AorTech International plc
("AorTech", "the Company" or "the Group")
Audited results for the year ended 31 March 2016
AorTech International plc (AIM: AOR), the biomaterials and medical device IP company, today
announces its results for the year ended 31 March 2016.
Financial summary
· Total Group revenue increased by over 5% from previous year to
US$901k
· Net trading profit of $128k (2015: US$96k profit) before exceptional
costs, exchange rate differences and bad debt provisions
· Operating loss after charging $312k in amortisation of intangible assets
and $369k in bad debt provisions
Other developments
· Maintained 2015 level of administrative expenses before exceptional
costs and bad debt provisions
· Share Capital reorganisation taken place, with contingent liability
extinguished.
For further information contact:
AorTech International plc
Eddie McDaid, Chief
Executive
Tel: +44 (0)7802 920869
AorTech International plc
Bill Brown,
Chairman
Tel: +44 (0)7730 718296
finnCap Limited
Giles Rolls / Jonny
Franklin-Adams
Tel: +44 20 7220 0500
A copy of this announcement will be available at
www.aortech.net/investor-relations/rns-and-insider-information/. The content of the website referred to in this announcement is
not incorporated into and does not form part of this announcement.
About AorTech:
AorTech has developed biostable, implantable polymers, including Elast-Eon™ and ECSil™ the world's
leading long-term implantable co-polymers, now manufactured on their behalf by Biomerics LLC in Utah, USA. With several
million implants and seven years of successful clinical use, AorTech polymers are being developed and used in cardiology and
urological applications, including pacing leads, cardiac cannulae, stents and neuro stimulation devices. Devices manufactured
from AorTech polymers have numerous US FDA PMA approvals, 510k's, CE Marks, Australian TGA and Japanese Ministry of Health
approvals.
Elast-Eon™ and ECSil™'s biostability is comparable to silicone while exhibiting excellent
mechanical, blood contacting and flex-fatigue properties. These polymers can be processed using conventional thermoplastic
extrusion and moulding techniques. A range of materials in a variety of application-specific formulations for use in medical
devices and components are available.
CHAIRMAN'S STATEMENT
In the year to 31 March 2016, Revenue and Other Income increased from $857,000 to $901,000, an
increase of just over 5%. Administrative expenses, before exceptional costs, foreign exchange differences and bad debt
provisions, were maintained in line with the prior year, $773,000 (2015: $761,000), resulting in a net trading profit of $128,000
before exceptional costs, exchange differences and bad debt provisions. However, after bad debt provisions of $369,000 the
net trading profit has been reduced to a net trading loss of $241,000. The Company incurred an overall operating loss of $575,000
after amortisation of intangible assets of $312,000 (2015: $332,000) after exceptional litigation costs of $80,000 (2015:
$204,000) and exchange rate differences of $58,000 (2015: $15,000). Operating losses increased from $455,000 to $575,000 with the
year-end cash balances reducing from $360,000 in 2015 to $314,000. This reduction was mainly due to the significant bad debt
provisions required in respect of two major debtors. In addition, further investment was made in development costs of $168,000
during the year.
Your Board has, however, continued to maintain close control on all of its overheads, as is
demonstrated by maintaining the costs at the same level as the previous year.
Bad Debt Provision
During the year, we had to provide for a sum of $150,000 due from SynCardia and $219,000 from
iSense. The SynCardia debt had been the subject of a mediated settlement which was being repaid at the rate of $25,000 per
month. Unfortunately, monthly payments ceased from October 2015 and appropriate legal action was immediately instigated for
recovery. AorTech achieved an arrestment on the debtor's bank account but then our recovery was frustrated due to SynCardia
filing for bankruptcy under Chapter 11. The other substantial debt of $219,000 was due under the terms of a licence regarding the
continuous glucose monitoring business. AorTech's US attorneys, who were pursuing this debt on our behalf, have recently
informed the Board that all of the assets of this company have been transferred to another company of a similar name, leaving the
debtor company with substantial liabilities, including its debt obligations to AorTech. Your Board is taking advice from its US
attorneys to determine what recovery options may be appropriate in respect of this debt.
Litigation against Frank Maguire and Others
One of the key tasks assigned to Mr Maguire in the final two years of his employment at AorTech,
in addition to the management and licensing of AorTech's polymer intellectual property, was to seek a partner or funding for the
polymer heart valve project. This was always viewed as an important area of business and of potential value to shareholders, and
indeed Mr Maguire often reported to the Board the potential value of the heart valve IP and know-how.
