7 Aug 2015 07:00
AorTech International plc
("AorTech", "the Company" or "the Group")
Audited results for the year ended 31 March 2015
AorTech International plc (AIM: AOR), the biomaterials and medical device IP company, today announces its results for the year ended 31 March 2015.
Financial summary
· Group revenue from continuing operations doubled from previous year to US$844k
· Operating profit of US$81k (2014: US$440k loss) before amortisation costs and exceptional items
· Loss from continuing operations more than halved from US$823k to US$326k
Other developments
· Continuing reduction in administrative expenses, following completion of exit from US
· Consideration being given to capitalising on existing IP and experience of past development work to create Polymer Heart Valves
· Share Capital reorganisation proposed
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
Jonny Franklin-Adams/ Giles Rolls Tel: +44 20 7220 0500
A copy of this announcement will be available at www.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™ 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 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™ 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
I am pleased to report that in the financial year to 31 March 2015 we experienced an improvement in the business with revenues and other income more than doubling from $419,000 to $857,000. The administrative expenses in operating the business before the costs of the litigation fell from $859,000 to $776,000, resulting in a net profit before exceptional items and IP amortisation of $81,000. Exceptional costs relating to the litigation against Frank Maguire and related parties amounted to $204,000 which compares to the cost incurred at the 6-month stage of $212,000, the reduction in the second half of the year being a further recovery from our insurers net of the excess on the insurance policy payable by AorTech. Over the course of the year, the cash position fell from $642,000 to $360,000. At the interim stage however, the cash position stood at $335,000 and there has therefore been progress during the second half.
Litigation
As previously reported in our interim accounts and in our recent update to shareholders released on 16 April 2015, the Company continues to pursue a legal action against the former CEO Frank Maguire. This litigation has been extended and has commenced against Foldax, the Company of which Mr Maguire is presently CEO, together with other associated parties. This litigation which was started in California has now been transferred to Utah to sit alongside the case against Frank Maguire. As previously announced, Mr Maguire has made a counter claim for alleged non-payment of expenses amounting to $168,000.
No provision has been made in these financial statements for any potential gains or losses as the action has not progressed sufficiently.
Your Board continues to pursue this action against Mr Maguire, Foldax and other connected parties in order to protect the interests of AorTech and its shareholders.
Biomerics Manufacturing Licence
As reported in last year's Accounts, a licence with Biomerics LLC was concluded for the manufacture and distribution of AorTech's Elast-Eon™ materials.
We expressed some disappointment in the progress of this licence in our 2014 Interim Results but I am now pleased to confirm that there has been progress on the contractual relationship between AorTech and Biomerics with an amendment to the original agreement concluded since the year end. This amended agreement incorporates several commercial changes including further capital expenditure by both companies. AorTech's capital expenditure commitment will be paid from future royalties.
The further positive news on this agreement is the commitment of a long term supply of Elast-Eon™ to one of AorTech's major licensees together with further enquiries from other potential customers regarding receiving supplies of Elast-Eon™.
Other Licensees
I am pleased to report, as demonstrated in the growth of AorTech's revenue, the continued increase of royalties from existing licensees. The licensees who have achieved commercialisation are continuing to see increased sales which should in turn result in increased royalties to AorTech.
Those licensees who have yet to achieve full commercialisation are continuing the development of their products through the Regulatory process. It is important to recognise that AorTech's future success is dependent upon the continued growth and success of its licensees.
In AorTech's Interim results of 30 September 2014 we reported that there was a balance due from a licensee of $175,000 which had not been provided against since a Blue Chip Company had a secondary obligation in respect of this debt. The debt has subsequently increased to $275,000. Since the year end AorTech has received a lump sum settlement from the Blue Chip Company in order to have it released from its secondary obligation. No provision has been made against this debt in these accounts but should AorTech's action for
recovery of the debt not be fully successful, any under recovery will be effectively offset in cash terms against the settlement figure received since the year end.
Cash
As previously indicated, although cash fell from $642,000 to $360,000 during the year, there was an improvement in cash in the second half.
In order to achieve this financial position your Board has had to rigorously monitor and control overheads and, indeed, Directors' salaries have been maintained at a reduced level and in certain instances Directors' salaries have been deferred.
I am pleased to report that the Company's cash position has increased since the financial year end and anticipate that the Company should be cash flow positive during the current financial year 2015/2016.
