TIDMLMT
RNS Number : 8792P
Lombard Medical Technologies PLC
01 April 2009
Press Information
Lombard Medical Technologies PLC
Preliminary Results for the Year ended 31 December 2008
London, UK, 1 April 2009 - Lombard Medical Technologies PLC ("Lombard Medical",
"LMT" or "the Company"), the specialist medical device company, today announces
its results for the year ended 31 December 2008.
Operating Highlights
* Number of patients treated with Aorfix(TM) more than doubled to 347 in 2008
(2007: 163)
* Total worldwide implantations now exceed 800
* 500 commercial cases in voluntary registry (RADAR) show:
* Positive clinical results even in challenging patients
* Growing key opinion leader support in the medical community
* Good progress made with pivotal US trial for Aorfix(TM):
* FDA grant approval to increase the number of trial centres and implement an
improved training programme
* 77 patients recruited into the trial during 2008
* 38 centres trained and qualified to treat high-angle neck aneurysms
* European Aorfix(TM) trial in high-angle neck aneurysms completed and data
submitted to regulatory authority
* Aorfix(TM) launched in Russia
* Restructuring plan implemented:
* Headcount reduced to 88 at 31 December 2008 (2007: 109) and reduced further in
2009 to 58
* US trial for EndoRefix(TM) suspended pending further funding
Financial Highlights
* GBP8.1 million (GBP7.3 million net of expenses) raised in October 2008 and
January 2009 in addition to GBP7.6 million (GBP7.1 million net of expenses)
fundraising completed January 2008
* Revenues increase by 94% to GBP1.95 million (2007: GBP1.0 million)
* Significant improvement in gross margin to 43% (2007: 21%)
* Investment in R&D increased to GBP7.5 million (2007: GBP6.4 million)
* Other operating expenses excluding investment related items reduced by 10% to
GBP4.7 million (2007: GBP5.2 million)
* Year-end cash balance of GBP0.8 million (2007: GBP2.7 million)
* Current cash balance GBP4.8 million after GBP0.3 million restructuring costs in
Q1 2009
Brian Howlett, Chief Executive of LMT, commented:
"Despite challenging market conditions we succeeded in raising more than GBP15
million which is testament to the growing clinical support for our lead product,
the Aorfix(TM) stent graft. We also filed the ARBITER II trial data and
significantly increased the number of patients recruited into the Aorfix(TM) US
trial. Additionally, we made significant financial progress with revenues nearly
doubling, improved margins and a reduced cash burn."
Enquiries:
+-------------------------------------------------+-------------------------+
| Lombard Medical Technologies PLC | Tel: +44 (0) 1235 750 |
| Simon Neathercoat, Non-executive Chairman | 800 |
| Brian Howlett, Chief Executive Officer | |
| Tim Hall, Finance Director | |
+-------------------------------------------------+-------------------------+
| | |
+-------------------------------------------------+-------------------------+
| Financial Dynamics | Tel: +44 (0) 20 7831 |
| Jonathan Birt / Susan Quigley | 3113 |
+-------------------------------------------------+-------------------------+
| | |
+-------------------------------------------------+-------------------------+
| Nomura Code Securities Limited | Tel: +44 (0) 20 7776 |
| Juliet Thompson / Richard Potts | 1200 |
+-------------------------------------------------+-------------------------+
Notes to editors
About Lombard Medical
Lombard Medical Technologies PLC is a medical devices group developing stent
grafts and other medical products for use in the treatment of vascular disease.
The Company's lead product, Aorfix(TM), is an endovascular stent graft for the
treatment of abdominal aortic aneurysms (AAAs), a balloon-like enlargement of
the aorta which, if untreated, may rupture and cause death. Approximately 1.7
million people have AAAs in the US where it is the 13th largest cause of death.
The market for endovascular stent grafts for the treatment of AAA is currently
worth over $600 million and is expected to grow to around a $1 billion by 2010.
Aorfix(TM) is currently being commercialised in the EU, with a pivotal clinical
trial ongoing in the USA.
The Company's Polymer Coatings Division has developed a novel hydrophilic
surface treatment to reduce friction on catheters called GlideMax(TM), which is
available for licensing, and is using its polymer coating technology in a number
of research collaborations developing novel products for the $5 billion
drug-eluting stent market.
The Company is headquartered in Oxfordshire, with operations in Yorkshire,
Ayrshire and Boston, USA.
Further background on the Company can be found at www.lombardmedical.com.
Chairman's Statement
The rapid deterioration in the global economic climate during 2008 significantly
reduced the availability of capital for small, high growth, technology-led
companies like Lombard Medical that are not yet profitable due to heavy
investment in clinical trials. Against these difficult market conditions, the
Company has succeeded in raising a total of GBP15.7 million before expenses
since 1 January 2008. This is a clear endorsement of the potential for the
Company's lead product Aorfix(TM) which we believe will deliver significant
returns to shareholders.
Strategy
The Board's decision to focus the business entirely around Aorfix(TM) and
significantly reduce costs was also a major factor in the Company's ability to
raise funds. The restructuring of the business is now largely complete, with the
Group headcount now standing at 58 compared with 105 in October 2008.
Our strategic objectives for 2009 are as follows:
1. Unique label claim in Europe - to receive regulatory approval to widen the
existing label claim for Aorfix(TM) to include its use in patients with
significantly more complicated high-angle-neck aneurysms of up to 90 degrees;
2. European sales - to implement measures to maximise the opportunities for
increasing sales in Europe in conjunction with the enhanced label claim now
being sought;
3. US trial for Aorfix(TM) - to complete recruitment of the Aorfix(TM) US
trial anticipated for Q2 2009 and progress the PMA modular filings in line with
the objective of receiving FDA approval at the earliest opportunity and in any
event no later than Q1 2011; and
4. Commercialisation in the US - to continue discussions with industry
leaders to explore mutually beneficial opportunities for the commercialisation
of Aorfix(TM) in the US.
Completion of these objectives should provide significant news flow during 2009
which would result in a transformational year for the Company.
As part of our strategy to conserve cash, we decided to place the US trial for
the Company's endovascular stapling product, EndoRefix(TM), on hold. However,
this product continues to be a valuable asset and following the recent
termination of the financially unattractive distribution and licensing
agreements with Medtronic, Inc., the Company is free to seek alternative
partners to fund completion of the US trial and gain 510k approval in the USA.
Equally, the thoracic version of Aorfix(TM) remains a valuable asset. The
Company intends to resume its development as soon as funds become available
either through commercial arrangements for the AAA version of Aorfix(TM) in the
US or from a development partner.
Employees
2008 was an extremely challenging year and I believe that it is not an
overstatement to say that the Company would not have survived without the
dedication and perseverance of my fellow Board members, senior management and
employees. On behalf of the Board I thank all our employees for their commitment
during the year and, in particular, the majority of employees who voluntarily
worked fewer hours or deferred 20% of their pay during November and December as
the Company sought to raise funds. Furthermore, to those loyal employees that we
have had to make redundant, may I thank them for their service to the Company
and wish them every success in the future.
There will be further challenges in 2009 I am sure, but, with a lean and
dedicated workforce, I believe that the Company is well placed to meet these and
also fulfil its objectives.