Mr Maguire tendered his resignation on 26 November 2013 providing the Company with three days'
notice. Since his resignation, Mr Maguire has worked with Foldax, Inc. as its CEO.
Shortly after his resignation, AorTech asked Mr Maguire to confirm that he had returned to the
Company all files, data and confidential information. AorTech understands that at the time Mr Maguire possessed substantial
amounts of AorTech information related to both its heart valve project and its polymers. Mr Maguire did not respond to this
request. Given this lack of response and our growing concern over other issues related to Mr Maguire's involvement with Foldax,
Inc., AorTech asked its legal representatives to write to Mr Maguire demanding return of all Company property. As a result of Mr
Maguire's lack of response, litigation ensued. To date, AorTech's information has not been fully returned.
Our focus in the litigation is to ensure that AorTech has returned to it all of the confidential
data misappropriated by Mr Maguire, that Mr Maguire's new business does not use or benefit from that confidential information and
that the manufacturing trade secrets for AorTech polymers and heart valve remain secret and are not used or disclosed in the
future.
Loan Note Share Issue
At last year's AGM, shareholders authorised the Directors to take all steps necessary to allot
shares to loan note holders in return for the surrender of their remaining rights under the notes issued in October 2012.
These rights were extinguished in January 2016 by the issue of new shares in the Company. The dilution to ordinary shareholders
amounted to 15% which, in the opinion of the Directors, is a level substantially less than would have been suffered if an equity
issue had been undertaken in October 2012.
Licenses
Over the years, AorTech has made substantial investment in the development of bio stable polymers
and medical device designs. The objective is to capitalise on this investment for the benefit of shareholders. The AorTech
polymers have significant benefits for medical device companies and in certain cases facilitate the underlying performance of the
devices. With our polymers being a critical component in the supply chain, the device manufacturers must have confidence in the
long term supply of material. AorTech was neither large enough nor perceived as secure enough to allow a greater acceptance of
the material, particularly by the larger device companies. AorTech recognized this limitation and rather than seek to continue as
a small sub-scale supplier elected to license the rights to manufacture polymer to Biomerics. Biomerics is not only a
polymer manufacturer but is an added value extruder, molder and sub-contract manufacturer of medical device components and
devices itself. Over the past year, driven by customer contracts and market interest, Biomerics has transferred the
Elast-Eon™ manufacture from a small scale set up into a fully validated, commercial scale facility. In partnership with
Biomerics, AorTech has supported this scale up with an additional investment during the financial year of $168,000 paid from a
share of gross margin on product sales. Biomerics have further developed upon the Elast-Eon™ family of materials and are
now marketing a lower cost, potentially higher volume version of the material. Business development activities continue and a
growing list of companies testing material is evidence of these efforts. Although some of AorTech's licencees continue to
experience delays in both the achievement and the increased commercialisation of their products, the performance of Elast-Eon™ is
recognized as critical in our customers' success. Significant funding has been achieved by AorTech licencees in developing and
commercialising their products with AorTech's Elast-Eon™ seen as critical to their success. In one instance, funds in excess of
$100 million have been raised to achieve successful commercialisation. We anticipate that with the renewed interest in our
material being generated through our licencing partner, Biomerics, that additional licences may be completed during the course of
the next twelve months.
Heart Valve Project
We have previously announced a potential transaction with a new business established to
commercialise the AorTech heart valve technology. Fund raising for the new project is continuing but is not yet finalised and any
license will be dependent upon the new business being fully funded. The package of data and information that AorTech is able to
deliver to the project is substantial. This ranges from specific manufacturing know how and trade secrets for the precise polymer
best suited to a heart valve, detailed design files for a polymer valve with a stress/strain profile substantially less than the
material mechanical properties, together with a fully documented manufacturing process that allows a clinical quality valve to be
made on a repeatable basis. All of these processes have been developed over a number of years of trial and error and
experimentation at considerable investment by AorTech.
New accounting framework applying for the year ended 31 March 2016
The Company has elected to adopt FRS 101 'Reduced Disclosure Framework' (FRS 101) for its parent
company financial statements for the year ended 31 March 2016. Following the application of FRS 101, the results, the
financial position of the parent company, and disclosures are the same as, or follow closely, those reported under previous UK
GAAP.
