UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
November 20, 2015
Date of report (Date of earliest event reported)
SurModics,
Inc.
(Exact Name of Registrant as Specified in its Charter)
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Minnesota |
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0-23837 |
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41-1356149 |
(State of Incorporation) |
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(Commission
File Number) |
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(I.R.S. Employer
Identification No.) |
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9924 West 74th Street
Eden Prairie, Minnesota |
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55344 |
(Address of Principal Executive Offices) |
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(Zip Code) |
(952) 500-7000
(Registrants Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any
of the following provisions (see General Instruction A.2):
¨ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
EXPLANATORY NOTE:
This Amendment No. 1 to the Current Report on Form 8-K/A (the Amendment) is being filed by SurModics, Inc. (the
Company) to amend Item 9.01 of the Current Report on Form 8-K filed by the Company on November 27, 2015 (the Original 8-K), which was filed in connection
with the completion, on November 20, 2015, of the Companys acquisition of 100% of the outstanding voting shares of Creagh Medical Limited (Creagh Medical). In response to Item 9.01(a) and Item 9.01(b), in the
Original 8-K, the Company indicated that it would file the required information by amendment.
Item 9.01 |
Financial Statements and Exhibits. |
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(a) |
Financial Statements of Businesses Acquired |
The following financial statements are
filed herewith:
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Audited Statement of Comprehensive Income for the year ended December 31, 2014; |
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Audited Statement of Changes in Equity for the year ended December 31, 2014; |
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Audited Statement of Financial Position as at December 31, 2014; |
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Audited Statement of Cash Flows for the year ended December 31, 2014; |
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Notes to the Financial Statements; |
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Unaudited Statement of Comprehensive Income for the nine months ended September 30, 2015; |
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Unaudited Statement of Changes in Equity for the nine months ended September 30, 2015; |
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Unaudited Statement of Financial Position as at September 30, 2015; |
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Unaudited Statement of Cash Flows for the nine months ended September 30, 2015; and |
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Notes to the Unaudited Interim Condensed Financial Statements. |
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(b) |
Pro Forma Financial Information |
The following financial statements are filed herewith:
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Unaudited Pro Forma Condensed Combined Balance Sheet as of September 30, 2015; |
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Unaudited Pro Forma Condensed Combined Statement of Income for the year ended September 30, 2015; and |
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Notes to the Unaudited Pro Forma Condensed Combined Financial Information. |
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23.1 |
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Consent of Independent Auditors. |
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99.1 |
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Audited financial statements of Creagh Medical as of and for the year ended December 31, 2014, and the notes thereto. |
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99.2 |
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Unaudited financial statements of Creagh Medical as of and for the nine months ended September 30, 2015, and the notes thereto. |
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99.3 |
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Unaudited Pro Forma Condensed Combined Financial Information as of and for the year ended September 30, 2015, and the notes thereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
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SURMODICS, INC. |
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Date: February 3, 2016 |
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/s/ Andrew D. C. LaFrence |
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Andrew D. C. LaFrence |
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Vice President Finance and Chief Financial Officer |
EXHIBIT INDEX
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Exhibit No. |
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Description |
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Manner of Filing |
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23.1 |
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Consent of Independent Auditors. |
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Filed Electronically |
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99.1 |
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Audited financial statements of Creagh Medical as of and for the year ended December 31, 2014, and the notes thereto. |
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Filed Electronically |
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99.2 |
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Unaudited financial statements of Creagh Medical as of and for the nine months ended September 30, 2015, and the notes thereto. |
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Filed Electronically |
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99.3 |
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Unaudited Pro Forma Condensed Combined Financial Information as of and for the year ended September 30, 2015, and the notes thereto. |
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Filed Electronically |
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation
by reference in Registration Statement Nos. 333-123524 and 333-197757 on Form S-3 and Registration Statement Nos. 333-104258, 333-123521, 333-165098, 333-165101, 333-54266, 333-64171, 333-64173 and 333-79741 on
Form S-8 of SurModics, Inc. our report dated February 3, 2016 related to the financial statements of Creagh Medical Limited as of and for the years ended December 31, 2014 and 2013 (which
report expresses an unmodified opinion and includes an emphasis-of-matter paragraph relating to financial statements prepared in accordance with Financial Reporting
Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland, which differs from accounting principles generally accepted in the United States of America).
/s/ Deloitte
Chartered Accountants and Statutory Audit
Firm
Limerick, Ireland
February 3, 2016
Exhibit 99.1
Creagh Medical Limited
Financial statements
31 December 2014
CREAGH MEDICAL LIMITED
FINANCIAL STATEMENTS
for the year ended 31 December 2014
TABLE OF
CONTENTS
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PAGE |
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INDEPENDENT AUDITORS REPORT |
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2 |
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STATEMENT OF COMPREHENSIVE INCOME |
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4 |
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STATEMENT OF CHANGES IN EQUITY |
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5 |
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STATEMENT OF FINANCIAL POSITION |
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6 |
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STATEMENT OF CASH FLOWS |
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7 |
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NOTES TO THE FINANCIAL STATEMENTS |
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8 |
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- 1 -
INDEPENDENT AUDITORS REPORT TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF CREAGH MEDICAL LIMITED
To the Board of Directors and Shareholders of Creagh Medical Limited
We have audited the accompanying financial statements of Creagh Medical Limited (the company), which comprise the Statements of Financial Position
as of December 31, 2014 and 2013, and the related Statements of Comprehensive Income, Changes in Equity and Cash Flows for the years then ended, and the related notes to the financial statements, which, as described in note 1 to the financial
statements, have been prepared on the basis of Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with Financial Reporting Standard 102 The
Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102); this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to fraud or error.
Auditors Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards
generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend
on the auditors judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the
Companys preparation and fair presentation of the financial statements in order to design procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys
internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of significant accounting estimates made by management as well as evaluating the
overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
- 2 -
INDEPENDENT AUDITORS REPORT TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF CREAGH MEDICAL LIMITED
(Continued)
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Creagh Medical Limited as of
December 31, 2014 and 2013, and the results of its operations and its cash flows for the years then ended in accordance with FRS 102.
Emphasis of
Matter
As discussed in Note 1 to the financial statements, the Company prepares its financial statements in accordance with FRS 102, which differs
from accounting principles generally accepted in the United States of America. A reconciliation has been included in Note 28, to account for the effect of these differences. Our opinion is not modified with respect to this matter.
/s/ Deloitte
Chartered Accountants and Statutory Audit
Firm
Limerick, Ireland
Date: February 3, 2016
- 3 -
CREAGH MEDICAL LIMITED
STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2014
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2014 |
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2013 |
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Note |
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Continuing operations |
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Turnover |
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4 |
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1,673,610 |
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1,114,340 |
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Cost of sales |
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(666,718 |
) |
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(355,337 |
) |
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Gross profit |
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1,006,892 |
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759,003 |
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Expenditures |
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Distribution costs |
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(6,578 |
) |
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(1,455 |
) |
Administrative expenses |
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(908,243 |
) |
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(880,504 |
) |
Research and development costs |
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(780,187 |
) |
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(863,725 |
) |
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Other income |
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6 |
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16,196 |
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Operating loss |
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(671,920 |
) |
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(986,681 |
) |
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Interest payable and similar charges |
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8 |
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(123,985 |
) |
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(114,083 |
) |
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Loss on ordinary activities before taxation |
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5 |
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(795,905 |
) |
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(1,100,764 |
) |
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Taxation |
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9 |
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Loss on ordinary activities after taxation |
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(795,905 |
) |
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(1,100,764 |
) |
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Other comprehensive income |
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Total comprehensive loss for the year |
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(795,905 |
) |
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(1,100,764 |
) |
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- 4 -
CREAGH MEDICAL LIMITED
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2014
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Share capital |
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Equity component of convertible loan |
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Profit and loss account |
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Total
equity |
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At 1 January 2013 |
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100 |
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(173,301 |
) |
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(173,201 |
) |
Loss for the year |
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(1,100,764 |
) |
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(1,100,764 |
) |
Other comprehensive income |
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Total comprehensive loss for the year |
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(1,100,764 |
) |
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(1,100,764 |
) |
Equity component of related party loan |
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69,701 |
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69,701 |
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At 31 December 2013 |
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|
100 |
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69,701 |
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(1,274,065 |
) |
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(1,204,264 |
) |
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Loss for the year |
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(795,905 |
) |
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(795,905 |
) |
Other comprehensive income |
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Total comprehensive loss for the year |
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|
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(795,905 |
) |
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(795,905 |
) |
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|
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|
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At 31 December 2014 |
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|
100 |
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|
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69,701 |
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(2,069,970 |
) |
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(2,000,169 |
) |
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- 5 -
CREAGH MEDICAL LIMITED
STATEMENT OF FINANCIAL POSITION
as at 31 December 2014
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2014 |
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2013 |
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Note |
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FIXED ASSETS |
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Tangible assets |
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10 |
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359,131 |
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324,906 |
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Other financial assets |
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27 |
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25 |
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25 |
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359,156 |
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324,931 |
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CURRENT ASSETS |
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Stocks |
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11 |
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59,103 |
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43,568 |
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Debtors |
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12 |
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351,769 |
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489,343 |
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Cash at bank and in hand |
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353,535 |
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396,903 |
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764,407 |
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929,814 |
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CREDITORS (amounts falling due within one year) |
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13 |
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(572,203 |
) |
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(358,996 |
) |
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NET CURRENT ASSETS |
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192,204 |
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570,818 |
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TOTAL ASSETS LESS CURRENT LIABILITIES |
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551,360 |
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895,749 |
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CREDITORS (amounts falling due after one year) |
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14 |
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(2,551,529 |
) |
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(2,100,013 |
) |
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NET LIABILITIES |
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(2,000,169 |
) |
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(1,204,264 |
) |
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CAPITAL AND RESERVES |
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Called up share capital |
|
17 |
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|
100 |
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|
100 |
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Equity component of related party loan |
|
15, 17 |
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|
69,701 |
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|
69,701 |
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Profit and loss account |
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(2,069,970 |
) |
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(1,274,065 |
) |
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TOTAL SHAREHOLDERS FUNDS |
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(2,000,169 |
) |
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(1,204,264 |
) |
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- 6 -
CREAGH MEDICAL LIMITED
STATEMENT OF CASH FLOWS
for the year ended 31 December 2014
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2014 |
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|
2013 |
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Note |
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NET CASH OUTFLOW FROM OPERATING ACTIVITIES |
|
18 |
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|
(292,380 |
) |
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|
(755,366 |
) |
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
Payments to acquire tangible fixed assets |
|
10 |
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|
(96,054 |
) |
|
|
(59,973 |
) |
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|
|
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|
|
|
|
|
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NET CASH FLOW FROM INVESTING ACTIVITIES |
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|
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|
(96,054 |
) |
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|
(59,973 |
) |
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|
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Financing activities |
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|
|
|
|
|
|
|
|
|
Dividends paid to preference shareholders |
|
17 |
|
|
(7,313 |
) |
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|
(4,500 |
) |
Bank interest paid |
|
|
|
|
(4,829 |
) |
|
|
(9,930 |
) |
Proceeds from issuance of Ordinary D shares |
|
17 |
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|
215,000 |
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|
|
145,000 |
|
Proceeds from issuance of Preference A shares |
|
17 |
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|
170,000 |
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|
|
|
|
Proceeds from related party loan |
|
15 |
|
|
|
|
|
|
500,000 |
|
Proceeds from bank loans |
|
15 |
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|
8,875 |
|
|
|
|
|
Repayment of bank loans |
|
15 |
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|
(36,667 |
) |
|
|
(36,667 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
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NET CASH FLOW FROM FINANCING ACTIVITIES |
|
|
|
|
345,066 |
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|
|
593,903 |
|
|
|
|
|
|
|
|
|
|
|
|
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NET DECREASE IN CASH AT BANK AND IN HAND |
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|
|
|
(43,368 |
) |
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|
(221,436 |
) |
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CASH AT BANK AND IN HAND AT 1 JANUARY |
|
|
|
|
396,903 |
|
|
|
618,339 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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CASH AT BANK AND IN HAND AT 31 DECEMBER |
|
|
|
|
353,535 |
|
|
|
396,903 |
|
|
|
|
|
|
|
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|
- 7 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014
1. |
GENERAL INFORMATION AND STATEMENT OF COMPLIANCE |
Creagh Medical Limited (the Company) is a limited
liability company incorporated in Ireland. The registered office of the Company is at IDA Business Park, Ballinasloe, Co. Galway. The Companys principal activities are the design, development and manufacture of medical devices.
(b) |
Statement of compliance |
The Companys financial statements have been prepared in
compliance with FRS 102 as it applies to the financial statements of the Company for the year ended 31 December 2014.
The financial statements of Creagh Medical Limited were approved
for issue by the Board of Directors on February 3, 2016. The financial statements have been prepared in accordance with FRS 102. The financial statements are prepared in Euro () and rounded to the nearest Euro.
These financial statements present information about the Company as an individual undertaking.
The Company incurred losses on ordinary activities of 795,905 and 1,100,764 for the year ended 31 December 2014 and 2013,
respectively, which resulted in a capital deficiency of 2,000,169 as of 31 December 2014 (2013: 1,204,264). The directors have assessed that the Company is an emerging developmental stage business. As anticipated, this has led to a
number of operating losses that have been funded on an ongoing basis by Series B and D Ordinary shares, preference and preference A shares as well as a bank loan and a line of credit. The directors have assessed that the funding referred
to above and the ultimate sale of the Company as disclosed in note 26 provide evidence before and after the end of the reporting period of the Companys ability to continue in business. Thus, the directors have prepared the financial statements
on a going concern basis.
2. |
JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY |
The following are the Companys
judgements and key sources of estimation uncertainty:
The Company exercises judgment when recognising revenue from sale
of goods in assessing whether it has transferred to the buyer the significant risks and rewards of ownership and whether the transaction has satisfied all of the conditions for revenue recognition. The Company also exercises judgment when
- 8 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
2. |
JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued) |
|
(i) |
Revenue recognition (continued) |
recognising revenue from the rendering of services in assessing whether the outcome of the transaction can be estimated reliably, in assessing the stage of completion of the transaction and in
assessing whether the transaction has satisfied all of the conditions for revenue recognition for rendering of services. The Company also exercises judgment in identifying the transaction and in determining whether to apply the revenue recognition
criteria to the separately identifiable components of a single transaction or to apply the recognition criteria to two or more transactions together when they are linked in such a way that the commercial effect cannot be understood without reference
to the series of transactions as a whole.
|
(ii) |
Operating lease commitments |
The Company has entered into a commercial property lease
as a lessee for use of the property as the Companys administrative and factory building. The classification of this lease as operating or finance lease requires the Company to determine, based on an evaluation of the terms and conditions of
the arrangement, whether it retains or acquires the significant risks and rewards of ownership of the asset and accordingly whether the lease requires an asset and liability to be recognised in the statement of financial position. The Company has
assessed that the lease of the administrative and factory building qualifies as an operating lease because it does not retain or acquire the significant risks and rewards of ownership of the asset under the lease arrangement.
|
(iii) |
Impairment of non-financial assets |
Where there are indicators of impairment of
individual assets, the Company performs impairment tests based on the recoverable amount which is the higher of fair value less costs to sell or a value in use calculation. The fair value less costs to sell calculation is based on available data
from binding sales transactions in an arms length transaction on similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. The cash
flows are derived from the budget for the next five years and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the assets performance of the cash generating
unit being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash flows and the growth rate used for extrapolation purposes. The Company has assessed that as
of 31 December 2014 and 2013, non-financial assets are not impaired (see note 10).
The Company establishes provisions based on reasonable estimates, for
possible consequences of audits by the tax authorities of the consequences of audits by the tax authorities in the country in which it operates. The amount of such provisions is based on various factors, such as experience with previous tax audits
and differing interpretations of tax regulations by the taxable entity and the responsible tax authority.
- 9 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
2. |
JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued) |
|
(iv) |
Taxation (continued) |
Management estimation is required to determine the amount of deferred tax assets that can be
recognised, based upon likely timing and level of future taxable profits together with an assessment of the effect of future tax planning strategies. Management has assessed that no deferred tax asset shall be recognised for tax loss carryforwards
because it is not probable that future taxable profits will be available against which they can be utilised (see note 9).
|
(v) |
Provisions and contingencies |
In 2014, the Company recognised 16,196 (2013:
Nil) for government grants receivable from Enterprise Ireland. If the Company fails to adhere to the conditions of the grant they may be liable to repay these amounts to Enterprise Ireland. This contingent liability remains in place for five
years from the date of the last payment of the grant.
The Company has assessed that it is unlikely that the Company will not be able to
adhere to the conditions of the grant.
|
(vi) |
Recognition of share-based payments |
The Companys Chief Executive Officer (CEO)
on behalf of the Company granted a number of options to certain key employees over a number of Ordinary shares of 0.01 each. The options may be exercised at the price per share, during the periods and subject to certain conditions in the
Option Granting Agreement. The options may only be exercised on or after the occurrence of an Exit Event.
