours before the time
appointed for the holding of the meeting or any adjourned meeting together with any documentation
required. In the case of a corporation, the Form of Proxy should be executed under its common seal or
signed by a duly authorised officer or attorney of the corporation. Details of how to appoint the Chairman
of the Meeting or another person as your proxy or proxies using the proxy form are set out in the notes
to the proxy form together with details as to how to change or terminate proxy appointments. A vote
withheld 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.

AorTech International Plc. Annual Report and Accounts 2018

NOTICE OF THE ANNUAL GENERAL MEETING (continued)

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.

6. As at noon on 19 July 2018 the Company’s issued share capital comprised 14,686,608 ordinary shares
of £0.05 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 20 July 2018 is
14,686,608.

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 Directors.
(b) A copy of the letters of appointment for the Non-Executive Directors.
(c) The Memorandum and Articles of Association of the Company.

These documents will also be available for inspection during the Annual General Meeting and for at least
fifteen minutes before it begins.

8. Any member attending the meeting has the right to ask questions. The Company must cause to be
answered any such question relating to the business being dealt with at the meeting but no such answer
need be given if (a) to do so would interfere unduly with the preparation for the meeting or involve the
disclosure of confidential information, (b) the answer has already been given on a website in the form of
an answer to a question, or (c) it is undesirable in the interests of the Company or the good order of the
meeting that the question be answered.

If you have any general queries about the meeting please contact the Company Secretary at
info@aortech.net 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.

AorTech International Plc. Annual Report and Accounts 2018