TIDMAOR
RNS Number : 3249P
AorTech International PLC
18 August 2014
AorTech International plc
("AorTech", "the Company" or "the Group")
Preliminary audited results for the year ended 31 March 2014
AorTech International plc (AIM: AOR), the biomaterials and
medical device IP company, today announces its preliminary results
for the year ended 31 March 2014.
Financial summary
-- Group revenue from continuing operations US$0.4m (2013
US$0.3m)
-- Operating loss from continuing operations US$764k (2013:
US$1,205k loss from continuing operations)
-- Cash reserves decreased from US$987k to US$642k
Other developments
-- Business completed transition to exploiting its IP and
outsourcing its polymer manufacture
-- Significantly lower cost base going forward, following exit
from US
-- Board restructured following exit of former CEO
For further information contact:
AorTech International plc
Eddie McDaid, Chief Executive Tel: +44 (0)7802 920869
AorTech International plc
Bill Brown, Chairman Tel: +44 20 3206 7335
finnCap Limited
Stuart Andrews / James Thompson Tel: +44 20 7220 0500
A copy of this announcement will be available at
aortech.com/investor/announcements. 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(TM) and ECSil(TM) 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 implantable
sensor technology. 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(TM) and ECSil(TM)'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
I set out below my report to the shareholders of AorTech for the
year ended 31 March 2014.
Audited results for the year
During the year, the Group discontinued its manufacturing
operations as part of the transition to an IP-focused business. The
accounts have therefore been presented on the basis of the
continuing operations with a charge shown for the losses from the
discontinued activities. The references to financial performance
below are based on continuing operations only.
Group revenue for the year was $418,000 (2013, $313,000).
Operating loss after exceptional items was $764,000 (2013:
$1,205,000). The net loss for the year was $823,000 (2013:
$3,258,000) after exceptional finance costs of $59,000 (2013:
$2,048,000). These finance costs relate to a provision in respect
of potential additional redemption premium due to loan note
holders.
The Group's administrative expenditure before exceptional items
was $859,000 (2013: $1,091,000). The reduction in this expenditure
arises as a direct consequence of the closure of the US
manufacturing facility and the transition of the business to an IP
company. The exceptional administrative expenses of $83,000 relate
to legal fees incurred in the dispute with the Group's former Chief
Executive, Mr Maguire, of which further details are set out
below.
The Group's cash position at 31 March 2014 was $642,000. This
shows a decrease of approximately $345,000 from the corresponding
date last year. As previously disclosed, the cash position has been
reduced by the additional investment required to establish the
manufacturing license with Biomerics LLC together with the legal
fees referred to above.
Business Model
The exit from polymer manufacture provided the opportunity to
develop a more attractive business model, on a significantly lower
cost base, of exploiting the IP held by the Group. This process has
now been completed with the exit from manufacturing during the year
and the transfer of manufacturing know-how under license to
Biomerics. The process to ensure Biomerics were able to validate
our manufacturing suffered delays but is now nearing
completion.
The structure of the Board has changed to reflect the new
business structure. Eddie McDaid was appointed as Chief Executive
Officer of the Group in December 2013 and Roy Mitchell took over
the role of Finance Director which was previously performed by
Eddie.
Maguire Dispute
We announced in June that AorTech is in dispute with Mr Frank
Maguire, the Company's previous CEO who resigned in November 2013.
Following Mr Maguire's resignation several matters arose which
created serious concerns for your Board.
We have found evidence showing that during his employment with
AorTech Mr Maguire sought to undertake business transactions,
unbeknown to the Board, with existing and potential licensees. Upon
his resignation from AorTech, Mr Maguire took up a senior
appointment with a company called Foldax which is involved in the
development of a TAVI heart valve.
Our investigations discovered that Mr Maguire had during the
previous two years been negotiating a potential heart valve deal
between AorTech and a company and individuals connected to Foldax.
In addition our investigations revealed that, during his period of
employment with AorTech, Mr Maguire had been negotiating with
another of AorTech's licensees for a transaction between himself
and the licensee to the exclusion of AorTech. AorTech's Board had
not been informed of these meetings and discussions.
As a result of these investigations, AorTech has taken legal
action against Mr Maguire for amongst other matters breach of his
contract, breach of his fiduciary duties, misappropriation of trade
secrets and the retaining of confidential documents, files and
assets which are the property of AorTech International.