Based on the terms and
conditions of this share-based payment scheme, the Company has assessed that no share-based payment expense needs to be recognised in 2014 and 2013 (see note 20).
|
(vii) |
Fair valuation of financial instruments |
When the fair values of financial assets and
financial liabilities recorded in the statement of financial position cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the discounted cash flow (DCF) model. The inputs to
these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values.
The Company has determined the fair value of a non-interest bearing three-year related party loan from USCI Japan Limited at inception using a
DCF model with an observable market rate. The difference between the face value of the loan and the fair value at inception date was treated as an additional share capital recognised in the equity section of the statement of financial position. The
loan was subsequently measured at amortised cost using the effective interest rate method. Please see more details in note 15.
- 10 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
2. |
JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued) |
|
(viii) |
Classification of share capital |
FRS 102 specifies the features of a puttable financial
instrument to be classified as an equity instrument. A puttable financial instrument includes a contractual obligation for the issuer to repurchase or redeem that instrument for cash or another financial asset on exercise of the put. As an exception
to the definition of a financial liability, an instrument that includes such an obligation is classified as an equity instrument if certain features are satisfied.
The Company has assessed that as of 31 December 2014 share capital amounting 1,792,000 (2013: 1,407,000) contain features
identical to a financial liability and has reclassified these amounts into financial liability. Please see note 17 for more details.
The
Company also has a convertible loan from USCI Japan Limited amounting to 500,000 (see note 15). Under FRS 102, if an instrument has both financial liability component and an equity component (e.g., a conversion option), the issuer is required
to separately account for each component. The liability component is recognised at fair value calculated by discounting the cash flows associated with the liability component at a market rate for a similar debt host instrument, and the equity
component is measured as the residual amount. As a result the Company has calculated the financial liability component of this loan amounting to 430,299 and has recognised this amount as a financial liability (see note 15). The residual amount
of the loan amounting to 69,701 was reclassified to equity (see note 17).
|
(ix) |
Assessment of functional currency |
Based on the economic substance of the underlying
circumstances relevant to the Company, the functional currency is determined to be the Euro. It is the currency that mainly influences the sale of goods and services and the cost manufacturing the goods and of rendering the services.
3. |
SIGNIFICANT ACCOUNTING POLICIES |
In accordance with FRS 102, the directors have reviewed the
accounting policies of Creagh Medical Limited (the Company) and consider these appropriate for the Company.
(a) |
Impairment of non-financial assets |
The Company assesses at each reporting date whether
an asset may be impaired. If any such indication exists the Company estimates recoverable amount of the asset. If it is not possible to estimate the recoverable amount of the individual asset, the Company estimates, the recoverable amount of the
cash-generating unit to which the asset belongs. The recoverable amount of an asset or cash-generating unit is the higher of its fair value less costs to sell and its value in use. If the recoverable amount is less than its carrying amount, the
carrying amount of the asset is impaired and it is reduced to its recoverable amount through an impairment recognised in the statement of comprehensive income unless the asset is carried at a revalued amount where the impairment loss of a revalued
asset is a revaluation decrease.
- 11 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
3. |
SIGNIFICANT ACCOUNTING POLICIES (Continued) |
(a) |
Impairment of non-financial assets (continued) |
An impairment loss recognised for all assets is reversed in a subsequent period if and only
if the reasons for the impairment loss have ceased to apply.
(b) |
Tangible fixed assets and depreciation |
Tangible fixed assets are stated at cost less
accumulated depreciation and accumulated impairment losses. The cost of fixed assets is written off by equal instalments over their expected useful lives as follows:
|
|
|
|
|
Balloon moulds |
|
20% straight line |
Computer equipment |
|
33.33% straight line |
Fixtures, fittings and equipment |
|
10% straight line |
(c) |
Investment in subsidiaries |
Investment in a subsidiary company is held at cost less
accumulated impairment losses.
The Company owns 100% of the Ordinary share capital of USCI Ireland Limited, a company incorporated in the
Republic of Ireland with its registered office located at IDA Business Park, Ballinasloe, Co. Galway. USCI Ireland Limited did not trade in 2014. The total of the statement of financial position of USCI Ireland Limited at 31 December 2014 is
15. The investment in the subsidiary is included in Other financial assets in the statement of financial position.
(d) |
Financial Instruments |
The Company has chosen to adopt Sections 11 and 12 of FRS 102 in
respect of financial instruments.
Basic financial assets, including trade and other debtors and cash
and bank balances are initially recognised at transaction price, unless the arrangement constitutes a financing transaction, where the transaction is measured at present value of the future receipts discounted at a market rate of interest.
Such assets are subsequently carried at amortised cost using the effective interest method.
At the end of each reporting period financial assets measured at amortised cost are assessed for objective evidence of impairment. If an asset
is impaired the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the assets original effective interest rate. The impairment loss is recognised in the statement of
comprehensive income.
- 12 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
3. |
SIGNIFICANT ACCOUNTING POLICIES (Continued) |
(d) |
Financial Instruments (Continued) |
|
(i) |
Financial assets (continued) |
If there is decrease in the impairment loss arising from an event occurring after the
impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been had the impairment not previously been recognised. The impairment reversal is
recognised in the statement of comprehensive income.
Financial assets are derecognised when (a) the contractual rights to the cash
flows from the asset expire or are settled, or (b) substantially all the risks and rewards of the ownership of the asset are transferred to another party or (c) despite having retained some significant risks and rewards of ownership,
control of the asset has been transferred to another party who has the practical ability to unilaterally sell the asset to an unrelated third party without imposing additional restrictions.
|
(ii) |
Financial liabilities |
Basic financial liabilities, including trade and other payables
and bank loans are initially recognised at transaction price, unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some
or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a
pre-payment for liquidity services and amortised over the period of the facility to which it relates.
Trade payables are obligations to
pay for goods or services that have been received in the ordinary course of business from suppliers. Trade payables are classified into amounts falling due within one year if payment is due within one year or less. If not, they are presented as
amounts falling due after one year. Trade payables are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Financial liabilities are derecognised when the liability is extinguished, that is when the contractual obligation is discharged, cancelled or
expires.
Revenue is recognised to the extent that the Company obtains the
right to consideration in exchange for its performance. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, VAT and other sales taxes or duty. The following criteria must also be met before revenue is
recognised:
- 13 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
3. |
SIGNIFICANT ACCOUNTING POLICIES (Continued) |
(e) |
Revenue recognition (Continued) |
Sale of medical devices
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, either
upon the goods dispatch by the Company or receipt by the customer of the goods depending on the terms of arrangement with the customer, the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the
transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Design and development services
Revenue from design and development services is recognised by reference to the stage of completion. Stage of completion is measured by
reference to labour hours incurred to date as a percentage of total estimated labour hours for each contract. Where the contract outcome cannot be measured reliably, revenue is recognised only to the extent of the expenses recognised that are
recoverable.
Interest income
Interest income is recognised using the effective interest rate method (EIR).
Government grants are recognised when it is reasonable to expect that
the grants will be received and that all related conditions will be met, usually on submission of a valid claim for payment. Government grants are recognised based on the accrual model.
Government grants in respect of capital expenditure are credited to a deferred income account and are released to income over the expected
useful lives of the relevant assets by equal annual instalments.
Grants of a revenue nature are credited to income so as to match them
with the expenditure to which they relate.
Stocks are stated at the lower of cost and net realisable value. Cost includes
all costs incurred in bringing each product to its present location and condition, as follows:
|
|
|
Raw materials and consumables purchase cost on a firstin, firstout basis |
|
|
|
Work in progress and finished goods cost of direct materials and labour plus attributable overheads based on a normal level of activity |
Net realisable value is based on estimated selling price less any further costs expected to be incurred to completion and disposal.
(h) |
Research and development |
Research and development expenditure is recognised in the
statement of comprehensive income as incurred.
- 14 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
3. |
SIGNIFICANT ACCOUNTING POLICIES (Continued) |
(i) |
Provisions for liabilities |
A provision is recognised when the Company has a legal or
constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation.
Deferred tax is recognised in respect of all timing differences which are
differences between taxable profits and total comprehensive income that arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in the financial statements.
The amount of deferred tax assets that can be recognised is estimated based upon the likely timing and level of future taxable profits together
with an assessment of the effect of future tax planning strategies. No deferred tax asset is recognised where it is not probable that future taxable profits will be available against which they can be utilised.
Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences
reverse, based on tax rates and laws enacted or substantively enacted at the end of the reporting period.
Transactions in foreign currencies are initially recorded in the
Companys functional currency by applying the spot exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange prevailing at the end of the
reporting period. All differences are recognised in the statement of comprehensive income.
(l) |
Cash and cash equivalents |
Cash and cash equivalents in the statement of financial
position comprise cash at banks and in hand and short term deposits with an original maturity date of three months or less. For the purpose of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above,
net of outstanding bank overdrafts.
Lease of assets where substantially all the risks and rewards of ownership of
the asset have passed to the Company are classified as finance lease. Under such a lease, the leased asset is capitalised in statement of financial position and depreciated over the shorter of the lease term and the assets useful lives. A
corresponding liability is recognised in the statement of financial position for the lower of the fair value of the leased asset and the present value of the minimum lease payments. All other leases are classified as operating leases. Rentals
payable under operating leases are recognised in the statement of comprehensive income on a straight-line basis over the lease term. Lease incentives are recognised over the lease term on a straight-line basis.
- 15 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
3. |
SIGNIFICANT ACCOUNTING POLICIES (Continued) |
Contributions payable for a period in respect of defined contribution
pension schemes are recognised:
|
|
|
as a liability, after deducting any amount already paid. If contribution payments exceed the contribution due for service before the reporting date, the excess is recognised as an asset to the extent that the prepayment
will lead to a reduction in future payments or a cash refund. |
|
|
|
as an expense, unless the cost qualifies to be recognised as part of the cost of an asset such as inventories or property, plant and equipment. |
The Company recognises employee services received in a
share-based payment transaction when it receives the services. If the share-based payments do not vest until the employee completes a specified period of service, the Company accounts for the share-based payment as the services are rendered during
the vesting period.
When the vesting period is subject to a time limit, such as the occurrence of a contingent event, the Company only
recognised the share-based payment awards on the date that such a contingent event occurs
(p) |
Classification of shares as debt or equity |
An equity instrument is a contract that
evidences a residual interest in the assets of an entity after deducting all its liabilities. Accordingly, a financial instrument is treated as equity if:
|
(i) |
There is no contractual obligation to deliver cash or other financial assets or to exchange financial assets or liabilities on terms that may be unfavourable |
|
(ii) |
The instrument is a non-derivative that contains no contractual obligations to deliver a variable number of shares or is a derivative that will be settled only by the Company exchanging a fixed amount of cash or other
assets for a fixed number of the Companys own equity instruments |
When shares are issued, any component that creates a
financial liability of the Company is presented as a liability in the statement of financial position; measured initially at fair value net of transaction costs and thereafter at amortised cost until extinguished on conversion or redemption. The
corresponding dividends relating to the liability component are charged as interest expense in the statement of comprehensive income. The initial fair value of the liability component is determined using a market rate for an equivalent liability
without a conversion feature.
- 16 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
3. |
SIGNIFICANT ACCOUNTING POLICIES (Continued) |
(p) |
Classification of shares as debt or equity (continued) |
The remainder of the proceeds on issue is allocated to the equity component and included in
shareholders funds, net of transaction costs. The carrying amount of the equity component is not remeasured in subsequent years.
Transaction costs are apportioned between the liability and equity components of the shares based on the allocation of proceeds to the
liability and equity components when the instruments are first recognised.
The Companys Ordinary B, Ordinary
D, Preference Shares and Preference A Shares have been accounted for as financial liabilities. The Companys convertible related party loan payable to USCI Japan Limited has been accounted for as a compound financial
instrument.
The total turnover of the Company for the year has been derived from its principal
activity wholly undertaken in Ireland.
The Company operates in two principal areas of activity, that of the manufacture and sale of
medical devices and the provision of design and development services.
|
|
|
|
|
|
|
|
|
Principal areas of activity |
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
Sale of medical devices |
|
|
1,138,486 |
|
|
|
889,230 |
|
Design and development services |
|
|
535,124 |
|
|
|
225,110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,673,610 |
|
|
|
1,114,340 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Geographical market |
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
Europe |
|
|
384,944 |
|
|
|
443,887 |
|
Rest of the World |
|
|
1,288,666 |
|
|
|
670,453 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,673,610 |
|
|
|
1,114,340 |
|
|
|
|
|
|
|
|
|
|
Turnover attributable to geographical markets outside Ireland amounted to 96% for 2014 (2013: 94%).
- 17 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
5. |
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION |
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
The loss on ordinary activities before taxation is stated after charging/(crediting): |
|
|
|
|
|
|
|
|
Directors remuneration: |
|
|
|
|
|
|
|
|
Salary |
|
|
85,252 |
|
|
|
81,735 |
|
Pension costs |
|
|
7,190 |
|
|
|
7,200 |
|
Depreciation of tangible fixed assets |
|
|
61,830 |
|
|
|
52,790 |
|
Research and development |
|
|
|
|
|
|
|
|
expenditure in current year |
|
|
875,431 |
|
|
|
1,001,467 |
|
research and development tax credit |
|
|
(95,244 |
) |
|
|
(137,742 |
) |
Operating lease rentals building |
|
|
117,080 |
|
|
|
117,080 |
|
In 2014, the Company recognised 16,196 (2013: Nil) for government
grants receivable from the Enterprise Ireland (see note 22).
- 18 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
The average number of persons employed by the Company (including directors) in
2014 was 27 (2013: 23) and is analysed into the following categories:
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2013 |
|
|
|
No. |
|
|
No. |
|
Department |
|
|
|
|
|
|
|
|
|
|
|
Engineering |
|
|
14 |
|
|
|
13 |
|
Manufacturing and logistics |
|
|
10 |
|
|
|
7 |
|
Administration |
|
|
3 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27 |
|
|
|
23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Staff costs |
|
|
|
|
|
|
|
|
Wages and salaries |
|
|
944,506 |
|
|
|
884,922 |
|
Employer PRSI Contribution |
|
|
112,779 |
|
|
|
97,121 |
|
Pension costs defined contribution |
|
|
53,837 |
|
|
|
53,818 |
|
VHI |
|
|
24,542 |
|
|
|
22,440 |
|
Death and disability benefits/life insurance |
|
|
10,247 |
|
|
|
9,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,145,911 |
|
|
|
1,068,035 |
|
|
|
|
|
|
|
|
|
|
The staff costs are split among the various cost centre headings in the statement of comprehensive income.
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
Directors emoluments |
|
|
|
|
|
|
|
|
Aggregate emoluments in respect of qualifying services |
|
|
85,252 |
|
|
|
81,735 |
|
Aggregate contributions to a retirement benefit scheme in respect of directors qualifying services |
|
|
7,190 |
|
|
|
7,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
92,442 |
|
|
|
88,935 |
|
|
|
|
|
|
|
|
|
|
There are 5 directors in 2014 (2013: 5 directors) to whom retirement benefits are accruing under the defined
contribution scheme in respect of qualifying services.
- 19 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
8. |
INTEREST PAYABLE AND SIMILAR CHARGES |
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
Bank interest and charges |
|
|
4,829 |
|
|
|
9,930 |
|
Dividends on 8% Cumulative Preference Shares |
|
|
12,000 |
|
|
|
19,000 |
|
Accretion of interest on related party loan (note 17) |
|
|
22,813 |
|
|
|
14,686 |
|
Accretion of interest on B and D shares (note 17) |
|
|
84,343 |
|
|
|
70,467 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
123,985 |
|
|
|
114,083 |
|
|
|
|
|
|
|
|
|
|
There is no charge to corporation tax in the accounts due to net operating loss tax
losses carried forwards.
The reconciliation between the tax line in the statement of comprehensive income and the loss on ordinary
activities before taxation multiplied by the Irish standard tax rate follows:
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
Loss on ordinary activities before taxation |
|
|
(795,905 |
) |
|
|
(1,100,764 |
) |
|
|
|
Tax income calculated at Irish standard rate of corporation tax of 12.5% (2013: 12.5%) |
|
|
(99,488 |
) |
|
|
(137,596 |
) |
Effect of unrecognised deferred tax asset on net operating loss carryover |
|
|
99,488 |
|
|
|
137,596 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tax expense reported in the statement of comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of 31 December 2014, the Company has 17,037,241 of tax losses for which no deferred tax assets
have been recognised because management believes that it may not be probable that sufficient future taxable income will be available against which the deferred tax assets can be utilized. Unused tax losses do not expire.