Simon Neathercoat FCA
Non-executive Chairman
Business Review
Against a backdrop of challenging market conditions, we have succeeded in
raising more than GBP15 million before expenses since 1 January 2008. These
funds will allow us to complete recruitment of our US trial for Aorfix(TM) and
progress its commercialisation in Europe. Trials for Aorfix(TM) are progressing
well; we have filed the ARBITER II trial data and significantly increased the
number of patients recruited into the US trial. Additionally, the Company has
made significant progress with revenues nearly doubling to GBP1.95 million.
Total worldwide implantations now exceed 800 and clinicians are favourably
impressed with the outcomes, notably in anatomies where competing devices have
been prone to migration or endoleaks. Lombard encourages all implanters to post
their results into a voluntary, all uses clinical registry. Since the first use
of Aorfix(TM) in 2003, the Retrospective Aorfix(TM) Data Retrieval Registry
(RADAR) shows 500 commercial cases registered. Clinical results from the
registry combined with data from the clinical studies show that Aorfix(TM)
achieves impressive shrinkage of the aneurysm sac and freedom from migration,
good clinical event and mortality rates and low endoleak rates at up to four
years. The changes to the organisation over the last few months, although
painful to implement, have significantly reduced the Company's cash burn giving
it more funds to spend on the main value driver for the Company, Aorfix(TM).
Aorfix(TM) US Clinical Trial
Obtaining US regulatory approval for Aorfix(TM) is the single most important
value driver for the Company as the US is the largest market for endovascular
AAA repair ("EVAR"), estimated to be worth approximately $440 million and
growing at around 10% per annum.
The US trial received a significant boost with FDA approval to increase the
number of trial centres and to allow cadaver-based training. During 2008, 77
patients were recruited into the pivotal US trial for Aorfix(TM) (PYTHAGORAS)
and the number of centres trained and qualified to treat high-angle neck
aneurysms increased to 38 by the end of the year from 8 at the beginning. The
Company's financial position in the months immediately prior to the fundraising
in January 2009 had a detrimental impact on trial recruitment rates. The Company
had to limit visits to centres in order to conserve cash and clinicians became
concerned as to whether the Company would have sufficient funds to follow-up
with patients. Since announcing the fundraising in January 2009, the Company has
worked hard to regain momentum in trial recruitment and the current pipeline of
patients is growing satisfactorily. The Company has already reached the data
submission requirement of 40 cases with neck angulations of less than 60 degrees
and the 60 open surgery control patients. With the recruitment rate
accelerating, the Company is now focussed on reaching the data submission
requirement of 120 high-angle neck cases by mid 2009. At present this means that
the Company is aiming to enrol around 40 high-angle neck patients in the next
three months. The Company will continue to recruit patients into PYTHAGORAS up
to the maximum allowed of 200 under the IDE in order to expand its clinical
database and to allow for any patients lost during the 12-month follow-up
period.
The number of patients recruited into the open surgery control arm currently
stands at 61 which exceeds the data submission requirement of 60 patients.
However, a further 14 patients will be recruited into this arm of the trial to
cover any patients lost during the year-long follow-up period.
At an international symposium in New York, the Principle Investigator of the
trial, Dr Mark Fillinger MD of Dartmouth Hitchcock Medical Centre ("DHMC") New
Hampshire, USA, commented on DHMC's experience with Aorfix(TM) stating that all
cases performed had been a technical and clinical success, with no
device-related endoleaks (at 1 month) or migration; no secondary interventions;
excellent aneurysm sac regression rates; and good implant control, even in quite
difficult anatomy.
Aorfix(TM) Commercialisation
Under US regulation the Aorfix(TM) device is classified as eligible for
reimbursement at investigational enrolling centres and with the number of
patients recruited into the trial increasing to 77 in 2008 (2007: 28), US
revenues increased accordingly reaching GBP490,000 in 2008 (2007: GBP166,000).
Outside the US, Aorfix(TM) sales increased by 47% to GBP1.1 million (2007:
GBP766,000). However, the 2007 figures include significant sales of stock, in
particular to the Company's previous Italian distributor, and the underlying
growth was much stronger, with the number of Aorfix(TM) implants doubling from
135 in 2007 to 270 in 2008.
In the UK, where Aorfix(TM) is marketed directly through the Company's own sales
force, the number of Aorfix(TM) implants increased 92% to 94 (2007: 49) and
sales increased by 98% to GBP446,000 (2007: GBP225,000). This growth was
achieved in the face of increased competition following the launch of
Medtronic's Endurant stent graft and despite the need to reduce marketing
expenditure in the fourth quarter.
In Continental Europe and surrounding regions, the number of Aorfix(TM) implants
more than doubled to 143 in 2008 from 67 in 2007. Growth was particularly strong
in Eastern Europe, helped by regulatory approval of Aorfix(TM) in Russia in
November 2008.
ARBITER II Trial in Europe
Recruitment to this trial, to widen the label claim for Aorfix(TM) in Europe to
include patients with aneurysm neck angulations of up to 90 degrees (ARBITER
II), was completed in September 2008. Follow-up data has subsequently been
submitted to the Company's notified body, TÜV, with regulatory approval expected
in Q2 2009.
Growing Clinical Support for Aorfix(TM)
The RADAR clinical registry now includes data on over 610 cases. This clinical
registry is an important element of the Company's post marketing surveillance of
the performance of Aorfix(TM) in the market place. RADAR data is also used in
the marketing of Aorfix(TM) with such data being presented at major congresses
during the year. At the Cardiology and Interventional Radiology Society of
Europe (CIRSE) congress in September 2008, Mr Jan Macierewicz, a vascular
surgeon from Doncaster Hospital, UK, presented data from RADAR including data
from patients with one year follow-up (N=57). The data showed no incidence of
procedure-related mortality, aneurysm rupture, graft migration, wire fracture or
graft occlusion (i.e. 100% graft patency) and just one (1.8%) device-related
endoleak (Type Ia). Mr Jan Macierwicz concluded that "Aorfix(TM) has good
clinical outcomes in terms of clinical events, mortality rate, endoleak,
migration and fracture for up to 36 months."
At the Veith Symposium in New York in November 2008, Professor Brian Hopkinson
of The University of Nottingham, described the breadth and depth of experience
that has been gained with the Aorfix(TM) implant. He showed recent X-ray images
of a patient who has been successfully treated for an angled and tortuous AAA,
six years after receiving implantation of the Aorfix(TM) device in 2002.
Hopkinson went on to describe Lombard Medical's multi-centre European study,
performed in Greece, Poland and Austria, which began in 2003 and is now
providing data 4 years post-implantation. The study shows that Aorfix(TM)
provides significant annual shrinkage (8% to 16%) of the aneurysm sac with no
migration of the device.
Commenting on Aorfix(TM), Professor Hopkinson said:
"With more than six years' implantation experience behind the product, and
positive feedback across a wide spectrum of countries and patients, Aorfix(TM)
is increasingly the treatment of choice for specialists in this field. Extreme
angulation is handled with results equally as good as more standard anatomy,
leaving little doubt about the product's ability to successfully treat both
standard and severely angled AAAs."
Further presentations were given at CIRSE by Dr Petr Varejka from
University Hospital, Prague and Dr John Hardman from the Royal United Hospital
in Bath on their positive experiences with Aorfix(TM), especially in those
patients with tortuous anatomy.