Heart Valve
Now that the polymer licensing business has been stabilised and has some positive momentum, we have been able to spend time and resource in reviewing exactly where AorTech stands with the Heart Valve project. Over the years, there have been three major development phases of the polymer heart valve. The first attempt was some 13 years ago when AorTech undertook the development itself. This attempt failed when a non-regulatory trial in juvenile sheep had a very disappointing conclusion. The valve was redesigned to change the stress profile on leaflets and the manufacturing process revised to ensure a better quality leaflet finish. The new design was licensed to a large medical device Company that undertook its own rigorous testing. The data from these tests remain the property of that licensee but the overall results were very encouraging. Unfortunately, the licensee did not pursue the project as we understand all their valve R&D efforts were being diverted to their trans-catheter project. A second major license was entered into in 2007 and was taken back in late 2011. During the course of this license, further design changes were made and a range of durability and animal trials undertaken. Much of the testing work was positive although there were also some adverse issues which arose.
From the review of the history of the Heart Valve project it is apparent that, despite these adverse issues, there are many positive results that indicate the exciting potential in AorTech's polymer heart valve. The recent development and early introduction of a TAVI valve into the heart valve market provides exciting new possibilities for the introduction of a heart valve made from a polymeric material. The root causes of the failures are now well understood and taking the positive aspects from all three projects suggests that replicating previous trials would get a positive outcome for both In Vitro and In Vivo testing. To reach the stage of human trials, all of the testing carried out to date will need to be redone under regulatory conditions which would require quality and manufacturing systems of a substantially higher standard than when AorTech manufactured valves for testing in the past. Seeking any subsequent deal with an industry major would require successful data from the above trials.
The opportunity for the Polymer Heart Valve remains the durability of a mechanical valve with the hemodynamics of a tissue valve. Cost of manufacture would be considerably lower than other prosthetic valves and the leaflet technology would be perfect for TAVI.
AorTech's technology, know-how and IP in the Polymer Valve area is only one of the ingredients required for success. The two other key inputs are people with the necessary Quality, Regulatory, Clinical and Manufacturing experience together with access to capital. In order to capitalise on the development work of the last 15 years for the benefit of AorTech shareholders, we are considering whether there is the opportunity of bringing a team together with the necessary experience and track record in the device industry that could be supported by external finance.
Share Capital Reorganisation
The Company's shares are currently trading at a price significantly below their nominal value of 250 pence per share. At the close of trading on 5 August 2015 the Company's Closing Price was 25.5 pence per Existing Ordinary Share. Accordingly, subject to Shareholder approval at the Company's AGM which is expected to be held on 24 September 2015, the Directors propose to reorganise the Company's share capital as explained below, with a view to reducing the nominal value of the Existing Ordinary Shares.
Pursuant to the Share Capital Reorganisation, it is proposed that each Existing Ordinary Share with a nominal value of 250 pence will be sub-divided and redesignated into one Ordinary Share of 5 pence and one Deferred Share of 245 pence.
Following the Share Capital Reorganisation each Shareholder will hold the same number of Ordinary Shares that he or she held immediately beforehand, with a nominal value per Ordinary Share of 5 pence.
The Ordinary Shares resulting from the Share Capital Reorganisation will have exactly the same rights as those currently accruing to the Existing Ordinary Shares under the Articles, including those relating to voting and entitlement to dividends.
The Deferred Shares will have very limited rights and will effectively be valueless. They will have no voting rights and will have no rights as to dividends and only very limited rights on a return of capital. They will not be admitted to or listed on any stock exchange and will not be freely transferable. The rights attaching to the Deferred Shares are set out in the Articles as amended pursuant to resolution 7 to be passed at the AGM. The amendments to the Articles are being made principally to set out the rights attaching to the Deferred Shares.
Resolution 8 contained in the Notice of General Meeting at the end of this document will, if passed by Shareholders, effect the proposed Share Capital Reorganisation as detailed above. If approved, the Share Capital Reorganisation will take place at 6pm on 24 September 2015. Application will be made to the London Stock Exchange for the admission to trading and dealings on AIM in the new Ordinary Shares arising from the Share Capital Reorganisation, becoming effective at 8am on 25 September 2015.
The Company does not propose to issue new share certificates to the existing Shareholders as a result of the Share Capital Reorganisation. The existing share certificates which have been issued to the Shareholders in respect of their holdings of Existing Ordinary Shares will remain valid in respect of the New Ordinary Shares following completion of the Share Capital Reorganisation.
CREST accounts of Shareholders will not be credited in respect of any entitlement to Deferred Shares.
Loan Notes
In October 2012 the Company issued Loan Notes to obtain the necessary funding to allow it to continue to operate. The Loan Note holders still have the right to receive from the Company a payment of a sum equal to 15% of sums paid to shareholders on a Change of Control. Resolution 9 being proposed at the AGM seeks shareholder approval for the Board to take all necessary steps to allow the Company to allot shares in exchange for the surrender of these rights. 8.26% of the Loan Notes are owned by Directors or their connected parties. Bill Brown and Eddie McDaid, and connected parties, will therefore abstain from voting on this resolution.