At an initial court hearing on 1 August 2014, the Court
indicated it would deny motions in which Mr Maguire asked the Court
to dismiss AorTech's claims identified above.
It is the Board's present intention to vigorously pursue Mr
Maguire through the appropriate legal processes in order to protect
AorTech's know-how and trade secrets and, in doing so, protect the
Company and its shareholders' interests. This may include seeking,
as appropriate, damages from Mr Maguire and his co-venturers.
At the initial court hearing on 1 August Mr Maguire was
instructed to return all of AorTech's property including all data
and confidential information relating to AorTech's know-how and
trade secrets.
A substantial amount of time, effort and work has been incurred,
in particular by both our Chief Executive Eddie McDaid and our
Finance Director Roy Mitchell, in not only investigating these
matters but also in implementing the appropriate legal processes.
However such work has been necessary in view of the serious
allegations which arose from Mr Maguire's actions.
AorTech is taking advice from our US attorneys on the
possibility of taking further action against Mr Maguire and indeed
against Foldax, particularly where it relates to our IP, know-how
and trade secrets.
AorTech has over many years maintained appropriate insurance
cover to protect our IP, know-how and trade secrets. I am pleased
to confirm that AorTech has recently received confirmation that
insurance coverage, in accordance with the policy terms, will be
available to meet the ongoing costs of its action against Mr
Maguire.
Heart Valve
We have not made the progress with the Heart Valve project we
would have wished, but the Board are now trying to get some
indications of interest back up to speed and restore momentum to
the project.
Biomerics
One of the key objectives of your Board during 2013 was to
ensure that we were in a position to benefit from developments
being carried out by existing licensees and to assure their ongoing
supply of polymer, as well as creating a model for bringing our
polymers to a much wider medical market. On 1 October 2013 we
announced a licence with Biomerics LLC for the manufacture and
distribution of our Elast-Eon(TM) materials.
This licence required a process of transferring our
manufacturing know-how to Biomerics. It became clear a few months
into the relationship that the former CEO had significantly
underestimated both the costs and time scale required to complete
the technology transfer in a professional manner. The contract
called for AorTech to contribute up to $100,000 towards the
technology transfer process, of which $50,000 was paid on signing
the contract. In addition to this, a further $110,000 has had to be
invested. Biomerics have also incurred $155,000 in costs relating
to labour costs for the validation process. Biomerics are
effectively reimbursed these costs out of gross margin made on
polymer and material sales. By the year end, we had reimbursed
$47,000 of these costs.
The validation and technology transfer is now in its final phase
and we are pleased that the first shipments of Elast-Eon(TM) were
made by Biomerics to AorTech's licensees at the end of July 2014.
The delays experienced by Biomerics in its validation processes has
inevitably resulted in delays in expected sales from the Biomerics
transaction. However Biomerics has already received enquiries from
several new potential customers who have shown an interest in
AorTech's Elast-Eon(TM) material.
Update on licensees
As announced in our trading and commercial update on 16 June
2014, our licensees are continuing to progress their products
through the development and regulatory phases, although some have
experienced delays during the past twelve months.
Conclusion
The last twelve months, in particular the last six months has
been a very difficult period for your Board in view of the
inordinate length of time that has been spent on the investigation
of the actions of Mr Maguire, our previous CEO. In addition, the
delays in both the validation process of Biomerics, our
manufacturing partner, and in the regulatory processes experienced
by several of our licensees have had an adverse effect on the
anticipated revenues both for this last financial year and the
current financial year.
On the positive side, AorTech together with it's manufacturing
partner Biomerics, has achieved a successful technology transfer to
enable and secure the continuation of future supply of
Elast-Eon(TM) material to not only our present customers but also
to future potential customers. Biomerics has already, at this early
stage, received a number of enquiries from several companies
regarding the potential use of AorTech's Elast-Eon(TM) material in
various medical devices.
The restructuring of AorTech is now complete resulting in
substantial cost savings going forward into the future.
I take this opportunity to recognise on behalf of the
shareholders the time, effort and hard work which has been carried
out by the Board. This past twelve months has demonstrated the
determination and commitment of your Board to continue to protect
the interests of its shareholders and the Company and to enhance
shareholder value in future years.