Aorfix(TM) Manufacture
The need to build stock, provide large numbers of demonstration devices for
physician training in the US and service a growing demand for commercial product
placed significant demands upon the production team in Didcot during 2008.
However, the team met these challenges and introduced a number of minor changes
to the production process during the year that have improved production
efficiency and increased potential capacity. Expanding the production area at
the Company's Didcot facility through the lease of warehouse space in the
adjoining building has allowed for a more efficient organisation of stores,
goods inwards and despatch making the Company better able to handle the growing
volume of commercial transactions.
The clean room at the Company's facility in Prestwick ("Culzean") has been
upgraded so that it can be used to produce stent grafts for commercial sale and
to accommodate Culzean's growing contract manufacturing business. In 2008,
revenues from this business reached GBP240,000 (2007: GBP70,000) and provided a
useful contribution to the site overheads. Culzean has also been involved in the
design, development and production of new grafts to expand the Aorfix(TM) size
range. However, with this project currently on hold to conserve cash to
implement our core Aorfix(TM) AAA plans, it will focus more on the supply of
stent grafts for commercial use during 2009.
Organisation
The revised strategy to focus the Company's limited resources entirely around
its lead product, Aorfix(TM) has resulted in significant changes to the
organisation. The number of people employed by the Group has been reduced from
109 at 31 December 2007 to just 58 today. Having developed a more efficient
manufacturing process and taken the decision to halt further development work on
EndoRefix(TM) and the Company's thoracic endovascular stent graft it became
possible in November 2008 to reorganise the Company's production and development
staff. This reorganisation accounted for the majority of the reduction in
headcount of 21 during 2008. In 2009, there has been further rationalisation and
refocusing of our operations resulting in an additional reduction in headcount
of 30. This restructuring, which has led to many remaining employees taking on
new roles and responsibilities, has occurred without disruption to our core
business activities in 2009.
EndoRefix(TM)
One consequence of the revised strategy is that the Company cannot currently
commit funds to the completion of the US trial for its endovascular stapling
product EndoRefix(TM). This study, designed to demonstrate the safety and
efficacy of the delivery system to allow implantation of the staple in
endovascular procedures, was suspended in December 2008 after 63 patients had
been enrolled out of a total requirement of 95 patients. In March 2009, the
financially unattractive distribution and licensing agreements with Medtronic
Inc. were terminated by mutual consent.
This US trial will remain on hold until the Company has secured an alternative
method of funding the remainder of the trial.
Polymer Coatings Division ("PBM")
Despite having a number of exciting technologies, the Polymer Coatings Division
is considered by the Board to be a non-core business. Rigorous measures have
been taken to streamline the division with the headcount reduced by more than
50%. Having restructured the Company to be cash neutral in the near term (other
than for unavoidable costs) with the possibility of some upside from contracts
currently under negotiation, the Board is now reviewing options for maximising
value from this business within the next three months.
Outlook
LMT has emerged from a difficult period as a more commercially focussed and
leaner organisation. With a strengthened financial position and rapidly
increasing awareness among physicians of the unique benefits of Aorfix(TM), we
believe Lombard is well positioned in the large and growing market for
endovascular AAA repair and this augurs well for the future growth of the
Company.
Brian Howlett
Chief Executive Officer
Finance Director's Report
Revenue
Total revenues increased 94% to GBP1,953,000 (2007: GBP1,007,000). Sales of
Aorfix(TM) increased by 78% and represented 83% of total revenues at
GBP1,621,000 (2007: GBP912,000). The underlying growth in the Aorfix(TM) market,
as measured by the number of Aorfix(TM) implants performed, was significantly
greater than the reported sales growth due to the sale of stock to distributors
in 2007 with Aorfix(TM) implants more than doubling from 163 in 2007 to 347 in
2008.
Contract manufacturing and service revenues from Culzean, acquired in June 2007,
increased strongly to GBP240,000 (2007: GBP69,000) as its main client launched a
product manufactured by Culzean in the US.
Other revenues of GBP92,000 (2007: GBP26,000) included GBP65,000 (2007:
GBP5,000) of licence and contract development fees earned by the Group's Polymer
Coatings Division.
Gross Profit
The gross profit for the year increased almost fourfold to GBP844,000 (2007:
GBP214,000). The gross margin of 43.2% (2007: 21.2%) increased primarily due to
yield improvements following the introduction of a new process for loading the
Aorfix(TM) stent graft into the delivery device in December 2007.
The gross margin for the full year is slightly less than that reported at the
half year due to the timing of licence fee revenues and lower production volumes
in the second half of the year after a planned increase in finished goods stocks
in the first half of the year.
Operating Expenses before Investment Related Items
The Group's operating expenses before investment related items increased by
GBP0.6 million to GBP12.2 million (2007: GBP11.6 million) as the Company's
investment in R&D rose GBP1.1 million to GBP7.5 million.
The 18% increase in R&D costs was primarily due to increased clinical trial
costs relating to the PYTHAGORAS and ARBITER II Aorfix(TM) trials and the US
trial for EndoRefix(TM), partially offset by reduced product development costs
associated with production process improvements.
Selling, marketing and distribution expenses were broadly stable at GBP2.1
million (2007: GBP2.1 million) despite a threefold increase in distribution
costs to GBP94,000 (2007: GBP29,000) as a result of increased shipments to the
US for clinical trials.
Administrative expenses of GBP2.6 million (2007: GBP3.1 million) include
redundancy costs of GBP257,000 (2007: GBP218,000) related to headcount
reductions, primarily in the fourth quarter, and share-based compensation
expenses which fell to GBP251,000 (2007: GBP353,000) as more of the options
granted at the time of the Company's IPO lapsed. Other administrative expenses
declined 14% to GBP2.1 million (2007: GBP2.5 million) as the Company recorded
exchange gains of GBP0.1 million and sought to cut all non-essential costs.
Investments
In February 2007, the Company sold its 3.2% shareholding in EndoArt SA pursuant
to the acquisition of EndoArt by Allergan Inc. The Company received $2.8 million
(GBP1.4 million) on closing of the transaction and a further $0.4 million
(GBP0.2 million) of consideration was held in escrow until February 2009 against
any potential warranty claims made by Allergan under the terms of the purchase
agreement. No asset was recorded for the potential deferred consideration at the
time of the transaction as there was a risk that warranty claims would be made
and no further funds received. However, in March 2009, the Company received
deferred consideration of GBP276,000 and as such has recognized this amount in
the 2008 accounts as both a profit on disposal of investments and a debtor.
In 2007, the Company's shareholding in Vascular Concepts Holdings Limited was
written down to the same price per share as an inward investment that occurred
in early 2008. Since the time of this inward investment, the equity market
values for similar listed companies have fallen by between 40% and 60% and hence
it was considered prudent to reduce the book value of the Company's shareholding
by a similar percentage, resulting in a non-cash charge to the profit and loss
account of GBP874,000.
Net Interest Receivable
Net interest receivable fell to GBP132,000 (2007: GBP202,000) primarily as a
result of the amortisation of issue costs and interest payable on the
Convertible Loan Notes issued in October 2008.
Taxation
The R&D tax credit, recorded in the Income Statement, increased to GBP1,971,000
(2007: GBP844,000) as, having established a track record in receiving such
credits, recovery was considered sufficiently probable for the Company to
recognise R&D tax credits on an accruals basis rather than on confirmation of a
claim. Therefore, the figure of GBP1,971,000 represents the R&D tax credits
confirmed or received in the year primarily relating to the previous year of
GBP1,071,000 (2007: GBP844,000) plus an accrual for GBP900,000 (2007: GBPnil)
being an estimate of the amount due in respect of 2008.