- 20 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
10. |
TANGIBLE FIXED ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2014 |
|
|
|
|
Fixtures, |
|
|
|
|
|
|
|
|
|
Balloon |
|
|
fittings and |
|
|
Computer |
|
|
|
|
|
|
moulds |
|
|
equipment |
|
|
equipment |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2014 |
|
|
34,700 |
|
|
|
480,081 |
|
|
|
15,157 |
|
|
|
529,938 |
|
Additions |
|
|
|
|
|
|
75,094 |
|
|
|
20,960 |
|
|
|
96,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2014 |
|
|
34,700 |
|
|
|
555,175 |
|
|
|
36,117 |
|
|
|
625,992 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2014 |
|
|
10,802 |
|
|
|
181,123 |
|
|
|
13,106 |
|
|
|
205,031 |
|
Charge for the year |
|
|
6,940 |
|
|
|
49,695 |
|
|
|
5,195 |
|
|
|
61,830 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2014 |
|
|
17,742 |
|
|
|
230,818 |
|
|
|
18,301 |
|
|
|
266,861 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book values |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2014 |
|
|
16,958 |
|
|
|
324,357 |
|
|
|
17,816 |
|
|
|
359,131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 21 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
10. |
TANGIBLE FIXED ASSETS (Continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2013 |
|
|
|
|
Fixtures, |
|
|
|
|
|
|
|
|
|
Balloon |
|
|
fittings and |
|
|
Computer |
|
|
|
|
|
|
moulds |
|
|
equipment |
|
|
equipment |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2013 |
|
|
17,555 |
|
|
|
437,253 |
|
|
|
15,157 |
|
|
|
469,965 |
|
Additions |
|
|
17,145 |
|
|
|
42,828 |
|
|
|
|
|
|
|
59,973 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2013 |
|
|
34,700 |
|
|
|
480,081 |
|
|
|
15,157 |
|
|
|
529,938 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2013 |
|
|
4,452 |
|
|
|
135,803 |
|
|
|
11,987 |
|
|
|
152,242 |
|
Charge for the year |
|
|
6,350 |
|
|
|
45,321 |
|
|
|
1,119 |
|
|
|
52,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2013 |
|
|
10,802 |
|
|
|
181,124 |
|
|
|
13,106 |
|
|
|
205,032 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book values |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2013 |
|
|
23,898 |
|
|
|
298,957 |
|
|
|
2,051 |
|
|
|
324,906 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company has assessed that continued operating losses are an indicator of potential impairment of
depreciable assets. Except for certain assets with immaterial carrying amounts, all of the Companys assets are being utilised in the business. As an emerging developmental stage business, the Companys business strategy is to design
balloon catheters and retain manufacturing. As anticipated, this has led to a number of operating losses that have been funded on an ongoing basis by Series B and D Ordinary shares, preference and preference A shares as well as a bank
loan and a line of credit.
There are no individually significant assets in the Companys fixed asset register other than the
extrusion room equipment; therefore, the Company has reviewed all of its assets as a single cash-generating unit. The Company has assessed that the ongoing funding and the ultimate sale of the Company as disclosed in note 26 provide evidence before
and after the end of the reporting period that the Companys assets are not impaired.
- 22 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
Raw materials and consumables |
|
|
29,304 |
|
|
|
36,157 |
|
Work in progress |
|
|
4,647 |
|
|
|
3,746 |
|
Finished goods |
|
|
25,152 |
|
|
|
3,665 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,103 |
|
|
|
43,568 |
|
|
|
|
|
|
|
|
|
|
There are no material differences between the replacement cost of stocks and the amounts recognised in the
statement of financial position.
Stocks recognised as an expense in 2014 amounted to 399,156 (2013: 48,992).
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
Trade debtors |
|
|
46,822 |
|
|
|
141,086 |
|
Prepayments and accrued income |
|
|
3,091 |
|
|
|
3,454 |
|
Other debtors |
|
|
301,856 |
|
|
|
344,803 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
351,769 |
|
|
|
489,343 |
|
|
|
|
|
|
|
|
|
|
Amounts falling due after more than one year and included in debtors are:
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
Other debtors |
|
|
110,048 |
|
|
|
171,456 |
|
|
|
|
|
|
|
|
|
|
The amounts included in Other Debtors relates to amounts owing from the Revenue Commissioners
related to research and development tax credits. Such amounts are collectible over a three-year period.
- 23 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
13. |
CREDITORS (amounts falling due within one year) |
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
Trade payables |
|
|
128,562 |
|
|
|
53,284 |
|
Accruals |
|
|
333,003 |
|
|
|
222,086 |
|
Current instalment due on bank loan |
|
|
38,654 |
|
|
|
36,667 |
|
Amounts due to related company |
|
|
15 |
|
|
|
15 |
|
VAT payable |
|
|
3,691 |
|
|
|
8,591 |
|
Payroll taxes |
|
|
10,743 |
|
|
|
28,977 |
|
Deferred income |
|
|
57,535 |
|
|
|
9,376 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
572,203 |
|
|
|
358,996 |
|
|
|
|
|
|
|
|
|
|
14. |
CREDITORS (amounts falling due after more than one year) |
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
Bank loan |
|
|
82,693 |
|
|
|
123,333 |
|
Liability component of convertible related party loan |
|
|
467,798 |
|
|
|
444,985 |
|
B ordinary shares classified as liability |
|
|
616,489 |
|
|
|
582,913 |
|
D ordinary shares classified as liability |
|
|
1,064,549 |
|
|
|
798,782 |
|
8% cumulative redeemable preference shares |
|
|
150,000 |
|
|
|
150,000 |
|
8% cumulative redeemable preference A shares |
|
|
170,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,551,529 |
|
|
|
2,100,013 |
|
|
|
|
|
|
|
|
|
|
The B ordinary shares were issued under an Employment and Investment Incentive Scheme and are
subject to a Put and Call Option Agreement, whereby the Company granted certain employee/investors the right exercisable at any time during the option period to require the Company to purchase the option shares for a fixed redemption price of
1.40 per B ordinary share. These shares have no right to attend or vote at general meetings of the Company. The B ordinary shares are classified as financial liabilities and are recognised at the present value of
their future redemption amounts.
The D ordinary shares were issued under an Employment and Investment Incentive Scheme and are
subject to a Put and Call Option Agreement, whereby the Company granted certain employee/investors the right exercisable at any time during the option period to require the Company to purchase the option shares for a sum representing the market
value thereof at the date of exercise of the option. These shares have no right to attend or vote at general meetings of the Company. On a winding up, the D ordinary shares shall be entitled to aggregate sum of all sums paid up but not
exceeding 1.20 per D ordinary share. The D ordinary shares are classified as financial liabilities and are recognised at the present value of their future redemption amounts.
- 24 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
14. |
CREDITORS (amounts falling due after more than one year) (Continued) |
The 8% Preference and the 8% Preference A shares are held by Enterprise Ireland.
Such shares are subject to cumulative preferred dividends and are also redeemable at the option of the holder. The Subscription Agreement provides that the Company shall redeem the Preference Shares on the redemption date. If the Company cannot
redeem the preference shares then due for redemption, then those preference shares which the Company cannot redeem shall be redeemed as soon as the Company becomes capable of doing so pursuant to the Irish Companies Act. If the Company does not
redeem all of the Preference Shares on the redemption date then, until the Company has redeemed all of the preference shares, it will not make any distribution.
Bank and related party loans repayable, included within creditors, are analysed as
follows:
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
Wholly repayable within five years |
|
|
589,145 |
|
|
|
604,985 |
|
Not wholly repayable within five years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
589,145 |
|
|
|
604,985 |
|
|
|
|
|
|
|
|
|
|
Details of terms and conditions of loans:
|
1. |
Bank loan from Bank of Ireland (BOI) |
The Companys loan facility with BOI
includes the following:
|
|
|
50,000 by way of overdraft, repayable on demand |
|
|
|
12,500 by way of Credit Card facility, repayable on standard credit terms |
|
|
|
121,346 by way of Term Loan, repayable by monthly instalments of 3,573, covering interest and principal. The loan is to be repaid in full by 31 December 2017. This repayment is based on current interest
rate of 3.84% and the repayment amount may need to be adjusted to reflect interest rate during the remaining term, such that repayments are sufficient to clear the loan in full by the expiry date of 31 December 2017. |
- 25 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
|
1. |
Bank loan from Bank of Ireland (BOI) (continued) |
The loan is also subject to a bank
covenant, including that the Company observes the following conditions:
|
|
|
Use all sums drawn for the purpose specified in the loan agreement |
|
|
|
Maintain its corporate existence |
|
|
|
Furnish certified accounts with the Lender within 6 months of the Companys financial year end |
|
|
|
Furnish half yearly Management Accounts within 60 days of the Companys half year end |
|
|
|
Conduct its business in an efficient and business-like manner and in compliance with all laws, authorisations, agreements and obligations applicable to it, and pay all taxes imposed on it when due and payable
|
The loan agreement is subject to a review. Unless circumstances change warranting an earlier review, the facilities would
be formally reviewed by 30 June 2015.
|
2. |
Loan from USCI Japan Limited |
The Company has a related party loan due to USCI Japan
Limited, a shareholder, amounting to 500,000 repayable after three years from drawdown in May 2013. The loan is interest-free.
The
loan has a conversion feature, whereby in the event the Company does not repay the loan on the repayment date, the lender shall be entitled by giving less than 30 days notice in writing to be issued with 500 ordinary shares in the capital of
the Company (being the amount of Ordinary Shares into which the loan converts on the basis of a pre-money valuation of the borrower of 10,000,000) or the Company will be entitled to elect to issue such shares in full conversion of the loan to
shares in the capital of the Company and on such shares being issued the Company shall have no further liability with respect to the loan.
If the conversion does not take place, then the loan shall become immediately repayable by the Company to the lender on the second repayment
date upon a written request by the lender and in the period between the first repayment date and the second repayment date. Interest at a rate of 5% per annum shall accrue on the loan and be payable to the lender on the second repayment date.
This loan was recognised at fair value at inception, which is the discounted value using a market interest rate of 5% that reflects the
term and risk profile of the loan.
As USCI Japan Limited is a shareholder of the Company, the difference between the face value of the
loan and the discounted value of the loan was recognised as additional capital contribution. An implied finance cost was subsequently recognised over the term of the loan using the effective interest method.
The loans conversion feature was separately accounted for as an equity instrument (see note 17).
- 26 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
16. |
OBLIGATIONS UNDER LEASES |
The Company has entered into a lease of the factory building in IDA
Industrial Estate, Ballinasloe. The lease is for a period of 20 years commencing on 13 January 2010. The lessor, Balcreagh Properties, has granted a discount on the agreed rental rates for lease payments between commencement of the lease and
1 April 2015. The lease discount is subject to a claw back provision as disclosed in note 22.
The yearly rent on the property was
205,800, referred as the first reserved rent exclusive of VAT but reduced by 60% for the first 5 years of the term and the rent being free until 31 March 2010. The rent payment provisions are as follows:
|
|
|
Rent to be paid after April 2015 quarterly in advance every 1st day of January, 1st day of April, 1st day of July and 1st day of October in every year and yielding and paying by way of additional rent all sums due by
the Company by way of insurance premiums |
|
|
|
Provided that after April 2015 so long as the Company during the term reserved by this lease occupies less than 90% of the premises then the amount of the rent payable by the Company to the lessor shall be no less than
90% of the rent during the residue of the term. The unused portion must be set aside for the lessor and access provided at agreed times for use by the lessor. |
The future minimum rentals payable under this noncancellable operating lease are as follows:
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
Not later than one year |
|
|
103,080 |
|
|
|
82,320 |
|
Later than one year and not later than five years |
|
|
515,000 |
|
|
|
488,080 |
|
Later than five years |
|
|
1,332,500 |
|
|
|
1,462,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,950,580 |
|
|
|
2,032,900 |
|
|
|
|
|
|
|
|
|
|
- 27 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
Authorised: |
|
|
|
|
|
|
|
|
100,000,000 Ordinary shares of 0.01 each |
|
|
1,000,000 |
|
|
|
1,000,000 |
|
2,000,000 B Ordinary shares of 1 each |
|
|
2,000,000 |
|
|
|
2,000,000 |
|
100,000,000 C Ordinary shares of 0.01 each |
|
|
1,000,000 |
|
|
|
1,000,000 |
|
2,000,000 D Ordinary shares of 1 each |
|
|
2,000,000 |
|
|
|
1,000,000 |
|
8% Cumulative redeemable preference shares of 1 each |
|
|
150,000 |
|
|
|
150,000 |
|
8% Cumulative Redeemable A Preference Shares of 1 each |
|
|
170,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,320,000 |
|
|
|
5,150,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued: |
|
|
|
|
|
|
|
|
10,000 Ordinary shares of 0.01 each |
|
|
100 |
|
|
|
100 |
|
500,000 Ordinary B shares of 1 each |
|
|
500,000 |
|
|
|
500,000 |
|
972,000 D Ordinary shares of 1 each |
|
|
972,000 |
|
|
|
757,000 |
|
8% Cumulative redeemable preference shares of 1 each |
|
|
150,000 |
|
|
|
150,000 |
|
8% Cumulative Redeemable A Preference Shares of 1 each |
|
|
170,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,792,100 |
|
|
|
1,407,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital classified as equity |
|
|
100 |
|
|
|
100 |
|
Share capital classified as financial liability (note 14) |
|
|
1,792,000 |
|
|
|
1,407,000 |
|
Equity component of convertible loan (note 15) |
|
|
69,701 |
|
|
|
69,701 |
|
|
(a) |
The B ordinary shares have no right to attend or vote at general meetings of the Company. They have been issued under an Employment and Incentive Scheme and are subject to a Put and Call Option
Agreement, whereby the Company granted the employee/investors the right exercisable at any time during the option period to require the Company to purchase the option shares for a fixed redemption price of 1.40 per B ordinary
share. B ordinary shares have been classified as a financial liability (see note 14). |
|
(b) |
The C ordinary shares have no right to attend or vote at general meetings of the company, save on a realisation in which event they shall rank pari passu with the ordinary shares in the capital of the
company. None of the C ordinary shares have yet been issued. |
- 28 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
17. |
SHARE CAPITAL (Continued) |
|
(c) |
The D ordinary shares have no right to attend or vote at general meetings of the company, on a winding up D ordinary shares shall be entitled to aggregate sum of all sums paid up but not
exceeding 1.20 per D Ordinary share. Similar to the B ordinary shares, the D ordinary shares are also subject to a Put and Call Option Agreement. These shares have been classified as a financial
liability (see note 14). |
|
(d) |
The preference shares have no right to attend or vote at general meetings of the Company. A Preference Shares shall be entitled to receive notice of, and to attend at all general meetings of the
Company but not to vote on any resolution proposed thereat. The Subscription Agreement provides that the Company shall redeem the preference shares on the redemption date. If the Company cannot redeem the preference shares then due for redemption,
then those preference shares which the Company cannot redeem shall be redeemed as soon as the Company becomes capable of doing so pursuant to the Irish Companies Act. If the Company does not redeem all of the preference shares on the redemption date
then, until the Company has redeemed all of the preference shares, it will not make any distribution. The price to be paid by the Company on redemption shall be the redemption price. |
Both classes of preference shares have been classified as financial liabilities (see note 14).
|
(e) |
The equity component of the convertible related party loan represents the equity component of the loan from USCI Japan Limited, which was issued with an equity conversion feature. Under FRS 102, such a compound
instrument is required to be separated between its debt and equity components (see note 15). |
|
(f) |
The Company may declare and pay a dividend on one class of shares in the capital of the Company without declaring or paying any dividend on other classes or may declare a greater dividend on such class than on
other such classes. |
- 29 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
18. |
NOTES TO THE STATEMENT OF CASH FLOWS |
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
Loss on ordinary activities after taxation |
|
|
(795,905 |
) |
|
|
(1,100,764 |
) |
|
|
|
Adjustments to reconcile profit for the year to net cash flows from operating activities |
|
|
|
|
|
|
|
|
Depreciation of tangible fixed assets (note 10) |
|
|
61,830 |
|
|
|
52,790 |
|
Net movement in government grants |
|
|
82,947 |
|
|
|
98,026 |
|
Net movement in deferred income |
|
|
48,159 |
|
|
|
5,376 |
|
Interest payable and similar charges |
|
|
123,985 |
|
|
|
114,083 |
|
Working capital movements |
|
|
|
|
|
|
|
|
Decrease/(increase) in debtors (note 12) |
|
|
54,627 |
|
|
|
(46,186 |
) |
Decrease/(increase) in stocks (note 11) |
|
|
(15,535 |
) |
|
|
104,265 |
|
Increase/(decrease) in creditors (note 13) |
|
|
147,512 |
|
|
|
17,044 |
|
Taxation |
|
|
|
|
|
|
|
|
Corporation tax paid (note 9) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash outflow from operating activities |
|
|
(292,380 |
) |
|
|
(755,366 |
) |
|
|
|
|
|
|
|
|
|
19. |
PENSION AND OTHER POSTEMPLOYMENT BENEFITS |
Defined contribution scheme
The Company participates in a defined contribution scheme operated by Zurich Life Assurance PLC in the form of a personal retirement savings
annuity account (PRSA). Employees are entitled to membership upon permanent status. The Company facilitates the account setup with Zurich Life Assurance PLC and makes contributions that match the employees contributions. Employees can
contribute between 1% to 6% of their salary, which is matched by the Company based on a range from 2% to 12%. The Company has no control over how the funds are managed or invested.
Amounts recognised in the 2014 statement of comprehensive income respect of the Companys contribution to the defined contribution scheme
amounted to 53,837 (2013: 53,818).