This current year will be one of continuing change and hopefully
result in resolution of some of the matters raised in this
report.
Bill Brown
Chairman
15 August 2014
Consolidated income statement
Year ended 31 March Year ended 31 March
2014 2013
Pre-exceptional Pre-exceptional
items Exceptional items Exceptional
items Total items Total
US$000 US$000 US$000 US$000 US$000 US$000
Revenue 418 - 418 313 - 313
Other income 1 - 1 62 - 62
Cost of sales - - - - - -
Administrative
expenses (859) (83) (942) (1,091) - (1,091)
Other expenses
-
development
expenditure - - - (239) - (239)
Other expenses
-
amortisation
of intangible
assets (241) - (241) (250) - (250)
-------------
Operating
(loss)
/ profit (681) (83) (764) (1,205) - (1,205)
Finance
expense - (59) (59) (5) (2,048) (2,053)
----------------- ----------------- ---------- ---------------- ------------- ------------------
Loss from
continuing
operations
attributable
to owners of
the
parent
company (681) (142) (823) (1,210) (2,048) (3,258)
(Loss) /
profit from
discontinued
operations (486) - (486) (782) 3,193 2,411
----------------- ----------------- ---------- ---------------- ------------- ------------------
(Loss) /
profit
attributable
to owners of
the
parent
company (1,167) (142) (1,309) (1,992) 1,145 (847)
Loss per share
Basic and
diluted
(US cents per
share) (27.09) (17.53)
Consolidated statement of comprehensive income
Year Year
ended ended
31 31
March March
2014 2013
US$000 US$000
Loss for the year (1,309) (847)
Other comprehensive income:
Exchange differences on
translating foreign operations (51) (130)
Income tax relating to other
comprehensive income - -
------------ ----------------
Other comprehensive income
for the year, net of tax (51) (130)
------------ ----------------
Total comprehensive income
for the year, attributable
to owners of the parent
company (1,360) (977)
No items of other comprehensive income can be subsequently
reclassified to profit and loss.
Consolidated balance sheet
31
March 31 March
2014 2013
US$000 US$000
Assets
Non current assets
Intangible assets 1,861 1,840
Property, plant and equipment - 4
Trade and other receivables 300 -
Total non current assets 2,161 1,844
------------- --------------
Current assets
Inventories 46 -
Trade and other receivables 401 1,820
Cash and cash equivalents 642 987
Total current assets 1,089 2,807
------------- --------------
Total assets 3,250 4,651
------------- --------------
Liabilities
Current liabilities
Trade and other payables (306) (406)
Total current liabilities (306) (406)
------------- --------------
Non current liabilities
Change of control redemption
premium (193) (134)
------------- --------------
Total non current liabilities (193) (134)
Total liabilities (499) (540)
Net assets 2,751 4,111
============= ==============
Equity
Issued capital 20,144 18,351
Share premium 3,901 3,555
Other reserve (3,340) (3,043)
Foreign exchange reserve 3,791 5,684
Profit and loss account (21,745) (20,436)
Total equity attributable
to equity holders of the
parent 2,751 4,111
============= ==============
The Group financial statements were approved by the Board on 15
August 2014.
