TAKE A LOOK AT LOMBARD MEDICAL - I'M IN 2 IT

-->Mr Pye
If you have concerns about the accounts audited by PWC you could, on a show of hands at the AGM, vote against them. The directors have no votes and LMT have one vote to be cast on proxy by the Chairman. Whilst the minorities have many hands. Of course it would be a futile gesture since LMT would then win on a count of shares.

Acquisition of Lombard Medical PLC by Lombard Medical Technologies PLC
On 27 May 2003, the Company’s offer for the issued share capital of Lombard Medical PLC became wholly unconditional and on closing the offer, 87% of the share capital and all of the convertible loan stock had been acquired. The Company subsequently carried out a further offer for subscription in which it subscribed for ordinary shares in Lombard Medical PLC, quarter paid up, taking its holding in Lombard Medical PLC to 94.4% of the issued share capital. The acquisition has been accounted for using the acquisition method of accounting and the minority interest in net liabilities has not been recorded as there is no obligation for the minority to fund this deficit.

The assets/(liabilities) acquired are as follows:
Book value and fair value...................£’000
Tangible fixed assets........................ 517
Intangible assets............................. 62
Unquoted investments ...................... 3,463
Stocks........................................ 93
Debtors ..................................... 381
Cash ........................................ 187
Creditors ................................ (1,241)
Loan notes.................................. (301)
Loans..................................... (3,342)
Net liabilities acquired................... (181)
Goodwill .................................. 2,224
Consideration.............................. 2,043
Satisfied by: Shares in Lombard Medical Technologies PLC; (note 23)
Ordinary shares recorded at nominal value.... 64
A preference shares recorded at fair value 1,359
...........................................1,423
Acquisition expenses paid .................. 620
Total......................................2,043

As part of the acquisition, £2,500,000 of convertible loan stock in Lombard Medical PLC was exchanged for 62,500,000 A preference shares of 1 pence in Lombard Medical Technologies PLC, giving an allotment value per share of 4 pence. These shares have been fair valued at £1,359,000, based upon cash subscriptions for A preference shares made in June 2003 (note 23).

Disposals
On 8 July 2003, the Group sold AME Medical Limited and DMC Medical Limited for £1 of consideration. The loss on disposal of £157,000 arises from the disposal expenses including settlement of service agreements. In addition, goodwill of £5.9 million, which was previously amortised, has been eliminated. The disposed businesses contributed £3,261,000 to the Group operating loss in the period ended 30 September 2002 and £237,000 in the period ended 31 December 2003.

Group restructuring In October 2004, a group restructuring took place which resulted in the Company acquiring the subsidiary investments held by Lombard Medical PLC, a 94.4% subsidiary at that date, for £25.1 million. The consideration for increasing the Company’s interest in the trading activity of the Group from 94.4% to 100% was satisfied through an intra-group loan, of which £1,398,000 relates to the minority shareholdings (see note 28). This has been treated as an increase in goodwill.

Under the loan agreement, interest accrues at the rate of 4% per annum on the amount outstanding of the loan. Repayment becomes immediately due and payable upon demand, together with accrued interest, if:
(i) the Company becomes insolvent or other insolvency arrangements or events, including administration, occur; or
(ii) there is a sale of the Company or a flotation.
On a sale or flotation the sum of £25,100,000, or if the net sum equates to an entity value of less than £25,100,000 then an amount reduced pro rata to equate to such value is the amount of the outstanding loan.