Recommendation
Gordon Wright, acting as an independent Director, believes resolution 9 to be in the best interests of the Company and the Shareholders as a whole and recommends you to vote in favour of that resolution as he intends to do in respect of his beneficial holdings amounting, in aggregate, to 308,311 Existing Ordinary Shares representing 6.38 per cent of the existing total voting rights. As noted above, Bill Brown and Eddie McDaid, and connected parties, will abstain from voting on this resolution.
Your Board believes resolutions 7 and 8 to be in the best interests of the Company and the Shareholders as a whole. Accordingly, the Directors unanimously recommend you to vote in favour of those Resolutions to be proposed at the General Meeting. All of the Directors intend to vote in favour of Resolutions 7 and 8 in respect of their beneficial holdings, amounting, in aggregate, to 667,632 Existing Ordinary Shares, representing 13.81 per cent, of the existing total voting rights.
Roy Mitchell
During the past year Roy served as finance director and his contribution was invaluable to the Company during that time. His forensic analysis of documentation provided additional evidence and support in AorTech's litigation action. I wish, on behalf of the Board, to thank Roy for his expertise and contribution during these past twelve months.
Conclusion
Despite the time and commitment required in the litigation action, the past year has been one of relative success. Revenue from license fees and royalties are now greater than overheads, the Company was cash positive in the second half of the year, progress is being made with our key licensees and we expect the year 2015/16 to be one of further progress.
Bill Brown
Chairman
6 August 2015
Consolidated income statement
|
|
Year ended 31 March 2015 |
Year ended 31 March 2014 | ||||
|
| 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 | 844 | - | 844 | 418 | - | 418 |
Other income |
|
13 |
- |
13 |
1 |
- |
1 |
Administrative expenses |
|
(776) |
(204) |
(980) |
(859) |
(83) |
(942) |
Other expenses - amortisation of intangible assets |
11 |
(332) |
- |
(332) |
(241) |
- |
(241) |
Operating (loss) / profit |
3 |
(251) |
(204) |
(455) |
(681) |
(83) |
(764) |
Finance income / (expense) |
8 |
- |
129 |
129 |
- |
(59) | (59) |
Loss from continuing operations attributable to owners of the parent company |
5 |
(251) |
(75) |
(326) |
(681) |
(142) |
(823) |
Loss from discontinued operations |
17 |
(44) |
- |
(44) |
(486) |
- |
(486) |
Loss attributable to owners of the parent company |
|
(295) |
(75) |
(370) |
(1,167) |
(142) |
(1,309) |
Loss per share |
|
|
|
|
|
|
|
Basic and diluted (US cents per share) |
10 |
|
|
(7.66) |
|
|
(27.09) |
Consolidated statement of comprehensive income
|
| Year ended 31 March 2015 |
| Year ended 31 March 2014 |
|
| US$000 |
| US$000 |
Loss for the year |
| (370) |
| (1,309) |
Other comprehensive income: |
|
|
|
|
Exchange differences on translating foreign operations |
| 17 |
| (51) |
Income tax relating to other comprehensive income |
| - |
| - |
Other comprehensive income for the year, net of tax |
| 17 |
| (51) |
Total comprehensive income for the year, attributable to owners of the parent company |
| (353) |
| (1,360) |
|
|
|
|
|
No items of other comprehensive income can be subsequently reclassified to profit and loss
Consolidated balance sheet
|
|
|
|
|
| |
|
|
| 31 March 2015 |
| 31 March 2014 | |
|
|
| US$000 |
| US$000 | |
| Notes |
|
|
|
| |
Assets |
|
|
|
|
| |
Non current assets |
|
|
|
|
| |
| Intangible assets | 11 |
| 1,546 |
| 1,861 |
| Trade and other receivables | 14 |
| - |
| 300 |
Total non current assets |
|
| 1,546 |
| 2,161 | |
Current assets |
|
|
|
|
| |
| Inventories | 12 |
| - |
| 46 |
| Trade and other receivables | 14 |
| 737 |
| 401 |
| Cash and cash equivalents | 15 |
| 360 |
| 642 |
Total current assets |
|
| 1,097 |
| 1,089 | |
Total assets |
|
| 2,643 |
| 3,250 | |
Liabilities |
|
|
|
|
| |
Current liabilities |
|
|
|
|
| |
| Trade and other payables | 16 |
| (192) |
| (306) |
|
|
|
|
|
|
|
Total current liabilities |
|
| (192) |
| (306) | |
Non current liabilities |
|
|
|
|
| |
Change of control redemption premium | 16 |
| (53) |
| (193) | |
Total non current liabilities |
|
| (53) |
| (193) | |
Total liabilities |
|
| (245) |
| (499) | |
Net assets |
|
| 2,398 |
| 2,751 | |
Equity |
|
|
|
|
| |
| Issued capital | 20 |
| 17,937 |
| 20,144 |
| Share premium | 20 |
| 3,474 |
| 3,901 |
| Other reserve |
|
| (2,974) |
| (3,340) |
| Foreign exchange reserve |