Loss after Taxation
The loss after taxation attributable to equity shareholders decreased 1% to
GBP9.9 million (2007: GBP10.0 million). The average number of shares in issue
during 2008 more than doubled to 132.4 million (2007: 64.3 million) resulting in
a decrease in the loss per ordinary share of 52% to 7.46 pence (2007: 15.55
pence).
Operating Cash Flow
Net cash outflow from operating activities increased by GBP1.0 million to
GBP10.5 million (2007: GBP9.5 million) primarily as a result of the higher loss
before taxation which in turn was largely due to a higher investment in R&D.
Investing activities
Overall there was a small net cash outflow from investing activities of
GBP16,000 as capital expenditure of GBP211,000 (2007: GBP135,000) slightly
exceeded interest received of GBP195,000 (2007: GBP206,000). This compared with
an inflow of GBP1.3 million in 2007 which included GBP1.4 million of proceeds
from the sale of the Company's investment in EndoArt SA.
Financing activities
In January 2008, the Company issued 54.2 million shares at a price of 14 pence
per share generating GBP7.6 million before expenses of GBP0.5 million.
In October 2008, the Company issued GBP1.7 million of convertible loan notes at
par with a term of one year. Costs associated with this issue were GBP0.3
million. These convertible loan notes accrued interest at 1 per cent above the
Bank of England base rate and each GBP1 nominal value could be converted into 40
ordinary shares either on election by the holder or mandatorily by the Company
following a successful fundraising of more than GBP6 million. Following the
fundraising of GBP6.4 million in January 2009, these convertible loan notes were
converted into 66.9 million ordinary shares in February 2009.
Treasury
The Company's policy is to invest surplus funds in money-market and short-term
bank deposits. The Company's primary focus is to safeguard the principal by only
placing deposits through institutions with good credit ratings or government
deposit guarantees.
As at December 2008, LMT had cash and short-term deposits of GBP775,000 (2007:
GBP2,665,000). Currently, as at 31 March 2009, LMT has cash and short-term
deposits of GBP4.8 million after paying GBP0.3 million of restructuring costs.
Headcount
Headcount at 31 December 2008 was 88 (2007: 109) with the decrease of 21,
primarily resulting from an initial re-organisation of the Company, in November
2008. In 2009, further re-focusing brought the headcount down to 58.
Post Balance Sheet Share and Loan Note Issues
At a General Meeting on 26 January 2009, shareholders approved the placing and
subscription of 588.2 million ordinary shares at a price of 1 pence each plus
the issue of GBP500,000 nominal of unsecured convertible redeemable loan notes.
Each 1 pence nominal value of these notes is convertible into one fully paid
ordinary share at any time by the note holders and at any time after five years
and three days from the date of issue by the Company. In total, GBP6.4 million
was raised through these issues, before expenses of GBP0.5 million.
Going Concern
The change in strategy to focus resources solely on the Company's lead product,
Aorfix(TM), and the significant restructuring of the business that has occurred
in the first quarter of 2009, has considerably reduced the Company's monthly
cash burn. As a result of this, the Company expects the net GBP5.9 million
raised in January 2009 along with the GBP0.8 million of net cash balances held
at 31 December 2008, based on current forecasts, to fund the business through
the first quarter of 2010 during which time the Company will seek marketing
collaborations, revenues from which should secure the long-term funding needs of
the Company. The financial statements have been prepared on a going concern
basis on the grounds that the Directors believe that based on this strategy the
Company will have sufficient funds for the foreseeable future.
Tim Hall
Finance Director
Consolidated Income Statement
for the year ended 31 December 2008
+-------------------------------------------------+--------+----------+----------+
| | | 2008 | 2007 |
+-------------------------------------------------+--------+----------+----------+
| | Note | GBP'000 | GBP'000 |
+-------------------------------------------------+--------+----------+----------+
| Revenue | 3 | 1,953 | 1,007 |
+-------------------------------------------------+--------+----------+----------+
| Cost of sales | | (1,109) | (793) |
+-------------------------------------------------+--------+----------+----------+
| Gross profit | | 844 | 214 |
+-------------------------------------------------+--------+----------+----------+
| Selling, marketing and distribution expenses | | (2,053) | (2,143) |
+-------------------------------------------------+--------+----------+----------+
| Research and development expenses | | (7,531) | (6,369) |
+-------------------------------------------------+--------+----------+----------+
| Administrative expenses | | (2,644) | (3,050) |
+-------------------------------------------------+--------+----------+----------+
| Operating expenses before investment related | | (12,228) | (11,562) |
| items | | | |
+-------------------------------------------------+--------+----------+----------+
| Profit on disposal of investment | | 276 | 1,138 |
+-------------------------------------------------+--------+----------+----------+
| Impairment provision - investment | 6 | (874) | (839) |
+-------------------------------------------------+--------+----------+----------+
| Operating expenses | | (12,826) | (11,263) |
+-------------------------------------------------+--------+----------+----------+
| Operating loss | | (11,982) | (11,049) |
+-------------------------------------------------+--------+----------+----------+
| Finance income - interest receivable | | 224 | 206 |
+-------------------------------------------------+--------+----------+----------+
| Finance costs | | (92) | (4) |
+-------------------------------------------------+--------+----------+----------+
| Loss before taxation | | (11,850) | (10,847) |
+-------------------------------------------------+--------+----------+----------+
| Taxation | 4 | 1,971 | 844 |
+-------------------------------------------------+--------+----------+----------+
| Loss after taxation attributable to equity | | (9,879) | (10,003) |
| shareholders | | | |
+-------------------------------------------------+--------+----------+----------+
| Basic and diluted loss per share (pence) | 5 | (7.46) | (15.55) |
+-------------------------------------------------+--------+----------+----------+
All activity relates to continuing operations.