Consolidated cash flow statement
Year Year
ended ended
31 31
March March
2014 2013
US$000 US$000
Cash flows from operating activities
Group loss after tax (823) (3,258)
Adjustments for:
Amortisation of intangible assets 241 250
Finance expense 59 2,053
(Decrease) / increase in trade
and other receivables 102 (754)
Increase in trade and other
payables 69 8
------------------ --------
Net cash flow from continuing
operations (352) (1,701)
Net cash flow from discontinued
operations 312 2,227
------------------ --------
Net cash flow from operating
activities (40) 526
Cash flows from investing activities
Purchase of intangible assets (439) (72)
------------------ --------
Net cash flow from continuing
operations (439) (72)
Net cash flow from discontinued
operations - 671
Net cash flow from investing
activities (439) 599
------------------ --------
Cash flows from financing activities
Interest paid - (5)
Proceeds from issue of loan
notes - 1,914
Repayment of loan notes - (1,914)
Redemption premium paid to loan
note holders - (1,914)
------------------ --------
Net cash flow from financing
activities - (1,919)
------------------ --------
Net decrease in cash and cash
equivalents (479) (794)
Foreign exchange movements on
cash held in foreign currencies 134 (136)
Cash and cash equivalents at
beginning of year 987 1,917
Cash and cash equivalents at
end of year 642 987
================== ========
Consolidated statement of changes
in equity
Profit
Issued Foreign and
Share Share Other exchange loss Total
capital premium reserve reserve account equity
US$000 US$000 US$000 US$000 US$000 US$000
Balance at 31 March
2012 19,319 3,742 (3,203) 4,819 (19,589) 5,088
Transactions with owners - - - - - -
Loss for the year - - - - (847) (847)
Other comprehensive
income
Exchange difference
on translating foreign
operations (968) (187) 160 865 - (130)
Total comprehensive
income for the year (968) (187) 160 865 (847) (977)
--------- --------- --------- ---------- --------- --------
Balance at 31 March
2013 18,351 3,555 (3,043) 5,684 (20,436) 4,111
Transactions with owners - - - - - -
Loss for the year - - - - (1,309) (1,309)
Other comprehensive
income
Exchange difference
on translating foreign
operations 1,793 346 (297) (1,893) - (51)
Total comprehensive
income for the year 1,793 346 (297) (1,893) (1,309) (1,360)
------- ------ -------- -------- --------- ----------
Balance at 31 March
2014 20,144 3,901 (3,340) 3,791 (21,745) 2,751
======= ====== ======== ======== ========= ==========
Notes:
1. Basis of preparation
The Group financial statements are for the year ended 31 March
2014. 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 2014.
The Group 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
for a period of at least twelve months from the date of signing
these financial statements, the Directors have formed a judgement
at the time of approving the financial statements that there is a
reasonable expectation that the Group has sufficient resources to
continue in operational existence for the foreseeable future. For
this reason the Directors consider the adoption of the going
concern basis in preparing the Group financial statements is
appropriate.
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 2014, 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 2014 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 2013 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 2013
have been delivered to the Registrar of Companies. The 31 March
2014 accounts were approved by the Directors on 15 August 2014, but
have not yet been delivered to the Registrar of Companies.
4. Earnings per share
The basic loss per Ordinary share of 27.09 US cents (2013: loss
of 17.53 US cents) is calculated on the loss of the Group of
US$1,309,000 (2013: loss of US$847,000) and on 4,832,778 (2013:
4,832,778) equity shares, being the number of shares in issue
during the year. Of this, 17.03 US cents (2013: 67.43 US cents) is
calculated on the loss from continuing operations, whilst a loss of
10.06 US cents (2013: earnings of 49.90 US cents) results from
discontinued operations.
The diluted earnings per share is not materially different from
the basic earnings per share. 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
During the year ended 31 March 2013, the Group settled a dispute
with St Jude Medical, a key US customer. A consequence of that
settlement was the effective transfer of the US manufacturing
facility to St Jude Medical. The Directors considered, at that
time, that the St Jude transaction and related asset disposal did
not constitute a discontinued operation under the definition in
IFRS 5.
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 Income Statement.
Comparative figures have been adjusted accordingly.
The results of the discontinued manufacturing operations are
shown in more detail below.
Pre-exceptional Pre-exceptional
items Exceptional items items Exceptional items
Total Total
2014 2014 2014 2013 2013 2013
$000 $000 $000 $000 $000 $000
Revenue 245 - 245 1,492 1,990 3,482
Other income 13 - 13 227 2.271 2,498
Cost of sales (211) - (211) (1,268) (786) (2,054)
Administrative
expenses (537) - (537) (1,233) (420) (1,653)
Profit on
disposal of
property,
plant and
equipment 4 - 4 - 138 138
------------------ ------------------ ------- ------------------ ------------------- -------
Operating
(loss) /
profit (486) - (486) (782) 3,193 2,411
------------------ ------------------ ------- ------------------ ------------------- -------
Notice of Annual General Meeting
Notice of the seventeenth 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 Monday, 29 September 2014 at
11:00am.
Posting and availability of accounts
The annual report and accounts for the year ended 31 March 2014
will be sent by post to all registered shareholders on 26 August
2014. 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.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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