The Company's decision to adopt FRS 101 for its parent company's financial statements does not
require shareholder approval and therefore no resolution on this matter is being put to the Annual General Meeting.
However, as stipulated in FRS 101, the Company is required to notify all shareholders of this election, and any shareholder or
shareholders holding in aggregate 5 per cent or more of the total allotted shares in the Company may serve an objection.
Objections must be served in writing and delivered to the Company Secretary at Level Two, Springfield House, 23 Oatlands Drive,
Weybridge, Surrey, KT13 9LZ no later than 2 September 2016.
This election will apply on an ongoing basis until such time as the Company notifies its
shareholders of any change to its chosen accounting framework for the parent company financial statements.
Conclusion
The principal disappointment of the past year has been the requirement to provide for sums of
money contractually due to AorTech. The ongoing litigation has also been a major consumption of management time and is likely to
continue to be so. AorTech has sought to pursue an alternative dispute resolution route with the objective being to have
our confidential information returned to us, the defendants precluded from using that information, and compensation for our time
and costs incurred. The defendants are presently unwilling to engage in this process. While disputed by defendants, our
conclusion is that the defendants have retained and are using or intend to use AorTech information in their business.
We are however comfortable with how Biomerics is developing the polymer manufacturing license and
with the progress from other licenses.
Bill Brown
Chairman
12 August 2016
Consolidated income statement
|
|
|
Year ended 31 March 2016
|
Year ended 31 March 2015
|
|
|
|
Pre-exceptional items
|
Exceptional items
|
Total
|
Pre-exceptional items
|
Exceptional items
|
Total
|
|
Notes
|
US$000
|
US$000
|
US$000
|
US$000
|
US$000
|
US$000
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
3
|
751
|
-
|
751
|
844
|
-
|
844
|
|
Other income
|
|
150
|
-
|
150
|
13
|
-
|
13
|
|
Administrative expenses
|
|
(1,084)
|
(80)
|
(1,164)
|
(776)
|
(204)
|
(980)
|
|
Other expenses - amortisation of intangible assets
|
11
|
(312)
|
-
|
(312)
|
(332)
|
-
|
(332)
|
|
Operating loss
|
3
|
(495)
|
(80)
|
(575)
|
(251)
|
(204)
|
(455)
|
|
Finance (expense) / income
|
8
|
-
|
(29)
|
(29)
|
-
|
129
|
129
|
|
Loss from continuing operations attributable to owners of the parent company
|
5
|
(495)
|
(109)
|
(604)
|
(251)
|
(75)
|
(326)
|
|
Loss from discontinued operations
|
16
|
-
|
-
|
-
|
(44)
|
-
|
(44)
|
|
Loss attributable to owners of the parent company
|
|
(495)
|
(109)
|
(604)
|
(295)
|
(75)
|
(370)
|
|
Loss per share
|
|
|
|
|
|
|
|
|
Basic and diluted
(US cents per share)
|
10
|
|
|
(12.00)
|
|
|
(7.66)
|
Consolidated statement of comprehensive income
|
|
|
Year ended
31 March 2016
|
|
Year ended
31 March 2015
|
|
|
|
US$000
|
|
US$000
|
|
Loss for the year
|
|
(604)
|
|
(370)
|
|
Other comprehensive income:
|
|
|
|
|
|
Exchange differences
|
|
(35)
|
|
17
|
|
Income tax relating to other comprehensive income
|
|
-
|
|
-
|
|
Other comprehensive income for the year, net of tax
|
|
(35)
|
|
17
|
|
Total comprehensive income for the year, attributable
to owners of the parent
company
|
|
(639)
|
|
(353)
|
|
|
|
|
|
|
No items of other comprehensive income can be subsequently reclassified to profit and
loss.