Consolidated Balance Sheet
as at 31 December 2008
+--------------------------------------------+----------+----------+----------+
| | | 2008 | 2007 |
+--------------------------------------------+----------+----------+----------+
| | Note | GBP'000 | GBP'000 |
+--------------------------------------------+----------+----------+----------+
| Assets | | | |
+--------------------------------------------+----------+----------+----------+
| Intangible assets | | 2,407 | 2,455 |
+--------------------------------------------+----------+----------+----------+
| Property, plant and equipment | | 354 | 382 |
+--------------------------------------------+----------+----------+----------+
| Financial assets - available for sale | 6 | 850 | 1,724 |
+--------------------------------------------+----------+----------+----------+
| Non-current assets | | 3,611 | 4,561 |
+--------------------------------------------+----------+----------+----------+
| Inventories | | 1,498 | 886 |
+--------------------------------------------+----------+----------+----------+
| Trade and other receivables | | 1,264 | 996 |
+--------------------------------------------+----------+----------+----------+
| Tax recoverable | | 900 | - |
+--------------------------------------------+----------+----------+----------+
| Cash and cash equivalents | | 775 | 2,665 |
+--------------------------------------------+----------+----------+----------+
| Current assets | | 4,437 | 4,547 |
+--------------------------------------------+----------+----------+----------+
| Total assets | | 8,048 | 9,108 |
+--------------------------------------------+----------+----------+----------+
| Liabilities | | | |
+--------------------------------------------+----------+----------+----------+
| Trade and other payables | | (2,347) | (2,514) |
+--------------------------------------------+----------+----------+----------+
| Financial liabilities - borrowings | | - | (56) |
+--------------------------------------------+----------+----------+----------+
| Financial liabilities - convertible loan | | (1,376) | - |
| notes 2009 | | | |
+--------------------------------------------+----------+----------+----------+
| Current liabilities | | (3,723) | (2,570) |
+--------------------------------------------+----------+----------+----------+
| Total liabilities | | (3,723) | (2,570) |
+--------------------------------------------+----------+----------+----------+
| Net assets | | 4,325 | 6,538 |
+--------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------+----------+----------+----------+
| Equity | | | |
+--------------------------------------------+----------+----------+----------+
| Capital and reserves attributable to equity holders of the | |
| Company | |
+------------------------------------------------------------------+----------+
| Called up share capital | 7 | 5,946 | 4,818 |
+--------------------------------------------+----------+----------+----------+
| Share premium account | 7 | 37,728 | 31,665 |
+--------------------------------------------+----------+----------+----------+
| Other reserves | 7 | 11,342 | 11,118 |
+--------------------------------------------+----------+----------+----------+
| Accumulated loss | | (50,691) | (41,063) |
+--------------------------------------------+----------+----------+----------+
| Total equity | | 4,325 | 6,538 |
+--------------------------------------------+----------+----------+----------+
Consolidated Cash Flow Statement
for the year ended 31 December 2008
+--------------------------------------------+----------+----------+----------+
| | | 2008 | 2007 |
+--------------------------------------------+----------+----------+----------+
| | Note | GBP'000 | GBP'000 |
+--------------------------------------------+----------+----------+----------+
| Net cash used in operating activities | 8 | (10,517) | (9,530) |
+--------------------------------------------+----------+----------+----------+
| Cash flows from investing activities | | | |
+--------------------------------------------+----------+----------+----------+
| Acquisition of Culzean Medical Devices | | - | (192) |
| Limited (including debt and payables | | | |
| settled) | | | |
+--------------------------------------------+----------+----------+----------+
| Interest received | | 195 | 206 |
+--------------------------------------------+----------+----------+----------+
| Purchase of property, plant and equipment | | (211) | (135) |
+--------------------------------------------+----------+----------+----------+
| Proceeds from the sale of investments | | - | 1,400 |
+--------------------------------------------+----------+----------+----------+
| Net cash flows from/(used in) investing | | (16) | 1,279 |
| activities | | | |
+--------------------------------------------+----------+----------+----------+
| Cash flows from financing activities | | | |
+--------------------------------------------+----------+----------+----------+
| Proceeds from issue of ordinary shares | | 7,587 | 7,382 |
+--------------------------------------------+----------+----------+----------+
| Share issue expenses | | (451) | (734) |
+--------------------------------------------+----------+----------+----------+
| Proceeds from issue of convertible loan | | 1,708 | - |
| notes 2009 | | | |
+--------------------------------------------+----------+----------+----------+
| Convertible loan notes 2009 issue costs | | (142) | - |
+--------------------------------------------+----------+----------+----------+
| Repayment of loan notes | | (56) | (90) |
+--------------------------------------------+----------+----------+----------+
| Interest paid | | (3) | (4) |
+--------------------------------------------+----------+----------+----------+
| Net cash flows from financing activities | | 8,643 | 6,554 |
+--------------------------------------------+----------+----------+----------+
| Decrease in cash and cash equivalents | | (1,890) | (1,697) |
+--------------------------------------------+----------+----------+----------+
| Cash and cash equivalents at beginning of | | 2,665 | 4,362 |
| year | | | |
+--------------------------------------------+----------+----------+----------+
| Cash and cash equivalents at end of period | | 775 | 2,665 |
+--------------------------------------------+----------+----------+----------+
Consolidated Statement of Changes in Equity
for the year ended 31 December 2008
+----------------------------+----------+-----------+----------+----------+----------+
| | Share | Share | Other | Accumu- | Total |
| | Capital | Premium | Reserves | lated | Equity |
| | | Account | | Loss | |
+----------------------------+----------+-----------+----------+----------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------------+----------+-----------+----------+----------+----------+
| At 1 January 2007 | 4,223 | 25,537 | 11,118 | (31,413) | 9,465 |
+----------------------------+----------+-----------+----------+----------+----------+
| Loss after taxation | - | - | - | (10,003) | (10,003) |
| attributable to equity | | | | | |
| shareholders | | | | | |
+----------------------------+----------+-----------+----------+----------+----------+
| Share-based compensation | - | - | - | 353 | 353 |
| expense | | | | | |
+----------------------------+----------+-----------+----------+----------+----------+
| Issue of ordinary shares | 595 | 6,862 | - | - | 7,457 |
+----------------------------+----------+-----------+----------+----------+----------+
| Share issue expenses | - | (734) | - | - | (734) |
+----------------------------+----------+-----------+----------+----------+----------+
| At 31 December 2007 | 4,818 | 31,665 | 11,118 | (41,063) | 6,538 |
+----------------------------+----------+-----------+----------+----------+----------+
| Loss after taxation | - | - | - | (9,879) | (9,879) |
| attributable to equity | | | | | |
| shareholders | | | | | |
+----------------------------+----------+-----------+----------+----------+----------+
| Share-based compensation | - | - | - | 251 | 251 |
| expense | | | | | |
+----------------------------+----------+-----------+----------+----------+----------+
| Equity component of | - | - | 224 | - | 224 |
| convertible loan notes | | | | | |
+----------------------------+----------+-----------+----------+----------+----------+
| Issue of ordinary shares | 1,128 | 6,514 | - | - | 7,642 |
+----------------------------+----------+-----------+----------+----------+----------+
| Share issue expenses | - | (451) | - | - | (451) |
+----------------------------+----------+-----------+----------+----------+----------+
| At 31 December 2008 | 5,946 | 37,728 | 11,342 | (50,691) | 4,325 |
+----------------------------+----------+-----------+----------+----------+----------+
Notes to the Financial Statements
for the year ended 31 December 2008
1. Basis of Preparation
The financial information presented by the Directors in this statement is
derived from the Group financial statements for the year ended 31 December 2008
that have been prepared and approved by the Directors in accordance with
International Financial Reporting Standards (IFRS) as adopted by the EU, and
with those parts of the Companies Act 1985 applicable to companies reporting
under IFRS. These accounts have been audited and the audit report is
unqualified, but contains an emphasis of matter clause referring to the funding
disclosures as set out below, and does not contain a statement under section
237(2) or (3) of the Companies Act. The accounts will be delivered to the
Registrar of Companies following the Company's Annual General Meeting on 20 May
2009.
The financial statements have been prepared on a going concern basis which
assumes that sufficient funds will be available for the Company and Group to
continue in operational existence for the foreseeable future.