Death in service and longterm disability benefits
Employees (both permanent and fixed term workers) under age 65 are eligible to be covered for lump sum death in service benefits from their
hire date. Permanent employees, excluding fixedterm workers, under age 65 are also eligible to be covered for longterm disability benefits from their hire date.
Amounts recognised in the 2014 statement of comprehensive income respect of the Companys payments to death in services and longterm
disability benefits plan amounted to 10,247 (2013: 9,734).
- 30 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
On 7 February 2012, the Companys Chief Executive Officer
(CEO) on behalf of the Company granted a number of options to certain key employees over a number of Ordinary shares of 0.01 each. Such options were granted from the Ordinary shares owned by the Companys CEO totalling to 7,800 shares.
Such options and any shares to be issued on exercise of the options shall be held subject to the Companys Memorandum and Articles of Association.
The options may be exercised at the price per share, during the periods and subject to the conditions set out in the schedule accompanying the
Option Granting Agreement. The options must be exercised in full and partial exercise of the options is not permitted.
In the event that
the employee should leave the employment of the Company for any reason, then all unexercised options shall lapse and shall be of no further effect.
The options may only be exercised on or after the occurrence of an Exit Event. An Exit Event for this purpose shall be:
|
(a) |
the sale to an unrelated third party of shares in the capital of the Company carrying greater than 50% of the overall voting rights in the Company; |
|
(b) |
a sale of substantially all of the undertaking and assets of the Company where the bulk of the proceeds of such sale are distributed to shareholders; or |
|
(c) |
the listing of shares of the Company on a recognised stock exchange or such other event as may be deemed an Exit Event by the Board of the Company. |
On the occurrence of an Exit Event, the Board of the Company shall be entitled but not obliged by notice in writing to the holders of options
to deem all unexercised options to be exercised, to cause the appropriate number of Ordinary shares to which option holders will be entitled on exercise of the options to be allotted from the CEOs Ordinary shares and issued to such option
holders and to cause the exercise price payable by option holders on exercise of such options to be withheld from any proceeds that would otherwise be payable to the option holders on completion of an Exit Event and instead paid to the Company.
As the exercise of the share options is contingently dependent on an Exit Event, no share-based payment expense has been recognised in 2014 or
2013.
- 31 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
The bank loan and overdraft facility (see note 15) are secured by means of:
|
(a) |
A Floating Debenture over the assets and undertakings of Creagh Medical Limited and |
|
(b) |
A Letter of Guarantee from Mr. Tom Greaney guaranteeing the companys liabilities in the amount of 250,000. |
As disclosed in note 26, on 20 November 2015, SurModics, Inc., a company incorporated in Minnesota, USA, acquired the Company. As a result
of the acquisition, the security and guarantees over the bank loan and overdraft facility have been released.
22. |
COMMITMENTS AND CONTINGENCIES |
Government grants
In 2014, the Company recognised 16,196 (2013: Nil) for government grants receivable from Enterprise Ireland. If the Company fails
to adhere to the conditions of the grant they may be liable to repay these amounts to Enterprise Ireland. This contingent liability remains in place for five years from the date of the last payment of the grant. The total value of the government
grants subject to this contingency is 448,752 at 31 December 2014. The contingency expires in the following periods:
|
|
|
|
|
|
|
|
|
|
|
Expiring in 2015 |
|
|
45,195 |
|
Expiring in 2016 |
|
|
174,337 |
|
Expiring in 2017 |
|
|
213,024 |
|
Expiring in 2018 |
|
|
|
|
Expiring in 2019 |
|
|
16,196 |
|
|
|
|
|
|
|
|
|
|
|
448,752 |
|
|
|
|
|
|
The Company has assessed that it is unlikely that the Company will not be able to adhere to the conditions of
the grant.
Lease discount claw back
The lease agreement (see note 16) with Balcreagh Properties for the factory building has a claw-back clause which states that if the Company is
acquired in the period up to 31 March 2017, the Company will reimburse to the lessor all discounted amounts in the period from 1 April 2015 to the date of acquisition up to 90% of the annual rent.
As disclosed in note 26, on 20 November 2015, SurModics, Inc., a company incorporated in Minnesota, USA, acquired the Company. As this is
an event that arose after the end of the reporting period and was not an indicator of conditions as of the date of the statement of financial position, no provision was recognised in the Companys 2014 financial statements.
- 32 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
23. |
OFF-BALANCE SHEET ARRANGEMENT |
The Company entered into an operating lease arrangement for the
hire of the administrative and factory building as this arrangement is a cost efficient way of obtaining the shortterm benefits of these assets. The Companys lease rental expense for the year is disclosed in note 5 and the annual Company
commitments under these arrangements are disclosed in note 16. There are no other material offbalance sheet arrangements.
24. |
FINANCIAL INSTRUMENTS |
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
Financial assets that are debt instruments measured at amortised cost: |
|
|
|
|
|
|
|
|
- Trade debtors |
|
|
46,822 |
|
|
|
141,086 |
|
|
|
|
Financial liabilities measured at amortised cost: |
|
|
|
|
|
|
|
|
- Trade payables |
|
|
128,562 |
|
|
|
53,284 |
|
- Bank loan |
|
|
121,347 |
|
|
|
160,000 |
|
- Amounts due to related parties |
|
|
467,813 |
|
|
|
445,000 |
|
- Shares classified as financial liabilities |
|
|
2,001,038 |
|
|
|
1,531,695 |
|
|
|
|
|
|
|
|
|
|
- 33 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
25. |
DIRECTORS AND SECRETARYS INTERESTS |
The interests of the directors in the issued
share capital of the Company at the beginning and end of the reporting period were as follows:
|
|
|
|
|
|
|
|
|
|
|
As at
1 January 2014
Ordinary shares of
0.01 each |
|
|
As at
31 December 2014
Ordinary shares of
0.01 each |
|
|
|
|
|
|
|
|
|
|
Bernard Collins |
|
|
300 |
|
|
|
300 |
|
Thomas Greaney |
|
|
7,800 |
|
|
|
7,800 |
|
Matthew Jenusailis |
|
|
100 |
|
|
|
100 |
|
|
|
|
|
|
B Ordinary shares
of 1 each |
|
|
B Ordinary shares
of 1 each |
|
|
|
|
|
|
Bernard Collins |
|
|
100,000 |
|
|
|
100,000 |
|
Thomas Greaney |
|
|
100,000 |
|
|
|
100,000 |
|
|
|
|
|
|
D Ordinary shares
of 1 each |
|
|
D Ordinary shares
of 1 each |
|
|
|
|
|
|
Thomas Greaney |
|
|
87,000 |
|
|
|
87,000 |
|
Bernard Collins |
|
|
200,000 |
|
|
|
250,000 |
|
Gerard Flood |
|
|
50,000 |
|
|
|
100,000 |
|
In November 2015, Mr. Bernard Collins, Mr. Matthew Jenusailis and Mr. Gerard Flood resigned from
the Board.
In November 2015, Mr. Bryan Phillips and Mr. Gary Maharaj were appointed directors of the Company.
26. |
EVENTS AFTER REPORTING PERIOD |
On 20 November 2015, SurModics, Inc., a company
incorporated in Minnesota, USA and a leading provider of medical device in vitro diagnostic technologies, acquired the Company. The acquisition is part of SurModics, Inc.s strategy to transform its Medical Device business from being a provider
of coating technologies to offering whole-product solutions to medical device customers in the large and growing global interventional vascular market.
SurModics, Inc. acquired the Company for 30 million, including an upfront payment of 18 million, and up to
12 million based on achievement of revenue and value-creating operational milestones, subject to certain adjustments including a customary working capital adjustment, as provided in the Transaction Documents.
Since the transaction is between the Companys shareholders and SurModics, Inc., it will not be recognised in the financial statements of
the Company.
- 34 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
27. |
RELATED COMPANIES AND RELATED PARTY TRANSACTIONS |
Related party transactions
The Company owns 100% of the share capital in USCI Ireland Limited. The Companys investment in USCI Ireland Limited of 15 is
included in Other financial assets in the statement of financial position. At the end of the year there is a balance due by the Company to USCI Ireland Limited of 15. USCI Ireland Limited did not trade during the period.
In 2010 USCI Japan Limited transferred the business of its Irish branch to the Company in a management buyout agreement. As part of this
agreement USCI Japan Limited retained a 15% shareholding in the Company.
In financial year ended 31 December 2013, USCI Japan Limited
granted an interest free loan of 500,000 to Creagh Medical Limited. This related party loan is due for repayment three years from the drawdown date (see note 15).
During the years ended 31 December 2014 and 31 December 2013, the Company did not enter into transactions, such as sales or purchases
to or from related parties, other than amounts owed to and from USCI Ireland Limited and USCI Japan Limited.
Terms and conditions of
transactions with related parties
The terms and conditions of the related party loan from USCI Japan Limited are disclosed in note 15.
The Company has not provided or benefited from any guarantees for any related party receivables or payables, except for the guarantee received from Mr. Tom Greaney, a director of the Company (see note 21).
Key management personnel
All directors and certain senior employees who have authority and responsibility for planning, directing and controlling the activities of the
Company are considered to be key management personnel. Total remuneration in respect of these individuals in 2014 is 450,087 (2013: 414,791).
The Companys CEO on behalf of the Company has also granted a number of options to certain key employees over a number of Ordinary shares
of 0.01 each. Such options were granted from the Ordinary shares owned by the Companys CEO. The options may only be exercised on or after the occurrence of an Exit Event. As the exercise of the share options is contingently dependent on
an Exit Event, no share-based payment expense has been recognised in 2014 or 2013 (see note 20).
- 35 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
28. |
SUMMARY OF DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE REPUBLIC OF IRELAND AND THE UNITED STATES OF AMERICA |
The Companys financial statements are prepared in accordance with Financial Reporting Standards 102, The Financial Reporting
Standard applicable in the UK and Republic of Ireland (FRS 102 or Local GAAP), which differ in certain respects from accounting principles generally accepted in the United States of America (US GAAP).
Differences which have an effect on the net income, shareholders equity, financial position and cash flows of the Company are set out below:
Effect of differences between Local GAAP and US GAAP on loss after tax:
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
Loss for the year in accordance with Local GAAP |
|
|
(795,905 |
) |
|
|
(1,100,764 |
) |
|
|
|
US GAAP adjustment |
|
|
|
|
|
|
|
|
Accretion of Ordinary B and D shares to redemption amounts |
|
|
84,343 |
|
|
|
70,467 |
|
Accretion of imputed interest on related party loan |
|
|
22,813 |
|
|
|
14,686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss in accordance with US GAAP |
|
|
(688,749 |
) |
|
|
(1,015,611 |
) |
|
|
|
|
|
|
|
|
|
Effect of differences between Local GAAP and US GAAP on net liabilities:
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
Net liabilities in accordance with Local GAAP |
|
|
(2,000,169 |
) |
|
|
(1,204,264 |
) |
|
|
|
US GAAP adjustments |
|
|
|
|
|
|
|
|
Reclassification of Ordinary B and D shares into mezzanine equity |
|
|
1,472,000 |
|
|
|
1,257,000 |
|
Accretion of Ordinary B and D shares to redemption amounts |
|
|
209,038 |
|
|
|
124,695 |
|
Reclassification of equity component of related party loan into debt |
|
|
(69,701 |
) |
|
|
(69,701 |
) |
Accretion of imputed interest on related party loan |
|
|
37,499 |
|
|
|
14,686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net equity in accordance with US GAAP |
|
|
(351,333 |
) |
|
|
122,416 |
|
|
|
|
|
|
|
|
|
|
- 36 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
28. |
SUMMARY OF DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE REPUBLIC OF IRELAND AND THE UNITED STATES OF AMERICA (Continued) |
Effect of differences between Local GAAP and US GAAP on cash flows:
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
Net cash outflow from operating activities in accordance with Local GAAP |
|
|
(292,380 |
) |
|
|
(755,366 |
) |
US GAAP adjustment: |
|
|
|
|
|
|
|
|
Bank interest paid classified as operating activity under US GAAP |
|
|
(4,829 |
) |
|
|
(9,930 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash outflow from operating activities in accordance with US GAAP |
|
|
(297,209 |
) |
|
|
(765,296 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash outflow from investing activities in accordance with Local GAAP |
|
|
(96,054 |
) |
|
|
(59,973 |
) |
US GAAP adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash outflow from investing activities in accordance with US GAAP |
|
|
(96,054 |
) |
|
|
(59,973 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flow from financing activities in accordance with Local GAAP |
|
|
345,066 |
|
|
|
593,903 |
|
US GAAP adjustment: |
|
|
|
|
|
|
|
|
Bank interest paid classified as operating activity under US GAAP |
|
|
4,829 |
|
|
|
9,930 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flow from financing activities in accordance with US GAAP |
|
|
349,895 |
|
|
|
603,833 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in cash at bank and in hand in accordance with US GAAP |
|
|
(43,368 |
) |
|
|
(221,436 |
) |
Cash at bank and in hand at beginning of period |
|
|
396,903 |
|
|
|
618,339 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at bank and in hand at end of period in accordance with US GAAP |
|
|
353,535 |
|
|
|
396,903 |
|
|
|
|
|
|
|
|
|
|
- 37 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
28. |
SUMMARY OF DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE REPUBLIC OF IRELAND AND THE UNITED STATES OF AMERICA (Continued) |
Explanation of Local GAAP to US GAAP differences
1. Ordinary B and D shares
The
Companys Ordinary B and D shares are puttable instruments since they give the holders the right to put the instrument back to the Company at a fixed redemption price. Under Local GAAP, a puttable instrument meets the definition of
financial liability because it gives the holder the right to put it back to the entity for cash or another financial asset, which represents a contractual obligation to deliver cash or another financial asset for which the entity does not have an
unconditional right to avoid.
Under US GAAP, an embedded put option in a share should be evaluated for bifurcation instead of
classifying the entire instrument as a liability. In addition, puttable shares are generally classified as temporary or mezzanine equity under US GAAP.
As a result, the Ordinary B and D shares which are classified as financial liabilities in the Companys Local GAAP statement of financial
position are reclassified to mezzanine equity under US GAAP. The face value of Ordinary B and D shares as of 31 December 2014 and 2013 amounted to 1,472,000 and 1,257,000, respectively.
Under FRS 102, the Company has measured the Ordinary B and D shares at the accreted value of their redemption amounts, with a corresponding
periodic charge to the statement of comprehensive income.
Under US GAAP, shares classified as mezzanine equity such as the
Companys Ordinary B and D shares shall also be measured at their redemption amounts. However, the corresponding charge shall be recognised in equity.
2. Related party loan
Under
Local GAAP, the Company has a related party loan due to USCI Japan Limited, which is interest-free. In accordance with Local GAAP, financial instruments in a financing transaction are initially measured at the present value of the future payments
discounted at a market rate of interest for a similar debt instrument. As a result, the Company recognised the loan at its present value at inception date using an observable market rate of interest.
Under US GAAP, the related party loan is not accounted for using the imputed interest rate and is accounted for at the cash proceeds
received.
- 38 -
CREAGH MEDICAL LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (Continued)
28. |
SUMMARY OF DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE REPUBLIC OF IRELAND AND THE UNITED STATES OF AMERICA (Continued) |
Explanation of Local GAAP to US GAAP differences
3. Presentation of bank interest paid in the statement of cash flows
Under Local GAAP, entities may present bank interest paid either as an operating activity or a financing activity, so long as the presentation
is consistent from period to period. The Company has elected to present bank interest paid as a financing activity under Local GAAP.
Under
US GAAP, bank interest paid is included within operating activities.