Consolidated balance sheet
|
|
|
|
31 March 2016
|
|
31 March 2015
|
|
|
|
|
US$000
|
|
US$000
|
|
|
Notes
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Non current assets
|
|
|
|
|
|
|
|
Intangible assets
|
11
|
|
1,367
|
|
1,546
|
|
Total non current assets
|
|
|
1,367
|
|
1,546
|
|
Current assets
|
|
|
|
|
|
|
|
Trade and other receivables
|
13
|
|
243
|
|
737
|
|
|
Cash and cash equivalents
|
14
|
|
314
|
|
360
|
|
Total current assets
|
|
|
557
|
|
1,097
|
|
Total assets
|
|
|
1,924
|
|
2,643
|
|
Liabilities
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
Trade and other payables
|
15
|
|
(165)
|
|
(192)
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
(165)
|
|
(192)
|
|
Non current liabilities
|
|
|
|
|
|
|
Change of control redemption
premium
|
15
|
|
-
|
|
(53)
|
|
Total non current liabilities
|
|
|
-
|
|
(53)
|
|
Total liabilities
|
|
|
(165)
|
|
(245)
|
|
Net assets
|
|
|
1,759
|
|
2,398
|
|
Equity
|
|
|
|
|
|
|
|
Issued capital
|
19
|
|
17,426
|
|
17,937
|
|
|
Share premium
|
19
|
|
3,595
|
|
3,474
|
|
|
Other reserve
|
|
|
(2,881)
|
|
(2,974)
|
|
|
Foreign exchange reserve
|
|
|
6,627
|
|
6,076
|
|
|
Profit and loss account
|
|
|
(23,008)
|
|
(22,115)
|
|
Total equity attributable to equity holders of the parent
|
|
|
1,759
|
|
2,398
|
|
|
|
|
|
|
|
|
The Consolidated financial statements were approved by the Board on 12 August 2016 and were signed
on its behalf by W Brown, Chairman and E McDaid, Director
Company number SC170071
Consolidated cash flow statement
|
|
|
Year ended
31 March 2016
|
|
Year ended
31 March
2015
|
|
|
|
US$000
|
|
US$000
|
|
Cash flows from operating activities
|
|
|
|
|
|
Group loss after tax
|
(604)
|
|
(326)
|
|
Adjustments for:
|
|
|
|
|
|
Amortisation of intangible assets
|
312
|
|
332
|
|
|
Finance expense / (income)
|
29
|
|
(129)
|
|
|
Decrease / (increase) in trade and other receivables
|
494
|
|
(36)
|
|
|
Decrease in trade and other payables
|
(109)
|
|
(125)
|
|
Net cash flow from continuing operations
|
122
|
|
(284)
|
|
Net cash flow from discontinued operations
|
-
|
|
2
|
|
Net cash flow from operating activities
|
122
|
|
(282)
|
|
Cash flows from investing activities
|
|
|
|
|
|
Purchase of intangible assets
|
(168)
|
|
-
|
|
Net cash flow from continuing operations
|
(168)
|
|
-
|
|
Net cash flow from discontinued operations
|
-
|
|
-
|
|
Net cash flow from investing activities
|
(168)
|
|
-
|
|
Net cash flow from financing activities
|
-
|
|
-
|
|
Net decrease in cash and cash equivalents
|
(46)
|
|
(282)
|
|
Cash and cash equivalents at beginning of year
|
360
|
|
642
|
|
Cash and cash equivalents at end of year
|
314
|
|
360
|
Consolidated statement of changes in equity
|
|
Issued Share capital
|
|
Share premium
|
|
Other reserve
|
|
Foreign exchange reserve
|
|
Profit and loss account
|
|
Total equity
|
|
|
|
US$000
|
|
US$000
|
|
US$000
|
|
US$000
|
|
US$000
|
|
US$000
|
|
Balance at 31 March 2014
|
20,144
|
|
3,901
|
|
(3,340)
|
|
3,791
|
|
(21,745)
|
|
2,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transactions with owners
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Loss for the year
|
-
|
|
-
|
|
-
|
|
-
|
|
(370)
|
|
(370)
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange difference on translating foreign operations
|
(2,207)
|
|
(427)
|
|
366
|
|
2,285
|
|
-
|
|
17
|
|
Total comprehensive income for the year
|
(2,207)
|
|
(427)
|
|
366
|
|
2,285
|
|
(370)
|
|
(353)
|
|
Balance at 31 March 2015
|
17,937
|
|
3,474
|
|
(2,974)
|
|
6,076
|
|
(22,115)
|
|
2,398
|
|
Changes in equity
Issue of equity share capital
|
54
|
|
235
|
|
-
|
|
-
|
|
(289)
|
|
-
|
|
Transactions with owners
|
54
|
|
235
|
|
-
|
|
-
|
|
(289)
|
|
-
|
|
Loss for the year
|
-
|
|
-
|
|
-
|
|
-
|
|
(604)
|
|
(604)
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange difference on translating foreign operations
|
(565)
|
|
(114)
|
|
93
|
|
551
|
|
-
|
|
(35)
|
|
Total comprehensive income for the year
|
(565)
|
|
(114)
|
|
93
|
|
551
|
|
(604)
|
|
(639)
|
|
Balance at 31 March 2016
|
17,426
|
|
3,595
|
|
(2,881)
|
|
6,627
|
|
(23,008)
|
|
1,759
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of preparation
The Consolidated financial statements are for the year ended 31 March 2016. 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 2016.
