AOR.L Regulatory News (AOR)

AorTech International Plc ("Aortech" or the "Company")

Shareholder Update

Introduction

In December 2012 we announced our interim results and the resolution of the dispute with St Jude Medical, Inc. ("St Jude"). Your Board believes that now is an appropriate time to update shareholders on developments since that time and the strategy for the Company going forward.

St Jude Transition arrangements

The agreement with St Jude envisaged the manufacturing facility in Rogers transferring to St Jude at the end of March 2013 and I am pleased to confirm that this has been concluded satisfactorily together with the transfer of the majority of our US employees.

In addition all payments due by St Jude under the agreement have now been made including the final $500,000 retention which was paid in April 2013.

During the period December 2012 to March 2013 AorTech continued to operate the Rogers facility producing Polymer for customers excluding St Jude and during the said period St Jude were responsible for the factory's operating costs. The balance of inventory produced during this period is held on a consignment basis and is available for delivery to customers during the remainder of this calendar year.

AorTech has, with effect from 1st April 2013, retained access to the Rogers customer application laboratory until the 31st December 2013 to enable the Company to manufacture small batches of customer material and development products.

It should be noted that AorTech has effectively ceased manufacturing volume material and, as a result, there has been a significant reduction in the Company's costs and overheads in the US.

Business Strategy

In our strategic review last year we identified that the key value driver for the Company was its Intellectual Property comprising material patents and the critical know-how to the manufacturing process.

It was also identified, however, that seeking to achieve a commercial return through volume manufacturing neither recognised nor provided a satisfactory commercial return for the Company's Patents and IP.

As a result, AorTech has focused on generating income from Patent and IP related revenue streams such as milestones payments, licence fees and royalties from customers who incorporate our material into their product line.

 We have been actively engaged and continue to be engaged with our customers in restructuring agreements to provide AorTech with future revenues, achieved mainly from royalties.

Your Board continues to examine the potential for achieving a satisfactory return to shareholders on the basis of realising appropriate value for its Polymer business, Patents and IP. However, notwithstanding this potential, your Board is determined to achieve a future revenue stream to enable the company to achieve profitability together with positive cash flow.

The business strategy outlined above provides the basis for AorTech to develop profitably as an IP business with attractive future royalty potential. This strategy does not however preclude the option for the Polymer business to become part of a larger business with the resources to further develop the reach and penetration of the IP into the wider medical devices sector.

Current Financial Position

The cash position of the Company at 30th April 2013 was $1.3 million which is stated after the receipt of the final $500,000 received from St Jude during that month. This cash position is also after having repaid approximately $3.75 million to the loan note holders in February 2013 and, with the exception of the fifteen per cent "carried interest", there are no further payments due to the loan note holders

I would also emphasise that in addition to reducing costs significantly in the US your Board has also taken steps to reduce costs in the UK.

Loan Notes

The Company was in a precarious financial position in October 2012 and the proceeds of the loan notes issued at that time enabled the Company to continue trading and, in particular, pursue its action against St Jude Medical which concluded with an agreed settlement in December 2012.

The loan note, by necessity, was expensive. However I trust shareholders will agree that the ultimate cost of a fifteen per cent dilution was cost effective.

Further to my earlier statement in December 2012 and following the Board's review, your Board intends to issue shares in the company to loan note holders to the extent of fifteen per cent. This would require approval at a future shareholders meeting.

Syncardia Dispute

In March of this year we announced the commencement of legal proceedings to recover approximately $2million in respect of sums due to AorTech from Syncardia Inc.

The Syncardia contract calls for disputes to be heard under arbitration procedures and our legal advisors in the US are liaising with Syncardia's legal team to appoint a judge as an independent arbitor acceptable to both parties.

In addition, and in conjunction with the arbitration process, our attorneys are seeking to appoint a mediator which may achieve a resolution to the dispute at an earlier date.

We will update shareholders on this matter when we have further progress to report.

Heart Valve Project

Your Board are continuing to pursue potential partnerships to exploit our heart valve technologies. There are ongoing discussions with two specific parties and we will report to shareholders when there is any further progress.

Board Appointment

I am pleased to announce the appointment of Roy Walter Mitchell to the Board with immediate effect. Roy, age 57, will be a non-executive member of the Board and is a member of the Institute of Chartered Accountants of Scotland and the Chartered Institute of Taxation.

Roy's previous career includes two years as a non-executive director of AIM quoted company Corero plc and nine years with Man Group plc as the Group Tax Director. Roy will be a member of the Audit Committee at Aortech.

The following disclosures regarding Roy's appointment are required under Schedule 2 (g) of the AIM Rules for Companies:

During the last five years, Roy was a director of the following companies:

Roy Mitchell owns 335,163 ordinary shares in the Company which represents approximately 6.9% of the Company's issued share capital.

There are no further disclosures that are required in relation to Roy's appointment.

Results

I anticipate an announcement of the Company's results at the end of July 2013. 

Enquiries:

AorTech International plc

Bill Brown, Chairman

Tel: +44 (0) 7730 718296

finnCap

Stuart Andrews/Rose HerbertfinnCap as Nominated AdviserTel: 020 7220 0500