The Group expects to continue to be cash consumptive as it plans to meet
employment and certain operational costs, as well as support its main trading
subsidiaries through intra-group funding, in order to pursue its principal
objectives of completing recruitment of the US trial for Aorfix(TM) and
increasing commercial sales within Europe. As noted in the Finance Director's
report the current forecasts prepared indicate that existing cash balances,
following the net GBP5.9 million fundraising in January 2009, will be absorbed
by the end of Q1 2010. These forecasts include a number of key assumptions, in
particular the ability to significantly increase sales and to complete stated
objectives without any further unforeseen costs but exclude any revenues or cost
savings that may occur as a result of the Company entering into a marketing
collaboration for Aorfix(TM). If the Company was unable to complete such
collaboration and was not able to make further cost savings to offset either a
shortfall in the planned sales increase or some unforeseen costs, then cash
resources may be absorbed earlier than forecast. Furthermore the Company needs
to receive material milestone income from a marketing collaboration (or further
monies from other transactions or fundraisings) in order, on current forecasts,
to trade beyond Q1 2010. These circumstances represent a material uncertainty
which may cast significant doubt on the Group's ability to continue as a going
concern. Should the Group be unable to obtain further funding by way of a
marketing collaboration or otherwise, adjustments would be required to reduce
balance sheet values of assets to their recoverable amounts, to provide for
further liabilities that might arise and to reclassify fixed assets as current
assets.
Although no marketing collaboration or other source of funding has been
confirmed, the Directors nevertheless believe that such agreements or funding
will be secured and hence regard it as appropriate that these financial
statements are prepared on a going concern basis.
2.Accounting Policies
The financial information is prepared in accordance with the accounting policies
set out in the 2007 financial statements with the exception of a change in
treatment of taxation as follow.
Taxation
Taxation on the profit or loss for the year comprises current and deferred tax
including tax on capital gains. Current tax is the expected tax payable, or
recoverable, on the taxable profit/loss and any adjustment to tax payable or
receivable in respect of prior years. Research and development tax credits
resulting from the utilisation of research and development losses to reclaim
payroll taxes are from 1 January 2008 recorded on an accruals basis having
previously been recorded on receipt of confirmation of a claim. The reason for
this change in accounting treatment is that with several R&D tax credit claims
successfully received it is considered probable that the claim for 2008 will
also be realised and hence the asset should be recognised in the period to which
it relates.
3. Segmental Reporting
Primary Reporting Format - by Business Segment
Analyses by business are based on the Group's management structure. Revenue
between business segments is immaterial. Unallocated includes central costs and
net assets that represent Group corporate expenditure or balances related to
management of the Group which are not attributable to either segment.
+---------------------------+----------------+----------+-------------+----------+
| | 2008 |
+---------------------------+----------------------------------------------------+
| | Cardiovascular | | | |
+---------------------------+----------------+----------+-------------+----------+
| | Devices | Polymer | | |
| | and | | | |
+---------------------------+----------------+----------+-------------+----------+
| | Medical | Coatings | Unallocated | Group |
| | Fabrics | | | |
+---------------------------+----------------+----------+-------------+----------+
| Business Analysis | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------------------+----------------+----------+-------------+----------+
| Revenue | 1,888 | 65 | - | 1,953 |
+---------------------------+----------------+----------+-------------+----------+
| Operating loss before | (8,977) | (406) | (2,001) | (11,384) |
| investment related items | | | | |
+---------------------------+----------------+----------+-------------+----------+
| Profit on disposal of | | | | 276 |
| investment | | | | |
+---------------------------+----------------+----------+-------------+----------+
| Impairment provision - | | | | (874) |
| investment | | | | |
+---------------------------+----------------+----------+-------------+----------+
| Operating loss | | | | (11,982) |
+---------------------------+----------------+----------+-------------+----------+
| Net finance income | | | | 132 |
+---------------------------+----------------+----------+-------------+----------+
| Loss before taxation | | | | (11,850) |
+---------------------------+----------------+----------+-------------+----------+
| Taxation | 1,921 | 50 | - | 1,971 |
+---------------------------+----------------+----------+-------------+----------+
| Loss for the year | | | | (9,879) |
+---------------------------+----------------+----------+-------------+----------+
| Assets | 5,848 | 84 | 1,341 | 7,273 |
+---------------------------+----------------+----------+-------------+----------+
| Liabilities | (1,735) | (50) | (1,938) | (3,723) |
+---------------------------+----------------+----------+-------------+----------+
| Cash | - | - | 775 | 775 |
+---------------------------+----------------+----------+-------------+----------+
| Net assets/(liabilities) | 4,113 | 34 | 178 | 4,325 |
+---------------------------+----------------+----------+-------------+----------+
| Goodwill on acquisition | - | - | - | - |
+---------------------------+----------------+----------+-------------+----------+
| Capital expenditure | 197 | 14 | - | 211 |
+---------------------------+----------------+----------+-------------+----------+
| Depreciation | 226 | 13 | - | 239 |
+---------------------------+----------------+----------+-------------+----------+
| Amortisation | 48 | - | - | 48 |
+---------------------------+----------------+----------+-------------+----------+
Table continued...
+---------------------------+----------------+----------+-------------+----------+
| | 2007 |
+---------------------------+----------------------------------------------------+
| | Cardiovascular | | | |
+---------------------------+----------------+----------+-------------+----------+
| | Devices | Polymer | | |
| | and | | | |
+---------------------------+----------------+----------+-------------+----------+
| | Medical | Coatings | Unallocated | Group |
| | Fabrics | | | |
+---------------------------+----------------+----------+-------------+----------+
| Business Analysis | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------------------+----------------+----------+-------------+----------+
| Revenue | 1,002 | 5 | - | 1,007 |
+---------------------------+----------------+----------+-------------+----------+
| Operating loss before | (8,424) | (568) | (2,356) | (11,348) |
| investment related items | | | | |
+---------------------------+----------------+----------+-------------+----------+
| Profit on disposal of | | | | 1,138 |
| investment | | | | |
+---------------------------+----------------+----------+-------------+----------+
| Impairment provision - | | | | (839) |
| investment | | | | |
+---------------------------+----------------+----------+-------------+----------+
| Operating loss | | | | (11,049) |
+---------------------------+----------------+----------+-------------+----------+
| Net finance income | | | | 202 |
+---------------------------+----------------+----------+-------------+----------+
| Loss before taxation | | | | (10,847) |
+---------------------------+----------------+----------+-------------+----------+
| Taxation | 787 | 57 | - | 844 |
+---------------------------+----------------+----------+-------------+----------+
| Loss for the year | | | | (10,003) |
+---------------------------+----------------+----------+-------------+----------+
| Assets | 4,509 | 35 | 1,899 | 6,443 |
+---------------------------+----------------+----------+-------------+----------+
| Liabilities | (1,447) | (56) | (1,067) | (2,570) |
+---------------------------+----------------+----------+-------------+----------+
| Cash | - | - | 2,665 | 2,665 |
+---------------------------+----------------+----------+-------------+----------+
| Net assets/(liabilities) | 3,062 | (21) | 3,497 | 6,538 |
+---------------------------+----------------+----------+-------------+----------+
| Goodwill on acquisition | 343 | - | - | 343 |
+---------------------------+----------------+----------+-------------+----------+
| Capital expenditure | 127 | 8 | - | 135 |
+---------------------------+----------------+----------+-------------+----------+
| Depreciation | 143 | 15 | - | 158 |
+---------------------------+----------------+----------+-------------+----------+
| Amortisation | 54 | - | - | 54 |
+---------------------------+----------------+----------+-------------+----------+
Secondary Reporting Format - Geographical Segments
+--------------------------------------------------+----------+----------+
| | 2008 | 2007 |
+--------------------------------------------------+----------+----------+
| Segmental Analysis by Country of Origin | GBP'000 | GBP'000 |