|
| 6,076 |
| 3,791 |
| Profit and loss account |
|
| (22,115) |
| (21,745) |
Total equity attributable to equity holders of the parent |
|
| 2,398 |
| 2,751 | |
|
|
|
|
|
|
|
The Consolidated financial statements were approved by the Board on 6 August 2015 and were signed on its behalf by
W D Brown, Chairman and E McDaid, Director
Company number SC170071
Consolidated cash flow statement
|
|
|
| |
|
| Year ended 31 March 2015 |
| Year ended 31 March 2014 |
|
| US$000 |
| US$000 |
Cash flows from operating activities |
|
|
| |
| Group loss after tax | (326) |
| (823) |
Adjustments for: |
|
|
| |
| Amortisation of intangible assets | 332 |
| 241 |
| Finance (income) / expense | (129) |
| 59 |
| Increase in trade and other receivables | 36 |
| 102 |
| (Decrease) / increase in trade and other payables | (254) |
| 69 |
Net cash flow from continuing operations | (341) |
| (352) | |
Net cash flow from discontinued operations | 2 |
| 312 | |
Net cash flow from operating activities | (339) |
| (40) | |
Cash flows from investing activities |
|
|
| |
| Purchase of intangible assets | - |
| (439) |
Net cash flow from continuing operations | - |
| (439) | |
Net cash flow from discontinued operations | - |
| - | |
Net cash flow from investing activities | - |
| (439) | |
Cash flows from financing activities |
|
|
| |
Interest paid | - |
| - | |
Proceeds from issue of loan notes | - |
| - | |
Repayment of loan notes | - |
| - | |
Redemption premium paid to loan note holders | - |
| - | |
Net cash flow from financing activities | - |
| - | |
Net decrease in cash and cash equivalents | (339) |
| (479) | |
Foreign exchange movements on cash held in foreign currencies | 57 |
| 134 | |
Cash and cash equivalents at beginning of year | 642 |
| 987 | |
Cash and cash equivalents at end of year | 360 |
| 642 | |
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 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 | ||||
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 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of preparation
The Consolidated financial statements are for the year ended 31 March 2015. They have been prepared in compliance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRIC) interpretations as adopted by the European Union as at 31 March 2015.
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 2021, the Directors have formed a judgement at the time of approving the financial statements that there is a reasonable expectation that the Group has sufficient resources to continue in operational existence for the foreseeable future. For this reason the Directors consider the adoption of the going concern basis in preparing the Consolidated financial statements is appropriate.
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 2015, 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 2015 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 2014 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 2014 have been delivered to the Registrar of Companies. The 31 March 2015 accounts were approved by the Directors on 6 August 2015, but have not yet been delivered to the Registrar of Companies.
4. Earnings per share
The basic loss per Ordinary share of 7.66 US cents (2014: loss of 27.09 US cents) is calculated on the loss of the Group of US$370,000 (2014: loss of US$1,309,000) and on 4,832,778 (2014: 4,832,778) equity shares, being the number of shares in issue during the year. Of this, 6.75 US cents (2014: 17.03 US cents) is calculated on the loss from continuing operations, whilst a loss of 0.916 US cents (2014: loss of 10.06 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
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 |
| 2015 | 2015 | 2015 |
| 2014 | 2014 | 2014 |
| $000 | $000 | $000 |
| $000 | $000 | $000 |
Revenue | - | - | - |
| 245 | - | 245 |
Other income | - | - | - |
| 13 | - | 13 |
Cost of sales | (44) | - | (44) |
| (211) | - | (211) |
Administrative expenses | - | - | - |
| (537) | - | (537) |
Profit on disposal of property, plant and equipment |
- |
- |
- |
|
4 |
- |
4 |
Operating (loss) / profit | (44) | - | (44) |
| (486) | - | (486) |
Notice of Annual General Meeting
Notice of the eightteenth 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 Thursday, 24 September 2014 at 11:00am.
Posting and availability of accounts
The annual report and accounts for the year ended 31 March 2015 will be sent by post to all registered shareholders on 25 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.