- 39 -
Exhibit 99.2
Creagh Medical Limited
Unaudited interim condensed
financial statements
for the nine-month period ended 30 September 2015
CREAGH MEDICAL LIMITED
UNAUDITED INTERIM CONDENSED FINANCIAL
STATEMENTS
30 September 2015
TABLE OF
CONTENTS
|
|
|
|
|
|
|
PAGE |
|
|
|
UNAUDITED STATEMENT OF COMPREHENSIVE INCOME |
|
|
2 |
|
|
|
UNAUDITED STATEMENT OF CHANGES IN EQUITY |
|
|
3 |
|
|
|
UNAUDITED STATEMENT OF FINANCIAL POSITION |
|
|
4 |
|
|
|
UNAUDITED STATEMENT OF CASH FLOWS |
|
|
5 |
|
|
|
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS |
|
|
6 |
|
- 1 -
CREAGH MEDICAL LIMITED
UNAUDITED STATEMENT OF COMPREHENSIVE INCOME
for the nine months ended 30 September 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Note |
|
2015
|
|
|
2014
|
|
|
|
|
Continuing operations |
|
|
|
|
|
|
|
|
|
|
Turnover |
|
3 |
|
|
1,659,399 |
|
|
|
1,192,019 |
|
|
|
|
|
Cost of sales |
|
|
|
|
(738,009 |
) |
|
|
(465,529 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
921,390 |
|
|
|
726,490 |
|
|
|
|
|
Expenditures |
|
|
|
|
|
|
|
|
|
|
Distribution costs |
|
|
|
|
(4,570 |
) |
|
|
(3,872 |
) |
Administrative expenses |
|
|
|
|
(760,693 |
) |
|
|
(669,060 |
) |
Research and development costs |
|
|
|
|
(668,554 |
) |
|
|
(559,280 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
|
|
(512,427 |
) |
|
|
(505,722 |
) |
|
|
|
|
Interest payable and similar charges |
|
|
|
|
(109,521 |
) |
|
|
(92,020 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on ordinary activities before taxation |
|
4 |
|
|
(621,948 |
) |
|
|
(597,742 |
) |
|
|
|
|
Taxation |
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on ordinary activities after taxation |
|
|
|
|
(621,948 |
) |
|
|
(597,742 |
) |
|
|
|
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss for the period |
|
|
|
|
(621,948 |
) |
|
|
(597,742 |
) |
|
|
|
|
|
|
|
|
|
|
|
- 2 -
CREAGH MEDICAL LIMITED
UNAUDITED STATEMENT OF CHANGES IN EQUITY
for the nine months ended 30 September 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
capital |
|
|
Equity
component of
convertible loan
|
|
|
Profit and
loss account
|
|
|
Total
equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2014 |
|
|
100 |
|
|
|
69,701 |
|
|
|
(1,274,065 |
) |
|
|
(1,204,264 |
) |
Loss for the period |
|
|
|
|
|
|
|
|
|
|
(597,742 |
) |
|
|
(597,742 |
) |
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss for the period |
|
|
|
|
|
|
|
|
|
|
(597,742 |
) |
|
|
(597,742 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 September 2014 |
|
|
100 |
|
|
|
69,701 |
|
|
|
(1,871,807 |
) |
|
|
(1,802,006 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2015 |
|
|
100 |
|
|
|
69,701 |
|
|
|
(2,069,970 |
) |
|
|
(2,000,169 |
) |
Loss for the period |
|
|
|
|
|
|
|
|
|
|
(621,948 |
) |
|
|
(621,948 |
) |
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss for the period |
|
|
|
|
|
|
|
|
|
|
(621,948 |
) |
|
|
(621,948 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 September 2015 |
|
|
100 |
|
|
|
69,701 |
|
|
|
(2,691,918 |
) |
|
|
(2,622,117 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 3 -
CREAGH MEDICAL LIMITED
UNAUDITED STATEMENT OF FINANCIAL POSITION
as at 30 September 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Note |
|
30 September
2015 |
|
|
31 December
2014 |
|
|
|
|
|
|
|
|
|
|
|
FIXED ASSETS |
|
|
|
|
|
|
|
|
|
|
Tangible assets |
|
6 |
|
|
339,937 |
|
|
|
359,131 |
|
Other financial assets |
|
|
|
|
25 |
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
339,962 |
|
|
|
359,156 |
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
|
|
|
|
|
|
Stocks |
|
|
|
|
144,816 |
|
|
|
59,103 |
|
Debtors |
|
|
|
|
546,975 |
|
|
|
351,769 |
|
Cash at bank and in hand |
|
|
|
|
205,201 |
|
|
|
353,535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
896,992 |
|
|
|
764,407 |
|
|
|
|
|
CREDITORS (amounts falling due within one year) |
|
|
|
|
(1,665,532 |
) |
|
|
(572,203 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CURRENT (LIABILITIES)/ASSETS |
|
|
|
|
(768,540 |
) |
|
|
192,204 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS LESS CURRENT LIABILITIES |
|
|
|
|
(428,578 |
) |
|
|
551,360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CREDITORS (amounts falling due after one year) |
|
7 |
|
|
(2,193,539 |
) |
|
|
(2,551,529 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LIABILITIES |
|
|
|
|
(2,622,117 |
) |
|
|
(2,000,169 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CAPITAL AND RESERVES |
|
|
|
|
|
|
|
|
|
|
Called up share capital |
|
8 |
|
|
100 |
|
|
|
100 |
|
Equity component of convertible loan |
|
7 |
|
|
69,701 |
|
|
|
69,701 |
|
Profit and loss account |
|
|
|
|
(2,691,918 |
) |
|
|
(2,069,970 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL SHAREHOLDERS FUNDS |
|
|
|
|
(2,622,117 |
) |
|
|
(2,000,169 |
) |
|
|
|
|
|
|
|
|
|
|
|
- 4 -
CREAGH MEDICAL LIMITED
UNAUDITED STATEMENT OF CASH FLOWS
for the nine months ended 30 September 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Note |
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
NET CASH OUTFLOW FROM OPERATING ACTIVITIES |
|
9 |
|
|
(125,627 |
) |
|
|
(367,534 |
) |
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
Payments to acquire tangible fixed assets |
|
6 |
|
|
(36,517 |
) |
|
|
(73,218 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH FLOW FROM INVESTING ACTIVITIES |
|
|
|
|
(36,517 |
) |
|
|
(73,218 |
) |
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
|
|
|
Dividends paid to preference shareholders |
|
8 |
|
|
|
|
|
|
(7,155 |
) |
Bank interest paid |
|
|
|
|
(2,055 |
) |
|
|
(4,024 |
) |
Proceeds from issuance of Ordinary D shares |
|
8 |
|
|
|
|
|
|
150,000 |
|
Proceeds from bank loans |
|
7 |
|
|
54,519 |
|
|
|
8,875 |
|
Repayment of bank loans |
|
7 |
|
|
(38,654 |
) |
|
|
(36,667 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH FLOW FROM FINANCING ACTIVITIES |
|
|
|
|
13,810 |
|
|
|
111,029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET DECREASE IN CASH AT BANK AND IN HAND |
|
|
|
|
(148,334 |
) |
|
|
(329,723 |
) |
|
|
|
|
CASH AT BANK AND IN HAND AT 1 JANUARY |
|
|
|
|
353,535 |
|
|
|
396,903 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AT BANK AND IN HAND AT 30 SEPTEMBER |
|
|
|
|
205,201 |
|
|
|
67,180 |
|
|
|
|
|
|
|
|
|
|
|
|
- 5 -
CREAGH MEDICAL LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED
FINANCIAL STATEMENTS
30 September 2015
1. |
GENERAL INFORMATION AND STATEMENT OF COMPLIANCE |
The Company is a limited liability company incorporated in
Ireland. The registered office of the Company is at IDA Business Park, Ballinasloe, Co. Galway. The Companys principal activities are the design, development and manufacture of medical devices.
(b) |
Statement of compliance |
These unaudited interim condensed financial statements have
been prepared in compliance with FRS 104, Interim Financial Reporting (FRS 104).
These unaudited interim condensed
financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Companys annual financial statements as at 31 December 2014.
These unaudited interim condensed financial statements of Creagh
Medical Limited were approved for issue by the Board of Directors on February 3, 2016. The financial statements have been prepared in accordance with FRS 104. The financial statements are prepared in Euro () and rounded to the nearest
Euro.
The Company incurred losses on ordinary activities of 621,948 and 597,742 for the nine months ended 30 September
2015 and 2014, respectively, which resulted in a capital deficiency of 2,622,117 as of 30 September 2015 (31 December 2014: 2,000,169). The directors have assessed that the Company is an emerging developmental stage business. As
anticipated, this has led to a number of operating losses that have been funded on an ongoing basis by Series B and D Ordinary shares, preference and preference A shares as well as a bank loan and a line of credit. The directors have
assessed that the funding referred to above and the ultimate sale of the Company as disclosed in note 11 provide evidence before and after the end of the reporting period of the Companys ability to continue in business. Thus, the directors
have prepared the financial statements on a going concern basis.
In accordance with FRS 102, the directors have reviewed the accounting
policies of Creagh Medical Limited (the Company) and consider these appropriate for the Company. The same accounting policies and methods of computation are followed in these interim condensed financial statements as compared with the
most recent annual financial statements as of 31 December 2014.
- 6 -
CREAGH MEDICAL LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED
FINANCIAL STATEMENTS
30 September 2015 (Continued)
2. |
JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY |
The Company exercises judgment when recognising revenue from sale
of goods in assessing whether it has transferred to the buyer the significant risks and rewards of ownership and whether the transaction has satisfied all of the conditions for revenue recognition. The Company also exercises judgment when
recognising revenue from the rendering of services in assessing whether the outcome of the transaction can be estimated reliably, in assessing the stage of completion of the transaction and in assessing whether the transaction has satisfied all of
the conditions for revenue recognition for rendering of services. The Company also exercises judgment in identifying the transaction and in determining whether to apply the revenue recognition criteria to the separately identifiable components of a
single transaction or to apply the recognition criteria to two or more transactions together when they are linked in such a way that the commercial effect cannot be understood without reference to the series of transactions as a whole.
|
(ii) |
Operating lease commitments |
The Company has entered into a commercial property lease
as a lessee for use of the property as the Companys administrative and factory building. The classification of this lease as operating or finance lease requires the Company to determine, based on an evaluation of the terms and conditions of
the arrangement, whether it retains or acquires the significant risks and rewards of ownership of the asset and accordingly whether the lease requires an asset and liability to be recognised in the statement of financial position. The Company has
assessed that the lease of the administrative and factory building qualifies as an operating lease because it does not retain or acquire the significant risks and rewards of ownership of the asset under the lease arrangement.
|
(iii) |
Impairment of non-financial assets |
Where there are indicators of impairment of
individual assets, the Company performs impairment tests based on recoverable amount which is the higher of fair value less costs to sell or a value in use calculation. The fair value less costs to sell calculation is based on available data from
binding sales transactions in an arms length transaction on similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. The cash flows are
derived from the budget for the next five years and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the assets performance of the cash generating unit being
tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash flows and the growth rate used for extrapolation purposes. The Company has assessed that as of
30 September 2015 and 31 December 2014, non-financial assets are not impaired (see note 6).
- 7 -
CREAGH MEDICAL LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED
FINANCIAL STATEMENTS
30 September 2015 (Continued)
2. |
JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued) |
The Company establishes provisions based on reasonable estimates, for
possible consequences of audits by the tax authorities of the consequences of audits by the tax authorities in the country in which it operates. The amount of such provisions is based on various factors, such as experience with previous tax audits
and differing interpretations of tax regulations by the taxable entity and the responsible tax authority.
Management estimation is
required to determine the amount of deferred tax assets that can be recognised, based upon likely timing and level of future taxable profits together with an assessment of the effect of future tax planning strategies. Management has assessed that no
deferred tax asset shall be recognised for tax loss carryforwards because it is not probable that future taxable profits will be available against which they can be utilised note 5.
|
(v) |
Provisions and contingencies |
In 2015, the Company recognised Nil (2014:
16,196) for government grants receivable from Enterprise Ireland. If the Company fails to adhere to the conditions of the grant they may be liable to repay these amounts to Enterprise Ireland. This contingent liability remains in place for
five years from the date of the last payment of the grant.
The Company has assessed that it is unlikely that the Company will not be able
to adhere to the conditions of the grant.
|
(vi) |
Recognition of share-based payments |
The Companys Chief Executive Officer (CEO)
on behalf of the Company granted a number of options to certain key employees over a number of Ordinary shares of 0.01 each. The options may be exercised at the price per share, during the periods and subject to certain conditions in the
Option Granting Agreement. The options may only be exercised on or after the occurrence of an Exit Event.
Based on the terms and
conditions of this share-based payment scheme, the Company has assessed that no share-based payment expense needs to be recognised in 2015 and 2014.
|
(vii) |
Fair valuation of financial instruments |
When the fair values of financial assets and
financial liabilities recorded in the statement of financial position cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the discounted cash flow (DCF) model. The inputs to
these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values.
- 8 -
CREAGH MEDICAL LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED
FINANCIAL STATEMENTS
30 September 2015 (Continued)
2. |
JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued) |
|
(vii) |
Fair valuation of financial instruments (Continued) |
The Company has determined the
fair value of a non-interest bearing three-year related party loan from USCI Japan Limited at inception using a DCF model with an observable market rate. The difference between the face value of the loan and the fair value at inception date was
treated as an additional share capital recognised in the equity section of the statement of financial position. The loan was subsequently measured at amortised cost using the effective interest rate method. Please see more details in note 7.
|
(viii) |
Classification of share capital |
FRS 102 specifies the features of a puttable financial
instrument to be classified as an equity instrument. A puttable financial instrument includes a contractual obligation for the issuer to repurchase or redeem that instrument for cash or another financial asset on exercise of the put. As an exception
to the definition of a financial liability, an instrument that includes such an obligation is classified as an equity instrument if certain features are satisfied.
The Company has assessed that as of 30 September 2015 share capital amounting 1,792,000 (2014: 1,792,000) contain features
identical to a financial liability and has reclassified these amounts into financial liability. Please see note 8 for more details.
The
Company also has a convertible related party loan from USCI Japan Limited amounting to 500,000 (see note 7). Under FRS 102, if an instrument has both a financial liability component and an equity component (e.g., a conversion option), the
issuer is required to separately account for each component. The liability component is recognised at fair value calculated by discounting the cash flows associated with the liability component at a market rate for a similar debt host instrument,
and the equity component is measured as the residual amount. As a result the Company has calculated the financial liability component of this loan amounting to 430,299 and has recognised this amount as a financial liability (see note 7). The
residual amount of the loan amounting to 69,701 was reclassified to equity (see note 8).
|
(ix) |
Assessment of functional currency |
Based on the economic substance of the underlying
circumstances relevant to the Company, the functional currency is determined to be the Euro. It is the currency that mainly influences the sale of goods and services and the cost manufacturing the goods and of rendering the services.
- 9 -
CREAGH MEDICAL LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED
FINANCIAL STATEMENTS
30 September 2015 (Continued)
The total turnover of the Company for the period has been derived from its principal
activity wholly undertaken in Ireland.
The Company operates in two principal areas of activity, that of the manufacture and sale of
medical devices and the provision of design and development services.
|
|
|
|
|
|
|
|
|
Principal areas of activity |
|
2015
|
|
|
2014
|
|
|
|
|
|
|
Sale of medical devices |
|
|
1,261,366 |
|
|
|
822,457 |
|
Design and development services |
|
|
398,033 |
|
|
|
369,562 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,659,399 |
|
|
|
1,192,019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Geographical market |
|
2015
|
|
|
2014
|
|
|
|
|
|
|
Europe |
|
|
305,092 |
|
|
|
276,187 |
|
Rest of the World |
|
|
1,354,307 |
|
|
|
915,832 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,659,399 |
|
|
|
1,192,019 |
|
|
|
|
|
|
|
|
|
|
Turnover attributable to geographical markets outside Ireland amounted to 94% for 2015 (2014: 97%).
4. |
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION |
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
The loss on ordinary activities before taxation is stated after charging/(crediting): |
|
|
|
|
|
|
|
|
Directors remuneration: |
|
|
|
|
|
|
|
|
Salary |
|
|
63,965 |
|
|
|
60,408 |
|
Pension costs |
|
|
5,387 |
|
|
|
5,394 |
|
Depreciation of tangible fixed assets |
|
|
55,711 |
|
|
|
44,379 |
|
Research and development |
|
|
|
|
|
|
|
|
expenditure in current year |
|
|
705,924 |
|
|
|
630,646 |
|
research and development tax credits |
|
|
(37,370 |
) |
|
|
(71,366 |
) |
Operating lease rentals building |
|
|
90,094 |
|
|
|
87,810 |
|
- 10 -
CREAGH MEDICAL LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED
FINANCIAL STATEMENTS
30 September 2015 (Continued)
There is no charge to corporation tax in the accounts due to net operating loss tax
losses carried forwards.
The reconciliation between the tax line in the statement of comprehensive income and the loss on ordinary
activities before taxation multiplied by the Irish standard tax rate follows:
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
Loss on ordinary activities before taxation |
|
|
(621,948 |
) |
|
|
(597,742 |
) |
|
|
|
Tax income calculated at Irish standard rate of corporation tax of 12.5% (2014: 12.5%) |
|
|
(77,744 |
) |
|
|
(74,718 |
) |
Effect of unrecognised deferred tax asset on net operating loss carryover |
|
|
77,744 |
|
|
|
74,718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tax expense reported in the statement of comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of 30 September 2015, the Company has 17,659,189 of tax losses for which no deferred tax assets
have been recognised because management believes that it may not be probable that sufficient future taxable income will be available against which the deferred tax assets can be utilized. Unused tax losses do not expire.