+--------------------------------------------------+----------+----------+
| Revenue | | |
+--------------------------------------------------+----------+----------+
| UK | 1,463 | 843 |
+--------------------------------------------------+----------+----------+
| USA | 490 | 164 |
+--------------------------------------------------+----------+----------+
| | 1,953 | 1,007 |
+--------------------------------------------------+----------+----------+
| Loss before taxation | | |
+--------------------------------------------------+----------+----------+
| UK | (10,041) | (9,757) |
+--------------------------------------------------+----------+----------+
| USA | (1,809) | (1,090) |
+--------------------------------------------------+----------+----------+
| | (11,850) | (10,847) |
+--------------------------------------------------+----------+----------+
| Net assets/(liabilities) | | |
+--------------------------------------------------+----------+----------+
| UK | 4,363 | 6,618 |
+--------------------------------------------------+----------+----------+
| USA | (38) | (80) |
+--------------------------------------------------+----------+----------+
| | 4,325 | 6,538 |
+--------------------------------------------------+----------+----------+
Geographical analysis is based on the country in which the customer is located
as follows:
+--------------------------------------------------+----------+----------+
| | 2008 | 2007 |
+--------------------------------------------------+----------+----------+
| Revenue by Destination | GBP'000 | GBP'000 |
+--------------------------------------------------+----------+----------+
| United Kingdom and Europe | 1,293 | 689 |
+--------------------------------------------------+----------+----------+
| United States of America | 495 | 172 |
+--------------------------------------------------+----------+----------+
| Rest of World | 165 | 146 |
+--------------------------------------------------+----------+----------+
| | 1,953 | 1,007 |
+--------------------------------------------------+----------+----------+
+--------------------------------------------------+----------+----------+
| | 2008 | 2007 |
+--------------------------------------------------+----------+----------+
| Revenue by Type | GBP'000 | GBP'000 |
+--------------------------------------------------+----------+----------+
| Product sales | 1,883 | 1,002 |
+--------------------------------------------------+----------+----------+
| Licence income | 45 | - |
+--------------------------------------------------+----------+----------+
| Provision of services | 25 | 5 |
+--------------------------------------------------+----------+----------+
| | 1,953 | 1,007 |
+--------------------------------------------------+----------+----------+
4. Taxation on Loss on Ordinary Activities
The net credit of GBP1,971,000 (2007: GBP844,000) relates to the utilisation of
UK tax losses from research and development expenditure to reclaim payroll taxes
paid in prior years of GBP1,071,000 (2007: GBP867,000) and GBP900,000 for the
current year (2007: GBPnil) less overseas taxation payable of GBPnil (2007:
GBP23,000).
Taxation losses carried forward at the end of the year amounted to approximately
GBP35 million (2007: GBP36 million) and the unrecognised deferred tax asset at
28% is approximately GBP10 million. No deferred tax asset has been recognised in
respect of these losses as the Directors consider it is, as yet, uncertain
whether the losses will be utilised. Tax losses would be utilised in future
periods against trading profits.
The current tax credit of GBP900,000 (2007: GBPnil) is lower than the standard
UK corporation rate of 28.5% (2007: 30%) applied to the loss for the year. The
differences are explained below:
+------------------------------------------------------+----------+----------+
| | 2008 | 2007 |
+------------------------------------------------------+----------+----------+
| | GBP'000 | GBP'000 |
+------------------------------------------------------+----------+----------+
| Loss before tax for the period at 28.5% (2007: 30%) | (3,377) | (3,254) |
+------------------------------------------------------+----------+----------+
| Additional deduction for research and development | (650) | (200) |
| expenditure | | |
+------------------------------------------------------+----------+----------+
| Amounts not deductible for tax purposes including | 462 | 282 |
| investment impairment provision | | |
+------------------------------------------------------+----------+----------+
| Amounts not taxable - profit on disposal of | (79) | (341) |
| investment | | |
+------------------------------------------------------+----------+----------+
| Payroll taxes recoverable at a lower effective rate | 798 | - |
| of 15% | | |
+------------------------------------------------------+----------+----------+
| Losses carried forward | 1,946 | 3,513 |
+------------------------------------------------------+----------+----------+
| | (900) | - |
+------------------------------------------------------+----------+----------+
5. Loss per Share
Basic loss per share is calculated by dividing the loss attributable to ordinary
shareholders by the weighted average number of ordinary shares. The diluted
earnings per ordinary share are identical to those used for the basic earnings
per ordinary share as the exercise of share options and warrants, and conversion
of loan notes would have had the effect of reducing the loss per ordinary share
and are therefore not dilutive.
Reconciliations of the losses and weighted average number of shares used in the
calculations are set out below:
+------------------------------------------------------+----------+----------+
| | 2008 | 2007 |
+------------------------------------------------------+----------+----------+
| Loss for the financial year GBP'000 | (9,879) | (10,003) |
+------------------------------------------------------+----------+----------+
| Weighted average number of shares ('000) | 132,374 | 64,327 |
+------------------------------------------------------+----------+----------+
| Basic and diluted loss per share (pence) | (7.46) | (15.55) |
| | | . |
+------------------------------------------------------+----------+----------+
On 26 January 2008 the Company issued 588,234,835 new 1 pence ordinary shares at
1 pence per share raising GBP5.9 million before expenses, and on 25 February
2009 the convertible loan notes 2009 were converted into 66,883,920 new ordinary
shares of 1 pence each
6. Financial Assets - Available for Sale
Investments - Unquoted
+---------------------------------------------------------+------------+
| Group | GBP'000 |
+---------------------------------------------------------+------------+
| Cost | |
+---------------------------------------------------------+------------+
| At 1 January 2007 | 3,693 |
+---------------------------------------------------------+------------+
| Disposal | (1,130) |
+---------------------------------------------------------+------------+
| At 31 December 2007 | 2,563 |
+---------------------------------------------------------+------------+
| At 31 December 2008 | 2,563 |
+---------------------------------------------------------+------------+
| Impairment | |
+---------------------------------------------------------+------------+
| At 1 January 2007 | 868 |
+---------------------------------------------------------+------------+
| Released on disposal | (868) |
+---------------------------------------------------------+------------+
| Provided in period | 839 |
+---------------------------------------------------------+------------+
| At 31 December 2007 | 839 |
+---------------------------------------------------------+------------+
| Provided in year | 874 |
+---------------------------------------------------------+------------+
| At 31 December 2008 | 1,713 |
+---------------------------------------------------------+------------+
| Net book value | |
+---------------------------------------------------------+------------+
| At 31 December 2008 | 850 |
+---------------------------------------------------------+------------+
| At 31 December 2007 | 1,724 |
+---------------------------------------------------------+------------+
At 31 December 2008 the Group held 9.4% (2007: 10.6%) of the ordinary share
capital of Vascular Concepts Holdings Limited (VCHL) (net investment of
GBP850,000), a company incorporated in the Isle of Man that is the holding
company for companies engaged in the development and marketing of medical
devices principally in India. The investment is not readily realisable, being
unquoted, and values can only be indicative of future prospects given the
company's early stage of development. The unaudited consolidated financial
accounts of VCHL record a profit of GBP433,000 for the year ended 31 March 2008
and net assets of GBP5,399,000 at that date. The audit opinion on the previous
year's financial statements was qualified in respect of a limitation of scope
relating to a US subsidiary. This company is engaged in the development of
medical devices. In 2007 on the basis of a proposed issue of shares in VCHL at a
price below the Group's cost per share the Directors recognised an impairment
write down of GBP839,000 in the carrying value of the Group's investment. As a
result of a fall in equity markets since this issue of shares the Directors
consider that a further impairment write down of GBP874,000 in the carrying
value of the Group's investment is necessary in 2008.