The Consolidated financial statements have been prepared under the historical cost
convention.
The accounting policies remain unchanged from the previous year.
2. Going concern
After considering the year end cash position, making appropriate enquiries
and reviewing budgets and profit and cash flow forecasts to 31 March 2022, the Directors have formed a judgement at the time
of approving the financial statements that there is a reasonable expectation that the Group has sufficient resources to continue
in operational existence for the foreseeable future. For this reason the Directors consider the adoption of the going concern
basis in preparing the Consolidated financial statements is
appropriate.
3. Preliminary announcement
The summary accounts set out above do not constitute statutory accounts as defined by Section 434
of the UK Companies Act 2006. The summarised consolidated balance sheet at 31 March 2016, the summarised consolidated income
statement, the summarised consolidated statement of comprehensive income, the summarised consolidated statement of changes in
equity and the summarised consolidated cash flow statement for the year then ended have been extracted from the Group's statutory
financial statements for the year ended 31 March 2016 upon which the auditor's opinion is unqualified and did not contain a
statement under either sections 498(2) or 498(3) of the Companies Act 2006. The audit report for the year ended 31 March 2015 did
not contain statements under Section 498(2) or Section 498(3) of the Companies Act 2006. The statutory financial statements for
the year ended 31 March 2015 have been delivered to the Registrar of Companies. The 31 March 2016 accounts were approved by the
Directors on 12 August 2016, but have not yet been delivered to the Registrar of Companies.
4. Earnings per share
The basic loss per Ordinary share of 12.00 US cents (2015: loss of 7.66 US cents) is calculated on
the loss of the Group of US$604,000 (2015: loss of US$370,000) and on 5,032,823 (2015: 4,832,778) equity shares, being the
weighted average number of shares in issue during the year.
The diluted loss per share does not differ from the basic loss per share as the exercise of share
options would have the effect of reducing the loss per share and is therefore not dilutive under the terms of IAS 33.
5. Discontinued operations
On 1 October 2013, the Group signed an agreement with Biomerics LLC for the manufacture and
distribution of our patented materials, including to our existing licensees. In the opinion of the Directors, the Biomerics
transaction transformed the Group into a pure intellectual property company. As a consequence, results attributable to
manufacturing activity constitute a discontinued operation, and have been presented as such in the prior year figures in the
Income Statement.
The results of the discontinued manufacturing operations are shown in more detail
below.
|
|
Pre-exceptional items
|
Exceptional items
|
Total
|
|
Pre-exceptional items
|
Exceptional items
|
Total
|
|
|
2016
|
2016
|
2016
|
|
2015
|
2015
|
2015
|
|
|
$000
|
$000
|
$000
|
|
$000
|
$000
|
$000
|
|
Revenue
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
Other income
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
Cost of sales
|
-
|
-
|
-
|
|
(44)
|
-
|
(44)
|
|
Administrative expenses
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
Profit on disposal of property, plant and equipment
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
Operating loss
|
-
|
-
|
-
|
|
(44)
|
-
|
(44)
|
Notice of Annual General Meeting
Notice of the nineteenth Annual General Meeting of AorTech International Plc will be posted with
the Annual Report and Accounts and will be held in the offices of Kergan Stewart LLP, 163 Bath Street, Glasgow G2 4SQ on Tuesday,
27 September 2016 at 11:00am.
Posting and availability of accounts
The annual report and accounts for the year ended 31 March 2016 will be sent by post to all
registered shareholders on 26 August 2016. Additional copies will be available for a month thereafter from the Company's
Weybridge office. Alternatively, the document may be viewed on, or downloaded from, the Company's website: www.aortech.net.