- 11 -
CREAGH MEDICAL LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED
FINANCIAL STATEMENTS
30 September 2015 (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 September 2015 |
|
|
|
|
Fixtures, |
|
|
|
|
|
|
|
|
|
Balloon |
|
|
fittings and |
|
|
Computer |
|
|
|
|
|
|
moulds |
|
|
equipment |
|
|
equipment |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2015 |
|
|
34,700 |
|
|
|
555,175 |
|
|
|
36,117 |
|
|
|
625,992 |
|
Additions |
|
|
5,464 |
|
|
|
19,904 |
|
|
|
11,149 |
|
|
|
36,517 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 September 2015 |
|
|
40,164 |
|
|
|
575,079 |
|
|
|
47,266 |
|
|
|
662,509 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2015 |
|
|
17,742 |
|
|
|
230,818 |
|
|
|
18,301 |
|
|
|
266,861 |
|
Charge for the year |
|
|
5,525 |
|
|
|
42,189 |
|
|
|
7,997 |
|
|
|
55,711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 September 2015 |
|
|
23,267 |
|
|
|
273,007 |
|
|
|
26,298 |
|
|
|
322,572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book values |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 September 2015 |
|
|
16,897 |
|
|
|
302,072 |
|
|
|
20,968 |
|
|
|
339,937 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2014 |
|
|
|
|
Fixtures, |
|
|
|
|
|
|
|
|
|
Balloon |
|
|
fittings and |
|
|
Computer |
|
|
|
|
|
|
moulds |
|
|
equipment |
|
|
equipment |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2014 |
|
|
34,700 |
|
|
|
480,081 |
|
|
|
15,157 |
|
|
|
529,938 |
|
Additions |
|
|
|
|
|
|
75,094 |
|
|
|
20,960 |
|
|
|
96,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2014 |
|
|
34,700 |
|
|
|
555,175 |
|
|
|
36,117 |
|
|
|
625,992 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2014 |
|
|
10,802 |
|
|
|
181,123 |
|
|
|
13,106 |
|
|
|
205,031 |
|
Charge for the year |
|
|
6,940 |
|
|
|
49,695 |
|
|
|
5,195 |
|
|
|
61,830 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2014 |
|
|
17,742 |
|
|
|
230,818 |
|
|
|
18,301 |
|
|
|
266,861 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book values |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2014 |
|
|
16,958 |
|
|
|
324,357 |
|
|
|
17,816 |
|
|
|
359,131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 12 -
CREAGH MEDICAL LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED
FINANCIAL STATEMENTS
30 September 2015 (Continued)
6. |
TANGIBLE FIXED ASSETS (Continued) |
The Company has assessed that continued operating losses are an indicator of potential
impairment of depreciable assets. Except for certain assets with immaterial carrying amounts, all of the Companys assets are being utilised in the business. As an emerging developmental stage business, the Companys business strategy is
to design balloon catheters and retain manufacturing. As anticipated, this has led to a number of operating losses that have been funded on an ongoing basis by Series B and D Ordinary shares, preference and preference A shares as well as
a bank loan and a line of credit.
There are no individually significant assets in the Companys fixed asset register other than the
extrusion room equipment; therefore, the Company has reviewed all of its assets as a single cash-generating unit. The Company has assessed that the ongoing funding and the ultimate sale of the Company as disclosed in note 11 provide evidence before
and after the end of the reporting period that the Companys assets are not impaired.
Bank and related party loans repayable, included within creditors due after more than
one year, are analysed as follows:
|
|
|
|
|
|
|
|
|
|
|
30 September |
|
|
31 December |
|
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
|
Wholly repayable within five years |
|
|
578,007 |
|
|
|
589,145 |
|
Not wholly repayable within five years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
578,007 |
|
|
|
589,145 |
|
|
|
|
|
|
|
|
|
|
Details of terms and conditions of loans:
|
1. |
Bank loan from Bank of Ireland (BOI) |
The Companys loan facility with BOI
includes the following:
|
|
|
50,000 by way of overdraft, repayable on demand |
|
|
|
12,500 by way of Credit Card facility, repayable on standard credit terms |
|
|
|
121,346 by way of Term Loan, repayable by monthly instalments of 3,573, covering interest and principal. The loan is to be repaid in full by 31 December 2017. This repayment is based on current interest
rate of 3.84% and the repayment amount may need to be adjusted to reflect interest rate during the remaining term, such that repayments are sufficient to clear the loan in full by the expiry date of 31 December 2017. |
- 13 -
CREAGH MEDICAL LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED
FINANCIAL STATEMENTS
30 September 2015 (Continued)
The loan is also subject to a bank covenant, including that the Company observes the
following conditions:
|
|
|
Use all sums drawn for the purpose specified in the loan agreement |
|
|
|
Maintain its corporate existence |
|
|
|
Furnish certified accounts with the Lender within 6 months of the Companys financial year end |
|
|
|
Furnish half yearly Management Accounts within 60 days of the Companys half year end |
|
|
|
Conduct its business in an efficient and business-like manner and in compliance with all laws, authorisations, agreements and obligations applicable to it, and pay all taxes imposed on it when due and payable
|
The loan agreement is subject to a review. Unless circumstances change warranting an earlier review, the facilities would
be formally reviewed by 30 June 2015.
|
2. |
Loan from USCI Japan Limited |
The Company has a related party loan due to USCI Japan
Limited, a shareholder, amounting to 500,000 repayable after three years from drawdown in May 2013. The loan is interest-free.
The
loan has a conversion feature, whereby in the event the Company does not repay the loan on the repayment date, the lender shall be entitled by giving less than 30 days notice in writing to be issued with 500 ordinary shares in the capital of
the Company (being the amount of Ordinary Shares into which the loan converts on the basis of a pre-money valuation of the borrower of 10,000,000) or the Company will be entitled to elect to issue such shares in full conversion of the loan to
shares in the capital of the Company and on such shares being issued the Company shall have no further liability with respect to the loan.
If the conversion does not take place, then the loan shall become immediately repayable by the Company to the lender on the second repayment
date upon a written request by the lender and in the period between the first repayment date and the second repayment date. Interest at a rate of 5% per annum shall accrue on the loan and be payable to the lender on the second repayment date.
This loan was recognised at fair value at inception, which is the discounted value using a market interest rate of 5% that reflects the
term and risk profile of the loan.
As USCI Japan Limited is a shareholder of the Company, the difference between the face value of the
loan and the discounted value of the loan was recognised as additional capital contribution. An implied finance cost was subsequently recognised over the term of the loan using the effective interest method.
The related party loans conversion feature was separately accounted for as an equity instrument (see note 8).
- 14 -
CREAGH MEDICAL LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED
FINANCIAL STATEMENTS
30 September 2015 (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 September |
|
|
31 December |
|
|
|
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
|
|
|
Authorised: |
|
|
|
|
|
|
|
|
|
|
100,000,000 Ordinary shares of 0.01 each |
|
|
|
|
1,000,000 |
|
|
|
1,000,000 |
|
2,000,000 B Ordinary shares of 1 each |
|
|
|
|
2,000,000 |
|
|
|
2,000,000 |
|
100,000,000 C Ordinary shares of 0.01 each |
|
|
|
|
1,000,000 |
|
|
|
1,000,000 |
|
2,000,000 D Ordinary shares of 1 each |
|
|
|
|
2,000,000 |
|
|
|
2,000,000 |
|
8% Cumulative redeemable preference shares of 1 each |
|
|
|
|
150,000 |
|
|
|
150,000 |
|
8% Cumulative Redeemable A Preference Shares of 1 each |
|
|
|
|
170,000 |
|
|
|
170,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,320,000 |
|
|
|
6,320,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued: |
|
|
|
|
|
|
|
|
|
|
10,000 Ordinary shares of 0.01 each |
|
|
|
|
100 |
|
|
|
100 |
|
500,000 Ordinary B shares of 1 each |
|
|
|
|
500,000 |
|
|
|
500,000 |
|
972,000 D Ordinary shares of 1 each |
|
|
|
|
972,000 |
|
|
|
972,000 |
|
8% Cumulative redeemable preference shares of 1 each |
|
|
|
|
150,000 |
|
|
|
150,000 |
|
8% Cumulative Redeemable A Preference Shares of 1 each |
|
|
|
|
170,000 |
|
|
|
170,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,792,100 |
|
|
|
1,792,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital classified as equity |
|
|
|
|
100 |
|
|
|
100 |
|
Share capital classified as financial liability |
|
|
|
|
1,792,000 |
|
|
|
1,792,000 |
|
Equity component of convertible related party loan (note 7) |
|
|
|
|
69,701 |
|
|
|
69,701 |
|
|
(a) |
The B ordinary shares have no right to attend or vote at general meetings of the Company. They have been issued under an Employment and Incentive Scheme and are subject to a Put and Call Option
Agreement, whereby the Company granted the employee/investors the right exercisable at any time during the option period to require the Company to purchase the option shares for a fixed redemption price of 1.40 per B ordinary
share. B ordinary shares have been classified as a financial liability. |
|
(b) |
The C ordinary shares have no right to attend or vote at general meetings of the company, save on a realisation in which event they shall rank pari passu with the ordinary shares in the capital of the
company. None of the C ordinary shares have yet been issued. |
- 15 -
CREAGH MEDICAL LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED
FINANCIAL STATEMENTS
30 September 2015 (Continued)
8. |
SHARE CAPITAL (Continued) |
|
(c) |
The D ordinary shares have no right to attend or vote at general meetings of the company, on a winding up D ordinary shares shall be entitled to aggregate sum of all sums paid up but not
exceeding 1.20 per D Ordinary share. Similar to the B ordinary shares, the D ordinary shares are also subject to a Put and Call Option Agreement. These shares have been classified as a financial
liability. |
|
(d) |
The preference shares have no right to attend or vote at general meetings of the Company. A Preference Shares shall be entitled to receive notice of, and to attend at all general meetings of the
Company but not to vote on any resolution proposed thereat. The Subscription Agreement provides that the Company shall redeem the preference shares on the redemption date. If the Company cannot redeem the preference shares then due for redemption,
then those preference shares which the Company cannot redeem shall be redeemed as soon as the Company becomes capable of doing so pursuant to the Irish Companies Act. If the Company does not redeem all of the preference shares on the redemption date
then, until the Company has redeemed all of the preference shares, it will not make any distribution. |
Both classes of
preference shares have been reclassified to financial liability.
|
(e) |
The equity component of the convertible related party loan represents the equity component of the loan from USCI Japan Limited, which was issued with an equity conversion feature. Under FRS 102, such a compound
instrument is required to be separated between its debt and equity components (see note 7). |
|
(f) |
The Company may declare and pay a dividend on one class of shares in the capital of the Company without declaring or paying any dividend on other classes or may declare a greater dividend on such class than on
other such classes. |
- 16 -
CREAGH MEDICAL LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED
FINANCIAL STATEMENTS
30 September 2015 (Continued)
9. |
NOTES TO THE STATEMENT OF CASH FLOWS |
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
Loss on ordinary activities after taxation |
|
|
(621,948 |
) |
|
|
(597,742 |
) |
|
|
|
Adjustments to reconcile profit for the year to net cash flows from operating activities |
|
|
|
|
|
|
|
|
Depreciation of tangible fixed assets |
|
|
55,711 |
|
|
|
44,379 |
|
Net movement in government grants |
|
|
(114,313 |
) |
|
|
(71,366 |
) |
Net movement in deferred income |
|
|
167,218 |
|
|
|
(5,810 |
) |
Interest payable and similar charges |
|
|
109,521 |
|
|
|
92,020 |
|
Working capital movements |
|
|
|
|
|
|
|
|
Decrease/(increase) in debtors |
|
|
(80,893 |
) |
|
|
14,552 |
|
Decrease/(increase) in stocks |
|
|
(85,713 |
) |
|
|
(15,519 |
) |
Increase/(decrease) in creditors |
|
|
444,790 |
|
|
|
171,952 |
|
Taxation |
|
|
|
|
|
|
|
|
Corporation tax paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash outflow from operating activities |
|
|
(125,627 |
) |
|
|
(367,534 |
) |
|
|
|
|
|
|
|
|
|
10. |
COMMITMENTS AND CONTINGENCIES |
Government grants
In 2015, the Company accrued Nil (2014: 16,196) for government grants receivable from Enterprise Ireland. If the Company fails to
adhere to the conditions of the grant they may be liable to repay these amounts to Enterprise Ireland. This contingent liability remains in place for five years from the date of the last payment of the grant. The total value of the government grants
subject to this contingency is 448,752. The contingency expires in the following periods:
|
|
|
|
|
|
|
|
|
|
|
Expiring in 2015 |
|
|
45,195 |
|
Expiring in 2016 |
|
|
174,337 |
|
Expiring in 2017 |
|
|
213,024 |
|
Expiring in 2018 |
|
|
|
|
Expiring in 2019 |
|
|
16,196 |
|
|
|
|
|
|
|
|
|
|
|
448,752 |
|
|
|
|
|
|
The Company has assessed that that it is unlikely that the Company will not be able to adhere to the conditions
of the grant.
- 17 -
CREAGH MEDICAL LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED
FINANCIAL STATEMENTS
30 September 2015 (Continued)
10. |
COMMITMENTS AND CONTINGENCIES (Continued) |
Lease discount claw back
The lease agreement with Balcreagh Properties for the factory building has a claw-back clause which states that if the Company is acquired in
the period up to 31 March 2017, the Company will reimburse to the lessor all discounted amounts in the period from 1 April 2015 to the date of acquisition up to 90% of the annual rent.
As disclosed in note 11, on 20 November 2015, SurModics, Inc., a company incorporated in Minnesota, USA, acquired the Company. As this is
an event that arose after the end of the reporting period and was not an indicator of conditions as of the statement of financial position date, no provision was recognised in the Companys 30 September 2015 interim financial statements.
11. |
EVENTS AFTER REPORTING PERIOD |
On 20 November 2015, SurModics, Inc., a company
incorporated in Minnesota, USA and a leading provider of medical device in vitro diagnostic technologies, acquired the Company. The acquisition is part of SurModics, Inc.s strategy to transform its Medical Device business from being a provider
of coating technologies to offering wholeproduct solutions to medical device customers in the large and growing global interventional vascular market.
SurModics, Inc. acquired the Company for 30 million, including an upfront payment of 18 million, and up to
12 million based on achievement of revenue and valuecreating operational milestones, subject to certain adjustments including a customary working capital adjustment, as provided in the Transaction Documents.
Since the transaction is between the Companys shareholders and SurModics, Inc., it will not be recognised in the financial statements of
the Company.
12. |
RELATED COMPANIES AND RELATED PARTY TRANSACTIONS |
Related party transactions
The Company owns 100% of the share capital in USCI Ireland Limited. The Companys investment in USCI Ireland Limited of 15 is
included in Other financial assets in the statement of financial position. At the end of the year there is a balance due by the Company to USCI Ireland Limited of 15. USCI Ireland Limited did not trade during the period.
In 2010 USCI Japan Limited transferred the business of its Irish branch to the Company in a management buyout agreement. As part of this
agreement USCI Japan Limited retained a 15% shareholding in the Company.
- 18 -
CREAGH MEDICAL LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED
FINANCIAL STATEMENTS
30 September 2015 (Continued)
12. |
RELATED COMPANIES AND RELATED PARTY TRANSACTIONS (Continued) |
Terms and conditions of transactions with related parties
The terms and conditions of the related party loan from USCI Japan Limited are disclosed in note 7. The Company has not provided or benefited
from any guarantees for any related party receivables or payables, except for the guarantee received from Mr. Tom Greaney, a director of the Company.
Key management personnel
All directors and certain senior employees who have authority and responsibility for planning, directing and controlling the activities of the
Company are considered to be key management personnel. Total remuneration in respect of these individuals in 2015 is 337,872 (2014: 315,351).
The Companys CEO on behalf of the Company has also granted a number of options to certain key employees over a number of Ordinary shares
of 0.01 each. Such options were granted from the Ordinary shares owned by the Companys CEO. The options may only be exercised on or after the occurrence of an Exit Event. As the exercise of the share options is contingently dependent on
an Exit Event, no share-based payment expense has been recognised in 2015 or 2014.
