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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Lombard Med.Tec | LSE:LMT | London | Ordinary Share | GB00B7FT8W85 | ORD 20P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 188.50 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
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 FR SDSEEFSUSESD
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