7. Equity
i) Share capital
+-------------------------------+-------------+-----------+-------------+----------+
| | 2008 | 2008 | 2007 | 2007 |
| | Number | Nominal | Number | Nominal |
| | of | Value | of | Value |
| | shares | GBP'000 | shares | GBP'000 |
+-------------------------------+-------------+-----------+-------------+----------+
| Authorised | | | | |
+-------------------------------+-------------+-----------+-------------+----------+
| Ordinary shares of 2p each | 388,867,439 | 7,777 | 338,867,439 | 6,777 |
+-------------------------------+-------------+-----------+-------------+----------+
| Deferred shares of 0.862 p | 373,857,388 | 3,223 | 373,857,388 | 3,223 |
| each | | | | |
+-------------------------------+-------------+-----------+-------------+----------+
| | 762,724,827 | 11,000 | 712,724,827 | 10,000 |
+-------------------------------+-------------+-----------+-------------+----------+
| Allotted, called up and fully | | | | |
| paid | | | | |
+-------------------------------+-------------+-----------+-------------+----------+
| Ordinary shares of 2p each | 136,186,011 | 2,723 | 79,788,506 | 1,595 |
+-------------------------------+-------------+-----------+-------------+----------+
| Deferred shares of 0.862 p | 373,857,388 | 3,223 | 373,857,388 | 3,223 |
| each | | | | |
+-------------------------------+-------------+-----------+-------------+----------+
| | 510,043,399 | 5,946 | 453,645,894 | 4,818 |
+-------------------------------+-------------+-----------+-------------+----------+
Deferred shares do not entitle the holders: to attend or vote at any general
meeting; to receive any dividend or other distribution; or to receive a payment
on winding up except where holders of ordinary shares have received the sum of
GBP1 million for each ordinary share in which case they are entitled to receive
the amount paid up on each deferred share.
The movements in share capital issued during the year were as follows:
+----------------------------------------------------------------+--------------------+--------------------+--------------------+
| | Number of | Nominal | Consideration |
| | Shares | Value | or Fair Value |
+----------------------------------------------------------------+--------------------+--------------------+--------------------+
| | | GBP'000 | GBP'000 |
+----------------------------------------------------------------+--------------------+--------------------+--------------------+
| Ordinary shares of 2 pence each | | | |
+----------------------------------------------------------------+--------------------+--------------------+--------------------+
| Issued to investors at 14 pence per share | 54,191,425 | 1,084 | 7,587 |
+----------------------------------------------------------------+--------------------+--------------------+--------------------+
| Issued on conversion of loan notes 2009 at 2.5 pence per share | 2,206,080 | 44 | 55 |
+----------------------------------------------------------------+--------------------+--------------------+--------------------+
| Total issued during the period | 56,397,505 | 1,128 | 7,642 |
+----------------------------------------------------------------+--------------------+--------------------+--------------------+
| At 1 January 2008 | 79,788,506 | 1,595 | |
+----------------------------------------------------------------+--------------------+--------------------+--------------------+
| At 31 December 2008 | 136,186,011 | 2,723 | |
+----------------------------------------------------------------+--------------------+--------------------+--------------------+
Post balance Sheet Share Capital Redesignations, Increase in Authorised Share
Capital and Share Issues
On 26 January 2009:
a. the deferred shares of 0.862 pence each were redesignated as "A" deferred
shares;
b. each of the ordinary shares of 2 pence each were subdivided and converted
into one new ordinary share of 1 pence and one new "B" deferred share of 1
pence;
c. each of the unissued ordinary shares of 2 pence each were subdivided into
two new ordinary shares of 1 pence each;
d. the authorised share capital was increased from GBP11,000,000 to
GBP14,600,000 by the creation of an additional 360,000,000 new ordinary shares
of 1 pence each;
e. 588,234,835 new ordinary shares of 1 pence each were issued for
GBP5,882,000 before expenses; and
f. GBP500,000 of unsecured convertible redeemable loan notes 2014 were
issued.
On 25 February 2009, the convertible loan notes 2009 were converted into
66,883,920 new ordinary shares of 1 pence each.
ii) Share Premium Account
This consists of the proceeds from the issue of shares in excess of their par
value less associated issue costs.
iii) Other Reserves
GBP11,118,000 arose on the conversion of convertible preference shares to
ordinary shares and represents the difference between the fair value of the
preference shares and the nominal value of the ordinary shares issued and
GBP224,000 represents the net present value of the equity component of the
convertible loan notes 2009 issued in the year calculated using a discount rate
of 18%.
8. Reconciliation of Loss before Taxation to Net Cash Outflow from Operating
Activities
+------------------------------------------------------+----------+----------+
| | 2008 | 2007 |
+------------------------------------------------------+----------+----------+
| | GBP'000 | GBP'000 |
+------------------------------------------------------+----------+----------+
| Loss before taxation | (11,850) | (10,847) |
+------------------------------------------------------+----------+----------+
| Depreciation and amortisation of licences | 287 | 211 |
+------------------------------------------------------+----------+----------+
| Share-based compensation expense | 251 | 353 |
+------------------------------------------------------+----------+----------+
| Profit on disposal of investment | (276) | (1,138) |
+------------------------------------------------------+----------+----------+
| Net finance income | (132) | (202) |
+------------------------------------------------------+----------+----------+
| Impairment provision - investment | 874 | 839 |
+------------------------------------------------------+----------+----------+
| Increase in inventories | (612) | (412) |
+------------------------------------------------------+----------+----------+
| Decrease/(increase) in receivables | 37 | (238) |
+------------------------------------------------------+----------+----------+
| (Decrease)/increase in payables | (167) | 682 |
+------------------------------------------------------+----------+----------+
| Net cash used in operations | (11,588) | (10,752) |
+------------------------------------------------------+----------+----------+
| Income taxes paid | - | (23) |
+------------------------------------------------------+----------+----------+
| Research and development tax credits | 1,071 | 1,245 |
+------------------------------------------------------+----------+----------+
| Net cash used in operating activities | (10,517) | (9,530) |
+------------------------------------------------------+----------+----------+
9. Post Balance Sheet Events
On 26 January 2009 there was a placing, subscription and offer of 588,234,835
new ordinary shares of 1 pence each at a price of 1 pence per share which raised
GBP5.4 million net of expenses of GBP0.5 million and the issue of GBP500,000 of
unsecured convertible redeemable loan notes 2014 which raised a further GBP0.5
million.
On 25 February 2009 the convertible loan notes 2009 were converted to 66,883,920
new ordinary shares of 1 pence each.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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Lombard Medical Technologies (LSE:LMT)
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From Jul 2023 to Jul 2024