13. |
SUMMARY OF DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE REPUBLIC OF IRELAND AND THE UNITED STATES OF AMERICA |
The Companys financial statements are prepared in accordance with Financial Reporting Standards 104, Interim Financial
Reporting (FRS 104 or Local GAAP), which differ in certain respects from accounting principles generally accepted in the United States of America (US GAAP). Differences which have an effect on the net
income, shareholders equity, financial position and cash flows of the Company are set out below:
- 19 -
CREAGH MEDICAL LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED
FINANCIAL STATEMENTS
30 September 2015 (Continued)
13. |
SUMMARY OF DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE REPUBLIC OF IRELAND AND THE UNITED STATES OF AMERICA (Continued) |
Effect of differences between Local GAAP and US GAAP on loss after tax:
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
Loss for the period in accordance with Local GAAP |
|
|
(621,948 |
) |
|
|
(597,742 |
) |
|
|
|
US GAAP adjustments |
|
|
|
|
|
|
|
|
Accretion of Ordinary B and D shares to redemption amounts |
|
|
75,815 |
|
|
|
62,041 |
|
Accretion of imputed interest on related party loan |
|
|
17,824 |
|
|
|
16,955 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss in accordance with US GAAP |
|
|
(528,309 |
) |
|
|
(518,746 |
) |
|
|
|
|
|
|
|
|
|
Effect of differences between Local GAAP and US GAAP on net equity:
|
|
|
|
|
|
|
|
|
|
|
30 September |
|
|
31 December |
|
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
Net liabilities in accordance with Local GAAP |
|
|
(2,622,117 |
) |
|
|
(2,000,169 |
) |
|
|
|
US GAAP adjustments |
|
|
|
|
|
|
|
|
Reclassification of Ordinary B and D shares into mezzanine equity |
|
|
1,472,000 |
|
|
|
1,472,000 |
|
Accretion of Ordinary B and D shares to redemption amounts |
|
|
284,853 |
|
|
|
209,038 |
|
Reclassification of equity component of related party loan into debt |
|
|
(69,701 |
) |
|
|
(69,701 |
) |
Accretion of imputed interest on related party loan |
|
|
55,323 |
|
|
|
37,499 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net liabilities in accordance with US GAAP |
|
|
(879,642 |
) |
|
|
(351,333 |
) |
|
|
|
|
|
|
|
|
|
- 20 -
CREAGH MEDICAL LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED
FINANCIAL STATEMENTS
30 September 2015 (Continued)
13. |
SUMMARY OF DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE REPUBLIC OF IRELAND AND THE UNITED STATES OF AMERICA (Continued) |
Effect of differences between Local GAAP and US GAAP on cash flows:
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
Net cash outflow from operating activities in accordance with Local GAAP |
|
|
(125,627 |
) |
|
|
(367,534 |
) |
US GAAP adjustment: |
|
|
|
|
|
|
|
|
Bank interest paid classified as operating activity under US GAAP |
|
|
(2,055 |
) |
|
|
(4,024 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash outflow from operating activities in accordance with US GAAP |
|
|
(127,682 |
) |
|
|
(371,558 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash outflow from investing activities in accordance with Local GAAP |
|
|
(36,517 |
) |
|
|
(73,218 |
) |
US GAAP adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash outflow from investing activities in accordance with US GAAP |
|
|
(36,517 |
) |
|
|
(73,218 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flow from financing activities in accordance with Local GAAP |
|
|
13,810 |
|
|
|
111,029 |
|
US GAAP adjustment: |
|
|
|
|
|
|
|
|
Bank interest paid classified as operating activity under US GAAP |
|
|
2,055 |
|
|
|
4,024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flow from financing activities in accordance with US GAAP |
|
|
15,865 |
|
|
|
115,053 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in cash at bank and in hand in accordance with US GAAP |
|
|
(148,334 |
) |
|
|
(329,723 |
) |
Cash at bank and in hand at beginning of period |
|
|
353,535 |
|
|
|
396,903 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at bank and in hand at end of period in accordance with US GAAP |
|
|
205,201 |
|
|
|
67,180 |
|
|
|
|
|
|
|
|
|
|
- 21 -
CREAGH MEDICAL LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED
FINANCIAL STATEMENTS
30 September 2015 (Continued)
13. |
SUMMARY OF DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE REPUBLIC OF IRELAND AND THE UNITED STATES OF AMERICA (Continued) |
Explanation of Local GAAP to US GAAP differences
1. Ordinary B and D shares
The
Companys Ordinary B and D shares are puttable instruments since they give the holders the right to put the instrument back to the Company at a fixed redemption price. Under Local GAAP, a puttable instrument meets the definition of
financial liability because it gives the holder the right to put it back to the entity for cash or another financial asset, which represents a contractual obligation to deliver cash or another financial asset for which the entity does not have an
unconditional right to avoid.
Under US GAAP, an embedded put option in a share should be evaluated for bifurcation instead of
classifying the entire instrument as a liability. In addition, puttable shares are generally classified as temporary or mezzanine equity under US GAAP.
As a result, the Ordinary B and D shares which are classified as financial liabilities in the Companys Local GAAP statement of financial
position are reclassified to mezzanine equity under US GAAP. The face value of Ordinary B and D shares as of 30 September 2015 and 31 December 2014 amounted to 1,472,000 and 1,257,000, respectively.
Under FRS 102, the Company has measured the Ordinary B and D shares at the accreted value of their redemption amounts, with a corresponding
periodic charge to the statement of comprehensive income.
Under US GAAP, shares classified as mezzanine equity such as the
Companys Ordinary B and D shares shall also be measured at their redemption amounts. However, the corresponding charge shall be recognised in equity.
2. Related party loan
Under
Local GAAP, the Company has a related party loan due to USCI Japan Limited, which is interest-free. In accordance with Local GAAP, financial instruments in a financing transaction are initially measured at the present value of the future payments
discounted at a market rate of interest for a similar debt instrument. As a result, the Company recognised the loan at its present value at inception date using an observable market rate of interest.
Under US GAAP, the related party loan is not accounted for using the imputed interest rate and is accounted for at the cash proceeds
received.
- 22 -
CREAGH MEDICAL LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED
FINANCIAL STATEMENTS
30 September 2015 (Continued)
13. |
SUMMARY OF DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE REPUBLIC OF IRELAND AND THE UNITED STATES OF AMERICA (Continued) |
Explanation of Local GAAP to US GAAP differences
3. Presentation of bank interest paid in the statement of cash flows
Under Local GAAP, entities may present bank interest paid either as an operating activity or a financing activity, so long as the presentation
is consistent from period to period. The Company has elected to present bank interest paid as a financing activity under Local GAAP.
Under
US GAAP, bank interest paid is included within operating activities.
- 23 -
Exhibit 99.3
SurModics, Inc. and Subsidiaries
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On November 20, 2015, SurModics, Inc. (the Company, SurModics) acquired 100% of the outstanding common shares and voting shares
of Creagh Medical Limited (Creagh Medical) (the Acquisition). The Company acquired Creagh Medical for up to 30 million (approximate as of the acquisition date $32.1 million), including an upfront payment of
18 million (approximate as of the acquisition date $19.3 million), and up to 12 million (approximate as of the acquisition date $12.8 million). The following unaudited pro forma condensed combined financial information is based
on the historical financial statements of SurModics, included in the Companys Annual Report on Form 10-K for the year ended September 30, 2015, and the historical financial statements of Creagh Medical, included elsewhere in this
document, and has been adjusted to give effect to the Acquisition, which was accounted for under the acquisition method of accounting in accordance with the Business Combinations Topic of the Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC). The pro forma adjustments are based on available information and certain assumptions that management believes are reasonable under the circumstances. The assumptions underlying the pro forma
adjustments are described in the accompanying notes, which should be read in conjunction with these unaudited pro forma condensed combined financial statements.
The unaudited pro forma condensed combined balance sheet has been adjusted to give effect to the Acquisition as if it had occurred on September 30, 2015.
The unaudited pro forma condensed combined statement of income for the year ended September 30, 2015 has been adjusted to give effect to the Acquisition as if it had occurred on October 1, 2014. The assumptions, estimates and adjustments
herein have been made solely for purposes of developing this pro forma condensed combined financial information. The Creagh Medical balance sheet and statement of income have been adjusted to conform to accounting principles generally accepted in
the United States and converted to United States dollars.
The unaudited pro forma condensed combined financial information is presented for illustrative
and informative purposes only and is not intended to represent what our results of operations or financial position would have been had the Acquisition actually occurred on the dates indicated. The pro forma results presented below are not
necessarily indicative of what our combined financial position, results of operations and cash flows may be in the future.
The Acquisition was accounted
for under the acquisition method of accounting. Accordingly, the purchase price has been allocated to the underlying tangible and intangible assets acquired and liabilities assumed generally based on their respective estimated fair market values,
with any excess purchase price allocated to goodwill after considering the estimated deferred tax impacts. The pro forma purchase price allocation is based on preliminary estimates of the fair values of tangible and intangible assets acquired and
liabilities assumed, and the unaudited pro forma condensed combined financial information is based upon available information and certain assumptions that management believes are factually supportable as of the date of this document. The actual
adjustments to the combined financial information will depend on a number of factors, including additional information available, working capital adjustments, and completion of the asset and liability valuations. Any such adjustments to the
preliminary estimate of fair value could be material.
The historical audited financial statements described below have been adjusted in the unaudited pro
forma condensed combined financial statements to give effect to events that are (1) directly attributable to the Acquisition, (2) factually supportable and (3) with respect to the condensed combined statement of income, expected to
have a continuing impact. The unaudited pro forma combined statement of income does not reflect any non-recurring charges directly related to the Acquisition that have already been incurred. These non-recurring charges are further described in the
accompanying notes to the unaudited pro forma condensed combined financial information and include transaction-related costs of $2.1 million such as financial advisory, legal and regulatory filing fees. The unaudited pro forma condensed combined
financial information should be read in conjunction with the accompanying notes to the unaudited pro forma condensed combined financial information.
The
unaudited pro forma condensed combined financial information does not include the realization of any future cost savings or restructuring or integration changes that are expected to result from the Acquisition.
The unaudited pro forma condensed combined financial information, including the notes hereto, should be read in
conjunction with the historical audited consolidated financial statements and related notes and Managements Discussions and Analysis of Financial Condition and Results of Operations contained in SurModics Annual Report on
Form 10-K for the year ended September 30, 2015, as well as Creagh Medicals historical audited financial statements and related notes for the years ended December 31, 2014 and 2013 and the unaudited financial statements and related
notes for the nine months ended September 30, 2015 and 2014 that are included as Exhibits 99.1 and 99.2 to this Current Report on Form 8-K/A. SurModics fiscal year ends on September 30 and Creagh Medicals fiscal year ends on
December 31. The historical financial information of Creagh Medical is prepared in accordance with Financial Reporting Standard 102 The Financial Reporting Standard Applicable in the UK and Republic of Ireland (FRS 102)
and reconciled to US GAAP. The unaudited pro forma condensed combined financial information is not intended to represent or be indicative of the consolidated results of operations or financial condition of SurModics that would have been reported had
the acquisition been completed as of the dates presented, and should not be construed as representative of the future consolidated results of operations or financial condition of the combined entity.
SurModics, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Combined Balance Sheet
As of September 30, 2015
(In thousands of United States Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical SurModics |
|
|
Historical Creagh Medical |
|
|
Pro Forma Adjustments |
|
|
Pro Forma Condensed Combined Total |
|
|
|
|
|
|
|
|
|
(Note 3) |
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
55,588 |
|
|
$ |
230 |
|
|
$ |
(19,427 |
) a |
|
$ |
36,391 |
|
Restricted cash |
|
|
|
|
|
|
|
|
|
|
812 |
b |
|
|
812 |
|
Accounts receivable, net |
|
|
7,478 |
|
|
|
572 |
|
|
|
|
|
|
|
8,050 |
|
Inventories |
|
|
2,979 |
|
|
|
162 |
|
|
|
45 |
c |
|
|
3,186 |
|
Deferred tax asset |
|
|
546 |
|
|
|
|
|
|
|
|
|
|
|
546 |
|
Prepaids and other |
|
|
1,198 |
|
|
|
42 |
|
|
|
209 |
d |
|
|
1,449 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
67,789 |
|
|
|
1,006 |
|
|
|
(18,361 |
) |
|
|
50,434 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
12,968 |
|
|
|
381 |
|
|
|
276 |
e |
|
|
13,625 |
|
Deferred tax asset |
|
|
6,704 |
|
|
|
|
|
|
|
|
|
|
|
6,704 |
|
Goodwill |
|
|
8,010 |
|
|
|
|
|
|
|
14,741 |
f |
|
|
22,751 |
|
Intangible assets, net |
|
|
2,760 |
|
|
|
|
|
|
|
14,593 |
g |
|
|
17,353 |
|
Other assets, net |
|
|
479 |
|
|
|
|
|
|
|
|
|
|
|
479 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
98,710 |
|
|
$ |
1,387 |
|
|
$ |
11,249 |
|
|
$ |
111,346 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
781 |
|
|
$ |
258 |
|
|
$ |
|
|
|
$ |
1,039 |
|
Accrued compensation |
|
|
2,772 |
|
|
|
165 |
|
|
|
|
|
|
|
2,937 |
|
Accrued other |
|
|
1,099 |
|
|
|
435 |
|
|
|
2,146 |
h |
|
|
3,680 |
|
Deferred tax liability |
|
|
|
|
|
|
|
|
|
|
10 |
i |
|
|
10 |
|
Deferred revenue |
|
|
48 |
|
|
|
378 |
|
|
|
|
|
|
|
426 |
|
Other current liabilities |
|
|
|
|
|
|
631 |
|
|
|
(631 |
) j |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
4,700 |
|
|
|
1,867 |
|
|
|
1,525 |
|
|
|
8,092 |
|
Deferred revenue, less current portion |
|
|
217 |
|
|
|
71 |
|
|
|
|
|
|
|
288 |
|
Other long-term liabilities |
|
|
1,920 |
|
|
|
|
|
|
|
9,501 |
k |
|
|
11,421 |
|
Long-term obligations |
|
|
|
|
|
|
419 |
|
|
|
(419 |
) l |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
6,837 |
|
|
|
2,357 |
|
|
|
10,607 |
|
|
|
19,801 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible mandatorily redeemable preferred stock |
|
|
|
|
|
|
1,971 |
|
|
|
(362 |
) m |
|
|
1,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
647 |
|
|
|
|
|
|
|
|
|
|
|
647 |
|
Additional paid-in capital |
|
|
3,060 |
|
|
|
|
|
|
|
|
|
|
|
3,060 |
|
Accumulated other comprehensive income |
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
5 |
|
Retained earnings (accumulated deficit) |
|
|
88,161 |
|
|
|
(2,941 |
) |
|
|
1,004 |
n |
|
|
86,224 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders Equity |
|
|
91,873 |
|
|
|
(2,941 |
) |
|
|
1,004 |
|
|
|
89,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities, Convertible Mandatorily Redeemable Preferred Stock and Stockholders Equity |
|
$ |
98,710 |
|
|
$ |
1,387 |
|
|
$ |
11,249 |
|
|
$ |
111,346 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to the unaudited pro forma condensed financial information.
SurModics, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Combined Statement of Income
For the year ended September 30, 2015
(In thousands of United States Dollars, Except Per Share Data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical SurModics |
|
|
Historical Creagh Medical |
|
|
Pro Forma Adjustments |
|
|
Pro Forma Condensed Combined Total |
|
|
|
|
|
|
|
|
|
(Note 3) |
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalties and license fees |
|
$ |
31,763 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
31,763 |
|
Product sales |
|
|
24,925 |
|
|
|
1,812 |
|
|
|
|
|
|
|
26,737 |
|
Research and development |
|
|
5,210 |
|
|
|
648 |
|
|
|
|
|
|
|
5,858 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
61,898 |
|
|
|
2,460 |
|
|
|
|
|
|
|
64,358 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product |
|
|
8,619 |
|
|
|
1,087 |
|
|
|
20 |
o |
|
|
9,726 |
|
Research and development |
|
|
16,165 |
|
|
|
1,022 |
|
|
|
9 |
o |
|
|
17,196 |
|
Selling, general and administrative |
|
|
14,906 |
|
|
|
1,149 |
|
|
|
|
|
|
|
16,055 |
|
Claim settlement |
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
|
2,500 |
|
Amortization expense |
|
|
619 |
|
|
|
|
|
|
|
1,866 |
p |
|
|
2,485 |
|
Contingent consideration accretion expense |
|
|
|
|
|
|
|
|
|
|
908 |
q |
|
|
908 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses |
|
|
42,809 |
|
|
|
3,258 |
|
|
|
2,803 |
|
|
|
48,870 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
19,089 |
|
|
|
(798 |
) |
|
|
(2,803 |
) |
|
|
15,488 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income (loss), net |
|
|
156 |
|
|
|
(50 |
) |
|
|
|
|
|
|
106 |
|
Impairment loss on investment |
|
|
(1,500 |
) |
|
|
|
|
|
|
|
|
|
|
(1,500 |
) |
Other gain |
|
|
496 |
|
|
|
19 |
|
|
|
|
|
|
|
515 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loss, net |
|
|
(848 |
) |
|
|
(31 |
) |
|
|
|
|
|
|
(879 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
18,241 |
|
|
|
(829 |
) |
|
|
(2,803 |
) |
|
|
14,609 |
|
Income tax provision |
|
|
(6,294 |
) |
|
|
|
|
|
|
|
r |
|
|
(6,294 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
11,947 |
|
|
$ |
(829 |
) |
|
$ |
(2,803 |
) |
|
$ |
8,315 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per share: |
|
$ |
0.92 |
|
|
|
|
|
|
|
|
|
|
$ |
0.64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per share: |
|
$ |
0.90 |
|
|
|
|
|
|
|
|
|
|
$ |
0.63 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
13,029 |
|
|
|
|
|
|
|
|
|
|
|
13,029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
13,289 |
|
|
|
|
|
|
|
|
|
|
|
13,289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to the unaudited pro forma condensed financial information.
SurModics, Inc. and Subsidiaries
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
(In thousands of United States Dollars, unless otherwise noted)
Note 1. Basis of Pro Forma Presentation
On
November 20, 2015, the Company entered into (i) a Share Purchase Agreement (the Purchase Agreement) with the shareholders of Creagh Medical named therein, (ii) a Put and Call Option Agreement with the shareholders of
Creagh Medical named therein (the Put and Call Agreement) and (iii) certain amendments to existing put and call option agreements with certain shareholders of Creagh Medical, as described in the Purchase Agreement (together with the
Purchase Agreement and the Put and Call Agreement, the Transaction Documents) pursuant to which the Company agreed to purchase all of the shares of Creagh Medical for up to 30 million (approximately $32 million), including an
upfront payment of 18 million, and up to 12 million based on achievement of revenue and value-creating operational milestones, subject to certain adjustments, including a customary working capital adjustment, as provided in the
Transaction Documents (the Acquisition). Creagh Medical, based in Ballinasloe, Ireland, is a developer and manufacturer of percutaneous transluminal angioplasty (PTA) balloon catheters.
The Company used available cash on hand to pay the initial payment of 18 million (approximately $19 million).
The unaudited pro forma condensed combined financial information has been prepared to give effect to the Acquisition, which will be accounted for under the
acquisition method of accounting in accordance with the Business Combinations Topic of the FASB ASC. Under the Business Combinations Topic (ASC Topic 805), the total purchase price is allocated to the identifiable assets acquired and
liabilities assumed based on their estimated fair values. The excess of the purchase price over the amounts assigned to tangible or intangible assets acquired and liabilities assumed is recognized as goodwill.
The unaudited pro forma condensed combined financial information included herein has been prepared by the Company pursuant to the rules and regulations of the
United States Securities and Exchange Commission (the SEC) for the purposes of inclusion in SurModics amended Current Report on Form 8-K/A prepared in connection with the acquisition of Creagh Medical. Certain information and
disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (US GAAP) have been condensed or omitted pursuant to such rules and regulations. The
significant accounting policies used in preparing the unaudited pro forma condensed combined financial information are set out in the Companys consolidated financial statements for the year ended September 30, 2015.
The pro forma adjustments and allocations of the preliminary purchase price are based in part on estimates of the fair value of assets acquired and
liabilities assumed. A preliminary determination of the related purchase price allocation has been presented herein; however, additional analysis with respect to the value of certain assets, contractual arrangements, tax attributes, and liabilities
could materially affect the allocation of the purchase price to the assets and liabilities presented in the unaudited pro forma condensed combined financial information.
SurModics fiscal year ends on September 30 and Creagh Medicals fiscal year ends on December 31. The information concerning SurModics has
been derived from the audited consolidated financial statements of SurModics as of and for the year ended September 30, 2015 prepared in accordance with US GAAP contained in SurModics Annual Report on Form 10-K for the year ended
September 30, 2015. The information concerning Creagh Medical as of and for the year ended September 30, 2015 has been derived from the unaudited balance sheet of Creagh Medical as of September 30, 2015, the unaudited statement of
income of Creagh Medical for the nine months ended September 30, 2015, both included in Exhibit 99.2 to this Current Report on Form 8-K/A, and the unaudited statement of income of Creagh Medical for the three months ended December 31,
2014, which is not included herein, all prepared in accordance with Financial Reporting Standard 102 The Financial Reporting Standard Applicable in the UK and Republic of Ireland (FRS 102) and reconciled to US GAAP. The
unaudited statement of income of Creagh Medical for the three months ended December 31, 2014 was derived from the accounting records and audited financial statements of Creagh Medical for the year ended December 31, 2014 included in
Exhibit 99.1 to this Current Report on Form 8-K/A. Note 4 to this pro forma financial information provides additional information with respect to the nature of the US GAAP adjustments needed to reconcile Creagh Medicals financial
statements prepared in accordance with FRS 102 to those prepared in accordance with US GAAP.
The unaudited pro forma condensed combined financial
information is provided for informational purposes only and does not purport to be indicative of the Companys financial position or results of operations that would actually have been obtained had the Acquisition been completed as of the date
or for the periods presented, or of the financial position or results of operations that may be obtained in the future.
SurModics, Inc. and Subsidiaries
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
(In thousands of United States Dollars, unless otherwise noted)
Note 2. Estimated Consideration Transferred and Preliminary Purchase Price Allocation
The following provides a summary of the estimated consideration transferred to effect the Acquisition:
|
|
|
|
|
|
|
Fair Value |
|
|
|
Fair value of cash transferred |
|
$ |
19,427 |
|
Fair value of obligations assumed, net of restricted cash in escrow |
|
|
797 |
|
Fair value of deferred contingent cash consideration (1) |
|
|
9,501 |
|
|
|
|
|
|
Total consideration at closing |
|
$ |
29,725 |
|
|
|
|
|
|
(1) |
Deferred contingent cash consideration has been presented at fair value based on the estimated amounts that will be paid after September 30, 2018, the end of the contingency period. To the extent the assumptions
used in determining the fair value were to change, the fair value of the deferred contingent cash consideration could change significantly. The deferred contingent cash consideration will be remeasured to fair value at each reporting date until the
contingency is resolved and changes in fair value will be recognized in earnings. |
For purposes of the pro forma condensed combined
financial information, the following is a summary of the preliminary allocation of the total estimated purchase price to Creagh Medicals net tangible and intangible assets acquired and liabilities assumed as reflected in the unaudited pro
forma consolidated balance sheet as of September 30, 2015. The preliminary purchase price allocation is as follows:
|
|
|
|
|
Cash and cash equivalents |
|
$ |
230 |
|
Net working capital deficit acquired, excluding cash and cash equivalents |
|
|
(425 |
) |
Other |
|
|
(71 |
) |
Property and equipment |
|
|
657 |
|
Intangible assets |
|
|
14,593 |
|
Goodwill |
|
|
14,741 |
|
|
|
|
|
|
Total preliminary purchase price (2) |
|
$ |
29,725 |
|
|
|
|
|
|
(2) |
The purchase price allocation is considered preliminary, subject to revision, mainly with respect to certain working capital accounts, taxes and goodwill, as final information is not yet available. |
The Company determined the fair value of the intangible assets with the support of a third-party valuation firm. The income approach, which includes the
application of the relief from royalty method or the discounted cash flow method, is the primary technique utilized in valuing the identifiable intangible assets. Identified acquired technology in the process of research and development
(IPR&D) represents an indefinite-lived intangible asset. The Company expects to amortize the value of customer relationships and acquired technology on a straight-line basis as follows:
|
|
|
|
|
Economic Life |
|
|
Trade name |
|
Indefinite |
Semi - compliant balloon technology |
|
7 years |
IPR&D compliant balloon technology |
|
Indefinite |
IPR&D braided balloon technology |
|
Indefinite |
Customer relationships original equipment manufacturers |
|
7 years |
Customer relationships distributors |
|
10 years |
Goodwill represents the excess of the purchase price of an acquired business over the fair value of the tangible and
intangible assets acquired and liabilities assumed. The goodwill is not expected to be deductible for tax purposes. Additional analysis with respect to the value of certain assets, contractual arrangements, tax attributes, and liabilities could
materially affect the allocation of the consideration to the assets and liabilities presented in the unaudited pro forma condensed combined financial information.
Note 3. Pro Forma Adjustments
The unaudited pro forma
condensed combined financial statements reflect adjustments attributed to the Acquisition to adjust amounts related to Creagh Medicals tangible and intangible assets acquired and liabilities assumed to an
SurModics, Inc. and Subsidiaries
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
(In thousands of United States Dollars, unless otherwise noted)
estimate of the fair values of those amounts, and to reflect amortization and depreciation expense related to the estimated amortizable intangible assets and adjustment to the fair value of
property and equipment acquired, respectively.
As of the date of this report, SurModics has not identified any material pre-acquisition contingencies
where the related asset or liability is probable and the amount of the asset or liability can be reasonably estimated. Prior to the end of the purchase price allocation period, if information becomes available that would indicate it is probable that
such events have occurred and the amounts can be reasonably estimated, such items will be included in the purchase price allocation.
The unaudited pro
forma condensed combined financial information includes pro forma adjustments to:
|
a. |
reflect the use of $19.4 million of available cash on hand to pay a portion of the purchase price ($18.5 million on the November 20, 2015 acquisition date, based on the actual exchange rate of 1 = $1.070153
on the acquisition date), which is net of the $0.8 million that remains in escrow; |
|
b. |
reflect the initial payment of $0.8 million for the convertible mandatorily redeemable preferred stock that remains in escrow; |
|
c. |
record increase of $0.05 million to the carrying values of inventory acquired to reflect its fair values; |
|
d. |
reflect a $0.2 million increase in income taxes receivable for deductible transaction costs, based on SurModics US tax rate of 34%, as such costs were incurred by SurModics; |
|
e. |
reflect a $0.3 million adjustment to the fair value of property and equipment acquired; |
|
f. |
reflect goodwill of $14.7 million based on net assets acquired as if the Acquisition occurred on September 30, 2015; |
|
g. |
reflect the fair value of identified intangible assets of $14.6 million resulting from the Acquisition; |
|
h. |
reflect $2.1 million in non-recurring transaction costs directly attributable to the Acquisition and not recorded in the historical September 30, 2015 condensed combined financial statements; |
|
i. |
reflect the increase in deferred tax assets of $2.4 million arising from 17 million ($19 million) of Creagh Medical net operating loss carry forwards partially offset by deferred tax liabilities of $1.9
million from the tax impacts of the identifiable intangible assets and adjustments to inventory and property and equipment resulting from the Acquisition as well as an increase in the valuation allowance of $0.5 million, all tax effects based on the
Irish statutory rate of 12.5%; |
|
j. |
eliminate the $0.6 million of existing Creagh Medical debt that was repaid upon the close of the transaction; |
|
k. |
reflect $9.5 million of deferred contingent consideration associated with the revenue and value-creating operational milestones, presented at fair value based on the amounts estimated to be paid after September 30,
2018, the end of the contingency period; |
|
l. |
eliminate the $0.4 million of existing Creagh Medical long-term obligations that were not assumed in the Acquisition; |
|
m. |
reflect a $0.1 million increase in fair value to the mandatory redemption amount, decreased by net initial payment of $0.5 million; |
|
n. |
eliminate the Creagh Medical accumulated deficit of $2.9 million; |
|
o. |
record depreciation of $0.03 million related to the fair value adjustment of the property and equipment acquired for the year ended September 30, 2015; |
|
p. |
record amortization expense of $1.9 million for intangible assets acquired as a result of the Acquisition for the year ended September 30, 2015. Due to the Acquisition, $0.6 million of amortization expense related
to the BioFx acquisition in fiscal 2007 was reclassified from selling, general and administration expense on SurModics historical September 30, 2015 condensed combined financial statements to provide a comparison to the current
presentation; |
|
q. |
record contingent consideration accretion expense of $0.9 million; and |
|
r. |
reflect that there are no tax effects of the above adjustments at the Irish statutory rate of 12.5% after reapportionment of income and expenses based on the post-acquisition structure and recording a full valuation
allowance. |
SurModics, Inc. and Subsidiaries
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
(In thousands of United States Dollars, unless otherwise noted)
Note 4. US GAAP Adjustments to Creagh Medicals Historical Financial Statements
Included in Schedules 1 and 2 below are the US GAAP adjustments to Creagh Medicals historical financial statements at September 30, 2015 and
for the year ended September 30, 2015, respectively.
|
a) |
Classification of Series B and D shares |
Under FRS 102, Creagh Medical has classified
Series B and D shares as liabilities. Under US GAAP, these instruments are classified within mezzanine equity. Accretion of these instruments from their par value to the mandatory redemption value was accounted for as interest expense under FRS
102. Under US GAAP, accretion of these instruments has been reflected within shareholders equity. Accretion for the year ended September 30, 2015 was 98,000, of which 70,000 was recorded as a reduction to additional paid
in capital and the remainder as a reduction to the increase in retained earnings (accumulated deficit).
Note 5. Translation of Creagh Medicals
Historical Financial Statements to US Dollars
The unaudited pro forma condensed combined financial information is presented in US dollars unless
otherwise stated, and accordingly, the financial information of Creagh Medical used to prepare the unaudited pro forma condensed combined financial information was translated from Euros to US dollars (Schedules 1 and 2) using the following exchange
rates, which correspond with the exchange rates for the periods being presented:
|
|
|
|
|
Balance sheet as of September 30, 2015 |
|
|
1 = $1.1217 |
|
|
|
Statement of income for the year ended September 30, 2015: |
|
|
|
|
Average for the period |
|
|
1 = $1.1490 |
|
SurModics, Inc. and Subsidiaries
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
(In thousands of United States Dollars, Unless Otherwise Noted)
Schedule 1
Creagh
Medical Ltd.
Balance Sheet
As of September 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FRS 102 (1) |
|
|
US GAAP Adjustments |
|
|
Note 4 |
|
As Converted to US GAAP |
|
|
|
EUR |
|
|
EUR (Note 4) |
|
|
|
|
EUR (Note 4) |
|
|
USD (Note 5) |
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
205 |
|
|
|
|
|
|
|
|
|
205 |
|
|
$ |
230 |
|
Restricted cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
510 |
|
|
|
|
|
|
|
|
|
510 |
|
|
|
572 |
|
Inventories |
|
|
145 |
|
|
|
|
|
|
|
|
|
145 |
|
|
|
162 |
|
Prepaids and other |
|
|
37 |
|
|
|
|
|
|
|
|
|
37 |
|
|
|
42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
897 |
|
|
|
|
|
|
|
|
|
897 |
|
|
|
1,006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
340 |
|
|
|
|
|
|
|
|
|
340 |
|
|
|
381 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
|
1,237 |
|
|
|
|
|
|
|
|
|
1,237 |
|
|
$ |
1,387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
|
230 |
|
|
|
|
|
|
|
|
|
230 |
|
|
$ |
258 |
|
Accrued compensation |
|
|
147 |
|
|
|
|
|
|
|
|
|
147 |
|
|
|
165 |
|
Accrued other |
|
|
387 |
|
|
|
|
|
|
|
|
|
387 |
|
|
|
435 |
|
Deferred tax liability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue |
|
|
338 |
|
|
|
|
|
|
|
|
|
338 |
|
|
|
378 |
|
Other current liabilities |
|
|
563 |
|
|
|
|
|
|
|
|
|
563 |
|
|
|
631 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
1,665 |
|
|
|
|
|
|
|
|
|
1,665 |
|
|
|
1,867 |
|
Long-term obligations |
|
|
2,131 |
|
|
|
(1,757 |
) |
|
a) |
|
|
374 |
|
|
|
419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
3,859 |
|
|
|
(1,757 |
) |
|
|
|
|
2,102 |
|
|
|
2,357 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible mandatorily redeemable preferred stock |
|
|
|
|
|
|
1,757 |
|
|
a) |
|
|
1,757 |
|
|
|
1,971 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital |
|
|
70 |
|
|
|
(70 |
) |
|
a) |
|
|
|
|
|
|
|
|
Accumulated other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings (accumulated deficit) |
|
|
(2,692 |
) |
|
|
70 |
|
|
a) |
|
|
(2,622 |
) |
|
|
(2,941 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders Equity |
|
|
(2,622 |
) |
|
|
|
|
|
|
|
|
(2,622 |
) |
|
|
(2,941 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities, Convertible Mandatorily Redeemable Preferred Stock and Stockholders Equity |
|
|
1,237 |
|
|
|
|
|
|
|
|
|
1,237 |
|
|
$ |
1,387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Amounts derived from Creaghs accounting records under FRS 102 and have been reclassified to be consistent with the manner in which items are classified in SurModics condensed consolidated balance
sheet. |
SurModics, Inc. and Subsidiaries
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
(In thousands of United States Dollars, Unless Otherwise Noted)
Schedule 2
Creagh
Medical Ltd.
Statement of Income
For the year ended September 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FRS 102 (1) |
|
|
US GAAP Adjustments |
|
|
Note 4 |
|
As Converted to US GAAP |
|
|
|
EUR |
|
|
EUR (Note 4) |
|
|
|
|
EUR |
|
|
USD |
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalties and license fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
Product sales |
|
|
1,577 |
|
|
|
|
|
|
|
|
|
1,577 |
|
|
|
1,812 |
|
Research and development |
|
|
564 |
|
|
|
|
|
|
|
|
|
564 |
|
|
|
648 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
2,141 |
|
|
|
|
|
|
|
|
|
2,141 |
|
|
|
2,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product |
|
|
946 |
|
|
|
|
|
|
|
|
|
946 |
|
|
|
1,087 |
|
Research and development |
|
|
889 |
|
|
|
|
|
|
|
|
|
889 |
|
|
|
1,022 |
|
Selling, general and administrative |
|
|
1,000 |
|
|
|
|
|
|
|
|
|
1,000 |
|
|
|
1,149 |
|
Amortization expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration accretion expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses |
|
|
2,835 |
|
|
|
|
|
|
|
|
|
2,835 |
|
|
|
3,258 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(694 |
) |
|
|
|
|
|
|
|
|
(694 |
) |
|
|
(798 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loss, net |
|
|
(125 |
) |
|
|
98 |
|
|
a) |
|
|
(27 |
) |
|
|
(31 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(819 |
) |
|
|
98 |
|
|
|
|
|
(721 |
) |
|
|
(829 |
) |
Income tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
(819 |
) |
|
|
98 |
|
|
|
|
|
(721 |
) |
|
$ |
(829 |
) |
Accretion of mandatorily redeemable convertible preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders |
|
|
(819 |
) |
|
|
98 |
|
|
|
|
|
(721 |
) |
|
$ |
(829 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Amounts derived from Creaghs accounting records under FRS 102 and have been reclassified to be consistent with the manner in which items are classified in SurModics condensed consolidated statement of
income. |
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